<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PIONEER AMERICAS ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2812 06-1420850
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
PIONEER AMERICAS, INC. DELAWARE 76-0280373
PIONEER CHLOR ALKALI COMPANY, INC. DELAWARE 51-0302028
IMPERIAL WEST CHEMICAL CO. NEVADA 95-2375683
ALL-PURE CHEMICAL CO. CALIFORNIA 94-2314942
BLACK MOUNTAIN POWER COMPANY TEXAS 76-0291143
ALL-PURE CHEMICAL NORTHWEST, INC. WASHINGTON 94-2714064
PIONEER CHLOR ALKALI INTERNATIONAL, BARBADOS 98-0118164
INC. NEVADA 88-0336831
G.O.W. CORPORATION DELAWARE 51-0375981
PIONEER (EAST), INC. NEW MEXICO 86-0311265
T.C. HOLDINGS, INC. WASHINGTON 91-1536884
T.C. PRODUCTS, INC. (State or other jurisdiction of (I.R.S. Employer
(Exact name of registrants as incorporation or organization) Identification No.)
specified in their charters)
</TABLE>
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4200 NATIONSBANK CENTER, 700 LOUISIANA STREET, HOUSTON, TEXAS 77002,
(713) 225-3831
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
---------------
KENT R. STEPHENSON, ESQ.
PIONEER AMERICAS ACQUISITION CORP.
4200 NATIONSBANK CENTER
700 LOUISIANA STREET
HOUSTON, TEXAS 77002
(713) 225-3831
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
with a copy to:
CORNELIUS T. FINNEGAN III, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE
SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
============================================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE OFFERING PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Series B Senior Secured Notes Due
2007...................................... $200,000,000 100% $200,000,000 $60,607
- ----------------------------------------------------------------------------------------------------------------------------
Guarantees(1)............................... (2) (2) (2) (2)
============================================================================================================================
</TABLE>
(1) Pioneer Americas, Inc., Pioneer Chlor Alkali Company, Inc., Imperial West
Chemical Co., All-Pure Chemical Co., Black Mountain Power Company, All-Pure
Chemical Northwest, Inc., Pioneer Chlor Alkali International, Inc., G.O.W.
Corporation, Pioneer (East), Inc., T.C. Holdings, Inc. and T.C. Products,
Inc. are wholly-owned subsidiaries of Pioneer Americas Acquisition Corp. and
each is registering Guarantees of the payment of the principal of, premium,
if any, and interest on the Notes being registered hereby. Pursuant to Rule
457(n) under the Securities Act of 1933, as amended, no registration fee is
required with respect to the Guarantees.
(2) Not applicable.
---------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 2, 1997
PROSPECTUS
PIONEER AMERICAS ACQUISITION CORP.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF
9 1/4% SERIES B SENIOR SECURED NOTES DUE 2007
FOR EACH $1,000 IN PRINCIPAL AMOUNT OF
OUTSTANDING 9 1/4% SERIES A SENIOR SECURED NOTES DUE 2007
---------------------
Pioneer Americas Acquisition Corp., a Delaware company ("PAAC" or the
"Company"), hereby offers to exchange (the "Exchange Offer") up to $200,000,000
in aggregate principal amount of its 9 1/4% Series B Senior Secured Notes Due
2007 (the "Exchange Notes") for up to $200,000,000 in aggregate principal amount
of its outstanding 9 1/4% Series A Senior Secured Notes Due 2007 issued in
reliance upon an exemption from registration under the Securities Act of 1933,
as amended (the "Original Notes" and, together with the Exchange Notes, the
"Notes").
The terms of the Exchange Notes will be substantially identical in all
respects (including principal amount, interest rate, maturity and ranking) to
the terms of the Original Notes for which they may be exchanged pursuant to the
Exchange Offer, except that (i) the Exchange Notes will be freely transferable
by holders thereof (except as provided below) and (ii) the Exchange Notes will
be issued without any covenant of the Issuers (as defined) regarding
registration. The Exchange Notes will be issued under the indenture governing
the Original Notes. The Exchange Notes will be, and the Original Notes are,
senior obligations of the Company and will be and are fully and unconditionally
guaranteed on a senior basis by all of the subsidiaries of the Company (the
"Subsidiary Guarantors", and together with the Company, the "Issuers"). In
addition, the guarantee of Pioneer Chlor Alkali Company, Inc. ("PCAC") with
respect to the Exchange Notes will be, and with respect to the Original Notes
is, secured by (i) a first mortgage lien on the chlor-alkali production facility
acquired in the Tacoma Acquisition (as defined), (ii) a first priority security
interest in certain agreements related to the Tacoma Acquisition and (iii) first
mortgage liens on PCAC's chlor-alkali production facilities located in
Henderson, Nevada and St. Gabriel, Louisiana, and the guarantee of Pioneer
Americas, Inc. ("PAI") with respect to the Exchange Notes will be, and with
respect to the Original Notes is, secured by a pledge of the Capital Stock of
PCAC and All-Pure Chemical Co. ("All-Pure") held by PAI. The Exchange Notes will
rank pari passu with all other existing and future Senior Indebtedness (as
defined) and senior to all subordinated Indebtedness of the Company. As of June
, 1997, the Company and its subsidiaries had approximately $ million of
outstanding Senior Indebtedness. For a complete description of the terms of the
Exchange Notes, including provisions relating to the ability of the Issuers to
create indebtedness that is senior or pari passu to the Exchange Notes, see
"Description of the Notes." There will be no cash proceeds to the Issuers from
the Exchange Offer.
The Notes will bear interest from and including their respective dates of
issuance. Holders whose Original Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of the
Exchange Notes, such interest to be payable with the first interest payment on
the Exchange Notes, but will not receive any payment in respect of interest on
the Original Notes accrued after the issuance of the Exchange Notes.
The Original Notes were originally issued and sold on June 17, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided in Section 4(2) of
the Securities Act and Rule 144A of the Securities Act (the "Initial Offering").
Accordingly, the Original Notes may not be reoffered, resold or otherwise
pledged, hypothecated or transferred in the United States unless so registered
or unless an applicable exemption from the registration requirements of the
Securities Act is available. Based upon interpretations by the Staff (the
"Staff") of the Securities and Exchange Commission (the "Commission") issued to
third parties, the Issuers believe that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Original Notes directly from
the Issuers or (iii) a broker-dealer who acquired Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. Broker-dealers who
acquired Original Notes as a result of market making or other trading activities
may use this Prospectus, as supplemented or amended, in connection with resales
of the Exchange Notes. The Issuers have agreed that, for a period not to exceed
180 days after the Exchange Date (as defined), they will make this Prospectus
available to any broker-dealer for use in connection with any such resale. Any
holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
The Original Notes and the Exchange Notes constitute new issues of
securities with no established trading market. Any Original Notes not tendered
and accepted in the Exchange Offer will remain outstanding. To the extent that
Original Notes are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered, and tendered but unaccepted, Original Notes could be
adversely affected. Following consummation of the Exchange Offer, the holders of
Original Notes will continue to be subject to the existing restrictions on
transfer thereof and the Issuers will have no further obligation to such holders
to provide for the registration under the Securities Act of the Original Notes
except under certain limited circumstances. (See "Original Notes Registration
Rights.") No assurance can be given as to the liquidity of the trading market
for either the Original Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1997, unless extended
(the "Expiration Date"). The date of acceptance for exchange of the Original
Notes (the "Exchange Date") will be the first business day following the
Expiration Date, upon surrender of the Original Notes. Original Notes tendered
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date; otherwise such tenders are irrevocable.
---------------------
SEE "RISK FACTORS" ON PAGE 13 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1997
<PAGE> 3
AVAILABLE INFORMATION
The Company and the Subsidiary Guarantors have filed with the Commission a
Registration Statement on Form S-4 (the "Registration Statement," which term
shall include all amendments, exhibits, annexes and schedules thereto) pursuant
to the Securities Act, and the rules and regulations promulgated thereunder,
covering the Exchange Notes being offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration Statement
are not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports and other information required
by the Commission. Periodic reports and other information filed by the Company
with the Commission may be inspected at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its regional offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, Suite 1300, New York, New York 10048. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding companies that file electronically with the Commission.
The address of such site is http://www.sec.gov. Copies of such material can also
be obtained from the Company upon request. Any such request should be directed
to the Secretary of the Company at 4200 NationsBank Center, 700 Louisiana
Street, Houston, Texas 77002, telephone number (713) 225-3831.
The Company's obligation to file periodic reports with the Commission
pursuant to the Exchange Act may be suspended if the Notes are held of record by
fewer than 300 holders at the beginning of any fiscal year of the Company, other
than the fiscal year in which the Exchange Offer Registration Statement (as
defined) or any Shelf Registration Statement (as defined) becomes effective. The
Company has agreed that, whether or not it is required to do so by the rules and
regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of the Notes and submit to the
Commission (unless the Commission will not accept such materials) (i) all
quarterly and annual financial information that would be required to be
contained in filings with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants, and (ii) all reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports. In addition, for so long as any of the Notes remain outstanding, the
Company has agreed to make available upon request to any prospective purchaser
of, or beneficial owner of Notes in connection with any offer or sale thereof,
the information required by Rule 144A(d)(4) under the Securities Act.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SUBSIDIARY GUARANTORS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE
NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF.
ii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION...................... ii
PROSPECTUS SUMMARY......................... 1
RISK FACTORS............................... 13
Consequences of Failure to Exchange...... 13
Financial Leverage....................... 13
Industry Cyclicality..................... 13
Environmental Regulation................. 14
Operating Hazards and Uninsured Risks.... 18
Limitations on Security Interest......... 18
No Assurance of Realizable Value from
Collateral............................. 18
Potential Environmental Liability of
Secured Lenders........................ 19
Competition.............................. 19
Dependence on Key Customers and Key
Suppliers.............................. 19
Ranking of the Notes..................... 20
Tax Matters.............................. 20
Change of Control........................ 20
Control by Certain Stockholders.......... 21
Forward-Looking Statements Lack of Public
Market................................. 21
USE OF PROCEEDS............................ 23
THE EXCHANGE OFFER......................... 24
Purpose of the Exchange Offer............ 24
Terms of the Exchange.................... 24
Expiration Date; Extensions; Termination;
Amendments............................. 25
How to Tender............................ 26
Terms and Conditions of the Letter of
Transmittal............................ 27
Withdrawal Rights........................ 28
Acceptance of Original Notes for
Exchange; Delivery of Exchange Notes... 28
Conditions to the Exchange Offer......... 28
Exchange Agent........................... 29
Solicitation of Tenders; Expenses........ 29
Appraisal Rights......................... 30
Federal Income Tax Consequences.......... 30
Other.................................... 30
THE ACQUISITION............................ 31
The Tacoma Acquisition................... 31
Use of Proceeds from Initial Offering.... 32
THE COMPANY AND PIONEER.................... 33
The Company.............................. 33
Pioneer.................................. 33
CAPITALIZATION............................. 35
PRO FORMA FINANCIAL
INFORMATION.............................. 36
SELECTED HISTORICAL FINANCIAL DATA......... 45
MANAGEMENT'S DISCUSSION AND ANALYSIS F
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................... 48
</TABLE>
<TABLE>
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<S> <C>
BUSINESS................................... 54
General.................................. 54
Industry Overview........................ 54
Strategy................................. 57
Operating Units.......................... 58
Facilities............................... 64
Saguaro Power............................ 67
Basic Investments........................ 67
Competition.............................. 67
Employees................................ 68
Environmental and Safety Regulation...... 68
Insurance................................ 75
Legal Proceedings........................ 75
MANAGEMENT................................. 76
Directors and Executive Officers of
PAAC................................... 76
Executive Compensation................... 78
Pension Plan............................. 81
Employment Agreements and Change-in-
Control Arrangements................... 81
Compensation of Directors................ 82
Compensation Committee Interlocks and
Insider Participation.................. 82
CERTAIN TRANSACTIONS....................... 83
STOCK OWNERSHIP............................ 85
DESCRIPTION OF OTHER INDEBTEDNESS.......... 86
New Credit Facilities.................... 86
First Mortgage Notes..................... 87
Other.................................... 87
DESCRIPTION OF THE NOTES................... 88
General.................................. 88
Payment Terms............................ 88
Ranking.................................. 88
Guarantees............................... 89
Security................................. 90
Intercreditor Agreements................. 91
Certain Bankruptcy Limitations........... 91
Optional Redemption...................... 92
Change of Control........................ 93
Certain Covenants........................ 95
Release of Note Collateral............... 105
Certain Definitions...................... 106
Defaults and Remedies.................... 116
Transfer and Exchange.................... 117
Amendment, Supplement and Waiver......... 117
Legal Defeasance and Covenant
Defeasance............................. 118
The Trustee.............................. 119
Book-entry; Delivery and Form............ 119
ORIGINAL NOTES REGISTRATION RIGHTS......... 121
PLAN OF DISTRIBUTION....................... 123
LEGAL MATTERS.............................. 124
EXPERTS.................................... 124
CHANGE IN INDEPENDENT ACCOUNTANTS.......... 124
INDEX TO FINANCIAL STATEMENTS.............. F-1
</TABLE>
iii
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless the
context otherwise requires, (i) the term PAAC refers to Pioneer Americas
Acquisition Corp., (ii) the terms PAI and Predecessor Company refer to Pioneer
Americas, Inc. and its subsidiaries, (iii) the term Company means PAAC and its
subsidiaries and (iv) the term Pioneer refers to Pioneer Companies, Inc., the
parent company of PAAC. "Pro forma net sales" for Pioneer Chlor Alkali Company,
Inc. gives effect to the acquisition of a chlor-alkali production facility and
related business located in Tacoma, Washington consummated on June 17, 1997 (the
"Tacoma Acquisition"). "Pro forma net sales" for All-Pure Chemical Co. gives
effect to the acquisition of T.C. Products, Inc. ("T.C. Products"), a regional
producer of bleach and related products that was acquired in July 1996. "Pro
forma net sales" and "pro forma EBITDA" for the Company and its subsidiaries
gives effect to these acquisitions. See "The Company and Pioneer".
THE COMPANY
The Company manufactures and markets chlorine and caustic soda and several
related downstream water treatment products. The Company conducts its business
primarily through its subsidiaries: Pioneer Chlor Alkali Company, Inc. ("PCAC"),
with pro forma net sales of $205.7 million for the twelve months ended March 31,
1997, and All-Pure Chemical Co. ("All-Pure"), with pro forma net sales of $54.7
million for such period. The Company also owns a 50% unconsolidated joint
venture interest in Kemwater North America Company ("Kemwater"). For the twelve
months ended March 31, 1997, the Company's pro forma net sales and pro forma
EBITDA (as defined) were $260.4 million and $80.7 million, respectively.
Chlorine and caustic soda are the seventh and sixth most commonly produced
chemicals, respectively, in the United States, based on volume, and are used in
a wide variety of applications and chemical processes. Chlorine and caustic soda
are co-products, concurrently produced in a ratio of 1 to 1.1, respectively,
through the electrolysis of salt water. A chlor-alkali electrochemical unit
("ECU") consists of 1 ton of chlorine and 1.1 tons of caustic soda. During the
twelve months ended March 31, 1997, after giving pro forma effect to the Tacoma
Acquisition, the Company produced approximately 565,800 tons of chlorine and
635,300 tons of caustic soda.
Chlorine is used in the manufacture of over 15,000 products, comprising
approximately 60% of all commercial chemistry, 85% of all pharmaceutical
chemistry and 95% of all crop protection chemistry. Products manufactured with
chlorine as a raw material include water treatment chemicals, plastics,
detergents, pharmaceuticals, disinfectants and agricultural chemicals. Chlorine
is also used directly in water disinfection applications. In the United States
and Canada, virtually all public drinking water is made safe to drink by
chlorination, and a significant portion of industrial and municipal waste water
is treated with chlorine or chlorine derivatives to kill water-borne pathogens
and remove solids.
Caustic soda is a versatile chemical alkali used in a diverse range of
manufacturing processes, including metal smelting, petroleum production and
refining, pulp and paper production and paint manufacturing. Caustic soda is
combined with chlorine and water to produce bleach and is used as an active
ingredient in a wide variety of other end use products, including detergents,
rayon and cellophane.
The Company has expanded its presence in the western United States by
acquiring the Tacoma, Washington-based chlor-alkali business of OCC Tacoma, Inc.
("OCC Tacoma"), a subsidiary of Occidental Chemical Corporation ("OxyChem").
Following the Tacoma Acquisition, the Company owns and operates three
chlor-alkali production facilities, located in St. Gabriel, Louisiana;
Henderson, Nevada; and Tacoma, Washington, with aggregate production capacity of
574,000 ECUs. These facilities produce chlorine and caustic soda for sale in the
merchant markets and for use as raw materials in the ten downstream production
facilities of All-Pure and Kemwater located in California, Washington and
Georgia. The downstream operations use chlorine and caustic soda in the
production of bleach, iron chlorides, polyaluminum chlorides and other water
treatment chemicals. After giving effect to the Tacoma Acquisition and the
acquisition of T.C. Products, the Company used approximately 13% of its chlorine
production capacity and
1
<PAGE> 6
approximately 6% of its caustic soda production capacity to supply substantially
all of the chlorine and caustic soda requirements of its downstream businesses
in 1996.
Primary markets for the Company's products include water treatment for
industrial, municipal and consumer applications, polyvinyl chloride ("PVC") and
other plastics, detergents and agricultural chemicals. The Company believes that
the chlorine and caustic soda currently produced at its Henderson and Tacoma
facilities provide a significant source of supply for the West Coast region,
where the Company is also the largest supplier of chlorine and bleach for water
treatment purposes and where Kemwater is the largest producer of iron chlorides.
The Company believes the St. Gabriel and Tacoma facilities are leading suppliers
of premium, low-salt grade caustic soda in their respective regions. The Company
believes the Tacoma Acquisition will allow the Company to more efficiently
supply its downstream operations in the western and northwestern United States.
THE TACOMA ACQUISITION
On June 17, 1997, Pioneer, the Company and OCC Tacoma, a subsidiary of
OxyChem, consummated the Tacoma Acquisition. Pursuant to the Asset Purchase
Agreement (the "Purchase Agreement"), dated as of May 14, 1997, the Company
acquired substantially all of the assets and properties used by OCC Tacoma in
the chlor-alkali business at Tacoma, Washington, including the Tacoma
chlor-alkali production facility (the "Tacoma Facility"). The purchase price
consisted of (i) $97.0 million, payable in cash, (ii) 55,000 shares of
Convertible Redeemable Preferred Stock, par value $.01 per share, of Pioneer
(the "Pioneer Preferred Stock"), having a liquidation preference of $100 per
share, and (iii) the assumption of certain obligations related to the acquired
chlor-alkali business. The amount of cash to be paid is subject to adjustment
under the terms of the Purchase Agreement.
The Company believes that the Tacoma Acquisition presented an attractive
opportunity to acquire a well-maintained chlor-alkali production facility, which
includes sophisticated membrane cell technology, in a location contiguous to the
Company's existing customer base. By acquiring a low-cost facility in the
Pacific Northwest, the Company is well-positioned to direct output to outlying
market areas while more efficiently supplying the All-Pure and Kemwater
downstream operations, principally in the western and northwestern United
States. The Tacoma Facility provides the Company with an opportunity to further
expand into chlor-alkali markets in the Pacific Northwest based on the Company's
operating efficiencies and disciplined market penetration.
The Tacoma Facility is located in an industrial complex on the Hylebos
waterway. It serves customers in the Pacific Northwest and California and to a
lesser extent, foreign caustic soda customers. Annual capacity is approximately
225,000 tons of chlorine, 247,500 tons of caustic soda, 44,000 tons of
hydrochloric acid and 8,800 tons of calcium chloride. The site has docks capable
of handling ocean-going vessels up to 30,000 DWT size, and is served by a rail
fleet of 492 leased tankcars included as a part of the Tacoma Acquisition. The
Company believes that the plant would have generated pro forma net sales of
$80.5 million and pro forma EBITDA of $33.5 million for the twelve months ended
March 31, 1997, if the Tacoma Acquisition had occurred at the beginning of such
period.
Pursuant to the terms of the Purchase Agreement, the Company, OxyChem and
OCC Tacoma entered into certain related agreements in connection with the Tacoma
Acquisition. Pursuant to a Chlorine Purchase Agreement, OCC Tacoma will purchase
100,000 tons of chlorine from the Company during the year following the Tacoma
Acquisition, which would have represented approximately 6% of the Company's pro
forma net sales for the twelve months ended March 31, 1997. In addition, the
Company has the right to require OCC Tacoma to purchase, and OCC Tacoma has the
right to require the Company to sell, certain decreasing amounts of chlorine
during the second through fifth years following the Tacoma Acquisition. Pursuant
to a Chlorine and Caustic Soda Sales Agreement, the Company will sell to OxyChem
those quantities of chlorine and caustic soda necessary for OxyChem to satisfy
its obligations under contracts with certain of OxyChem's national account
customers.
2
<PAGE> 7
BUSINESS STRATEGY
The Company's management team is pursuing a business strategy designed to
capitalize on its competitive strengths in terms of its marketing expertise,
production and distribution capabilities and geographic focus. The Company seeks
to manage effectively the intrinsic cyclicality of the chlor-alkali industry
while continuing to grow and improve profitability by pursuing a strategy which
includes the following principal elements:
- Focusing on the Merchant Chlor-Alkali Market. The Company is dedicated to
serving the merchant chlor-alkali market, acting as a reliable source of
supply of chlorine and caustic soda. The Company is committed to being
flexible and responsive in periods of volatile chlor-alkali demand,
making it the preferred supplier for many of its customers. Unlike its
major competitors, the Company does not compete with its PVC customers
and, as a result, is viewed as a preferred, non-competing source of raw
materials.
- Optimizing Plant Efficiencies through High Capacity Utilization. The
Company seeks to maximize profitability by achieving a constant flow of
product through its plants. The Company strives to maintain a steady
demand for its output through (i) programs aimed primarily at growing
markets such as PVC and water treatment; (ii) renewable contracts with
major customers and the Chlorine Purchase Agreement with OCC Tacoma;
(iii) direct linkage with major customers via pipelines, including a
proposed seven-mile liquid chlorine pipeline from the St. Gabriel
facility (the "Pipeline Project") expected to be completed in 1998; and
(iv) captive demand for chlorine and caustic soda through its downstream
water treatment operations. As a result of these actions, the Company's
Henderson and St. Gabriel chlor-alkali plants have operated at 101%, 100%
and 100% capacity utilization during 1994, 1995 and 1996, respectively,
up from 93% in 1990.
- Improving Cost Efficiency. The Company continually seeks to improve its
cost competitiveness through a combination of productivity enhancements,
strict operating cost controls, capital improvements and maintenance of
high capacity utilization rates. Despite inflation, the Company's cash
production costs per ECU decreased by 5% from 1990 through 1996, while
ECU production per employee increased by 20%. In addition, the Company
seeks to reduce distribution costs and improve plant operating efficiency
through the efficient use of its strategic locations with deep water port
facilities, direct pipeline connections to customers and opportunistic
product exchanges with chlor-alkali producers in other regions.
- Focusing on Geographic Diversity and Market Penetration. The Company's
products are manufactured and marketed in a number of markets, providing
a wide base for future growth and distribution to help mitigate the
effects of regional and economic fluctuations. Following the Tacoma
Acquisition, the Company has major chlor-alkali facilities in three
states (Louisiana, Nevada and Washington) and downstream water treatment
chemical processing plants serving several distinct areas of the country.
The Company is well-positioned to direct its chlor-alkali output to
additional areas while more efficiently supplying the growth in its own
downstream operations in the western, northwestern and southeastern
United States. Through focused expansion, the Company has been able to
penetrate new and outlying market areas while maintaining its strong
presence in the Gulf Coast region and areas west of the Rocky Mountains.
- Expanding Water Treatment Operations. The Company has developed water
treatment operations whose steady requirements for chlorine and caustic
soda help maintain high operating rates at the Company's chlor-alkali
facilities which, in turn, decreases unit production costs. In addition
to serving as a source of demand, these growing businesses service
diverse product markets and regions and can tend to offset industry
cyclicality in the chlorine and caustic soda markets by providing a more
stable downstream source of revenue.
- Growing through Product Line Extensions and Strategic
Acquisitions. Management believes that there are significant
opportunities to continue the Company's growth both internally and
through strategic acquisitions. The Company focuses its product
development efforts on areas identified by its customers
3
<PAGE> 8
as being of major commercial importance. For example, in the area of water
treatment, the Company has developed or acquired rights to a number of
innovative coagulant products which represent cost effective, advanced
waste water treatment solutions. In addition, the Company is constantly
reviewing acquisitions in related markets and since 1990 has consummated
five downstream acquisitions, which provide attractive product offerings
and geographic coverage.
RECENT INDUSTRY TRENDS
The chlorine and caustic soda markets are cyclical markets that are
sensitive to relative changes in supply and demand, which are in turn affected
by general economic conditions, capacity additions and other factors. Over the
last five years, the market for PVC, the largest use of chlorine in the United
States, has experienced steady growth, resulting in strong demand for chlorine.
However, the use of chlorine as a bleaching agent in the pulp and paper industry
and as feedstock in the production of chlorofluorocarbons ("CFCs") has been
reduced significantly due to regulatory pressures. As a result of these factors
and a general decline in economic growth in the early 1990s, the North American
chlor-alkali industry experienced declining prices, as ECU prices fell by over
52% from $389 per ECU in the fourth quarter of 1989 to $185 per ECU in the
second quarter of 1993. After a significant improvement in domestic economic
growth, in early 1994 chlor-alkali markets experienced increased levels of
demand. Limited new capacity was added during this time, resulting in greater
capacity utilization and higher domestic and export prices for chlor-alkali
products. These conditions continued in 1995 and the increase in demand enabled
the Company and the industry in general to increase selling prices significantly
at a time when operating costs generally did not increase. Toward the end of
1995, however, ECU prices began to decrease as strengthening demand for chlorine
was offset by an oversupply of caustic soda. The industry has continued to
operate at full capacity and management does not anticipate a significant
increase in capacity over the next several years. The Company therefore believes
that the previous volatility in ECU prices should moderate over such period.
THE COMPANY AND PIONEER
PAAC is a wholly-owned subsidiary of Pioneer, a publicly-traded company
that immediately prior to the acquisition of PAI had no operations. Pioneer has
an available net operating loss carryforward for federal income tax reporting
purposes which it believes was approximately $36.8 million at March 31, 1997. In
April 1995, PAAC acquired PAI for a purchase price, including the retirement of
debt and the redemption of preferred stock, of approximately $152.3 million in
cash and $11.5 million of subordinated promissory notes of Pioneer, as well as
certain amounts payable after the closing based on certain of PAI's real estate
holdings.
Interlaken Investment Partners, L.P., a Delaware limited partnership (the
"Interlaken Partnership"), beneficially owns approximately 34.9% of the voting
power of Pioneer, and William R. Berkley, Chairman of Pioneer and PAAC (who may
be deemed to beneficially own all shares of Pioneer common stock held by the
Interlaken Partnership), may be deemed to beneficially own approximately 56.0%
of the voting power of Pioneer. See "Stock Ownership."
4
<PAGE> 9
THE REFINANCINGS
Concurrent with the closing of the Tacoma Acquisition on June 17, 1997, the
Company consummated a series of related transactions (the "Refinancings")
comprised of (i) the Initial Offering, (ii) a cash tender offer (the "Tender
Offer") to purchase all of its existing 13 3/8% First Mortgage Notes due 2005
(the "First Mortgage Notes") and the related solicitation of consents (the
"Consent Solicitation") and (iii) borrowings of $100.0 million in term loans
under a new term loan facility.
THE TENDER OFFER AND CONSENT SOLICITATION
On May 19, 1997, PAAC commenced the Tender Offer for all of its existing
First Mortgage Notes and the related Consent Solicitation from holders of the
First Mortgage Notes to delete or modify certain covenants and other provisions
governing the First Mortgage Notes. On June 17, 1997, all outstanding First
Mortgage Notes were repurchased in the Tender Offer.
NEW CREDIT FACILITIES
On June 17, 1997, the Company entered into new credit facilities (the "New
Credit Facilities"), consisting of a $100.0 million term loan facility (the
"Term Facility") and a $35.0 million revolving loan and letter of credit
facility (the "Revolving Facility"). See "Description of Other
Indebtedness -- New Credit Facilities."
Term Facility
The Company entered into the Term Facility, to provide for term loans (the
"Term Loans") in an aggregate principal amount up to $100.0 million. The Company
borrowed $100.0 million in Term Loans on June 17, 1997 in connection with the
Refinancings and the Tacoma Acquisition.
Revolving Facility
The Company entered into the Revolving Facility, to provide for revolving
loans (the "Revolving Loans") in an aggregate principal amount up to $35.0
million, of which up to $10.0 million will be available for the issuance of
letters of credit. The Company did not incur Revolving Loans at closing in
connection with the Refinancings and the Tacoma Acquisition but had $2.8 million
in letters of credit outstanding at such time under the Revolving Facility.
5
<PAGE> 10
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange (the "Exchange
Offer") up to $200,000,000 aggregate principal
amount of 9 1/4% Series B Senior Secured Notes due
2007 (the "Exchange Notes") for up to $200,000,000
aggregate principal amount of its outstanding
9 1/4% Series A Senior Secured Notes due 2007
issued in reliance upon an exemption from
registration under the Securities Act (the
"Original Notes"). The terms of the Exchange Notes
will be substantially identical in all respects
(including principal amount, interest rate,
maturity and ranking) to the terms of the Original
Notes for which they may be exchanged pursuant to
the Exchange Offer, except that (i) the Exchange
Notes will be freely transferable by holders
thereof except as provided herein (see "The
Exchange Offer -- Terms of the Exchange" and
"-- Terms and Conditions of the Letter of
Transmittal") and (ii) the Exchange Notes will be
issued without any covenant regarding registration
under the Securities Act.
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than any
holder which is (i) an "affiliate" of the Issuers
within the meaning of Rule 405 under the Securities
Act, (ii) a broker-dealer who acquired Original
Notes directly from an Issuer or (iii)
broker-dealers who acquired Original Notes as a
result of market making or other trading
activities) without compliance with the
registration and prospectus delivery provisions of
the Securities Act provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged
in, and do not intend to engage in, and have no
arrangement or understanding with any person to
participate in, a distribution of such Exchange
Notes.
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Original
Notes being tendered for exchange.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997 unless
extended (the "Expiration Date").
Exchange Date.............. The first date of acceptance for exchange for the
Original Notes will be the first business day
following the Expiration Date.
Conditions to the Exchange
Offer.................... The obligation of the Issuers to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer -- Conditions to the
Exchange Offer." The Issuers reserve the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
any such condition.
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Original Notes not accepted
for any reason will be returned without expense to
the tendering holders thereof as promptly as
practicable after the expiration or termination of
the Exchange Offer.
Procedures for Tendering
Original Notes........... See "The Exchange Offer -- How to Tender."
6
<PAGE> 11
Federal Income Tax
Consequences............. The exchange of Original Notes for Exchange Notes
by holders will not be a taxable exchange for
federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest
income as a result of such exchange.
Effect on Holders of
Original Notes............. As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Original Notes pursuant to the terms of
this Exchange Offer, the Issuers will have
fulfilled a covenant contained in the terms of the
Original Notes and the Exchange and Registration
Rights Agreement (the "Registration Rights
Agreement") dated as of June 17, 1997 between the
Issuers, Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Brothers Inc, as initial
purchasers, and, accordingly, the holders of the
Original Notes will have no further registration or
other rights under the Registration Rights
Agreement, except under certain limited
circumstances. See "Original Notes Registration
Rights." Holders of the Original Notes who do not
tender their Original Notes in the Exchange Offer
will continue to hold such Original Notes and will
be entitled to all the rights and limitations
applicable thereto under the Indenture, dated as of
June 17, 1997, among the Company, the Subsidiary
Guarantors and United States Trust Company of New
York, as Trustee (the "Trustee"), relating to the
Original Notes and the Exchange Notes (the
"Indenture"). All untendered, and tendered but
unaccepted, Original Notes will continue to be
subject to the restrictions on transfer provided
for in the Original Notes and the Indenture. To the
extent that Original Notes are tendered and
accepted in the Exchange Offer, the trading market,
if any, for the Original Notes could be adversely
affected. See "Risk Factors -- Consequences of
Failure to Exchange."
TERMS OF THE NOTES
The Exchange Offer applies to $200,000,000 aggregate principal amount of
the Original Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Original Notes for which they may be exchanged except that
the Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof. The Exchange Notes will
evidence the same debt as the Original Notes and will be entitled to the
benefits of the Indenture. See "Description of the Notes."
Notes Offered.............. $200,000,000 aggregate principal amount of 9 1/4%
Series B Senior Secured Notes due 2007.
Maturity................... June 15, 2007.
Interest Payment Dates..... June and December of each year, commencing December
15, 1997.
Ranking.................... The Notes will be senior obligations of the
Company, and will rank pari passu with all existing
and future Senior Indebtedness of the Company and
senior to all Subordinated Indebtedness of the
Company. The Notes, however, will be effectively
subordinated to secured Senior Indebtedness of the
Company and its subsidiaries with respect to the
assets securing such Indebtedness. Such secured
Senior Indebtedness will include loans under the
New Credit Facilities. The Guarantee of PCAC with
respect to the Notes and the Term Loans is
effectively
7
<PAGE> 12
secured (i) by a first mortgage lien on the Tacoma
Facility, (ii) by a first priority security
interest in certain agreements related to the
Tacoma Acquisition and (iii) by first mortgage
liens on the Henderson and St. Gabriel facilities.
The guarantee of PAI with respect to the Notes and
the Term Loans is secured by a pledge of the
Capital Stock of PCAC and All-Pure held by PAI. In
addition, the Company and its Subsidiaries may
incur up to $50.0 million of Senior Indebtedness
which will be secured on a pari passu basis with
the Notes. As of March 31, 1997, after giving pro
forma effect to the Initial Offering and the
Refinancings, the Company and its Subsidiaries
would have had outstanding approximately $306.8
million aggregate principal amount of secured
Senior Indebtedness. As of March 31, 1997, on a pro
forma basis, the Company and its Subsidiaries would
have had, subject to certain restrictions
(including borrowing base limitations), the ability
to draw up to $32.2 million of additional secured
Senior Indebtedness under the Revolving Facility.
See "Risk Factors -- Ranking of the Notes,"
"Description of Other Indebtedness -- New Credit
Facilities" and "Description of the
Notes -- Ranking."
Security................... The Notes will be effectively secured by the Note
Collateral (as defined). Pursuant to an
Intercreditor and Collateral Agency Agreement (the
"Intercreditor Agreement") by and among the
Company, PAI, PCAC, the Trustee under the
Indenture, the agent under the Term Facility (the
"Term Loan Agent") and the collateral agent
thereunder (the "Collateral Agent"), the Collateral
Agent will hold the Collateral (as defined)
securing the Notes and the Term Loans for the equal
and ratable benefit of the Trustee, the holders of
the Notes, the Term Loan Agent and the holders of
the Term Loans. The Collateral will be limited to
(i) a first mortgage lien on the Tacoma Facility
(including real property, buildings, fixtures and
certain equipment), (ii) a first priority security
interest in certain agreements related to the
Tacoma Acquisition, (iii) first mortgage liens on
the Henderson and St. Gabriel facilities (including
real property, buildings, fixtures and certain
equipment) and (iv) a pledge of the Capital Stock
of PCAC and All-Pure. The Intercreditor Agreement
will provide generally that the holders of a
majority of the obligations secured by the
Collateral may direct the Collateral Agent with
respect to certain matters. The Indenture will
provide that any release of Note Collateral,
including Trust Moneys, will be subject to the
provisions of Section 314(d) of the Trust Indenture
Act relating to, among other things, the delivery
of a certificate or an opinion of an engineer,
appraiser or other expert as to the fair value of
Note Collateral being released from the Liens of
the Security Documents. See "Description of the
Notes -- Security" and "-- Intercreditor
Agreement."
Guarantees................. The Notes will be fully and unconditionally
guaranteed on a senior basis by the Subsidiary
Guarantors (which will be PAI and its
subsidiaries). The Guarantee of each Subsidiary
Guarantor will rank pari passu with all existing
and future Senior Indebtedness of such Subsidiary
Guarantor and senior to all Subordinated
Indebtedness, if any, of such Subsidiary Guarantor,
except that the Guarantees will be effectively
subordinated to secured Senior Indebtedness of the
Subsidiary Guarantors with respect to the assets
securing such Indebtedness. The Guarantees will be
joint and several obligations of the Subsidiary
Guarantors. PCAC has granted
8
<PAGE> 13
liens on certain of its assets and property
(including the Tacoma Facility) to secure its
Guarantee of the Notes, and PAI has pledged the
Capital Stock of PCAC and All-Pure to secure PAI's
Guarantee of the Notes. See "Description of the
Notes -- Guarantees."
Optional Redemption........ The Notes will be redeemable in cash at the option
of the Company, in whole or in part, at any time or
from time to time on or after June 15, 2002, at the
redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of
redemption. In addition, the Company may also
redeem in cash at its option at any time prior to
June 15, 2000 up to 35% of the aggregate principal
amount of the Notes originally issued at a purchase
price of 109.25% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption, with
the net proceeds of (i) an Equity Offering by the
Company or (ii) an Equity Offering by Pioneer, but
only to the extent that Pioneer contributes such
net proceeds to the Company as a capital
contribution; provided that at least 65% of the
aggregate principal amount of the Notes originally
issued remains outstanding immediately after giving
effect to such redemption. See "Description of the
Notes -- Optional Redemption."
Change of Control.......... Upon a Change of Control, each holder of the Notes
will have the right to require the Company to
repurchase all or a portion of such holder's Notes
then outstanding at a purchase price equal to 101%
of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to
the date of repurchase. The Company's ability to
repurchase the Notes may be limited by, among other
things, the Company's financial resources at the
time of repurchase. See "Risk Factors -- Change of
Control" and "Description of the Notes -- Change of
Control."
Certain Covenants.......... The indenture governing the Notes (the "Indenture")
contains certain covenants with respect to the
Company and its subsidiaries which restrict, among
other things, (a) the incurrence of additional
indebtedness, (b) the payment of dividends and
other restricted payments, (c) the creation of
certain liens, (d) the use of proceeds from sales
of assets and subsidiary stock, (e) sale and
leaseback transactions and (f) transactions with
affiliates. The Indenture also restricts the
Company's ability to consolidate or merge with or
into, or to transfer all or substantially all of
its assets to, another person. These restrictions
and requirements are subject to a number of
important qualifications and exceptions. See
"Description of the Notes -- Certain Covenants."
Exchange Offer;
Registration Rights........ Pursuant to an Exchange and Registration Rights
Agreement (the "Registration Rights Agreement")
among the Company, the Subsidiary Guarantors and
the Initial Purchasers, the Company and the
Subsidiary Guarantors have agreed to file by the
30th day following the date of closing of the
Initial Offering (the "Closing Date") a
registration statement (the "Exchange Offer
Registration Statement") with respect to an offer
to exchange the Original Notes for the Exchange
Notes, which will be registered under the
Securities Act with terms (other than restrictions
on transfer as set forth in "Notices to Investors")
substantially identical to those of the Original
Notes and to use their best efforts to cause such
registration statement to become effective by the
150th day
9
<PAGE> 14
following the Closing Date and, upon becoming
effective, to commence the Exchange Offer and cause
the same to remain open for acceptance for not less
than 20 business days after the date of
commencement. If the Exchange Offer is not
consummated within 30 business days following the
date the Exchange Offer Registration Statement is
declared effective or, under certain circumstances,
the initial purchasers in the Initial Offering (the
"Initial Purchasers") so request, the Company and
the Subsidiary Guarantors will file and use their
best efforts to cause to be declared effective a
shelf registration statement with respect to
resales of the Original Notes from time to time and
will use their best efforts to keep such
registration statement effective until three years
after the effective date thereof.
If the applicable registration statement is not
filed or declared effective or ceases to be
effective or the Exchange Offer is not consummated
within the applicable time periods related thereto
(each, a "Registration Default"), the Company will
be required to pay Liquidated Damages to each
holder of the Original Notes, in the amount of $.05
per week per $1,000 principal amount of Original
Notes for the initial 90-day period following such
Registration Default. The amount of such Liquidated
Damages will increase by an additional $.05 per
week per $1,000 principal amount of Original Notes
at the beginning of each subsequent 90-day period,
up to a maximum amount of $.50 per week per $1,000
principal amount of Original Notes. If,
subsequently, such Registration Default is cured,
the accrual of Liquidated Damages will cease. See
"Original Notes Registration Rights."
Use of Proceeds............ There will be no proceeds to the Issuers from the
exchange pursuant to the Exchange Offer. The net
proceeds from the Initial Offering, together with
borrowings under the Term Facility, were used to
pay the cash portion of the purchase price of the
Tacoma Acquisition, to repurchase First Mortgage
Notes in the Tender Offer, to pay the consent fee
in the Consent Solicitation and for working capital
and general corporate purposes. See "The
Acquisition."
Transfer Restrictions...... The Original Notes have not been registered under
the Securities Act or under the securities laws of
any state and may not be offered or sold within the
United States or to, or for the benefit of, U.S.
persons except pursuant to an exemption from, or in
a transaction not subject to, the registration
requirements of the Securities Act or applicable
state securities laws.
Risk Factors............... Holders of Original Notes should carefully consider
the matters set forth under the caption "Risk
Factors" prior to making a decision with respect to
the Exchange Offer. See "Risk Factors."
10
<PAGE> 15
SUMMARY CONSOLIDATED FINANCIAL DATA
The following financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Selected Historical Financial Data," "Pro Forma Financial
Information" and the audited and unaudited historical financial statements of
the Company and the Tacoma Plant and the respective notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA(4)
------------------------
PREDECESSOR TWELVE
COMPANY COMBINED THREE MONTHS THREE MONTHS MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31, DECEMBER 31, MARCH 31,
1994(1) 1995(2) 1996(3) 1996 1997 1996 1997(5)
------------ ------------ ------------ ------------ ------------ ------------ ---------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................... $167,217 $200,756 $183,326 $44,292 $38,743 $267,238 $260,397
Cost of sales............... 134,556 135,575 126,739 30,797 29,003 181,680 179,134
-------- -------- -------- ------- ------- -------- --------
Gross profit................ 32,661 65,181 56,587 13,495 9,740 85,558 81,263
Selling, general and
administrative expenses... 22,529 26,883 23,528 6,090 6,170 27,207 26,837
-------- -------- -------- ------- ------- -------- --------
Operating income............ 10,132 38,298 33,059 7,405 3,570 58,351 54,426
Equity in net income (loss)
of unconsolidated
subsidiary................ 183 204 (2,607) (110) (1,055) (2,607) (3,552)
Interest expense, net....... 6,407 14,570 17,290 3,944 4,458 26,390 26,768
Settlement of litigation and
insurance claims, net..... 3,326 -- -- -- -- -- --
Other income, net........... 1,154 318 1,684 89 231 1,702 1,883
-------- -------- -------- ------- ------- -------- --------
Income (loss) before income
taxes and extraordinary
items..................... 8,388 24,250 14,846 3,440 (1,712) 31,056 25,989
Income tax provision........ 3,242 11,017 6,735 2,028 178 12,380 10,450
-------- -------- -------- ------- ------- -------- --------
Income (loss) before
extraordinary item........ 5,146 13,233 8,111 1,412 (1,890) $ 18,676 $ 15,539
======== ========
Extraordinary item, net of
applicable tax(6)......... -- 3,420 -- -- --
-------- -------- -------- ------- -------
Net income (loss)........... $ 5,146 $ 9,813 $ 8,111 $ 1,412 $(1,890)
======== ======== ======== ======= =======
OTHER FINANCIAL DATA:
Depreciation and
amortization.............. 13,595 16,764 15,695 4,217 4,080 24,717 24,382
Capital expenditures........ 5,681 17,003 17,121 3,907 2,337 21,900 20,057
ADDITIONAL INFORMATION:
EBITDA(7)................... $ 28,207 $ 55,380 $ 50,438 $11,711 $ 7,881 $ 84,770 $ 80,691
Ratio of pro forma EBITDA to
pro forma interest........ 3.2x 3.0x
Ratio of pro forma net debt
to pro forma EBITDA....... 3.1x 3.2x
OPERATING DATA:
Average ECU price........... $ 327 $ 414 $ 385 $ 385 $ 377 $ 374 $ 371
ECU production (in
thousands)................ 321.1 327.9 345.7 86.4 85.0 559.7 565.8
Annualized ECU production
per employee.............. 1,189 1,123 1,137 1,137 1,118 1,186 1,199
Chlor-alkali operating
rate...................... 101% 100% 100% 99% 97% 98% 99%
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
------------------------
ACTUAL PRO FORMA(4)
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 3,026 $ 40,662
Total assets................................................ 291,595 443,453
Total debt.................................................. 141,757 306,757
Common stockholders' equity................................. 72,433 59,291
</TABLE>
(see footnotes on following page)
11
<PAGE> 16
- ---------------
(1) GPS Pool Supply, Inc. ("GPS") was acquired in May 1994 and therefore the
results of operations for the year ended December 31, 1994 include the
results of operations from the date of acquisition in May 1994 through
December 31, 1994. GPS generated third party sales during such partial
period of $9.4 million.
(2) For comparative purposes the combined results of operations for the year
ended December 31, 1995 include the Company's operating results for the
period from Inception through December 31, 1995 and the Predecessor
Company's operating results from January 1, 1995 through April 20, 1995. The
Company believes that this provides a meaningful basis for comparison.
(3) Kemwater was formed in connection with the acquisition of Kemira Water
Treatment, Inc. ("KWT") in February 1996 to continue the business activities
previously conducted by Imperial West Chemical Co. ("Imperial West") and,
accordingly, the results of operations for the year ended December 31, 1996
include the results of operations of Imperial West only for the month of
January 1996. Since the acquisition, 50% of Kemwater's results of operations
are included as equity in net loss of unconsolidated subsidiary. Prior to
the formation of Kemwater, the financial statements of Imperial West were
consolidated with the Company's consolidated financial statements.
(4) The pro forma statement of income data for the year ended December 31, 1996
gives effect to the Initial Offering, the other Refinancings, the Tacoma
Acquisition and the acquisition of T.C. Products as if they had occurred on
January 1, 1996. The pro forma statement of income data for the twelve
months ended March 31, 1997 gives effect to the Initial Offering, the other
Refinancings, the Tacoma Acquisition and the acquisition of T.C. Products as
if they had occurred on April 1, 1996. The pro forma balance sheet data as
of March 31, 1997 gives effect to the Initial Offering, the other
Refinancings and the Tacoma Acquisition as if they had occurred on March 31,
1997. The pro forma financial data is not necessarily indicative of either
future results of operations or the results that might have occurred if the
foregoing transactions had been consummated on the indicated date.
(5) The pro forma financial information for the twelve months ended March 31,
1997 is calculated by subtracting the pro forma three months ended March 31,
1996 from the pro forma year ended December 31, 1996 and adding the pro
forma three months ended March 31, 1997.
(6) An extraordinary item of $3.4 million, net of an income tax benefit of $2.1
million, was due to costs incurred and previously capitalized costs written
off, pertaining to debt refinanced by the Predecessor Company prior to the
PAI Acquisition.
(7) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization and equity in net income (loss) of unconsolidated
subsidiaries and is presented because the Company believes that it provides
useful information regarding its ability to service and/or incur debt.
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other combined income or
cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of the Company's profitability or
liquidity.
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RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Original Notes for the Exchange Notes offered hereby, holders of
Original Notes should consider carefully the following factors, which may be
generally applicable to the Original Notes as well as the Exchange Notes:
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Issuers do
not intend to register the Original Notes under the Securities Act. In addition,
any holder of Original Notes who tenders in the Exchange Offer for the purpose
of participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. To the extent Original Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for the
Original Notes not tendered could be adversely affected. See "The Exchange
Offer" and "Original Notes Registration Rights."
FINANCIAL LEVERAGE
As of March 31, 1997, after giving pro forma effect to the Initial
Offering, the other Refinancings and the Tacoma Acquisition, PAAC would have had
approximately $306.8 million of indebtedness and $59.3 million of stockholders'
equity. See "Capitalization."
The degree to which PAAC is leveraged could have important consequences to
holders of the Notes, including the following: (i) the Company has significant
cash interest expense for the Notes and other debt; (ii) the Company's
significant degree of leverage could make it vulnerable to changes in industry
and general economic conditions; and (iii) the Company's ability to obtain
additional financings for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired.
In addition, the Company's operating flexibility with respect to certain
business matters is limited by covenants contained in the Indenture and in the
New Credit Facilities. Among other things, these covenants limit the ability of
the Company and its subsidiaries to incur additional indebtedness, create liens
upon assets, apply the proceeds from disposal of assets, make dividend payments
and other distributions on capital stock and redeem any capital stock. There can
be no assurance that such covenants will not adversely affect the Company's
ability to finance its future operations or capital needs or to engage in other
business activities which may be in the interest of the Company. See
"Description of Other Indebtedness -- New Credit Facilities" and "Description of
the Notes -- Certain Covenants."
PAAC expects to generate sufficient cash flow from operations to meet its
debt service obligations. However, the ability of the Company to satisfy its
obligations, including its obligations on the Notes, will be dependent upon the
future performance of the Company and will be subject to financial, business and
other factors affecting the business and operations of the Company, including
factors beyond its control, such as prevailing economic conditions and
regulatory matters. See "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
INDUSTRY CYCLICALITY
Substantially all of the Company's revenues are attributable to the sale of
chlorine, caustic soda and other chemicals that use chlorine or caustic soda as
a primary raw material. The chlorine and caustic soda markets are cyclical
markets that are sensitive to relative changes in supply and demand, which are
in turn affected by general economic conditions, capacity additions and other
factors. Over the last five years, the market for
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PVC, the largest use of chlorine in the United States, has experienced steady
growth, resulting in strong demand for chlorine. However, the use of chlorine as
a bleaching agent in the pulp and paper industry and as feedstock in the
production of CFCs has been reduced significantly due to regulatory pressures.
As a result of these factors and a general decline in economic growth in the
early 1990s, the North American chlor-alkali industry experienced declining
prices, as ECU prices fell by over 52% from $389 per ECU in the fourth quarter
of 1989 to $185 per ECU in the second quarter of 1993. After a significant
improvement in domestic economic growth in early 1994, chlor-alkali markets
experienced increased levels of demand. Limited new capacity was added during
this time, resulting in greater capacity utilization and higher domestic and
export prices for chlor-alkali products. These conditions continued in 1995 and
the increase in demand enabled the Company and the industry in general to
increase selling prices significantly at a time when operating costs generally
did not increase. Toward the end of 1995, however, ECU prices began to decrease
as strengthening demand for chlorine was offset by an oversupply of caustic
soda. There can be no assurance that demand for the Company's products will be
sustained or that it will keep pace with unanticipated capacity additions or
that other events which may adversely affect the supply/demand balance for
chlorine and caustic soda will not occur.
ENVIRONMENTAL REGULATION
The Company and its operations are subject to extensive federal, state and
local laws, regulations, rules and ordinances relating to pollution, the
protection of the environment and the release or disposal of regulated
materials. The operation of any chemical manufacturing plant and the
distribution of chemical products entail obligations under current environmental
laws, and present or future laws may affect the Company's capital and operating
costs relating to compliance, impose cleanup requirements with respect to site
contamination resulting from past, present or future spills and releases and
affect the markets for the Company's products. Furthermore, there can be no
assurance that such costs or liabilities will not be material.
The Company relies on indemnification from the previous owners in
connection with certain environmental liabilities at its chlor-alkali plants and
other facilities. There can be no assurance, however, that such indemnification
arrangements will be adequate to protect the Company from environmental
liabilities at these sites or that such third parties will perform their
obligations under the respective indemnification arrangements, in which case the
Company would be required to incur significant expenses for environmental
liabilities, which would have a material adverse effect on the Company. See
"Business -- Environmental and Safety Regulation -- Indemnities."
Compliance Costs. Environmental laws and regulations impose requirements
pertaining to emissions to the air, discharges to water, management and disposal
of solid and hazardous wastes and other activities of the Company in connection
with its manufacturing operations. Failure to observe these requirements may
lead to enforcement actions brought by governmental agencies or private parties,
and can lead to substantial civil or criminal fines and other penalties. The
Company believes that its operations are currently in general compliance with
environmental laws and regulations, the violation of which could result in a
material adverse effect on the Company's business, properties or results of
operations on a consolidated basis. There can be no assurance, however, that
material costs will not be incurred as a result of instances of noncompliance or
new regulatory requirements.
Cleanup Costs. Environmental laws and regulations also impose liability for
the cleanup of contamination, even if the contamination resulted from historical
activities that were in compliance with applicable legal requirements at the
time they occurred. Such costs may arise at facilities owned or operated by the
Company or at off-site facilities to which the Company sent wastes for
treatment, storage or disposal. As a result of historical activities, incidental
spills or other releases, many of the facilities owned or operated by the
Company are known to be, or could be, affected by contamination of soil or
groundwater. The Company has conducted investigations, including Phase I
pre-acquisition assessments and, in some cases, soil or groundwater sampling, at
its facilities and has implemented or is implementing cleanup actions where
required by regulatory authorities. The investigations have generally been
non-invasive in nature and are inherently limited in the sense that conclusions
are drawn and recommendations developed from information obtained from limited
research and site evaluation; there can be no assurance that any such
investigation can determine the
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<PAGE> 19
existence of any hazardous materials at a given site. In addition, the Company,
along with other parties with an interest in the Henderson, Nevada industrial
complex, has entered into a consent agreement with the State of Nevada, pursuant
to which the Company has submitted a "Phase I Environmental Conditions
Assessment." The Company has also executed a Phase II Consent Agreement, which
covers additional investigation of the plant site, including sampling. The
Company is also aware of certain claims that have been asserted with respect to
off-site facilities, which claims could lead to liability for the Company. See
"Business -- Environmental and Safety Regulation -- Superfund" and
"-- Remediation Matters." Such investigation and cleanup activities have not had
a material adverse effect on the operations or financial results of the Company
to date. There can be no assurance, however, that the Company is aware of all
such site contamination issues, that regulatory authorities will not require
cleanup in the future for sites that are not currently being remediated, or that
remedial standards will not become more stringent. Accordingly, no assurance can
be given that such activities will not have a material adverse effect on the
operations or financial results of the Company in the future.
Environmental Regulation of Products. Environmental regulations can
directly or indirectly affect the markets for the Company's products by
regulating the uses of the Company's products or the chemicals or materials made
from those products. Certain environmental groups and international commissions
have urged the restriction or ban of chlorine-related processes and products,
based on concerns that the products or by-products from these applications might
cause damage to human health or the environment. Such pressures may stimulate
regulatory initiatives which could have the effect of reducing the use of
chlorine by customers in the Company's markets or could have the effect of
increasing competition from other chlorine producers with respect to the
Company's markets. Each such effect was experienced by the Company from 1990 to
1992 following increased regulation of the use of CFCs, although during that
period demand for chlorine from other market segments more than offset the loss
of demand from reduced production of CFCs. The Company is working with other
industry representatives to advocate a risk-based scientific approach for
evaluating the alleged health and environmental risks of chlorine and
chlorinated compounds, which are used in a broad range of consumer products,
including water, plastics, detergents, agricultural chemicals and
pharmaceuticals. See "Business -- Environmental and Safety Regulation."
Environmental Cost Summary. The Company's operating expenses relating to
environmental matters totaled $1.7 million during the year ended December 31,
1996 and $0.3 million for the three months ended March 31, 1997. The Company
does not anticipate a material increase in these types of expenses during the
remainder of 1997. Capital expenditures for environmental related matters were
$4.3 million during the year ended December 31, 1996 and are expected to be
approximately $4.1 million in 1997. Capital expenditures and, to a lesser
extent, costs and operating expenses relating to environmental matters for years
after 1997 will be subject to evolving regulatory requirements and will depend
to a great degree on the types of procedures that may be approved by various
federal and state governmental agencies with respect to environmental clean-up.
Henderson Remediation Matters; ZENECA Indemnity; PAI Sellers'
Indemnity. The Company's plant in Henderson, Nevada is located within an area
known as the "Basic Complex" that was originally owned by and constructed under
the direction of the United States government in the 1940s and since that time
has been used for chemical manufacturing by several companies. Soil and
groundwater contamination have been identified within and adjoining the land
owned by the Company. See "Business -- Environmental and Safety
Regulation -- Remediation Matters."
Certain of the Company's environmental liabilities in connection with the
Henderson facility are addressed by indemnifications provided by the previous
owner of the Henderson facility, and by the sellers under the PAI Acquisition
Agreement (as defined). The Henderson plant was acquired by the Company in
October 1988 in connection with the purchase of Stauffer Chlor Alkali Company,
Inc. from ICI Delaware Holdings, Inc. ("ICI"), a subsidiary of ICI Americas,
Inc. ("ICI Americas"). Under the acquisition agreement relating to such
acquisition, ICI indemnified the Company for certain environmental liabilities
that might be incurred by the Company as a result of actions occurring prior to
the closing date, including actions (other than chlor-alkali related actions) at
the Henderson property and liabilities for actions at other sites in the Basic
Complex and liabilities arising in connection with off-site disposal sites. See
"Business --
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Environmental and Safety Regulation -- Indemnities." The Company has been
advised by ZENECA Delaware Holdings, Inc. and ZENECA, Inc. (collectively, the
"ZENECA Companies") that the indemnity obligations of ICI and ICI Americas under
the acquisition agreement have been assumed by the ZENECA Companies.
Payments for environmental liabilities under the indemnity from the ZENECA
Companies (the "ZENECA Indemnity"), together with other non-environmental
liabilities for which ICI agreed to indemnify the Company, cannot exceed
approximately $65 million. Through March 31, 1997, the Company has been
reimbursed for approximately $12 million of costs covered by the ZENECA
Indemnity, but the ZENECA Companies may have directly incurred additional costs
that would further reduce the total amount remaining under the ZENECA Indemnity.
As a result of the PAI Acquisition, the ZENECA Indemnity will terminate in
accordance with its terms on April 20, 1999, except with respect to claims as to
which PAI has satisfied the contractual requirements for extending the
indemnity. See "Business -- Environmental and Safety Regulation -- Indemnities."
In April 1995, pursuant to a Stock Purchase Agreement, dated as of March
24, 1995 (the "PAI Acquisition Agreement"), PAAC acquired PAI (the "PAI
Acquisition") for a purchase price, including the retirement of debt and the
redemption of preferred stock, of approximately $152.3 million in cash and $11.5
million of subordinated promissory notes of Pioneer (the "Pioneer Seller
Notes"), as well as certain amounts payable after the closing based upon
earnings or proceeds attributable to certain of PAI's direct and indirect real
estate holdings which were not necessary for PAI's chlor-alkali business. In the
PAI Acquisition Agreement, the sellers agreed to indemnify Pioneer, PAAC and
their affiliates for certain environmental liabilities that result from certain
discharges of hazardous materials, or violations of environmental laws, arising
prior to the PAI Acquisition from or relating to the PAI plant sites or arising
before or after the PAI Acquisition with respect to certain environmental
liabilities relating to the real estate owned by Basic Investments and Victory
Valley (each as defined) and certain real property adjoining the sites of the
Company's Henderson, St. Gabriel and Mojave plants (collectively, the
"Contingent Payment Properties"). See "Business -- Basic Investments." Amounts
payable pursuant to such indemnification obligations (the "PAI Sellers'
Indemnity") will generally be payable as follows: (i) out of certain reserves
established on PAI's balance sheet at December 31, 1994; (ii) either by offset
against the amounts payable under the Pioneer Seller Notes or from amounts held
in an account (the "Contingent Payment Account") established under the related
Contingent Payment Agreement; and (iii) in certain circumstances and subject to
specified limitations, out of the personal assets of the sellers. The Company is
required to reimburse the sellers 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.
The sellers will not be required to make any payments under the PAI
Sellers' Indemnity out of their personal assets until the end of the tenth year
from the PAI Acquisition, and to the extent that liabilities exceed amounts
realized from sales of Contingent Payment Properties, the Company would be
limited, for a ten-year period, principally to its rights of offset against the
Pioneer Seller Notes (and to amounts available under the ZENECA Indemnity, to
the extent then in effect) to cover such liabilities. The Pioneer Seller Notes
will be payable in five equal annual principal installments, beginning on the
sixth anniversary of the PAI Acquisition.
The Company believes that the remediation costs relating to its Henderson
chlor-alkali facilities will not be material and that the Company will be
reimbursed by the ZENECA Companies, under the PAI Sellers' Indemnity or from
other responsible parties for substantially all of the non-chlor-alkali related
remediation costs it may incur in connection with the Henderson, Nevada
facility. No assurance can be given, however, that the Company will not be
required to incur significant expenses for remedial and other liabilities under
environmental laws in connection with the Henderson facility or operations,
whether at or near the Henderson facility or at off-site locations, or that such
expenses will be reimbursed under the ZENECA Indemnity or the PAI Sellers'
Indemnity or by other responsible parties. In any such event, the Company may be
required to fund costs and expenses or other environmental liabilities, and such
funding could have a material adverse effect on the Company. See
"Business -- Environmental and Safety Regulation."
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<PAGE> 21
No assurance can be given that the indemnification provisions of the PAI
Sellers' Indemnity will be adequate to protect the Company from the
environmental liabilities intended to be covered by the PAI Sellers' Indemnity.
In particular, no assurance can be given that funds will be available in the
Contingent Payment Account in amounts, or at the times, necessary to pay any
such liabilities as they arise. Further, no assurance can be given that the
sellers will have the financial resources to perform their personal obligations
under the PAI Sellers' Indemnity, that the sellers will promptly pay any
liability for which they are responsible or that the Company will be able to
recover funds or assets from the sellers (particularly in view of the ten-year
period that must pass before the sellers would be personally liable under the
PAI Sellers' Indemnity) or that the Company will not be required to incur
significant costs for environmental conditions not covered by the PAI Sellers'
Indemnity. In addition, because the sellers may recognize certain economic
benefits from the Contingent Payment Properties, there can be no assurance that
conflicts will not arise between the interests of sellers who are directors or
officers of the Company or its subsidiaries and the Company.
Tacoma Remediation Matters; OCC Tacoma Indemnity. The Tacoma Facility is
located adjacent to the Hylebos Waterway, which is connected to Commencement
Bay. The Hylebos Waterway is one of the study areas included in the Commencement
Bay Nearshore/Tideflats site which has been placed on the National Priorities
List for remediation under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"). OxyChem is a member of the Hylebos
Cleanup Committee ("HCC"), which has entered into a consent agreement with the
Environmental Protection Agency ("EPA") under which HCC will prepare a
pre-remedial design for cleanup of the Hylebos Waterway. OxyChem is
participating in a voluntary, non-binding mediation under which an arbitrator
will allocate liability for the waterway among approximately 30 participating
Potentially Responsible Parties ("PRPs"). The aggregate costs of the cleanup of
the Hylebos Waterway will depend upon cleanup levels established by the EPA.
Such cleanup levels have been proposed by the EPA, and are presently under
discussion among the EPA, the HCC and other interested parties.
The Tacoma Facility has a federal Resource Conservation and Recovery Act
("RCRA") treatment, storage, and disposal facility permit which requires the
plant to investigate groundwater contamination at the site and to treat the
groundwater to standards established in the permit. Pursuant to this
requirement, the plant has installed a groundwater extraction, treatment and
injection system (not included in the Tacoma Acquisition), which withdraws the
groundwater, removes volatile organic compounds and returns the treated water to
the subsurface through wells that are designed to control off-site migration of
contamination. Certain areas at the Tacoma Facility are currently being
voluntarily investigated under the oversight of the Washington Department of
Ecology ("DOE") or the EPA.
OxyChem has been named as a Potentially Liable Party ("PLP") under state
law for remediation of, or it is voluntarily investigating, certain off-site,
upland disposal sites used by the Tacoma Facility. OCC Tacoma agreed to retain
responsibility for these sites. Two other properties, located immediately
adjacent to the Tacoma Facility, have allegedly been affected by operations at
the Tacoma Facility. A groundwater contamination plume under the Tacoma Facility
extends to the northwest and west. This area is being addressed by the Tacoma
Facility's groundwater treatment system. The owner of the neighboring property
to the south has alleged that waste from the Tacoma Facility was disposed of on
its property, and that the operations of the Tacoma Facility also caused
groundwater contamination. This area is currently under investigation with the
oversight of the Washington DOE.
OCC Tacoma agreed to indemnify the Company for certain pre-closing
environmental conditions. The OCC Tacoma indemnity is subject to limitations as
to dollar amount and duration, as well as certain other conditions. After the
applicable period of OCC Tacoma's indemnification, the Company will indemnify
OCC Tacoma for remaining liabilities other than those from hazardous materials
present as a result of pre-closing releases in the non-Hylebos area of
Commencement Bay, public, private or commercial disposal facilities upland of
the waterways and natural resource damages arising under state or federal
statutes, for which liability will be retained by OCC Tacoma. The Company has
reviewed the time frames currently estimated for remediation of the known
environmental conditions associated with Commencement Bay, the Hylebos Waterway,
the plant and adjacent properties and the Company presently believes that it
should have no material liability upon the termination of OCC Tacoma's
indemnity. There can be no assurance that such
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indemnity will be adequate to protect the Company, that remediation will proceed
on the present schedule, that it will involve the presently anticipated remedial
methods, or that unanticipated conditions will not be identified. If these or
other changes occur, the Company could incur a material liability for which it
is not insured or indemnified. See "Business -- Environmental and Safety
Regulation -- Indemnities."
OPERATING HAZARDS AND UNINSURED RISKS
The Company's operations are subject to risks inherent in the chemical
industry, such as explosions, fires, chemical spills or releases, pollution and
other environmental risks. Any significant interruption of operations at the
Company's principal facilities could have a material adverse effect on the
Company. The Company has in the past experienced chlorine releases at its
plants. In 1991, there was a release of approximately 42 tons of chlorine from
the Henderson facility. The Company has resolved substantially all of the
personal injury, property damage and regulatory claims relating to this release,
and certain of the costs incurred as a result of the accident were recovered
under applicable insurance policies. See "Business -- Environmental and Safety
Regulation." The Company maintains general liability insurance and property and
business interruption insurance with coverage limits it believes are adequate.
Because of the nature of industry hazards, it is possible that liabilities for
pollution and other damages arising from a major occurrence could exceed
insurance coverage or policy limits or that such insurance may not be available
at reasonable rates in the future. Any such liabilities, which could arise due
to injury and loss of life, severe damage to and destruction of property and
equipment, pollution and other environmental damage and suspension of
operations, could have a material adverse effect on the Company. See
"Business -- Insurance."
LIMITATIONS ON SECURITY INTEREST
The Notes will be effectively secured by the Note Collateral more fully
described under "Description of the Notes -- Security." Such security interest
generally is limited to (i) a first mortgage lien on the Tacoma Facility, (ii) a
first priority security interest in certain agreements related to the Tacoma
Acquisition, (iii) first mortgage liens on PCAC's chlor-alkali production
facilities located in Henderson, Nevada and St. Gabriel, Louisiana, and (iv) a
pledge of the Capital Stock of PCAC and All-Pure. Upon a default on indebtedness
secured by the Note Collateral, including the Notes, and a declaration of
acceleration of the Notes as a result thereof, the Trustee may, subject to the
provisions of the Intercreditor Agreement, cause the Collateral Agent to take
such action as it may deem advisable to protect and enforce the rights of the
Trustee and the holders in the Note Collateral, including causing any Note
Collateral to be sold and the proceeds to be applied to the pro rata payment of
the indebtedness secured by the Note Collateral, including the Notes, before
such proceeds are applied to debts of other creditors of PCAC and/or PAI, except
to the extent that certain liens, including landlord's, warehousemen's and
materialmen's liens and certain tax liens, may, as a matter of law, have
priority over the lien and security interest granted to the Collateral Agent in
the Note Collateral. The ability of the Collateral Agent to cause any Note
Collateral to be sold may be delayed pursuant to the automatic stay provisions
under the United States Bankruptcy Code, as amended (the "Bankruptcy Code"), if
PAAC, PCAC and/or PAI is the subject of any bankruptcy or receivership
proceedings. The Indenture permits the release of Note Collateral without
substitution of Note Collateral of equal value under certain circumstances. See
"Description of the Notes -- Release of Note Collateral."
The Company and its Subsidiaries may incur up to $50.0 million of Senior
Indebtedness which will be secured on a pari passu basis with the Notes. In
addition, the Indenture will permit the Company and its subsidiaries, under
certain circumstances, to incur additional Indebtedness, including Indebtedness
secured by assets that do not constitute Note Collateral. See "Description of
the Notes -- Certain Covenants."
NO ASSURANCE OF REALIZABLE VALUE FROM NOTE COLLATERAL
In connection with the granting of liens on the Note Collateral, the
Company made no representation as to the value or sufficiency of such Note
Collateral. Accordingly, there can be no assurance that the proceeds of sale of
any Note Collateral pursuant to the Indenture and the related security documents
following a declaration of acceleration of the Notes, will be sufficient to
satisfy any payment of principal of, or accrued and unpaid interest, if any, on,
the Notes. Any deficiency claim would rank pari passu in right of payment with
all
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<PAGE> 23
other unsecured senior indebtedness of PAAC. In addition, the ability of the
Collateral Agent to realize upon the Note Collateral may be inhibited or
impaired by applicable bankruptcy law. See "Description of the Notes -- Certain
Bankruptcy Considerations."
POTENTIAL ENVIRONMENTAL LIABILITY OF SECURED LENDERS
Lenders that hold a security interest in real property may, in certain
specific circumstances, be held liable under certain environmental laws for the
costs of remediating or preventing releases or threatened releases of hazardous
substances at the mortgaged property. See "Description of the
Notes -- Security." While lenders that neither foreclose on nor participate in
the management of the mortgaged property (as interpreted under applicable law)
generally have not been subject to such liability, currently, the law is unclear
with respect to lenders that take possession of a mortgaged property or that
participate in the management of a mortgaged property. In this regard, the
Collateral Agent, the Trustee or the holders of the Notes would need to evaluate
the impact of these potential liabilities before determining to foreclose on the
mortgaged properties securing such Notes and exercising other available
remedies. In addition, the Collateral Agent or the Trustee, as the case may be,
may decline to foreclose upon the mortgaged properties or exercise remedies
available to the extent that they do not receive indemnification to their
satisfaction from the holders of the Notes. See "Description of the
Notes -- Security."
COMPETITION
The industries in which the Company operates are highly competitive. Many
of the Company's competitors are larger and have greater financial resources
than the Company. Among the Company's competitors are two of the world's largest
chemical companies, OxyChem and The Dow Chemical Company. Because of their
greater financial resources, these companies may be better able than the Company
to withstand severe price competition and volatile market conditions. In
addition, as a result of the reduced demand for chlorine by the pulp and paper
industry and in the production of CFCs, certain competitors may rely on price
competition to capture market share. See "Business -- Competition."
DEPENDENCE ON KEY CUSTOMERS AND KEY SUPPLIERS
Novartis Crop Protection Inc. ("Novartis") accounted for approximately 13%
of the Company's net sales for the year ended December 31, 1996 and was the only
customer that accounted for more than 10% of the Company's sales during such
period. Novartis would have accounted for approximately 9% of the Company's pro
forma net sales in 1996. The loss of Novartis or a number of other significant
customers would have a material adverse effect on the Company's financial
condition, results of operations and cash flows. In connection with the Tacoma
Acquisition, the Company and OCC Tacoma entered into a Chlorine Purchase
Agreement, pursuant to which OCC Tacoma will purchase 100,000 tons of chlorine
from the Company during the year following the Tacoma Acquisition, which would
have represented approximately 6% of the Company's pro forma net sales for the
twelve months ended March 31, 1997, and the Company has the right to require OCC
Tacoma to purchase, and OCC Tacoma has the right to require the Company to sell,
certain decreasing amounts of chlorine during the second through fifth years
following the Tacoma Acquisition. Pursuant to a Chlorine and Caustic Soda Sales
Agreement, the Company will sell to OxyChem those quantities of chlorine and
caustic soda necessary for OxyChem to satisfy its obligations under contracts
with certain of OxyChem's national account customers. There can be no assurance
that the Company will be able to replace chlorine sales under such agreements
with sales to alternative customers in the future. There can be no assurance
that the historical levels of business from these customers will be maintained
in the future.
The production of chlor-alkali products principally requires salt,
electricity and water as raw materials, and if the supply of such materials were
limited or a significant supplier were unable to meet its obligations under the
current supply arrangements, the Company could be forced to incur increased
costs. Additional raw materials purchased by the Company include scrap iron,
aluminum oxide compounds and sulfuric acid. Any significant interruption in
supply or increase in prices for raw materials could have a material adverse
effect on the Company's financial condition, results of operation or cash flows.
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RANKING OF THE NOTES
The Notes will be senior obligations of the Company and will rank pari
passu with all existing and future Senior Indebtedness of the Company (including
the loans under the New Credit Facilities) and senior to all Subordinated
Indebtedness of the Company. The Notes, however, will be effectively
subordinated to secured Senior Indebtedness of the Company and its subsidiaries
with respect to the assets securing such Indebtedness (such as accounts
receivable, inventory and certain related assets of the Company and its
subsidiaries that secure the loans under the Revolving Facility). The guarantee
of PCAC with respect to the Notes and the Term Loans will be secured by (i) a
first mortgage lien on the Tacoma Facility, (ii) a first priority security
interest in certain agreements related to the Tacoma Acquisition, and (iii)
first mortgage liens on PCAC's chlor-alkali production facilities located in
Henderson, Nevada and St. Gabriel, Louisiana, and the guarantee of PAI with
respect to the Notes and the Term Loans is secured by a pledge of the Capital
Stock of PCAC and All-Pure held by PAI. In addition, the Company and its
Subsidiaries may incur up to $50.0 million of Senior Indebtedness which will be
secured on a pari passu basis with the Notes.
As of March 31, 1997, after giving pro forma effect to the Initial
Offering, the other Refinancings and the Tacoma Acquisition, the Company and its
Subsidiaries would have had outstanding approximately $306.8 million aggregate
principal amount of secured Senior Indebtedness. It is expected that as of March
31, 1997, on a pro forma basis, the Company and its Subsidiaries would have had,
subject to certain restrictions (including borrowing base limitations), the
ability to draw up to $32.2 million of additional secured Senior Indebtedness
under the Revolving Facility.
Pursuant to the Indenture governing the Notes, PAAC and the Subsidiary
Guarantors may incur additional secured and unsecured Indebtedness, or provide
guarantees of Indebtedness, in certain circumstances. See "Description of Other
Indebtedness" and "Description of the Notes -- Ranking" and "-- Certain
Covenants."
TAX MATTERS
Pioneer has an available net operating loss carryforward ("NOL") for
federal income tax reporting purposes which it believes was approximately $36.8
million at March 31, 1997. The NOL would be available for offset against future
federal taxable income, including income of PAI (except PAI "built-in" gain
recognized during the five-year period following the acquisition of PAI as
provided by section 384 of the Internal Revenue Code of 1986, as amended (the
"Code")), if generated during the carryforward period, which expires between
2003 to 2010. See "The Company and Pioneer -- Pioneer."
Tax benefits arising from net operating loss carryforwards are subject to
challenge by the Internal Revenue Service and may not be available. In
particular, the use of the NOL may be reduced or eliminated if (a) an ownership
change within the meaning of Code section 382 has occurred or occurs after the
Offering with respect to Pioneer, (b) a subsidiary of Pioneer that in prior
years generated a significant portion of the NOL was not permitted to file a
consolidated return with Pioneer or (c) Code section 269 (applicable to certain
transactions the principal purpose of which is tax avoidance) applies to PAAC's
acquisition of PAI. Until April 1998, the Tacoma Acquisition may increase the
possibility that Pioneer may experience an "ownership change" under Code Section
382, either through subsequent issuances of stock by Pioneer or through certain
public trading in the Pioneer stock. Pioneer's ability to use the NOL to offset
operating income of PAI will also depend on Pioneer's ability to establish
certain facts and to prevail with respect to certain legal issues in any
controversy with the Internal Revenue Service. If challenged by the Internal
Revenue Service, Pioneer believes that it can present adequate proof of these
facts and prevail with respect to these legal issues to the satisfaction of the
Internal Revenue Service or in litigation. If Pioneer is unable to establish
such facts and prevail with respect to such legal issues, its ability to use the
NOL may be substantially restricted, and Pioneer's after-tax cash flow may be
materially adversely affected.
CHANGE OF CONTROL
Upon the occurrence of a "Change of Control", as defined in the Indenture,
each holder of Notes will have the right to require that PAAC purchase such
holder's Notes in whole or in part at a purchase price in
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cash in an amount equal to 101% of the principal amount thereof, plus accrued
and unpaid interest. PAAC's ability to redeem Notes may be limited by the
availability of sufficient funds, restrictions imposed by any other debt
obligations (including the New Credit Facilities) that may then be in effect and
compliance with applicable securities laws. The Term Facility requires a
mandatory prepayment of the Term Loans at 100% of the principal amount thereof,
plus accrued and unpaid interest, with respect to a change of control under the
Term Facility. The Revolving Facility prohibits the Company from repurchasing
Notes if at the time of such repurchase an event of default under the Revolving
Facility exists or would be caused thereby. The occurrence of a Change of
Control may cause an event of default under the New Credit Facilities, upon
which event of default all amounts outstanding under the New Credit Facilities
may become due and payable. After giving effect to the Initial Offering, the
other Refinancings and the Tacoma Acquisition, PAAC does not currently have, and
no assurance can be given that PAAC will have, sufficient funds available to
purchase all of the outstanding Notes were they to be tendered in response to an
offer made as a result of a Change of Control. Further, the provisions of the
Indenture may not afford holders of Notes protection in the event of a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction involving PAAC that may adversely affect holders of Notes, if such
transaction does not result in a Change of Control. See "Description of the
Notes -- Change of Control."
CONTROL BY CERTAIN STOCKHOLDERS
William R. Berkley, Chairman of Pioneer and PAAC (who may be deemed to
beneficially own all shares of Pioneer common stock held by the Interlaken
Partnership), may be deemed to beneficially own approximately 56.0% of Pioneer's
outstanding voting power. Pioneer, in turn, owns all of the outstanding common
stock of PAAC, which owns all of the outstanding stock of PAI. As a result, Mr.
Berkley is able to control the election of PAAC's Board of Directors and thereby
direct the management and policies of PAAC, PAI and its subsidiaries. See "Stock
Ownership."
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements." Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, both domestic and foreign;
industry capacity; demographic changes; existing government regulations and
changes in, or the failure to comply with, government regulations; legislative
proposals concerning pollution, protection of the environment and the release or
disposal of regulated materials; liability and other claims asserted against the
Company; competition; the loss of any significant customers; changes in
operating strategy or development plans; the ability to attract and retain
qualified personnel; the significant indebtedness of the Company after the
Tacoma Acquisition; the successful integration of the Tacoma Facility following
the Tacoma Acquisition; the availability and terms of capital to fund the
expansion of the Company's business; and other factors referenced in this
Prospectus. Certain of these factors are discussed in more detail elsewhere in
this Prospectus, including, without limitation, under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business." Given these uncertainties,
prospective investors are cautioned not to place undue reliance on such forward-
looking statements. The Company disclaims any obligation to update any such
factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments.
LACK OF PUBLIC MARKET FOR THE NOTES
The Notes constitute a new issue of securities with no established trading
market, and there can be no assurance as to (i) the liquidity of any such market
that may develop, (ii) the ability of holders of Notes to
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sell their Notes or (iii) the price at which the holders of Notes would be able
to sell their Notes. If such a market were to exist, the Notes could trade at
prices that may be higher or lower than their principal amount or purchase
price, depending on many factors, including prevailing interest rates, the
market for similar notes and the financial performance of the Company and its
subsidiaries. PAAC has been advised by the Initial Purchasers that they
presently intend to make a market in the Original Notes and the Exchange Notes.
However, the Initial Purchasers are not obligated to do so, and any
market-making activity with respect to the Original Notes or the Exchange Notes
may be discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and may be
limited during such exchange offer or the pendency of an applicable shelf
registration statement. See "Original Notes Registration Rights." There can be
no assurance that even following registration of the Original Notes or the
Exchange Notes, as the case may be, an active trading market will exist for the
Original Notes or the Exchange Notes, as the case may be, or that any such
trading market will be liquid.
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USE OF PROCEEDS
There will be no proceeds to the Issuers from the exchange pursuant to the
Exchange Offer. The net proceeds to the Company from the issuance of the
Original Notes in the Initial Offering were approximately $194.0 million. The
net proceeds received by the Company, together with borrowings under the Term
Facility, were used to pay the cash portion of the purchase price of the Tacoma
Acquisition, to repurchase First Mortgage Notes in the Tender Offer, to pay the
consent fee in the Consent Solicitation and for working capital and general
corporate purposes. See "The Acquisition -- Use of Proceeds from Initial
Offering."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were originally issued and sold on June 17, 1997. Such
sales were not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act and Rule 144A of the
Securities Act. Pursuant to the Registration Rights Agreement, the Company and
the Subsidiary Guarantors have agreed to file by the 30th day following the
Closing Date of the Initial Offering, a registration statement (the "Exchange
Offer Registration Statement") with respect to an offer to exchange the Original
Notes for the Exchange Notes and to use their best efforts to cause such
registration statement to become effective by the 150th day following the
Closing Date and, upon becoming effective, to commence the Exchange Offer and
cause the same to remain open for acceptance for not less than 20 business days
after the date of commencement. If the Exchange Offer is not consummated within
30 days following the date the Exchange Offer Registration Statement is declared
effective or, under certain circumstances, the Initial Purchasers so request,
the Company and the Subsidiary Guarantors will file and use their best efforts
to cause to be declared effective a shelf registration statement with respect to
resales of the Original Notes and the Guarantees from time to time and will use
their best efforts to keep such registration statement effective until three
years after the effective date thereof. If the applicable registration statement
is not filed or declared effective or ceases to be effective or the Exchange
Offer is not consummated within the applicable time periods related thereto
(each, a "Registration Default"), the Company will be required to pay Liquidated
Damages to each holder of the Original Notes, in the amount of $.05 per week per
$1,000 principal amount of Original Notes for the initial 90-day period
following such Registration Default. The amount of such Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of Original
Notes at the beginning of each subsequent 90-day period, up to a maximum amount
of $.50 per week per $1,000 principal amount of Original Notes. If,
subsequently, such Registration Default is cured, the accrual of Liquidated
Damages will cease. See "Original Notes Registration Rights."
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Issuers with respect to the Registration Rights Agreement.
TERMS OF THE EXCHANGE
The Issuers hereby offer to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus (the "Letter of Transmittal"), $1,000 in principal amount of Exchange
Notes for each $1,000 in principal amount of the Original Notes. The terms of
the Exchange Notes are identical in all respects to the terms of the Original
Notes for which they may be exchanged pursuant to this Exchange Offer, except
that the Exchange Notes will generally be freely transferable by holders
thereof, and the holders of the Exchange Notes (as well as remaining holders of
any Original Notes) will not be entitled to registration rights under the
Registration Rights Agreement. See "Original Notes Registration Rights." The
Exchange Notes will evidence the same debt as the Original Notes and will be
entitled to the benefits of the Indenture. See "Description of the Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange.
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Original Notes directly from
the Issuer or (iii) broker-dealers who acquired Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes pursuant to the Exchange Offer must acknowledge that it
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will deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging, and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Broker-dealers who
acquired Original Notes as a result of market making or other trading activities
may use this Prospectus, as supplemented or amended, in connection with resales
of the Exchange Notes. The Issuers have agreed that, for a period not to exceed
180 days after the Exchange Date, they will make this Prospectus available to
any broker-dealer for use in connection with any such resale. Any holder that
cannot rely upon such interpretations must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
Tendering holders of Original Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Original Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Original Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
the Exchange Notes, such interest to be payable with the first interest payment
on the Exchange Notes, but will not receive any payment in respect of interest
on the Original Notes accrued after the issuance of the Exchange Notes.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1997, unless the
Issuers in their sole discretion extend the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Issuers, expires.
The Issuers reserve the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to United
States Trust Company of New York (the "Exchange Agent") and by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Original Notes previously tendered pursuant
to the Exchange Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Issuers expressly reserve the right to (i) terminate the
Exchange Offer and not accept for exchange any Original Notes for any reason,
including if any of the events set forth below under "-- Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Issuers and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Original Notes. If any such termination or
amendment occurs, the Issuers will notify the Exchange Agent in writing and will
either issue a press release or give written notice to the holders of the
Original Notes as promptly as practicable. Unless the Issuers terminate the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
the Issuers will exchange the Exchange Notes for the Original Notes on the
Exchange Date.
If the Issuers waive any material condition to the Exchange Offer, or amend
the Exchange Offer in any other material respect, and if at the time that notice
of such waiver or amendment is first published, sent or given to holders of
Original Notes in the manner specified above, the Exchange Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the fifth
business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Issuers to record holders of Original Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Original Notes.
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HOW TO TENDER
The tender to the Issuers of Original Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Issuers in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
General Procedures. A holder of an Original Note may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile thereof
(all references in this Prospectus to the Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the Original Notes being tendered and
any required signature guarantees (or a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") pursuant to the procedure described
below), to the Exchange Agent at its address set forth on the back cover of this
Prospectus on or prior to the Expiration Date or (ii) complying with the
guaranteed delivery procedures described below.
If tendered Original Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Original Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Original Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Issuers and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a firm (an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program (an "Eligible Program") within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Original Notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the note register for the Original Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact such holder promptly and instruct such
holder to tender Original Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Original Notes at The Depository Trust Company (the
"Book-Entry Transfer Facility") for purposes of the Exchange Offer within two
business days after receipt of this Prospectus, and any financial institution
that is a participant in the Book-Entry Transfer Facility's systems may make
book-entry delivery of Original Notes by causing the Book-Entry Transfer
Facility to transfer such Original Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Original Notes
may be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at the address specified on the back cover page of this
Prospectus on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Original Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected if
the Exchange Agent has received at its office listed on the back cover hereof on
or prior to the Expiration Date a letter, telegram or facsimile transmission
from an Eligible Institution setting forth the name and address of the tendering
holder, the names in which the Original Notes are registered and,
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if possible, the certificate numbers of the Original Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within five
New York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission by the Eligible Institution, the Original
Notes, in proper form for transfer, will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Original Notes being
tendered by the above-described method (or a timely Book-Entry Confirmation) are
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), the Issuers may, at their option, reject the tender.
Copies of a Notice of Guaranteed Delivery which may be used by Eligible
Institutions for the purposes described in this paragraph are being delivered
with this Prospectus and the related Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Original Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Notes will be
determined by the Issuers, whose determination will be final and binding. The
Issuers reserve the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Issuers, be unlawful. The Issuers also reserve the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. None of the Issuers, the
Exchange Agent or any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Issuers' interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Original Notes to the Issuers and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Original Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
Original Notes, and that, when the same are accepted for exchange, the Issuers
will acquire good and unencumbered title to the tendered Original Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Issuers to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes. The Transferor further agrees that acceptance of any
tendered Original Notes by the Issuers and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Issuers of its
obligations under the Registration Rights Agreement and that the Issuers shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
By tendering Original Notes, the Transferor certifies (a) that it is not an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act, that it is not a broker-dealer that owns Original Notes acquired directly
from the Issuers or an affiliate of the Issuers, that it is acquiring the
Exchange Notes offered
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hereby in the ordinary course of such Transferor's business and that such
Transferor has no arrangement with any person to participate in the distribution
of such Exchange Notes or (b) that it is an "affiliate" (as so defined) of the
Issuers or of the initial purchasers in the Initial Offering of the Original
Notes, and that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable to it.
WITHDRAWAL RIGHTS
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus. Any such notice of
withdrawal must specify the person named in the Letter of Transmittal as having
tendered Original Notes to be withdrawn, the certificate numbers of Original
Notes to be withdrawn, the principal amount of Original Notes to be withdrawn
(which must be an authorized denomination), a statement that such holder is
withdrawing his election to have such Original Notes exchanged, and the name of
the registered holder of such Original Notes, and must be signed by the holder
in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Issuers that the person withdrawing the tender has succeeded
to the beneficial ownership of the Original Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Original Notes promptly following
receipt of notice of withdrawal. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Issuers, and
such determination will be final and binding on all parties.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Issuers shall be deemed to have accepted for
exchange validly tendered Original Notes when, as and if the Issuers have given
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Original
Notes for the purposes of receiving Exchange Notes from the Issuers and causing
the Original Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of Exchange Notes to
be issued in exchange for accepted Original Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Original Notes. Original Notes
not accepted for exchange by the Issuers will be returned without expense to the
tendering holders (or in the case of Original Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the procedures described above, such non-exchanged Original Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) promptly following the Expiration Date or, if the Issuers terminate
the Exchange Offer prior to the Expiration Date, promptly after the Exchange
Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Issuers will not be required to issue Exchange Notes
in respect of any properly tendered Original Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service) or, at its option, modify or otherwise amend the Exchange Offer, if (a)
there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any court
or governmental agency or other governmental regulatory or administrative agency
or commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
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(ii) assessing or seeking any damages as a result thereof, or (iii) resulting in
a material delay in the ability of the Issuers to accept for exchange or
exchange some or all of the Original Notes pursuant to the Exchange Offer; (b)
any statute, rule, regulation, order or injunction shall be sought, proposed,
introduced, enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by the Exchange Offer by any government or
governmental authority, domestic or foreign, or any action shall have been
taken, proposed or threatened, by any government, governmental authority, agency
or court, domestic or foreign, that in the sole judgment of the Issuers might
directly or indirectly result in any of the consequences referred to in clauses
(a)(i) or (ii) above or, in the sole judgment of the Issuers, might result in
the holders of Exchange Notes having obligations with respect to resales and
transfers of Exchange Notes which are greater than those described in the
interpretations of the Commission referred to on the cover page of this
Prospectus, or would otherwise make it inadvisable to proceed with the Exchange
Offer; or (c) a material adverse change shall have occurred in the business,
condition (financial or otherwise), operations, or prospects of the Issuers.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by them with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Issuers) giving rise to such condition or may be waived by the Issuers in whole
or in part at any time or from time to time in their sole discretion. The
failure by the Issuers at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right, and each right will be deemed an
ongoing right which may be asserted at any time or from time to time. In
addition, the Issuers have reserved the right, notwithstanding the satisfaction
of each of the foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Issuers concerning the fulfillment or
non-fulfillment of any conditions will be final and binding upon all parties.
In addition, the Issuers will not accept for exchange any Original Notes
tendered and no Exchange Notes will be issued in exchange for any such Original
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act").
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. Letters of Transmittal must be addressed to the
Exchange Agent at its address set forth on the back cover page of this
Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Issuers have not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Issuers
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Issuers will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting and legal fees, will be paid by
the Company and are estimated at approximately $250,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuers. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Issuers since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of)
29
<PAGE> 34
holders of Original Notes in any jurisdiction in which the making of the
Exchange Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction. However, the Issuers may, at their discretion, take
such action as it may deem necessary to make the Exchange Offer in any such
jurisdiction and extend the Exchange Offer to holders of Original Notes in such
jurisdiction. In any jurisdiction the securities laws or blue sky laws of which
require the Exchange Offer to be made by a licensed broker or dealer, the
Exchange Offer is being made on behalf of the Issuers by one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF ORIGINAL NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by holders will not be a
taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Original Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Notes pursuant to the terms of this Exchange Offer,
the Issuers will have fulfilled a covenant contained in the terms of the
Original Notes and the Registration Rights Agreement. Holders of the Original
Notes who do not tender their certificates in the Exchange Offer will continue
to hold such certificates and will be entitled to all the rights, and
limitations applicable thereto, under the Indenture, except for any such rights
under the Registration Rights Agreement, which by their terms terminate or cease
to have further effect as a result of the making of this Exchange Offer. See
"Description of the Notes." All untendered Original Notes will continue to be
subject to the restriction on transfer set forth in the Indenture. To the extent
that Original Notes are tendered and accepted in the Exchange Offer, the trading
market, if any, for the Original Notes could be adversely affected. See "Risk
Factors -- Consequences of Failure to Exchange."
The Issuers may in the future seek to acquire untendered Original Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuers have no present plan to acquire any Original
Notes which are not tendered in the Exchange Offer.
30
<PAGE> 35
THE ACQUISITION
THE TACOMA ACQUISITION
On June 17, 1997, Pioneer, the Company and OCC Tacoma, a subsidiary of
OxyChem, consummated the Tacoma Acquisition. Pursuant to the Purchase Agreement,
the Company acquired substantially all of the assets and properties used by OCC
Tacoma in the chlor-alkali business at Tacoma, Washington, including the Tacoma
Facility. The purchase price consisted of (i) $97.0 million, payable in cash,
(ii) 55,000 shares of Pioneer Preferred Stock, having a liquidation preference
of $100 per share, and (iii) the assumption of certain obligations related to
the acquired chlor-alkali business. Prior to closing, Pioneer assigned its
rights and obligations under the Purchase Agreement to PCAC (except for rights
to acquire certain inventory, which were assigned to PAAC).
The Company believes that the Tacoma Acquisition presented an attractive
opportunity to acquire a well-maintained chlor-alkali production facility, which
includes sophisticated membrane cell technology, in a location contiguous to the
Company's existing customer base. By acquiring a low-cost production facility in
the Pacific Northwest, the Company is well-positioned to direct output to
outlying market areas while more efficiently supplying the All-Pure and Kemwater
downstream operations, principally in the western and northwestern United
States. The Tacoma Facility provides the Company with an opportunity to further
expand chlor-alkali markets in the Pacific Northwest based on the Company's
operating efficiencies and disciplined market penetration.
The Tacoma Facility is located in an industrial complex on the Hylebos
waterway. It serves customers in the Pacific Northwest and California and, to a
lesser extent, foreign caustic soda customers. Annual capacity is approximately
225,000 tons of chlorine, 247,500 tons of caustic soda, 44,000 tons of
hydrochloric acid and 8,800 tons of calcium chloride. The site has docks capable
of handling ocean-going vessels up to 30,000 DWT size, and is served by a rail
fleet of 492 leased tankcars included as a part of the Tacoma Acquisition. The
Company believes that the plant would have generated pro forma net sales of
$80.5 million and pro forma EBITDA of $33.5 million during the twelve months
ended March 31, 1997, if the Tacoma Acquisition had occurred at the beginning of
such period.
Pursuant to the terms of the Purchase Agreement, the Company, OxyChem and
OCC Tacoma entered into certain related agreements in connection with the Tacoma
Acquisition. Pursuant to a Chlorine Purchase Agreement, OCC Tacoma will purchase
100,000 tons of chlorine from the Company during the year following the Tacoma
Acquisition, which would have represented approximately 6% of the Company's pro
forma net sales for the twelve months ended March 31, 1997. In addition, the
Company has the right to require OCC Tacoma to purchase, and OCC Tacoma has the
right to require the Company to sell, up to 100,000 tons of chlorine during the
second year following the Tacoma Acquisition and up to 75,000 tons of chlorine
during the third year following the Tacoma Acquisition. All deliveries will be
from the Tacoma Facility to OxyChem's plant at Ingleside, Texas. Market prices
will apply to all such transactions, with transportation costs to be borne and
paid by OCC Tacoma. The Company will also have the right to require OCC Tacoma
to purchase up to 50,000 tons of chlorine during the fourth year following the
Tacoma Acquisition and up to 25,000 tons of chlorine during the fifth year
following the Tacoma Acquisition at market prices, with each of the parties to
bear 50% of the transportation costs from Tacoma to Ingleside for any purchases
during such fourth and fifth years.
Pursuant to a Chlorine and Caustic Soda Sales Agreement, the Company will
sell to OxyChem those quantities of chlorine and caustic soda necessary for
OxyChem to satisfy its obligations under contracts with certain of OxyChem's
national account customers. The Company estimates that during the year following
the Tacoma Acquisition the Company will sell approximately 22,400 tons of
chlorine and 46,000 tons of caustic soda under the agreement, at prices set each
quarter at levels equal to 95% of the average prices received by OxyChem under
its arm's-length customer contracts during the preceding quarter. The final
deliveries of chlorine and caustic soda under the arrangement will occur in
December 2000.
In connection with the Tacoma Acquisition, the Company acquired OCC
Tacoma's leases of terminal facilities and related terminal services in
Wilmington and Richmond, California and, pursuant to two Product
31
<PAGE> 36
Exchange and Terminal Services Agreements, the Company agreed to allow OxyChem
to use the terminals for the storage and transfer of up to 16,000 tons of
OxyChem's caustic soda during the year following the Tacoma Acquisition, to the
extent the parties do not otherwise enter into product exchange transactions.
Under any such transactions, the Company will accept deliveries from one of
OxyChem's facilities in the Gulf Coast area and OxyChem will accept deliveries
from the Richmond and Wilmington terminal facilities.
The Company and OCC Tacoma also entered into an Interim Services Agreement,
pursuant to which OCC Tacoma will provide certain interim services to the
Company during the transition of plant operations, and an Environmental
Operating Agreement, which provides certain agreements and indemnities with
respect to environmental matters affecting the Tacoma Facility. The obligations
of OCC Tacoma under its agreements with the Company have been guaranteed by
OxyChem. See "Business -- Operating Units" and "-- Environmental and Safety
Regulation."
Each share of Pioneer Preferred Stock issued in connection with the Tacoma
Acquisition will be convertible at any time into eight shares of Class A Common
Stock of Pioneer, and each share will be redeemable at Pioneer's option at
redemption prices equal to the following percentages of liquidation value: 102%
during the first year after the Tacoma Acquisition, 104% during the second year
after the Tacoma Acquisition, 106% during the third year after the Tacoma
Acquisition, 108% during the fourth year after the Tacoma Acquisition and 110%
during each of the fifth through the tenth years after the Tacoma Acquisition.
On the first business day after the end of the tenth year after the Tacoma
Acquisition, Pioneer is required to redeem any Pioneer Preferred Stock which
remains outstanding at a price of $100 per share. No dividends are payable on
the Pioneer Preferred Stock. The Pioneer Preferred Stock is entitled to eight
votes per share (subject to adjustment) and will vote with the Pioneer common
stock on all matters. The Pioneer Preferred Stock issued to OCC Tacoma
represents approximately 4.8% of the voting power of Pioneer.
The cash portion of the purchase price for the Tacoma Acquisition is
subject to adjustment based on the difference, if any, between the aggregate
value of the inventories of raw materials, work-in-process, finished goods and
spares and stores transferred to the Company pursuant to the Tacoma Acquisition
and the agreed minimum value of such inventories as set forth in the Purchase
Agreement.
USE OF PROCEEDS FROM INITIAL OFFERING
The net proceeds from the sale of the Original Notes of approximately
$194.0 million, together with net proceeds of $97.6 million from borrowings
under the Term Facility, were used to pay the cash portion of the purchase price
of the Tacoma Acquisition, to repurchase PAAC's 13 3/8% First Mortgage Notes due
2005 in the Tender Offer, to pay the consent fee in the Consent Solicitation and
for working capital and general corporate purposes.
32
<PAGE> 37
THE COMPANY AND PIONEER
THE COMPANY
The Predecessor Company was formed in October 1988 to acquire two existing
chlor-alkali plants. Subsequently, the Company acquired several businesses
engaged in municipal, industrial and commercial water treatment, and on June 17,
1997 acquired the Tacoma Facility as its third chlor-alkali plant. The Company
conducts its business primarily through PCAC and All-Pure. The Company also owns
a 50% unconsolidated joint venture interest in Kemwater (which effective in
February 1996 succeeded to the operations of Imperial West). Pioneer owns the
remaining 50% joint venture interest in Kemwater.
PCAC. Following the Tacoma Acquisition, PCAC owns and operates three
chlor-alkali production facilities, located in St. Gabriel, Louisiana;
Henderson, Nevada; and Tacoma, Washington. These facilities produce chlorine and
caustic soda for sale in the merchant markets and for use as raw materials by
PCAC, All-Pure and Kemwater in the manufacture of downstream products. The
Henderson facility also produces hydrochloric acid, and the Tacoma Facility also
produces hydrochloric acid and calcium chloride. PCAC also has an indirect 15%
equity interest in Saguaro Power Company LP ("Saguaro Power"), which owns and
operates a 90-megawatt cogeneration facility located on approximately six acres
of the Henderson property.
All-Pure. The Company believes that All-Pure is the largest distributor of
packaged chlor-alkali products in the region of the United States west of the
Rocky Mountains and the only full-line marketer of bleach in the region.
All-Pure manufactures bleach and repackages chlorine and hydrochloric acid and
distributes these products along with caustic soda and related products to
municipalities, swimming pool supply distributors and selected commercial and
retail markets. In July 1996, All-Pure acquired T.C. Products, which is engaged
in the manufacture and marketing of bleach and related products from its plant
in Tacoma, Washington. All-Pure purchases substantially all of its chlorine and
caustic soda and a substantial portion of its hydrochloric acid from PCAC.
Because bleach contains a high percentage of water, freight costs and logistics
are an important competitive factor. All-Pure's production plants and
distribution facilities are strategically located in or near most of the largest
population centers of the West Coast.
Kemwater. Kemwater, a 50% owned joint venture, manufactures and supplies
iron chlorides to the potable and waste water markets in the region of the
United States west of the Rocky Mountains, supplying municipal customers such as
the cities of Los Angeles, Sacramento and San Diego. Iron chlorides are used
primarily to remove solids from waste water streams and to control hydrogen
sulfide emissions. Kemwater also manufactures and markets polyaluminum chlorides
for markets in the southeastern United States, as well as aluminum sulfate for
the potable and waste water and industrial water treatment industries, sodium
aluminate for the production of catalysts and paint ingredients, and bleach for
municipal water disinfection. Kemwater has exclusive licenses to use the
existing and future advanced water treatment technology of Kemira Oy of Finland
("Kemira") in the development and sale of products and services for the potable
water, waste water and industrial water treatment markets in the United States
(other than the northeastern United States) and the Caribbean, and nonexclusive
access to the use of the technology for the Canadian and Mexican markets, with
an option to acquire an exclusive license for those markets in the future. For
the year ended December 31, 1996, Kemwater purchased all of its chlorine and
caustic soda requirements and a substantial portion of its hydrochloric acid
requirements from PCAC, and it is anticipated that in the future PCAC will
continue to provide Kemwater with a substantial amount of its raw materials.
PIONEER
PAAC is a wholly-owned subsidiary of Pioneer, a publicly-traded company
that immediately prior to the acquisition of PAI had no operations. Pioneer has
an available net operating loss carryforward for federal income reporting
purposes which it believes was approximately $36.8 million at March 31, 1997. In
April 1995, PAAC acquired PAI for a purchase price, including the retirement of
debt and the redemption of preferred stock, of approximately $152.3 million in
cash and $11.5 million of subordinated promissory notes of Pioneer, as well as
certain amounts payable after the closing based on certain of PAI's real estate
holdings.
33
<PAGE> 38
The Interlaken Partnership beneficially owns approximately 34.9% of the
voting power of Pioneer, and William R. Berkley, Chairman of Pioneer and PAAC
(who may be deemed to beneficially own all shares of Pioneer common stock held
by the Interlaken Partnership), may be deemed to beneficially own approximately
56.0% of the voting power of Pioneer. See "Stock Ownership."
PAAC maintains its headquarters at 4200 NationsBank Center, 700 Louisiana
Street, Houston, Texas 77002, and its telephone number is (713) 225-3831. PAAC
was incorporated in the State of Delaware in March 1995.
34
<PAGE> 39
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997, and as adjusted to reflect the Initial Offering, the other
Refinancings and the Tacoma Acquisition. See "The Acquisition." The table should
be read in conjunction with the historical financial information of the Company
and the Tacoma Plant and the respective notes thereto and the unaudited pro
forma information of the Company and the notes thereto appearing elsewhere in
this Prospectus. See the notes to the Pro Forma Financial Information for an
explanation of adjustments made to arrive at pro forma amounts. See also
"Description of the Notes."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt......................... $ 128 $ 128
-------- --------
Total short-term debt............................. 128 128
-------- --------
Long-term debt:
New Credit Facilities (1)................................. -- 100,000
9 1/4% Notes offered hereby............................... -- 200,000
Long-term debt............................................ 141,629 6,629
-------- --------
Total long-term debt.............................. 141,629 306,629
-------- --------
Stockholders' equity:
Common Stock(2)........................................... 1 1
Additional paid in capital(3)............................. 61,124 66,624
Retained earnings (deficit)(4)............................ 11,308 (7,334)
-------- --------
Total stockholders' equity........................ 72,433 59,291
-------- --------
Total capitalization.............................. $214,190 $366,048
======== ========
</TABLE>
- ------------
(1) Represents borrowings of $100.0 million in Term Loans. The Company did not
incur Revolving Loans at closing in connection with the Refinancings and the
Tacoma Acquisition but had $2.8 million in letters of credit outstanding at
such time under the Revolving Facility. See "Description of Other
Indebtedness -- New Credit Facilities."
(2) Par value $.01 per share, 1,000 shares authorized, issued and outstanding.
(3) Concurrent with the Tacoma Acquisition, Pioneer issued to OCC Tacoma the
Pioneer Preferred Stock. As a result, Pioneer contributed additional paid-in
capital of $5.5 million to PAAC.
(4) Includes, on an As Adjusted basis, the extraordinary loss on the early
extinguishment of debt associated with the Tender Offer for the $135.0
million of First Mortgage Notes, of $18.6 million, net of an income tax
benefit of $12.4 million.
35
<PAGE> 40
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") of the Company has been derived from and should be read
in conjunction with (i) the audited consolidated financial statements of the
Company and the related notes thereto included elsewhere herein which statements
have been audited by Deloitte & Touche LLP, independent auditors, whose report
is included elsewhere herein and (ii) the audited financial statements of the
Tacoma Plant and the related notes thereto included elsewhere herein, which
statements have been audited by Arthur Andersen LLP, independent auditors, whose
report is included elsewhere herein. The Pro Forma Financial Information has
been prepared to illustrate the effects of the Initial Offering, the other
Refinancings, the Tacoma Acquisition and the acquisition of T.C. Products. This
pro forma financial information does not necessarily present the financial
position or results of operations as they would have been if the companies
involved had constituted one entity for the periods presented. See "Prospectus
Summary -- The Tacoma Acquisition" and "The Acquisition."
The pro forma balance sheet as of March 31, 1997 gives effect to the
Initial Offering, the other Refinancings and the Tacoma Acquisition as if they
had occurred on March 31, 1997. The pro forma statement of operations for the
year ended December 31, 1996 gives effect to the Initial Offering, the other
Refinancings, the Tacoma Acquisition and the acquisition of T.C. Products as if
they had occurred on January 1, 1996. The pro forma statement of operations for
the three months ended March 31, 1997 gives effect to the Initial Offering, the
other Refinancings and the Tacoma Acquisition as if they had occurred on January
1, 1997. The pro forma statement of operations for the three months ended March
31, 1996 gives effect to the Initial Offering, the other Refinancings, the
Tacoma Acquisition and the acquisition of T.C. Products as if they had occurred
on January 1, 1996. The acquisition of T.C. Products was effective July 1, 1996
and was accounted for using the purchase method. The Pro Forma Financial
Information is not necessarily indicative of either future results of operations
or the results that might have occurred if the foregoing transactions had been
consummated on the indicated date.
The Tacoma Acquisition is accounted for using the purchase method. The
total purchase price of the Tacoma Acquisition will be allocated to the Tacoma
Facility's assets and liabilities based upon the estimated fair value of the
assets and liabilities being acquired. The pro forma adjustments reflected in
the Pro Forma Financial Information are based upon information available as of
the date hereof, while the actual adjustments will be based upon evaluations and
estimates of fair values at the time of closing of the Tacoma Acquisition.
Accordingly, there can be no assurance that the actual adjustments will not
differ significantly from the pro forma adjustments reflected in the Pro Forma
Financial Information. The pro forma adjustments reflect certain plans and
assumptions of management of the Company. No assurance can be given that such
plans will be implemented as now contemplated or that such assumptions will
prove to be accurate.
36
<PAGE> 41
PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------------------- -------------------------
TACOMA AS
COMPANY PLANT ADJUSTMENTS ADJUSTED
-------- ------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash........................................ $ 14,640 $ 6 $ 30,125(a) $ 44,771
Accounts receivable, net.................... 18,438 -- 18,438
Due from parent............................. 2,840 -- 2,840
Inventories................................. 8,896 5,181 1,781(b) 15,858
Prepaid expenses............................ 806 1,990 (1,447)(c) 1,349
-------- ------- --------- --------
Total current assets................ 45,620 7,177 30,459 83,256
Property, plant and equipment, net............ 92,224 60,695 18,480(d) 171,399
Investment in and advances to unconsolidated
subsidiary.................................. 28,553 -- 28,553
Other assets, net............................. 19,268 794 19,233(e) 39,295
Excess cost over the fair value of net assets
acquired, net............................... 105,930 -- 15,020(f) 120,950
-------- ------- --------- --------
Total assets........................ $291,595 $68,666 $ 83,192 $443,453
======== ======= ========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable............................ $ 17,677 $ 2,104 $ (2,104)(g) $ 17,677
Accrued liabilities......................... 21,614 3,037 (3,037)(h) 21,614
Returnable deposits......................... 3,175 -- 3,175
Current portion of long-term debt........... 128 -- 128
-------- ------- --------- --------
Total current liabilities........... 42,594 5,141 (5,141) 42,594
Long-term debt, less current maturities....... 141,629 -- (135,000)(i) 6,629
Term Loans.................................. -- -- 100,000(j) 100,000
9 1/4% Senior Secured Notes due 2007........ -- -- 200,000(j) 200,000
Returnable deposits........................... 3,272 -- 3,272
Accrued pension and other employee benefits... 14,555 -- 14,555
Deferred income taxes......................... -- 2,384 (2,384)(k) --
Other long-term liabilities................... 17,112 27,924 (27,924)(l) 17,112
Stockholder's equity..................... 72,433 33,217 (46,359)(m) 59,291
-------- ------- --------- --------
Total liabilities and stockholder's
equity............................ $291,595 $68,666 $ 83,192 $443,453
======== ======= ========= ========
</TABLE>
(see footnotes on following page)
37
<PAGE> 42
NOTES TO PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(a) Excess cash after payment of purchase price and related acquisition and
financing costs.
(b) Elimination of the last in first out ("LIFO") reserve from the Tacoma
Plant's balance sheet as the Company uses the first in first out ("FIFO") or
average cost methods for inventory valuation.
(c) Reflects the following:
<TABLE>
<C> <S> <C>
(1) Elimination of the Tacoma Plant's deferred taxes as the
transaction is an asset purchase.......................... $(1,249)
(2) Elimination of OCC Tacoma's prepaid pension expense......... (198)
-------
$(1,447)
=======
</TABLE>
(d) Adjustment to fair value of acquired property, plant and equipment in
accordance with the purchase method of accounting.
(e) Reflects the following:
<TABLE>
<S> <S> <C>
(1) Capitalization of transaction and financing costs........... $10,875
(2) Write-off of existing financing costs....................... (4,070)
(3) Deferred tax benefit on extraordinary item.................. 12,428
-------
$19,233
=======
</TABLE>
(f) Addition of excess of cost over the fair value of net assets acquired.
(g) Elimination of accounts payable not assumed by the Company in the Tacoma
Acquisition.
(h) Elimination of accrued liabilities not assumed by the Company in the Tacoma
Acquisition.
(i) Repurchase of existing 13 3/8% First Mortgage Notes.
(j) Debt incurred under the Offering and the Term Loans in connection with the
other Refinancings and the Tacoma Acquisition.
(k) Elimination of deferred taxes as the transaction is an asset purchase.
(l) Elimination of other long-term liabilities not assumed by the Company in the
Tacoma Acquisition.
(m) Reflects the following:
<TABLE>
<C> <S> <C>
(1) Elimination of the Tacoma Plant's historical equity in
accordance with the purchase method of accounting......... $(33,217)
(2) Equity contribution by Pioneer for preferred stock issued by
Pioneer to OCC Tacoma as part of the purchase price....... 5,500
(3) Extraordinary item, early extinguishment of debt, net of
applicable tax............................................ (18,642)
--------
$(46,359)
========
</TABLE>
38
<PAGE> 43
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------------------- -------------------------------------------
TACOMA T.C. PRODUCTS AS
COMPANY PLANT ACQUISITION(1) ADJUSTMENTS(2) ADJUSTED
-------- ------- -------------- -------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues............................ $183,326 $73,715 $4,255 $5,942(a) $267,238
Cost of sales....................... 126,739 52,420 2,550 (29)(b) 181,680
-------- ------- ------ ------ --------
Gross profit........................ 56,587 21,295 1,705 5,971 85,558
Selling, general and administrative
expenses.......................... 23,528 1,782 900 997(c) 27,207
-------- ------- ------ ------ --------
Operating income.................... 33,059 19,513 805 4,974 58,351
Equity in net loss of unconsolidated
subsidiary........................ 2,607 -- -- -- 2,607
Interest expense, net............... 17,290 -- 271 8,829(d) 26,390
Other income (expense), net......... 1,684 (2,209) 11 2,216(e) 1,702
-------- ------- ------ ------ --------
Income before income taxes and
extraordinary item................ 14,846 17,304 545 (1,639) 31,056
Provision for income taxes.......... 6,735 6,059 241 (655)(f) 12,380
-------- ------- ------ ------ --------
Income before extraordinary item.... $ 8,111 $11,245 $ 304 $ (984) $ 18,676
======== ======= ====== ====== ========
</TABLE>
(see footnotes on following page)
39
<PAGE> 44
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(1) Reflects the pro forma financial results of T.C. Products for the period of
January 1, 1996 to July 1, 1996, the period prior to ownership by the
Company.
(2) Reflects the adjustments to the Tacoma Plant's operating results to reflect
operations as part of the Company:
(a) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of freight costs associated with the sale of
100,000 tons per year of chlorine shipped to the Gulf Coast
for which OCC Tacoma will bear the cost..................... $ 6,394
(2) Adjustment to sales to OCC Tacoma for the difference between
historical prices and Gulf Coast prices..................... 60
(3) Additional 5% commission to be paid to OxyChem on OxyChem's
national accounts to be serviced by the Company............. (512)
--------
$ 5,942
========
</TABLE>
(b) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of the impact of LIFO accounting previously used
by the Tacoma Plant as the Company uses FIFO or average cost
methods of accounting for inventory valuation............... $ 652
(2) Additional depreciation expense with respect to the
properties, plant and equipment purchased in connection with
the Tacoma Acquisition using the straight-line method over
an average life of 20 years................................. 351
(3) Elimination of operating lease expense for equipment
capitalized by the Company which was previously leased by
OCC Tacoma.................................................. (1,532)
(4) Incremental insurance costs................................. 500
--------
$ (29)
========
</TABLE>
(c) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of OxyChem corporate allocations................ $ (1,782)
(2) Addition of the Company's incremental selling, general and
administrative expenses..................................... 750
(3) Additional amortization expense with respect to intangible
assets purchased in connection with the Tacoma Acquisition
using the straight-line method over periods of 5 to 25
years....................................................... 2,029
--------
$ 997
========
</TABLE>
(d) Incremental interest expense related to the Term Loans with an assumed
interest rate of 8.375% and to the Notes with an interest rate of 9.25%. A
0.25% change in the interest rate applicable to the Term Loans would change
pro forma interest expense by $250.
(e) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of environmental expense associated with the
Tacoma Plant's accrual of known environmental matters....... $ 1,932
(2) Elimination of fees related to the Tacoma Plant's sales of
receivables................................................. 377
(3) Elimination of amortization of deferred gain on equipment
capitalized by the Company, which was previously leased by
the Tacoma Plant............................................ (93)
--------
$ 2,216
========
</TABLE>
(f) Represents the tax effect of all pro forma adjustments.
40
<PAGE> 45
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------------------ -----------------------
TACOMA AS
COMPANY PLANT ADJUSTMENTS ADJUSTED
------- ------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues........................................... $38,743 $18,738 $ 1,065(a) $58,546
Cost of sales...................................... 29,003 13,590 (121)(b) 42,472
------- ------- ------- -------
Gross profit....................................... 9,740 5,148 1,186 16,074
Selling, general and administrative expenses....... 6,170 269 426(c) 6,865
------- ------- ------- -------
Operating income................................... 3,570 4,879 760 9,209
Equity in net loss of unconsolidated subsidiary.... 1,055 -- 1,055
Interest expense, net.............................. 4,458 -- 2,207(d) 6,665
Other income, net.................................. 231 542 (540)(e) 233
------- ------- ------- -------
Income (loss) before income taxes and extraordinary
item............................................. (1,712) 5,421 (1,987) 1,722
Provision for income taxes......................... 178 1,898 (795)(f) 1,281
------- ------- ------- -------
Income (loss) before extraordinary item............ $(1,890) $ 3,523 $(1,192) $ 441
======= ======= ======= =======
</TABLE>
(see footnotes on following page)
41
<PAGE> 46
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(a) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of freight costs associated with the sale of
100,000 tons per year of chlorine shipped to the Gulf Coast
for which OCC Tacoma will bear the cost..................... $ 793
(2) Reclassification of freight rebate from other income to
offset freight costs included in revenues................... 586
(3) Adjustment to sales to OCC Tacoma for the difference between
historical prices and Gulf Coast prices..................... (186)
(4) Additional 5% commission to be paid to OxyChem on OxyChem's
national accounts to be serviced by the Company............. (128)
------
$1,065
======
</TABLE>
(b) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of the impact of LIFO accounting previously used
by the Tacoma Plant as the Company uses FIFO or average cost
methods of accounting for inventory valuation............... $ 101
(2) Additional depreciation expense with respect to the
properties, plant and equipment purchased in connection with
the Tacoma Acquisition using the straight-line method over
an average life of 20 years................................. 36
(3) Elimination of operating lease expense for the equipment
capitalized by the Company which was previously leased by
OCC Tacoma.................................................. (383)
(4) Incremental insurance costs................................. 125
------
$ (121)
======
</TABLE>
(c) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of OxyChem corporate allocations................ $ (269)
(2) Addition of the Company's incremental selling, general and
administrative expenses..................................... 188
(3) Additional amortization expense with respect to intangible
assets purchased in connection with the Tacoma Acquisition
using the straight-line method over periods of 5 to 25
years....................................................... 507
------
$ 426
======
</TABLE>
(d) Incremental interest expense related to the Term Loans with an assumed
interest rate of 8.375% and to the Notes with an interest rate of 9.25%.
(e) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of fees related to the Tacoma Plant's sales of
receivables................................................. $ 69
(2) Elimination of amortization of deferred gain on equipment
capitalized by the Company, which was previously leased by
the Tacoma Plant............................................ (23)
(3) Reclassification of freight rebate to revenues to offset
freight costs............................................... (586)
------
$ (540)
======
</TABLE>
(f) Represents the tax effect of all pro forma adjustments.
42
<PAGE> 47
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
----------------- ------------------------------------------------
TACOMA T.C. PRODUCTS AS
COMPANY PLANT ACQUISITION(1) ADJUSTMENTS(2) ADJUSTED
------- ------- -------------- -------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues........................... $44,292 $17,504 $2,128 $1,463(a) $65,387
Cost of sales...................... 30,797 13,065 1,275 (119)(b) 45,018
------- ------- ------ ------ -------
Gross profit....................... 13,495 4,439 853 1,582 20,369
Selling, general and administrative
expenses......................... 6,090 446 450 249(c) 7,235
------- ------- ------ ------ -------
Operating income................... 7,405 3,993 403 1,333 13,134
Equity in net loss of
unconsolidated subsidiary........ 110 -- -- 110
Interest expense, net.............. 3,944 -- 136 2,207(d) 6,287
Other income (expense), net........ 89 (599) 6 556(e) 52
------- ------- ------ ------ -------
Income before income taxes and
extraordinary item............... 3,440 3,394 273 (318) 6,789
Provision for income taxes......... 2,028 1,189 121 (127)(f) 3,211
------- ------- ------ ------ -------
Income before extraordinary item... $ 1,412 $ 2,205 $ 152 $ (191) $ 3,578
======= ======= ====== ====== =======
</TABLE>
(see footnotes on following page)
43
<PAGE> 48
NOTES TO PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(1) Reflects the pro forma financial results of T.C. Products for the period of
January 1, 1996 to July 1, 1996, the period prior to ownership by the
Company.
(2) Reflects the adjustments to the Tacoma Plant's operating results to reflect
operations as part of the Company:
(a) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of freight costs associated with the sale of
100,000 tons per year of chlorine shipped to the Gulf Coast
for which OCC Tacoma will bear the cost..................... $1,602
(2) Additional 5% commission to be paid to OxyChem on OxyChem's
national accounts to be serviced by the Company............. (139)
------
$1,463
======
</TABLE>
(b) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of the impact of LIFO accounting previously used
by the Tacoma Plant as the Company uses FIFO or average
costs methods of accounting for inventory valuation......... $ (75)
(2) Additional depreciation expense with respect to the
properties, plant and equipment purchased in connection with
the Tacoma Acquisition using the straight-line method over
an average life of 20 years................................. 214
(3) Elimination of operating lease expense for the equipment
capitalized by the Company which was previously leased by
OCC Tacoma.................................................. (383)
(4) Incremental insurance costs................................. 125
------
$ (119)
======
</TABLE>
(c) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of OxyChem corporate allocations................ $ (446)
(2) Addition of the Company's incremental selling, general and
administrative expenses..................................... 188
(3) Additional amortization expense with respect to intangible
assets purchased in connection with the Tacoma Acquisition
using the straight-line method over periods of 5 to 25
years....................................................... 507
------
$ 249
======
</TABLE>
(d) Incremental interest expense related to the Term Loans with an assumed
interest rate of 8.375% and to the Notes with an interest rate of 9.25%.
(e) Reflects the following:
<TABLE>
<S> <C> <C>
(1) Elimination of environmental expense associated with the
Tacoma Plant's accrual of known environmental matters....... $ 483
(2) Elimination of fees related to the Tacoma Plant's sales of
receivables................................................. 96
(3) Elimination of amortization of deferred gain on equipment
capitalized by the Company, which was previously leased by
the Tacoma Plant............................................ (23)
------
$ 556
======
</TABLE>
(f) Represents the tax effect of all pro forma adjustments.
44
<PAGE> 49
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data of the
Predecessor Company for the years ended December 31, 1992, 1993, and 1994 and
the period from January 1, 1995 through April 20, 1995. Such data were derived
from the Predecessor Company's financial statements, which were audited by Ernst
& Young LLP, independent auditors, except for the financial statements of
certain of the Company's investments, which were audited by other independent
auditors. The table also sets forth the historical financial information of the
Company for the period from March 6, 1995 ("Inception") through December 31,
1995 and the year ended December 31, 1996. Such data were audited by Deloitte &
Touche LLP. For comparative purposes the combined year ended December 31, 1995
has been included. The table also sets forth the historical financial
information of the Company for the three months ended March 31, 1996 and 1997.
The consolidated balance sheets at March 31, 1996 and March 31, 1997 and the
consolidated statements of operations for the three months ended March 31, 1996
and March 31, 1997 are unaudited and reflect all adjustments, consisting of
normal recurring items, which management considers necessary for a fair
presentation. Operating results for the first three months of 1997 are not
necessarily indicative of results to be expected for the year ending December
31, 1997. The data should be read in conjunction with the Consolidated Financial
Statements included elsewhere in this Prospectus. The following table should
also be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
45
<PAGE> 50
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------------------------- PERIOD FROM
PERIOD FROM INCEPTION
YEAR ENDED DECEMBER 31, JANUARY 1, 1995 THROUGH
------------------------------ THROUGH APRIL 20, DECEMBER 31,
1992 1993 1994(1) 1995 1995
-------- -------- -------- ----------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues........................... $157,401 $151,191 $167,217 $ 57,848 $142,908
Cost of sales...................... 126,149 131,711 134,556 37,400 98,175
-------- -------- -------- -------- --------
Gross profit....................... 31,252 19,480 32,661 20,448 44,733
Selling, general and administrative
expenses......................... 22,602 21,850 22,529 7,047 19,836
-------- -------- -------- -------- --------
Operating income (loss)............ 8,650 (2,370) 10,132 13,401 24,897
Equity in net income (loss) of
unconsolidated subsidiary........ 26 1,149 183 204 --
Interest expense, net.............. 8,189 7,551 6,407 1,665 12,905
Settlement of litigation and
insurance claims, net............ 2,755 8,360 3,326 -- --
Other income (expense), net........ 1,104 954 1,154 (319) 637
-------- -------- -------- -------- --------
Income (loss) before taxes and
extraordinary items.............. 4,346 542 8,388 11,621 12,629
Income tax provision............... 1,765 486 3,242 4,809 6,208
-------- -------- -------- -------- --------
Income (loss) before extraordinary
item............................. 2,581 56 5,146 6,812 6,421
Extraordinary item, net of
applicable tax(4)................ -- -- -- 3,420 --
-------- -------- -------- -------- --------
Net income (loss).................. $ 2,581 $ 56 $ 5,146 $ 3,392 $ 6,421
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Working capital.................... $ 7,697 $ (5,521) $ (4,351) $ 10,013 $ 10,450
Total assets....................... 165,915 154,922 163,039 165,329 264,731
Total debt, redeemable preferred
stock and redeemable stock put
warrants......................... 76,848 67,709 57,865 57,677 135,000
Common stockholders' equity........ 20,165 19,721 23,102 26,370 55,427
OTHER FINANCIAL DATA:
Capital expenditures............... 6,652 5,888 5,681 3,447 13,556
Depreciation and amortization...... 12,992 13,446 13,595 4,490 12,274
Ratio of earnings to fixed
charges(5)....................... 1.4x -- 1.8x 5.1x 1.8x
ADDITIONAL INFORMATION:
EBITDA(6).......................... $ 25,501 $ 20,390 $ 28,207 $ 17,572 $ 37,808
<CAPTION>
COMBINED THREE MONTHS ENDED
YEAR ENDED YEAR ENDED ---------------------
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1995(2) 1996(3) 1996 1997
------------ ------------ --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues........................... $200,756 $183,326 $ 44,292 $ 38,743
Cost of sales...................... 135,575 126,739 30,797 29,003
-------- -------- -------- --------
Gross profit....................... 65,181 56,587 13,495 9,740
Selling, general and administrative
expenses......................... 26,883 23,528 6,090 6,170
-------- -------- -------- --------
Operating income (loss)............ 38,298 33,059 7,405 3,570
Equity in net income (loss) of
unconsolidated subsidiary........ 204 (2,607) (110) (1,055)
Interest expense, net.............. 14,570 17,290 3,944 4,458
Settlement of litigation and
insurance claims, net............ -- -- -- --
Other income (expense), net........ 318 1,684 89 231
-------- -------- -------- --------
Income (loss) before taxes and
extraordinary items.............. 24,250 14,846 3,440 (1,712)
Income tax provision............... 11,017 6,735 2,028 178
-------- -------- -------- --------
Income (loss) before extraordinary
item............................. 13,233 8,111 1,412 (1,890)
Extraordinary item, net of
applicable tax(4)................ 3,420 -- -- --
-------- -------- -------- --------
Net income (loss).................. $ 9,813 $ 8,111 $ 1,412 $ (1,890)
======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Working capital.................... $ 10,450 $ 3,334 $ 7,201 $ 3,026
Total assets....................... 264,731 291,010 269,808 291,595
Total debt, redeemable preferred
stock and redeemable stock put
warrants......................... 135,000 141,757 135,000 141,757
Common stockholders' equity........ 55,427 74,323 58,264 72,433
OTHER FINANCIAL DATA:
Capital expenditures............... 17,003 17,121 3,907 2,337
Depreciation and amortization...... 16,764 15,695 4,217 4,080
Ratio of earnings to fixed
charges(5)....................... 2.4x 1.7x 1.7x 0.6x
ADDITIONAL INFORMATION:
EBITDA(6).......................... $ 55,380 $ 50,438 $ 11,711 $ 7,881
</TABLE>
(see footnotes on following page)
46
<PAGE> 51
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
(1) GPS was acquired in May 1994 and therefore the results of operations for the
year ended December 31, 1994 include the results of operations from the date
of acquisition in May 1994 through December 31, 1994. GPS generated third
party sales during such partial period of $9.4 million.
(2) For comparative purposes the combined results of operations for the year
ended December 31, 1995 include the Company's operating results for the
period from Inception through December 31, 1995 and the Predecessor
Company's operating results from January 1, 1995 through April 20, 1995. The
Company believes that this provides a meaningful basis for comparison.
(3) Kemwater was formed in connection with the acquisition of KWT in February
1996 to continue the business activities previously conducted by Imperial
West and, accordingly, the results of operations for the year ended December
31, 1996 include the results of operations of Imperial West only for the
month of January 1996. Since the acquisition, 50% of Kemwater's results of
operations are included as equity in net loss of unconsolidated subsidiary.
Prior to the formation of Kemwater, the financial statements of Imperial
West were consolidated with the Company's consolidated financial statements.
(4) An extraordinary item of $3.4 million, net of an income tax benefit of $2.1
million, was due to costs incurred and previously capitalized costs written
off, pertaining to debt refinanced by the Predecessor Company prior to the
PAI Acquisition.
(5) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income (loss) before provision for income taxes, excluding equity
in net income (loss) of subsidiaries owned 50% or less by the Company, plus
fixed charges net of capitalized interest. Fixed charges consist of interest
expense, including capitalized interest, the portion of rental expense
representative of an interest factor from operating leases and the
amortization of financing costs. The Company's earnings were insufficient to
cover total fixed charges for the year ended December 31, 1993. The coverage
deficiency was $0.6 million.
(6) EBITDA is defined as earnings before interest, income taxes, depreciation
and amortization and equity in net income (loss) of unconsolidated
subsidiaries and is presented because the Company believes that it provides
useful information regarding its ability to service and/or incur debt.
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other combined income or
cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of the Company's profitability or
liquidity.
47
<PAGE> 52
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth revenues of the Company for the periods
indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------
PREDECESSOR
COMPANY COMBINED(1)
----------- -----------
1994 1995 1996(2) 1996(2) 1997
----------- ----------- -------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues
PCAC.............................. $ 88,907 $118,298 $129,570 $32,913 $28,574
All-Pure.......................... 47,872 49,549 51,317 8,940 10,169
Kemwater/Imperial West(3)......... 30,438 32,909 2,439 2,439 --
-------- -------- -------- ------- -------
Total revenues............ $167,217 $200,756 $183,326 $44,292 $38,743
======== ======== ======== ======= =======
</TABLE>
- ---------------
(1) For comparative purposes the combined results of operations for the year
ended December 31, 1995 include the Predecessor Company's operating results
from January 1, 1995 through April 20, 1995 and the Company's operating
results for the period from Inception through December 31, 1995. The Company
believes that this provides a meaningful basis for comparison.
(2) T.C. Products was acquired by All-Pure in July 1996 and, accordingly, the
results of operations for the year ended December 31, 1996 includes the
results of operations since the acquisition date. T.C. Products generated
third party sales during such period of $5.1 million.
(3) Kemwater was formed in connection with the acquisition of KWT in February
1996 to continue the business activities previously conducted by Imperial
West and, accordingly, the results of operations for the year ended December
31, 1996 include the results of operations of Imperial West only for the
month of January 1996. Since the acquisition, 50% of Kemwater's results of
operations are included as equity in net loss of unconsolidated subsidiary.
Prior to the formation of Kemwater, the financial statements of Imperial
West were consolidated with the Company's consolidated financial statements.
GENERAL
The Company manufactures and markets chlorine and caustic soda in the
United States and is a major manufacturer and marketer of several related
downstream water treatment products. The Company generates revenues principally
through PCAC and All-Pure. The Company also owns a 50% unconsolidated interest
in Kemwater, which was formed in February 1996 to continue the operations
previously conducted by the Company's Imperial West subsidiary and to operate
the business acquired through the acquisition of KWT.
Chlorine and caustic soda markets and profitability have been, and are
likely to continue to be, cyclical. Periods of high demand, high capacity
utilization and increasing operating margins tend to result in new plant
investments and increased production until supply exceeds demand, followed by
periods of declining prices and declining capacity utilization until the cycle
is repeated. In addition, markets for chlorine and caustic soda are affected by
general economic conditions, both in the United States and elsewhere in the
world, and a downturn in the economy could have a material adverse effect on the
Company's operations and its cash flows.
Large quantities of chlorine are not typically stored on- or off-site.
Chlor-alkali production rates are therefore typically based on short-term
chlorine demand (typically one month). However, chlor-alkali plants do not
achieve optimum cost efficiency if production rates are cycled. The maintaining
of steady production rates is made difficult by the cyclical nature of the
chlor-alkali business, which is at times exacerbated by the fact that the price
and demand curves for chlorine differ from those of caustic soda. Peak and
trough demand for chlorine and caustic soda rarely coincide and caustic soda
demand, in the past, has tended to trail chlorine
48
<PAGE> 53
demand into and out of economic growth cycles. In addition, in recent years the
end markets for chlorine and caustic soda have increasingly diverged.
Chlorine demand over the last three years has experienced steady growth,
following trends in PVC, urethane intermediates and water treatment markets.
This increased demand has been partially offset by declining chlorine use in the
pulp and paper industry and as a feedstock in the production of CFCs due to
regulatory pressures. Due to increased demand, published chlorine prices have
risen from approximately $145 per ton during 1994 to approximately $160 per ton
at the end of 1996.
As chlorine demand continued to be strong in 1996, the industry's operating
rate remained high. However, this resulted in an overproduction of chlorine's
co-product, caustic soda, relative to demand. This oversupply led to decreasing
caustic soda prices, offsetting increased chlorine prices and resulting in ECU
netbacks (net selling prices) decreasing during 1996 from 1995 levels.
To achieve operating efficiencies and to help mitigate the effects of
cyclicality on the Company's business, the Company has pursued a strategy of
converting chlorine and caustic soda into products that are used in markets with
steady demand, particularly water treatment chemicals. In pursuit of this
strategy, the Predecessor Company acquired Imperial West and All-Pure in 1990
and GPS in 1994, and the Company acquired T.C. Products in July 1996, each of
which is a major manufacturer and distributor of water treatment chemicals such
as iron chlorides, aluminum sulfate, repackaged chlorine and bleach, primarily
in the western United States.
Due in part to these acquisitions and the improved chlorine market, the
Predecessor Company and the Company increased ECU capacity utilization rates
over the last seven years from 93% in 1990 to approximately 100% in 1996.
On February 2, 1996, Imperial West participated in the acquisition of KWT
from a subsidiary of Kemira. KWT produces specialty and commodity inorganic
coagulants, including polyaluminum chlorides, aluminum sulfate, sodium aluminate
and ferric sulfate, at its plant in Savannah, Georgia for sale to the water
treatment market in the eastern United States and the Caribbean. The combined
operations of Imperial West and KWT are now conducted by Kemwater, 50% of the
common stock of which is held by a subsidiary of PAAC and 50% of the common
stock which is owned by a subsidiary of Pioneer. A subsidiary of PAAC also owns
all of the outstanding shares of Kemwater's preferred stock. The Company's
investment in Kemwater is accounted for by the equity method.
Effective July 1, 1996, All-Pure acquired T.C. Products through the
acquisition of its parent, T.C. Holdings, Inc. from its shareholders.
Consideration for the acquisition consisted of net cash payments of $5.5 million
and All-Pure subordinated notes with an aggregate principal amount of $4.5
million due July 30, 2001, subject to prepayment. The Company's existing cash
balances were used to fund the cash portion of the purchase price. T.C. Products
continues to manufacture and package bleach and related products at its plant in
Tacoma, Washington. The purchase of T.C. Products has been accounted for as a
purchase transaction and, accordingly, the consolidated financial statements
subsequent to July 1, 1996 reflect the purchase price, including transaction
costs, allocated to tangible and intangible assets acquired and liabilities
assumed, based on their fair values as of July 1, 1996, and include the results
of operations of T.C. Products subsequent to such date.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Revenues
Revenues decreased by $5.5 million, or approximately 13%, to $38.7 million
for the three months ended March 31, 1997 from $44.3 million for the three
months ended March 31, 1996. Revenues at PCAC decreased by $4.3 million, or
approximately 13%, to $28.6 million as a result of both ECU pricing pressure and
lower unit sales volumes of caustic soda. ECU prices declined by approximately
2%, which reflects a $40 per ton decrease in caustic soda prices offset
partially by a $36 per ton increase in chlorine prices. Caustic soda sales also
declined as a result of a 21% decrease in unit sales volumes (21,000 tons)
resulting from a lower emphasis on sales of lower priced product as well as
weather related delays in Mississippi River barge
49
<PAGE> 54
shipments due to flooding. Chlorine sales were higher in the first quarter of
1997 as compared to the first quarter of 1996, which reflects a higher chlorine
sales price and relatively flat sales volume. Revenues for All-Pure increased
14%, or $1.2 million in the first quarter of 1997 compared to the same quarter a
year ago. This increase was primarily related to the inclusion of T.C. Products,
which the Company acquired in the second quarter of 1996.
Cost of Sales
Cost of sales decreased by $1.8 million, or approximately 6%, to $29.0
million for the three months ended March 31, 1997 from $30.8 million for the
three months ended March 31, 1996. The decrease was primarily the result of
lower sales volumes for caustic soda and chlorine, which was partially offset by
the inclusion of T.C. Products. In addition, PCAC experienced higher power costs
at St. Gabriel in the first quarter of 1997 as compared to the first quarter of
1996.
Gross Profit
Gross profit margin decreased from 30% during the first quarter of 1996 to
approximately 25% during the first quarter of 1997. This decrease was a result
of the lower sales volumes and higher production costs at PCAC described above.
Selling, General and Administrative
Selling, general and administrative expenses increased slightly to $6.2
million in the first quarter of 1997 from $6.1 million in the first quarter of
1996. The increase was primarily related to the inclusion of T.C. Products.
Equity in Net Loss of Unconsolidated Subsidiary
Equity in net loss of unconsolidated subsidiary increased by approximately
$0.9 million for the three months ended March 31, 1997 due to increased losses
sustained by Kemwater. Kemwater's profitability decreased as a result of higher
raw material costs which it was unable to pass through to its customers.
Interest Expense
Interest expense increased by approximately $0.5 million to $4.4 million in
the first quarter of 1997 from $3.9 million in the first quarter of 1996. The
increase was primarily the result of the additional debt incurred with the T.C.
Products acquisition in July 1996.
Income (Loss) Before Taxes
As a result of the above, income (loss) before income taxes decreased $5.1
million to a loss of $1.7 million for the three months ended March 31, 1997 from
a net income of $3.4 million for the three months ended March 31, 1996.
Income Tax Provision
Provision for income taxes declined to $0.2 million in the first quarter of
1997 from $2.0 million in the first quarter of 1996 as a result of the decline
in the Company's profitability outlined above. Taxable income is higher than
book income due to the non-deductibility of amortization of the excess cost over
the fair value of net assets acquired. A provision is recorded on the income
statement based on taxable income; however, federal income taxes payable are
reduced and paid-in capital is increased due to the utilization of the net
operating loss carryforward.
Net Income
As a result of the factors outlined above, net income for the first quarter
of 1997 declined to a net loss of $1.9 million from a net income of $1.4 million
in the first quarter of 1996.
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YEAR ENDED DECEMBER 31, 1996 COMPARED TO COMBINED YEAR ENDED DECEMBER 31, 1995
Revenues
Revenues decreased by $17.4 million or approximately 9% to $183.3 million
for 1996 compared to $200.8 million in 1995. The transfer of the Imperial West
business to Kemwater in February 1996 caused a decrease in Imperial West's
revenues of approximately $30.5 million. This decrease was partially offset by
an $8.3 million increase in revenues at PCAC related to sales to Kemwater which,
as a result of this change of ownership, are no longer eliminated in
consolidation. Also affecting PCAC's 1996 as compared to 1995 revenues was a 9%
increase in caustic soda sales volumes of 31,000 tons ($7.4 million), a 6%
increase in chlorine sales volumes of 20,000 tons ($3.0 million) and an
approximate 7% decrease in ECU sales prices ($10.6 million). Revenues for
All-Pure in 1996 increased by $1.7 million, which included the impact of $5.4
million of revenues from the T.C. Products acquisition in July 1996, which was
partially offset by a decrease in All-Pure sales volumes in 1996 as compared
with 1995.
Cost of Sales
Cost of sales decreased by approximately $8.8 million, or 7%, to $126.7 in
1996 from $135.5 million in 1995. The decrease was the result of the transfer of
the Imperial West operations to Kemwater ($20.5 million). Offsetting this
decrease was an increase in manufacturing costs ($4.2 million), which was
primarily related to increased electricity costs, and increased caustic soda and
chlorine sales volume ($6.1 million). In addition, All-Pure's 1996 cost of sales
were higher primarily as the result of the inclusion of T.C. Products which
increased cost of sales by $3.1 million.
Gross Profit
Gross profit decreased by $8.6 million, or 13%, from $65.2 million in 1995
to $56.6 million in 1996. Gross margin decreased from 32% in 1995 to 31% in
1996. The decline was a result of a reduction of the factors outlined above.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased approximately $3.4
million to $23.5 million in 1996 due primarily to the transfer of Imperial West
operations to Kemwater during 1996.
Equity in Net Loss of Unconsolidated Subsidiaries
Equity in net loss of unconsolidated subsidiaries represents the Company's
50% ownership interest in Kemwater which was formed in February 1996 as the
result of the acquisition of KWT by Imperial West. Kemwater experienced a loss
in 1996 as a result of increased competitive pressure in their markets.
Interest Expense, Net
Interest expense increased by $2.7 million or 19% to $17.3 million for
1996. This increase was a result of including a full year of interest expense
for the debt incurred in connection with the PAI Acquisition in April 1995 as
well as the debt incurred in financing the T.C. Products acquisition.
Income Tax Provision
Provision for income taxes was $6.7 million in 1996 with an effective tax
rate of 45% as compared to $11.0 million in 1995, with an effective tax rate of
45%. The decrease in the income tax provision was primarily a result of the
decrease in the Company's income before income tax and extraordinary item to
$14.8 million for 1996 from $24.2 million in 1995.
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Net Income
Due to the factors described above, net income for the year ended December
31, 1996 decreased to $8.1 million from $9.8 million for 1995, which includes an
extraordinary expense of $3.4 million for the write-off of financing costs.
COMBINED YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenues
Revenues increased by $33.5 million or 20% to $200.7 million for the 1995
period. This increase was primarily due to a $29.4 million increase in
chlor-alkali sales at PCAC, resulting from an industry-wide strengthening of ECU
prices. The average ECU price during the 1995 period increased 27% over the same
period in 1994.
Gross Profit
Gross profit increased as a percentage of revenues to 32% in 1995 from 20%
in 1994 due to a combination of increased revenues and lower raw material costs
which more than offset higher transportation and other expenses and an inventory
step-up related to the PAI Acquisition.
Selling, General and Administrative Expense
Selling, general and administrative expense increased by $4.4 million or
19% to $26.9 million for the year ended December 31, 1995. This increase was
primarily the result of an acquisition by the Predecessor Company in May 1994,
additional compensation pursuant to the Company's incentive compensation
program, and increased amortization as a result of the PAI Acquisition.
Interest Expense, Net
Interest expense increased by $8.2 million or 127% to $14.6 million for the
1995 period from $6.4 million for 1994. This increase was a result of debt
incurred with the PAI Acquisition.
Income Before Taxes and Extraordinary Item
As a result of the above, net income before taxes and extraordinary item
increased by $15.9 million or 189% to $24.2 million of income for the year ended
December 31, 1995 from $8.4 million for the year ended December 31, 1994.
Income Tax Provision
Provision for income taxes increased $7.8 million to $11.0 million for the
year ended December 31, 1995 from $3.2 million for the comparable 1994 period
due to higher income. Taxable income is higher than book income due to the
non-deductibility of amortization of the excess cost over the fair value of the
net assets acquired. A provision is recorded on the income statement; however,
federal income taxes payable are reduced due to the utilization of the net
operating loss carryforward.
Extraordinary Item
An extraordinary item of $3.4 million net of an income tax benefit of $2.1
million recorded during the 1995 period 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 PAI Acquisition.
Net Income
As a result of the foregoing, net income increased 91% to $9.8 million.
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LIQUIDITY AND CAPITAL RESOURCES
The Company is highly leveraged. Concurrently with the closing of the
Initial Offering and the Tacoma Acquisition, the Company entered into the New
Credit Facilities. The New Credit Facilities consist of a $100.0 million senior
Term Facility and a $35.0 million Revolving Facility, subject to borrowing base
limitations that relate to the level of accounts receivable and inventory. As of
March 31, 1997, on a pro forma basis after giving effect to the Initial
Offering, the other Refinancing and the Tacoma Acquisition, the Company would
have had outstanding indebtedness of approximately $306.8 million.
The Company believes that cash flow from current and anticipated future
levels of operations and, to a lesser extent, the availability under the
Revolving Facility, will be adequate to make required payments of interest and
principal on the indebtedness that is outstanding, as well as to fund its
foreseeable capital expenditures and working capital requirements. The Company
estimates that annualized cash interest of $26.9 million will be payable on the
Notes and Term Loans. The Company anticipates that capital expenditures for
1997, excluding acquisitions, will be approximately $20.4 million, including
approximately $4.1 million for environmental compliance matters. The Company
believes that forecasted capital expenditures will permit it to maintain its
facilities on a basis competitive within the industry through improved
efficiency and throughput and continuation of high operating rates.
The Company's belief that it will generate sufficient cash flow for its
requirements is based upon, among other things, the assumptions that: (i) the
Company's cash flow will be positive as a result of the continuing operating
profitability of its business; (ii) the Company will invest in working capital
in accordance with prior practices; (iii) the Company will not incur any
material capital expenditures in excess of its business plan; and (iv) the
Company has the benefit of a tax-sharing agreement with Pioneer which reduces
the amount of taxes payable by the Company.
Net Cash Provided by Operating Activities. During the year ended December
31, 1996, the Company generated $32.5 million in cash from operating activities
from profitability, depreciation, the utilization of the NOL and a decrease in
working capital (excluding the effects of the purchases of KWT and T. C.
Products). During the three months ended March 31, 1997, the Company generated
$3.6 million in cash for operating activities from depreciation and
amortization.
Net Cash Used in Investing Activities. Cash used in investing activities
for the year ended December 31, 1996 was $29.2 million, primarily due to capital
expenditures related to property, plant and equipment and the purchases of KWT
and T.C. Products by the Company. Cash used in investing activities for the
three months ended March 31, 1997 was $3.4 million, primarily due to such
expenditures.
Net Cash Used in Financing Activities. Cash used in financing activities
for the year ended December 31, 1996 was $757,000, primarily due to a payment of
dividends to Pioneer. There were no financing activities during the three months
ended March 31, 1997.
ACCOUNTING CHANGES
The Company adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("SFAS No. 121"), on January 1, 1996. SFAS No. 121 sets forth
guidance on how to measure an impairment of long-lived assets and when to
recognize such an impairment. The adoption of this standard did not have a
material impact on the Company's financial position or results from operations.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128 establishes new standards for computing and presenting
earnings per share. The Company is required to adopt the provisions of SFAS No.
128 for its consolidated financial statements for the year ended December 31,
1997 and subsequent interim periods. Upon adoption, the standard also requires
the restatement of all prior period earnings per share information presented.
The adoption of SFAS No. 128 is not expected to have a material effect on the
Company's earnings per share computations or disclosures.
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BUSINESS
GENERAL
The Company is a manufacturer and marketer of chlorine and caustic soda in
the United States and is a major manufacturer and marketer of several related
downstream water treatment products. The Company conducts its business primarily
through PCAC and All-Pure. The Company also owns a 50% unconsolidated joint
venture interest in Kemwater (which effective in February 1996 succeeded to the
operations of Imperial West). Pioneer owns the remaining 50% joint venture
interest in Kemwater.
INDUSTRY OVERVIEW
The Company operates in chlor-alkali and chlor-alkali related industries.
Chlorine and caustic soda are co-products, concurrently produced in a ratio of 1
to 1.1. An ECU consists of 1 ton of chlorine and 1.1 tons of caustic soda.
Chlorine is used in the manufacture of over 15,000 products, comprising
approximately 60% of all commercial chemistry, 85% of all pharmaceutical
chemistry and 95% of all crop protection chemistry. Products manufactured with
chlorine as a raw material include plastics, detergents, pharmaceuticals, water
treatment chemicals and agricultural chemicals. Chlorine also is used directly
in water disinfection applications. In the United States and Canada, virtually
all public drinking water is made safe to drink by chlorination, and a
significant portion of industrial and municipal waste water is treated by
chlorine and chlorinated chemicals to kill water-borne pathogens and remove
solids.
The caustic soda market is even more diverse than that of chlorine. It is
used in thousands of industrial and commercial processes (either as an essential
raw material, as an intermediate or as a medium to control acidity) including
metal smelting, petroleum production and refining, pulp and paper production and
paint manufacturing. Caustic soda is combined with chlorine and water to produce
bleach and is also used as an active ingredient in a wide variety of end use
products, including detergents, rayon and cellophane.
The following table sets forth certain information regarding the principal
industry-wide applications for the Company's products.
<TABLE>
<CAPTION>
PRODUCTS PRINCIPAL APPLICATIONS
-------- ----------------------
<S> <C>
Chlorine....................... Agricultural chemical and pharmaceutical manufacturing,
steel, PVC and other plastics, detergents, paints, water
purification, bleach, pulp and paper products, mining,
textiles
Caustic soda................... Cleaners, pulp and paper products, oil production and
refining, rayon, cellophane, vegetable oils, cosmetics,
aluminum, food processing, bleach, water treatment, mining
Hydrochloric acid.............. Cleaning, mining, dyes, ink, titanium, textiles, rocket
fuel, exotic metals, water treatment, oil production
Hydrogen....................... Boiler and turbine fuel, chemical manufacturing, petroleum
Calcium chloride............... Concrete formulation, dust control, pulp and paper
products
Iron chlorides................. Waste and potable water treatment, electronics
Polyaluminum chlorides......... Waste and potable water treatment
Sodium aluminate............... Catalyst production, paints, waste and potable water
treatment
Ferric sulfate................. Waste and potable water treatment
Aluminum sulfate............... Waste and potable water treatment, pulp and paper products
Bleach......................... Waste and potable water treatment, household and
commercial cleaners, food processing, swimming pool
treatment
</TABLE>
The United States represents approximately one-fourth of world chlor-alkali
production capacity, with approximately 12.9 million tons of chlorine and 13.9
million tons of caustic soda production capacity. OxyChem and The Dow Chemical
Company are the two largest chlor-alkali producers in the United States, each
with approximately one quarter of United States capacity. The remaining capacity
is held by approximately 20 companies. Approximately 70% of United States
chlor-alkali capacity is located on the Gulf Coast of Texas and Louisiana. The
Company believes that following the Tacoma Acquisition it has
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approximately 4.1% of U.S. chlor-alkali capacity. The Company believes that the
chlorine and caustic soda currently produced at its Henderson facility provide a
significant source of supply for the West Coast region, where the Company is
also the largest supplier of chlorine and bleach for water treatment purposes
and where Kemwater is the largest producer of iron chlorides. The Company
believes the St. Gabriel and Tacoma facilities are leading suppliers of premium,
low-salt grade caustic soda in their respective regions. The Company believes
the Tacoma Facility is a significant producer of chlorine and caustic soda in
the Pacific Northwest and will allow the Company to more efficiently supply its
downstream operations in the western and northwestern United States.
There has been a long-term downward trend in total North-American
chlor-alkali production capacity as industry participants have closed
inefficient production facilities. Since 1982, 29 United States facilities with
an annual production capacity of approximately 3.4 million ECUs have been
permanently shut down. As a result, total industry production capacity has
decreased from a peak of approximately 14.2 million ECUs in 1982 to
approximately 13.6 million ECUs in 1996.
Over the same time period, there has been a long-term upward trend in
capacity utilization, increasing from a low of approximately 62% in 1982 to
approximately 99% in 1996. This trend is a result of the combination of
decreasing industry production capacity and increasing chlor-alkali demand.
The Company believes that the chlor-alkali capacity increases announced for
completion in late 1997 will increase overall North-American capacity by
approximately 2%, keeping pace with the overall projected chlorine demand
increase. The Company anticipates that the global chlorine supply/demand balance
will remain relatively stable over the next few years.
The following graph highlights these trends.
INDUSTRY CAPACITY AND UTILIZATION RATES
[CAPACITY AND UTILIZATION RATES GRAPH]
Source: The Chlorine Institute, Inc., industry and Company data.
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Environmental pressures over the last five years have led to a substantial
decline in chlorine demand in two major chlorine markets -- pulp and paper and
CFCs. Usage of chlorine by the pulp and paper industry declined by 36%, from 1.2
million tons in 1991 to 771,610 tons in 1996. The use of chlorine for the
production of CFCs has been almost completely discontinued. The Company believes
that the current level of chlorine demand by the pulp and paper industry will
continue to decline over the next five years.
The declines in these markets have been offset by the growth in chlorine
demand for PVC, polycarbonate resins and isocyanates, water treatment
applications and engineering plastics. In addition, the Company believes that as
the global economy continues to improve, export demand for chlorine derivatives
should increase. The Company believes that caustic soda demand will grow at a
slower pace than chlorine demand. Industry sources estimate that world
chlor-alkali demand will grow by approximately one to two percent annually.
The chlorine and caustic soda markets are cyclical markets that are
sensitive to relative changes in supply and demand, which are in turn affected
by general economic conditions, capacity additions and other factors. Over the
last five years, the market for PVC, the largest use of chlorine, has
experienced steady growth, resulting in strong demand for chlorine. However, the
use of chlorine as a bleaching agent in the pulp and paper industry and as
feedstock in the production of CFCs has been reduced significantly due to
regulatory pressures. As a result of these factors and a general decline in
economic growth in the early 1990s, the North American chlor-alkali industry
experienced declining prices, as ECU prices fell by over 52% from $389 per ECU
in the fourth quarter of 1989 to $185 per ECU in the second quarter of 1993.
After a significant improvement in domestic economic growth, in early 1994
chlor-alkali markets experienced increased levels of demand. Limited new
capacity was added during this time, resulting in greater capacity utilization
and higher domestic and export prices for chlor-alkali products. These
conditions continued in 1995 and the increase in demand enabled the Company and
the industry in general to increase selling prices significantly at a time when
operating costs generally did not increase. Toward the end of 1995, however, ECU
prices began to decrease as strengthening demand for chlorine was offset by an
oversupply of caustic soda. The industry has continued to operate at full
capacity and management does not anticipate a significant increase in capacity
over the next several years. The Company therefore believes that the previous
volatility in ECU prices should moderate over such period.
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The following graph presents industry-wide average annual ECU prices since
1976 and the Company's average annual ECU prices since 1991.
INDUSTRY AVERAGE ANNUAL ECU PRICES
Source: United States Commerce Department, industry and Company data.
STRATEGY
The Company's management team is pursuing a business strategy designed to
capitalize on its competitive strengths in terms of its marketing expertise,
production and distribution capabilities and geographic focus. The Company seeks
to manage effectively the intrinsic cyclicality of the chlor-alkali industry
while continuing to grow and improve profitability by pursuing a strategy which
includes the following principal elements:
- Focusing on the Merchant Chlor-Alkali Market. The Company is dedicated to
serving the merchant chlor-alkali market, acting as a reliable source of
supply of chlorine and caustic soda. The Company is committed to being
flexible and responsive in periods of volatile chlor-alkali demand,
making it the preferred supplier for many of its customers. Unlike its
major competitors, the Company does not compete with its PVC customers
and, as a result, is viewed as a preferred, non-competing source of raw
materials.
- Optimizing Plant Efficiencies through High Capacity Utilization. The
Company seeks to maximize profitability by achieving a constant flow of
product through its plants. The Company strives to maintain a steady
demand for its output through (i) programs aimed primarily at growing
markets such as PVC and water treatment; (ii) renewable contracts with
major customers and the Chlorine Purchase Agreement with OCC Tacoma;
(iii) direct linkage with major customers via pipelines, including the
Pipeline Project, a proposed seven-mile liquid chlorine pipeline from the
St. Gabriel facility expected to be completed in 1998; and (iv) captive
demand for chlorine and caustic soda through its downstream water
treatment operations. As a result of these actions, the Company's
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Henderson and St. Gabriel chlor-alkali plants have operated at 101%, 100%
and 100% capacity utilization during 1994, 1995 and 1996, respectively,
up from 93% in 1990.
- Improving Cost Efficiency. The Company continually seeks to improve its
cost competitiveness through a combination of productivity enhancements,
strict operating cost controls, capital improvements and maintenance of
high capacity utilization rates. Despite inflation, the Company's cash
production costs per ECU decreased by 5% from 1990 through 1996, while
ECU production per employee increased by 20%. In addition, the Company
seeks to reduce distribution costs and improve plant operating efficiency
through the efficient use of its strategic locations with deep water port
facilities, direct pipeline connections to customers and opportunistic
product exchanges with chlor-alkali producers in other regions.
- Focusing on Geographic Diversity and Market Penetration. The Company's
products are manufactured and marketed in a number of markets, providing
a wide base for future growth and distribution to help mitigate the
effects of regional and economic fluctuations. Following the Tacoma
Acquisition, the Company has major chlor-alkali facilities in three
states (Louisiana, Nevada and Washington) and downstream water treatment
chemical processing plants serving several distinct areas of the country.
The Company is well-positioned to direct its chlor-alkali output to
additional areas while more efficiently supplying the growth in its own
downstream operations in the western, northwestern and southeastern
United States. Through focused expansion, the Company has been able to
penetrate new and outlying market areas while maintaining its strong
presence in the Gulf Coast region and areas west of the Rocky Mountains.
- Expanding Water Treatment Operations. The Company has developed
downstream water treatment operations whose steady requirements for
chlorine and caustic soda help maintain high operating rates at the
Company's chlor-alkali facilities which, in turn, decreases unit
production costs. In addition to serving as a source of demand, these
growing businesses service diverse product markets and regions and can
tend to offset industry cyclicality in the chlorine and caustic soda
markets by providing a more stable downstream source of revenue.
- Growing through Product Line Extensions and Strategic Acquisitions.
Management believes that there are significant opportunities to continue
the Company's growth both internally and through strategic acquisitions.
The Company focuses its product development efforts on areas identified
by its customers as being of major commercial importance. For example, in
the area of water treatment, the Company has developed or acquired rights
to a number of innovative coagulant products which represent cost
effective, advanced waste water treatment solutions. In addition, the
Company is constantly reviewing acquisitions in related markets and since
1990 has consummated five downstream acquisitions, which provide
attractive product offerings and geographic coverage.
OPERATING UNITS
PCAC
PCAC manufactures chlorine and caustic soda for sale to third parties and
to All-Pure and Kemwater as raw materials in the manufacture of chlor-alkali
related products, including bleach and iron chlorides. In addition to chlorine
and caustic soda, PCAC produces commercial quantities of hydrochloric acid and
hydrogen. PCAC's chlor-alkali operations generated pro forma net sales
representing approximately 78% of the Company's total pro forma net sales in
1996. Pro forma merchant sales of chlorine (including resales of purchased
chlorine) accounted for approximately 35% of PCAC's pro forma net sales in such
period. Pro forma merchant sales of caustic soda accounted for approximately 60%
of PCAC's pro forma net sales in such period. Pro forma merchant sales of
hydrochloric acid and hydrogen accounted for approximately 5% of PCAC's pro
forma net sales in such period. On a pro forma basis, approximately 10% of
PCAC's chlorine production was used by PCAC for the production of hydrochloric
acid and other chemical products, while approximately 14% of chlorine production
and 6% of caustic soda production was supplied to All-Pure and Kemwater for
bleach and iron chloride production, repackaging and distribution.
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Following the Tacoma Acquisition, PCAC owns and operates three chlor-alkali
production facilities, located in St. Gabriel, Louisiana; Henderson, Nevada; and
Tacoma, Washington, with aggregate production capacity of 574,000 ECUs.
The Tacoma Facility manufactures chlorine, caustic soda, hydrochloric acid
and calcium chloride. Annual capacity is approximately 225,000 tons of chlorine,
247,500 tons of caustic soda, 44,000 tons of hydrochloric acid and 8,800 tons of
calcium chloride. The products are sold to many customers previously being
served by the plant, as well as to the Company's downstream operations at
All-Pure and Kemwater. The Company believes that the plant would have generated
pro forma net sales of $80.5 million and pro forma EBITDA of $33.5 million for
the twelve months ended March 31, 1997, if the Tacoma Acquisition had occurred
at the beginning of such period. On a pro forma basis, such sales would
represent approximately 31% of the Company's total net sales.
The Tacoma Facility utilizes both membrane cell and diaphragm cell
technology to produce chlorine, caustic soda and hydrogen. The membrane cells
account for approximately 45% of the total plant capacity and the diaphragm
cells account for approximately 55% of the total plant capacity. The chlorine is
stored in pressurized tanks on-site, and the caustic soda solution is stored in
tanks at the plant and at off-site terminals. Bulk shipments of evaporated sea
salt are brought in from Baja California, Mexico under a long-term contract with
Mitsubishi. The typical salt load on a ship is approximately 35,000 tons, and is
stored on-site on an open-air salt storage pad, for dilution and processing.
PCAC's other chlor-alkali production facilities are located in Henderson,
Nevada and St. Gabriel, Louisiana. The Henderson facility utilizes diaphragm
cell technology and the St. Gabriel facility utilizes mercury cell technology.
The elemental chlorine gas is dried, liquefied through compression and
refrigeration and stored in pressurized tanks. The caustic soda solution is
stored in tanks at the plants and off-site terminals. Hydrogen, produced as a
by-product, is transported by pipeline to the point of its final consumption,
used internally in the production of hydrochloric acid or vented.
Production rates for chlorine and caustic soda are generally set based upon
demand for chlorine, because storage capacity for chlorine is both limited and
expensive. When demand is less than plant operational capacity and available
storage is filled, production operations must be curtailed. PCAC currently
leases a fleet of 672 rail cars for chlorine distribution, 503 rail cars for
caustic soda distribution, 103 rail cars for hydrochloric acid distribution and
three rail cars for calcium chloride distribution. These cars can, under certain
circumstances, be used to provide additional storage capacity.
Chlorine. PCAC has the capacity to produce approximately 349,000 tons of
chlorine annually at its Henderson and St. Gabriel plants. Expansion projects
between 1990 and 1996 have increased the production capacity at the Henderson
plant by approximately 37,300 tons of chlorine per year. For the year ended
December 31, 1996, the Company produced approximately 345,700 tons of chlorine.
Directly and through exchanges, PCAC supplied the equivalent of approximately
76,100 tons of chlorine to All-Pure and Kemwater for bleach and iron chloride
production and for repackaging and distribution. An additional 44,800 tons of
chlorine, approximately 13% of PCAC's chlorine production, was used to produce
hydrochloric acid at the Henderson plant. Chlorine was also sold to
approximately 30 customers or shipped on behalf of exchange partners.
Caustic Soda. PCAC has the capacity to produce approximately 383,900 tons
of caustic soda annually at its Henderson and St. Gabriel plants. The St.
Gabriel plant's mercury cell production process yields a higher grade of caustic
soda, commonly known as low salt. This higher grade caustic soda is a niche
product which is required for certain end uses and therefore receives premium
pricing in the marketplace. For the year ended December 31, 1996, PCAC produced
approximately 379,700 tons of caustic soda, approximately 57% of which was low
salt grade. PCAC supplied all caustic soda required by All-Pure and Kemwater for
bleach production and distribution. Caustic soda was also sold to approximately
75 customers or shipped on behalf of exchange partners.
Hydrochloric Acid. PCAC has the capacity to produce approximately 130,000
tons of hydrochloric acid annually at its Henderson plant by combining hydrogen
and chlorine. For the year ended December 31, 1996,
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PCAC produced approximately 134,300 tons of hydrochloric acid. PCAC supplied the
equivalent of approximately 18% of its hydrochloric acid production to All-Pure
and Kemwater for distribution and production of iron chlorides. The remainder
was sold to approximately 45 customers or shipped on behalf of exchange
partners. PCAC can and does vary the production of hydrochloric acid depending
upon the relative prices of chlorine and hydrochloric acid.
Hydrogen. Hydrogen produced at the Henderson facility is used to
manufacture hydrochloric acid and is sold to a third party for use as turbine
fuel. Hydrogen produced at the St. Gabriel plant is used as a boiler fuel and is
sold as a feedstock to another chemical company. For the year ended December 31,
1996, PCAC produced approximately four million cubic feet of hydrogen, a portion
of which was sold to Saguaro Power as fuel and a portion to Borden Chemicals and
Plastics, LP ("BCP") as feedstock. Approximately 24% of the hydrogen was used
internally in the production of hydrochloric acid and as boiler fuel. At both
plants, hydrogen not used or sold is vented.
Sales and Marketing. Pursuant to a Chlorine Purchase Agreement, OCC Tacoma
will purchase 100,000 tons of chlorine during the year following the Tacoma
Acquisition, which would have represented approximately 6% of the Company's pro
forma net sales for the twelve months ended March 31, 1997. In addition, the
Company has the right to require OCC Tacoma to purchase, and OCC Tacoma has the
right to require the Company to sell, up to 100,000 tons of chlorine during the
second year following the Tacoma Acquisition and up to 75,000 tons of chlorine
during the third year following the Tacoma Acquisition. All deliveries will be
from the Tacoma Facility to OxyChem's plant at Ingleside, Texas. Market prices
will apply to all such transactions, with transportation costs to be borne and
paid by OCC Tacoma. The Company will also have the right to require OCC Tacoma
to purchase up to 50,000 tons of chlorine during the fourth year following the
Tacoma Acquisition and up to 25,000 tons of chlorine during the fifth year
following the Tacoma Acquisition at market prices, with each of the parties to
bear 50% of the transportation costs from Tacoma to Ingleside for any purchases
during such fourth and fifth years.
Pursuant to a Chlorine and Caustic Soda Sales Agreement, the Company will
sell to OxyChem those quantities of chlorine and caustic soda necessary for
OxyChem to satisfy its obligations under contracts with certain of OxyChem's
national account customers. The Company estimates that during the year following
the Tacoma Acquisition the Company will sell approximately 22,400 tons of
chlorine and 46,000 tons of caustic soda under the agreement, at prices set each
quarter at levels equal to 95% of the average price received by OxyChem under
its arm's-length customer contracts during the preceding quarter. The final
deliveries of chlorine and caustic soda under the arrangement will occur in
December 2000.
One PCAC customer, Novartis, accounted for approximately 13% of the
Company's net sales for the year ended December 31, 1996 and would have
accounted for approximately 9% of the Company's pro forma net sales for such
period. PCAC has a five-year contract with Novartis that expires in 1998 and
requires Novartis to purchase from PCAC 100% of Novartis's annual requirement of
chlorine. Product is transported directly to Novartis through pipelines from the
St. Gabriel plant.
Logistics play a significant role in marketing chlor-alkali and
chlor-alkali related products for two primary reasons. First, many customers
take shipments to fulfill requirement on an as-needed basis. PCAC must therefore
manage potential short-term dislocations between sales and production due to
seasonal or other factors in order to maintain the high, steady production rates
at which the plants operate most efficiently. Second, the relatively high cost
of distribution tends to regionalize producers and markets. To minimize these
exposures, PCAC has developed product exchange relationships with other
producers for its primary products. The purpose of these exchanges is to lower
freight and other distribution costs, control inventory, maintain steady
operating rates and diversify sales through exchanges of different products and
product grades. In addition, PCAC utilizes product exchanges in instances where
it can capture more of a premium for its low-salt grade caustic soda than it
might otherwise receive.
The Company continually seeks improved methods of meeting the needs of its
customers. As a part of that effort, the Company is currently acquiring the
necessary permits and easements for the Pipeline Project, a seven-mile liquid
chlorine pipeline, which will extend from the St. Gabriel facility to Geismar,
Louisiana. The state-of-the-art pipeline, which will be equipped with leak and
excavation detection systems, will be capable of
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delivering 600 tons of chlorine per day to customers in the Geismar area. It is
estimated that the Pipeline Project will be completed in 1998.
In order to maintain high capacity utilization rates at its chlor-alkali
plants, PCAC seeks to sell more chlorine than it can produce and therefore
frequently purchases chlorine for resale. In this manner, it is often able to
adjust chlorine purchase levels, rather than plant production levels, in
response to changes in the demand for chlorine. This strategy resulted in
chlorine production of 345,700 tons for the year ended December 31, 1996,
implying a capacity utilization rate of approximately 100%.
PCAC's chlor-alkali operations employ 25 personnel in sales, marketing and
distribution. The corporate executive offices in Houston, Texas include sales
administration and distribution functions and oversight of the field sales
offices. Field sales offices are located in Huntington Beach, California and St.
Louis, Missouri. Unlike most of its competitors, PCAC has maintained its
customer service centers at its plants. This facilitates the close
synchronization of sales, production, shipping and accounting which has given
PCAC the capability of filling "just-in-time" orders. The customer service
centers at the Henderson and St. Gabriel plants are responsible for all
order-entry and shipping and rail fleet management. Sales of chlor-alkali
products are primarily on a direct basis to customers under annual or
longer-term contractual arrangements. The arrangements identify delivery,
product quality and other standard terms and allow PCAC to make advance
determination of output requirements, although generally price provisions are
flexible so that both PCAC and the customer receive the benefit of prices which
bear a relationship to the current market price. In addition to direct sales,
PCAC has resale agreements with approximately 20 independent distributors for
caustic soda and hydrochloric acid.
All-Pure
All-Pure manufactures bleach and repackages chlorine and hydrochloric acid
and distributes these products along with caustic soda and other related
products in the western U.S. All-Pure also purchases and distributes various
complementary dry and specialty products such as calcium hypochloride and sulfur
dioxide, and purchases, tabletizes and repackages dry and specialty water
treatment products for distribution to municipalities, swimming pool supply
distributors and selected commercial and retail markets in southern California.
All-Pure's products are generally sold on a delivered basis and are delivered
primarily through a fleet of trucks, including equipment owned by Kemwater. In
July 1996, All-Pure acquired T.C. Products, which is engaged in the manufacture
and marketing of household bleach and related products from its plant in Tacoma,
Washington. All-Pure generated pro forma net sales representing approximately
21% of the Company's total pro forma net sales in 1996. Pro forma sales of
bleach accounted for approximately 56% of All-Pure's pro forma sales for such
period. Pro forma sales of repackaged chlorine accounted for approximately 25%
of All-Pure's pro forma sales for such period. Pro forma sales of specialty
swimming pool and spa chemicals accounted for approximately 7% of All-Pure's pro
forma sales for such period. The remaining 12% of All-Pure's pro forma sales was
derived from sales of other chlor-alkali related products.
While the technology for bleach-making and chlorine-repackaging is neither
difficult nor capital-intensive, the local operating permits required to engage
in these activities are not easily acquired. Management believes that these
operating permits constitute a significant barrier to entry into the business,
particularly in California. Because bleach contains a high percentage of water,
freight costs and logistics are an important consideration in product
distribution. All-Pure's production plants and distribution facilities are
strategically located in or near most of the largest population centers of the
West Coast. For safety reasons, some municipalities have switched from chlorine
gas to bleach for water disinfection purposes, and should other municipalities
decide to switch from chlorine gas to bleach for this purpose, All-Pure has
significant spare bleach-making capacity that can be used to supply product in
bulk.
Bleach. All-Pure has the capacity to produce approximately 200 million
gallons of bleach annually. For the year ended December 31, 1996, All-Pure
produced approximately 34.0 million gallons of bleach, which was sold in
containers ranging from gallon containers to tank trucks.
Chlorine Repackaging. All-Pure repackages and distributes chlorine to end
users in the western U.S. As a regional distributor of chlorine, All-Pure
purchases chlorine in rail cars and repackages the chlorine for sale to
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customers. For the year ended December 31, 1996, All-Pure repackaged and sold
approximately 29.2 tons of chlorine.
Product Distribution. In addition to chlorine and hydrochloric acid,
All-Pure distributes caustic soda and other related products in the western U.S.
For the year ended December 31, 1996, All-Pure sold approximately 4,800 tons of
caustic soda to customers located primarily in northern California.
Dry and Specialty Pool and Spa Chemicals. All-Pure purchases dry and
specialty pool and spa products for distribution to the pool water treatment
supply industry. In addition, All-Pure repackages dry pool chemicals for
distribution.
Sales and Marketing. All-Pure primarily repackages chlor-alkali chemicals,
manufactures bleach and distributes these products as well as other products
purchased for resale to approximately 2,200 customers in a variety of markets.
The dynamics of each market vary significantly, requiring All-Pure to be
extremely versatile in its methods of marketing. All-Pure also manufactures and
distributes bleach for swimming pool water treatment in southern California.
All-Pure repackages and distributes complementary products such as hydrochloric
acid and specialty pool and spa products.
Delivered costs of All-Pure's products are freight sensitive because the
products contain water, or are packaged in steel containers that constitute
approximately 40% of the gross weight of the delivered unit, and because such
products provide relatively low per-volume sales revenue. All-Pure has an
advantage over its competitors through its multiple plant locations, which limit
freight costs through their close proximity to customers, allowing All-Pure to
provide reliable supply and service.
The majority of products are sold as water treatment chemicals for swimming
pools, potable water and waste water. Seasonality is a variable that impacts
sales of water treatment chemicals for swimming pools. In order to lessen the
impact of seasonality on their business, All-Pure focuses on increasing
household bleach sales during the winter months.
All-Pure is divided into three regional profit centers -- southern
California, northern California and the Pacific Northwest each under the
direction of a general manager, who, in turn, reports to senior management of
Pioneer. There are 12 sales representatives overall. The administrative support
staff is at All-Pure headquarters, currently located in Tracy, California. In
1997, All-Pure headquarters were relocated to rented offices in Walnut Creek,
California shared with Kemwater. It is anticipated that the ability to share
certain administrative support functions will provide cost savings for both
All-Pure and Kemwater.
Kemwater
The combined operations of Imperial West and KWT are now conducted by
Kemwater, 50% of the common stock of which is held by a subsidiary of PAAC and
50% of the common stock of which is owned by a subsidiary of Pioneer. A
subsidiary of PAAC also owns all of the outstanding shares of Kemwater's
preferred stock.
Since the Company does not own a controlling interest in Kemwater, the
Company accounts for Kemwater using the equity method. In the consolidated
financial statements, the Company's investment in Kemwater is presented as
"Investment in and advances to unconsolidated subsidiary" and its equity in the
loss of Kemwater is shown as "Equity in net loss of unconsolidated subsidiary."
In the 1995 consolidated financial statements, Imperial West is consolidated and
includes total assets of $25.7 million, total revenues of $23.7 million and a
net loss of $0.6 million.
Kemwater manufactures six chemical products: iron chlorides (ferric and
ferrous chlorides), polyaluminum chlorides, aluminum sulfate, sodium aluminate,
ferric sulfate solution and bleach. Kemwater markets these products and other
inorganic chemicals purchased by it to municipalities and industrial customers
for use primarily in the treatment of potable water and waste water. Kemwater's
products are generally sold on a delivered basis and are delivered primarily
through a fleet of tank trucks, including Kemwater's own equipment. All of
Kemwater's chlorine requirements for its production of iron chlorides and bleach
are provided by PCAC.
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Kemwater is the major supplier of iron chlorides to the waste and potable
water markets west of the Rocky Mountains. Iron chlorides are used primarily to
remove organic solids from waste water and potable water streams and to control
hydrogen sulfide emissions. Kemwater also manufactures polyaluminum chlorides in
Savannah, Georgia. The majority of polyaluminum chloride sales are currently in
the southeastern United States. Kemwater also uses terminals at its facilities
in Mojave, California and Spokane, Washington for distribution of polyaluminum
chlorides in the western U.S. and Canada. Additionally, Kemwater sells
polyaluminum chlorides through exclusive distributors in Mexico, the Caribbean
and western Canada. Kemwater will be adding polyaluminum chloride production
capacity to its western plants. Kemwater has exclusive licenses to use Kemira's
existing and future advanced water treatment technology in the development and
sale of products and services for the potable water, waste water and industrial
water treatment markets in the United States (other than the northeastern United
States) and the Caribbean, and nonexclusive access to the use of the technology
for the Canadian and Mexican markets, with an option to acquire an exclusive
license for those markets in the future. Kemwater also manufactures and markets
aluminum sulfate to the water treatment and pulp and paper industries and is a
manufacturer of bleach for municipal water disinfection.
Kemwater markets liquid inorganic chemicals in bulk to municipalities and
industry for use mainly in the treatment of municipal and industrial waste water
and potable water. Kemwater differentiates itself from its competitors through
emphasis on superior product quality, customer service and a private tank truck
transportation fleet. Kemwater employs 16 personnel in sales, marketing and
customer service. Kemwater sells its products directly to customers primarily on
municipal bid contracts. The contracts typically have terms of one or more years
with prices fixed on an annual basis. Sales through distributors accounted for
less than 10% of product sales volume for the year ended December 31, 1996.
Kemwater's headquarters is currently located in Antioch, California. In
1997, its headquarters were relocated to Walnut Creek, California, to rented
offices shared with All-Pure. It is anticipated that the ability to share
certain administrative support functions will provide cost savings for both
Kemwater and All-Pure.
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FACILITIES
The following table sets forth certain information regarding the Company's
principal production, distribution and storage facilities. All property is
leased unless otherwise indicated.
<TABLE>
<CAPTION>
LOCATION MANUFACTURED PRODUCTS: TYPE OF FACILITY
-------- ---------------------------------------
<S> <C>
PCAC Facilities
St. Gabriel, Louisiana*...................... Chlorine and caustic soda
Hydrogen
Henderson, Nevada*........................... Chlorine and caustic soda
Hydrochloric acid
Bleach
Tacoma, Washington*.......................... Chlorine and caustic soda
Calcium chloride
Hydrochloric acid
Tampa, Florida............................... Caustic soda storage tanks
Richmond, California......................... Caustic soda storage tanks
Wilmington, California....................... Caustic soda storage tanks
All-Pure Facilities
Tracy, California............................ Bleach
Chlorine repackaging
Santa Fe Springs, California................. Bleach
Chlorine repackaging
Kalama, Washington........................... Bleach
Chlorine repackaging
Tacoma, Washington*.......................... Bleach
Fresno, California........................... Distribution center
City of Industry, California................. Bleach
Chlorine repackaging
Hydrochloric acid repackaging
Dry chemical repackaging
</TABLE>
- ---------------
* Owned property
PCAC Facilities
St. Gabriel, Louisiana Plant. PCAC's St. Gabriel plant is located on a
100-acre site near Baton Rouge, Louisiana and serves the southern U.S. and
Mississippi River markets and the export market. Approximately 228 acres
adjoining this site are available to the Company for future industrial
development. The plant was completed in 1970 and is situated on the Mississippi
River with river frontage and deep water docking, loading and unloading
facilities. The dock is capable of berthing ocean-going vessels of up to 36,000
DWT. Annual capacity at St. Gabriel is 197,000 tons of chlorine and 216,700 tons
of caustic soda. In 1996, the plant received ISO 9002 registration.
St. Gabriel is the newest mercury-cell plant in the U.S. The mercury-cell
production process yields a higher quality of caustic soda, called low-salt
grade, which usually receives premium pricing in the marketplace. Caustic soda
produced by mercury cells does not require evaporation to meet market
concentration requirements. Accordingly, even though mercury cell technology
uses more electricity than membrane cell or diaphragm cell technology, total
costs of production are generally competitive.
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The production of chlor-alkali products principally requires salt,
electricity and water as raw materials. Salt is delivered under long-term supply
contracts to the St. Gabriel plant by barge. Electricity is supplied to the
plant under long-term contracts through regional power networks. Water is
provided at the St. Gabriel plant from on-site water wells.
St. Gabriel's chlorine production system includes a three-tower drying
system, multi-stage centrifugal chlorine compressors and a three-stage
liquefaction system. St. Gabriel has a utility section consisting of two boiler
systems for steam generation used principally for heating. Each boiler, capable
of producing 325,000 pounds per hour of steam, has fuel feedstock flexibility,
allowing conversion from outside-sourced natural gas to internally generated
hydrogen.
Chlorine tank storage capacity at the St. Gabriel plant is 3,000 tons,
which provides storage for approximately six days of production. The St. Gabriel
plant supplies its largest customer, Novartis, which is located adjacent to the
St. Gabriel facility, with chlorine directly through a dedicated pipeline. No
other chlor-alkali producer has a dedicated line to such customer. Caustic soda
storage capacity is 10,500 tons, which provides for approximately 18 days of
production. Additional production storage capacity is available using rail cars.
Hydrogen produced at the St. Gabriel plant is piped directly to BCP under a
long-term contract.
Henderson, Nevada Plant. PCAC's Henderson plant is located on a 374-acre
site near Las Vegas, Nevada and serves customers in the western U.S. It is the
closest chlor-alkali plant to the important southern California area by over 500
miles. Approximately 70 acres are developed and used for production facilities.
The original plant began operation in 1942. Annual capacity at the plant is
152,000 tons of chlorine, 167,200 tons of caustic soda, 130,000 tons of
hydrochloric acid and 5,100 tons of bleach. The Henderson plant is part of an
industrial complex shared with three other manufacturing companies. Common
facilities and property are owned and managed by subsidiaries of Basic
Investments, which provide common services to the four site companies. Basic
Investments' facilities include extensive water and high voltage power
distribution systems and access roads.
Salt is delivered under long-term supply contracts to the Henderson plant
by rail car. Electricity is supplied to the plant under long-term contracts
through regional power networks. The electric power is distributed within the
Henderson industrial site through facilities owned and operated by a subsidiary
of Basic Investments. The Henderson plant obtains water from Lake Mead pursuant
to PCAC's Category IV federal water rights. The water is transported by means of
a 25-mile pipeline system operated by a subsidiary of Basic Investments.
The plant was upgraded and rebuilt in 1976-1977 to use diaphragm cell
technology, and in 1978 quadruple-effect caustic soda evaporation units were
installed. Incremental expansions during the period from 1990 to 1995 resulted
in plant capacity increases of 105 ECUs per day. The evaporation plant requires
2.2 tons of steam per ton of caustic soda produced. Steam for the facility is
currently provided under a favorable long-term contract with Saguaro Power, a
cogeneration electricity producer in which PCAC has an indirect 15% interest.
PCAC also has its own boilers at the Henderson facility that are capable of
producing steam. PCAC leases two units used in the production of hydrochloric
acid.
Following evaporation to desired levels of concentration, caustic soda is
stored in tanks and off-site terminals. Caustic soda storage capacity is 7,000
tons, which provides storage for approximately 16 days of production. Chlorine
tank storage capacity at the Henderson plant is 600 tons, which provides storage
for approximately two days of production. Additional production storage capacity
for chlorine and caustic soda is available using rail cars, and the Company's
terminals in Richmond, California and Wilmington, California provide additional
caustic soda storage capacity. Hydrochloric acid storage capacity at the
Henderson plant is 1,500 tons, which provides for approximately three days of
production. Additional storage capacity is available using rail cars.
Tacoma, Washington Plant. The Tacoma Facility is located on a 31-acre site
which is part of an industrial complex on the Hylebos waterway in Tacoma,
Washington. It serves customers in the Pacific Northwest and California and, to
a lesser extent, foreign caustic soda customers. The site has docks capable of
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handling ocean-going vessels up to 30,000 DWT size. Annual capacity is
approximately 225,000 tons of chlorine, 247,500 tons of caustic soda, 44,000
tons of hydrochloric acid and 8,800 tons of calcium chloride.
The plant uses both diaphragm cells installed in the late 1970s and
membrane cells installed in 1988. The state-of-the-art membrane cell production
process yields a higher quality of caustic soda and thus for some end uses
receives premium pricing. The membrane cells account for approximately 45% of
the total plant caustic soda capacity, with the diaphragm cells accounting for
the remaining caustic soda production capacity. The operations of the two
systems are designed to optimize the capabilities of the plant in a
cost-efficient manner, resulting in a cost-competitive facility.
Steam for the facility is produced on-site in two natural gas fired steam
boilers. The boilers are capable of using a portion of the hydrogen generated in
the cell operations as fuel. Process water for the plant is purchased from the
City of Tacoma and sea water is used for cooling purposes throughout the
facility.
Electric power is purchased from the Tacoma Department of Public Utilities
under a contract extending to September 30, 2001. Prices are fixed except for
the top 27 MW portion of the load, or approximately 33% of the total electricity
usage, which is purchased on a market-price basis. Steam for the facility is
produced on-site in two natural gas fired steam boilers. The gas for these units
is supplied under a contract effective through September 30, 1997. The boilers
are capable of utilizing a portion of the hydrogen generated in the cell
operations. Process water for the plant is purchased from the City of Tacoma and
sea water is used for cooling purposes throughout the facility.
Chlorine tank storage capacity is 1,500 tons, which provides storage for
approximately 2 1/2 days of production. Caustic soda storage capacity is 11,100
tons, providing storage for approximately 16 days of production. Additional
production storage capacity is available using rail cars, and the Company's
leased terminals in Richmond, California and Wilmington, California provide
additional storage capacity for caustic soda. The Company also acquired a leased
railroad tankcar fleet as part of the Tacoma Acquisition. The Tacoma Facility is
a WISHA Star site. ISO 9002 registration was completed in December 1996.
Tampa, Florida. To facilitate distribution to the southeastern region of
the U.S., PCAC leases two caustic soda storage tanks at Tampa, Florida with a
capacity of 5,100 tons, approximately nine days of production from the St.
Gabriel facility.
Richmond, California. As a part of the Tacoma Acquisition, PCAC acquired
the leases to three caustic soda storage tanks at Richmond, California, which
are used to facilitate distribution to customers in northern California. The
tanks have a capacity of 9,100 tons, approximately 13 days of production from
the Tacoma Facility.
Wilmington, California. PCAC acquired the leases to four caustic soda
storage tanks at Wilmington, California as a part of the Tacoma Acquisition.
Those tanks and PCAC's existing leased tank at the same facility provide storage
capacity of 17,400 tons, representing approximately 38 days of production from
the Henderson facility or approximately 25 days of production from the Tacoma
Facility. The tanks are used to facilitate distribution to the southern
California region.
All-Pure Facilities
Tracy, California. The Tracy facility is located 60 miles east of Oakland
and serves the central California and San Francisco Bay area markets. The plant
includes a 262,000 ton per year bleach production facility and a chlorine
repackaging facility on a 15-acre tract. The land at the facility is leased
under a lease expiring in the year 2000. All-Pure's home office is currently
located in a leased facility in Tracy.
Santa Fe Springs, California. The Santa Fe facility is located in the Los
Angeles area and serves the southern California markets. The plant includes a
262,000 ton per year bleach production facility and a chlorine repackaging
facility on a 4.5-acre tract. The land at the facility is leased under a lease
expiring in 1998 with a five-year renewal option.
Kalama, Washington. Located 30 miles north of Portland, Oregon, the Kalama
facility serves the northern Oregon and Washington markets. The plant includes a
52,500 ton per year bleach production facility
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and a chlorine repackaging facility on a three-acre tract. The land at the
facility is leased under a month-to-month lease; All-Pure and the lessor are
engaged in discussions regarding a long-term lease extension or the lease of a
new site within the same port facility.
Tacoma, Washington. The T.C. Products facility in Tacoma serves the Pacific
Northwest market. The plant consists of a 105,000 ton per year bleach production
facility on a five-acre tract.
Fresno, California. The Fresno facility consists of an approximately 10,000
square foot warehouse, excluding office space, and serves the central California
market. All product shipped from the warehouse is transferred from the Tracy,
California production facility for distribution to customers. The land at the
facility is leased under a lease expiring in June 2001.
City of Industry, California. The City of Industry facility is located in
the Los Angeles area and serves the southern California, southern Nevada and
western Arizona markets. The plant includes a 262,000 ton per year bleach
production facility and chlorine, hydrochloric acid and dry chemical repackaging
facilities on a five-acre tract. The facility includes a 96,000 square foot
warehouse. The land at the facility is leased under a lease expiring in 1998
with options to extend until 2008.
SAGUARO POWER
PCAC has an indirect 15% equity interest in Saguaro Power, which owns and
operates a 90-megawatt cogeneration facility located on approximately six acres
of the Henderson property. The Saguaro Power facility is operated by an indirect
subsidiary of S.C.E. Capital Company. The facility uses natural gas, which is
supplied under a defined price long-term contract, as feedstock to produce
electricity and steam. Electricity is sold to one customer under a long-term
contract, and steam is sold primarily to PCAC, which has a right to resell steam
to other companies in the Henderson industrial complex. PCAC leases the property
to Saguaro Power under a lease that expires in 2022. The cost to the Company of
purchasing steam from Saguaro Power is substantially less than the cost to the
Company of producing the steam internally.
BASIC INVESTMENTS
PCAC's facility in Henderson, Nevada is located within an industrial
complex operated by Basic Investments. Other industrial operators in the complex
are Kerr-McGee Chemical Corporation ("Kerr McGee"), Titanium Metals Corporation
("Timet") and Chemical Lime Company ("Chemical Lime") which, together with PCAC,
own all of the capital stock of Basic Investments. PCAC owns approximately 32%
of the common stock of Basic Investments, including voting shares which entitle
it to elect two members of the seven person board of directors.
The Company's interests in Basic Investments and in Victory Valley Land
Company, L.P. (referred to collectively as the "Basic Ownership"), together with
certain real property (the "Excess Land"), constitute assets that, pursuant to
the PAI Acquisition Agreement, will be held for the economic benefit of the
sellers for a period of 20 years. Any proceeds from such interests are deposited
into an escrow account and are available to satisfy certain obligations of the
sellers under environmental and other obligations in favor of Pioneer, PAAC and
their affiliates. After payment or provision for payment of such obligations,
amounts received by the Company on account of the Basic Ownership will be
remitted to the PAI sellers for such 20-year period. The sellers also have
certain rights during such period with respect to determinations affecting the
Basic Ownership, including the right (subject to certain conditions) to direct
the sale or disposition of interests constituting the Basic Ownership and the
sale or disposition of Excess Land and the right (with certain exceptions) to
vote the interests constituting the Basic Ownership. Since the PAI Acquisition,
approximately 64 acres of Excess Land have been sold, and the escrow account had
a balance of approximately $4.4 million on March 31, 1997.
COMPETITION
The chlor-alkali industry is highly competitive. Most of the Company's
competitors are larger and have greater financial resources than the Company.
Many of the Company's competitors are some of the world's
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largest chemical companies that have their own raw material resources and
numerous regional companies that specialize in a smaller number of chemical
products. While a significant portion of the Company's business is based upon
widely available technology, the difficulty in obtaining permits for the
production of chlor-alkali and chlor-alkali related products is a barrier to
entry. The Company's ability to compete effectively depends on its ability to
deliver quality products at competitive prices and to provide reliable and
responsive service to its customers.
The U.S. chlor-alkali industry is currently dominated by two producers,
OxyChem and The Dow Chemical Company, each with approximately one quarter of
U.S. capacity. The remaining capacity is held by approximately 20 companies.
Approximately 70% of U.S. chlor-alkali capacity is located on the Gulf Coast in
Texas and Louisiana. The Company currently has approximately 4.1% of U.S.
chlor-alkali capacity. The Company believes it has a strong regional presence
with respect to many of its products in the markets it serves.
Competitors in the chlor-alkali related industries in which the Company
operates are numerous and the industry is highly fragmented. The Company
believes that All-Pure is the largest supplier of chlorine and bleach for water
treatment purposes in the region of the United States west of the Rocky
Mountains and that Kemwater is the largest producer of iron chlorides in such
region.
EMPLOYEES
As of June 30, 1997, the Company had 913 employees. Approximately 100 of
the Company's employees at its Henderson, Nevada plant are covered by collective
bargaining agreements with the United Steelworkers of America and the
International Association of Machinists and Aerospace Workers that are in effect
until March 2001. Approximately 115 employees at the Tacoma Facility are
represented by the International Chemical Workers Union and International Union
of Operating Engineers under collective bargaining agreements that expire in
September 1997 and June 1998, respectively. Approximately 110 of the Company's
employees at an All-Pure facility are covered by collective bargaining
agreements with the Steel, Paper House, Chemical Drivers and Helpers Union and
the International Chemical Workers Union that are in effect until September 1997
and January 1998, respectively. An additional 30 employees are covered by a
collective bargaining agreement with the Teamsters Union in Tacoma, Washington
which is in effect until December 1997. The Company's employees at its other
production facilities are not covered by union contracts or collective
bargaining agreements. The Company considers its relationship with its employees
to be good and has not experienced any strikes or work stoppages.
ENVIRONMENTAL AND SAFETY REGULATION
General Environmental Matters
General. The manufacturing operations of the Company are subject to
federal, state and local laws and regulations relating to protection of the
environment, including those applicable to waste management, discharge of
pollutants into the air and water, cleanup liability from historical waste
disposal practices and employee health and safety. Each of the federal
environmental programs typically has a state counterpart. The state
environmental programs generally must be at least as stringent as the federal
requirements, and some state regulations are more onerous than the federal
requirements. Both federal and state environmental programs allow the imposition
of substantial civil and criminal penalties for noncompliance. Although the
Company believes that its operations are in general compliance with applicable
environmental laws and regulations, risks of substantial costs and liabilities
are inherent in chemical manufacturing operations, and there can be no assurance
that significant costs and liabilities will not be incurred. Moreover, it is
possible that other developments, such as new environmental laws and regulations
or stricter enforcement and cleanup policies, could result in substantial costs
and liabilities to the Company. The Company has accrued $11.9 million related to
expected future environmental restoration and remediation costs, computed on an
undiscounted basis. In the opinion of management, there is currently no material
estimable range of loss in excess of the amount recorded. However, it is
possible that new information about the sites for which the
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reserve has been established, new technology or future developments could
require the Company to reassess its potential exposure related to environmental
matters.
The Company relies on indemnification from the previous owners in
connection with certain environmental liabilities at its chlor-alkali plants and
other facilities. There can be no assurance, however, that such indemnification
arrangements will be adequate to protect the Company from environmental
liabilities at these sites or that such third parties will perform their
obligations under the respective indemnification arrangements, in which case the
Company would be required to incur significant expenses for environmental
liabilities, which would have a material adverse effect on the Company.
Air Quality. The Company's operations are subject to the Federal Clean Air
Act and the amendments to that act which were enacted in 1990. The Company will
be subject to some of the additional environmental regulations adopted by the
federal EPA and state environmental agencies to implement the Clean Air Act
Amendments of 1990. The Tacoma plant has applied for a Title V operating permit
under these regulations. Among the requirements that are potentially applicable
to the Company are those that require the EPA to establish hazardous air
pollutant emissions requirements for chlorine production facilities. Although
the Company cannot estimate the cost of complying with these requirements until
the implementing regulations are proposed, at this time the Company does not
believe that such requirements will have a material adverse effect on it.
Most of the Company's plants manufacture or use chlorine, which is in
gaseous form if released into the air. Chlorine gas in relatively low
concentrations can irritate the eyes, nose and skin and in large quantities or
high concentrations can cause permanent injury or death. In 1991, there was an
accidental release of approximately 42 tons of chlorine from the Henderson
facility. In response, local emergency authorities evacuated areas in and around
the City of Henderson. The Company has resolved substantially all of the
personal injury, property damage and regulatory claims relating to this release,
and substantially all the costs incurred as a result of the accident have been
recovered under applicable insurance policies. There was a release of about 10
tons of chlorine from the St. Gabriel facility in 1992 and another release in
1994 of less than one ton of chlorine, and from 1995 to date, there have been
six releases from the Company's plants, each of which was less than 35 pounds.
These releases were controlled by plant personnel, in some cases with the
assistance of local emergency response personnel, and there were no material
claims against the Company as a result of these incidents. The Company maintains
systems to detect emissions of chlorine at its plants, and the St. Gabriel and
Henderson plants are members of their local industrial emergency response
networks. The Company believes that its insurance coverage is adequate with
respect to costs that might be incurred in connection with any future release,
although there can be no assurance that the Company will not incur substantial
expenditures that are not covered by insurance if a release does occur in the
future.
Water Quality. The Company maintains waste water discharge permits for many
of its facilities pursuant to the Federal Water Pollution Control Act of 1972,
as amended, and comparable state laws. Where required, the Company has also
applied for permits to discharge stormwater under such laws. In order to meet
the discharge requirements applicable to stormwater, it will be necessary to
modify surface drainage or make other changes at certain plants. The Company
plans to spend an additional $2.1 million by the end of 1997 for modifications
to the stormwater system at the Henderson plant. The Company believes that the
costs associated with stormwater discharge at Henderson and its other plants
will not have a material adverse effect on the Company's financial condition,
liquidity or operating results. The various states in which the Company operates
also have water pollution control statutes and regulatory programs which include
groundwater, as well as surface water, protection provisions. The requirements
of these laws vary and are generally implemented through a state regulatory
agency. These water protection programs typically require site discharge
permits, and spill notification, prevention and corrective action plans. At
several of the Company's facilities, investigations or remediations are underway
and at some of these locations regulatory agencies are considering whether
additional actions are necessary to protect or remediate surface or groundwater
resources and the Company could be required to incur additional costs to
construct and operate remediation systems in the future. In addition, at several
of its facilities, the Company is in the process of replacing or closing ponds
for the collection of wastewater. The Company plans to spend approximately $1.3
million during the next 15 years for closure of eight chlor-alkali waste water
disposal ponds at its Henderson plant.
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Chlorine Regulation. Chlorine uses in two markets, pulp and paper bleaching
and as a feedstock in the production of CFCs, have declined since the late
1980s. This decline was based on concerns that the products or by-products from
those applications might cause damage to human health or the environment.
Certain environmental groups and international commissions have urged the
restriction or ban of chlorine-related processes and products and the EPA is
considering new or additional regulation of chlorine-containing substances such
as the herbicide atrazine and byproducts from the treatment of drinking water.
Such pressures and regulatory initiatives could have the effect of reducing the
use of chlorine by customers in the Company's markets or could have the effect
of increasing competition from other chlorine producers with respect to the
Company's markets. The Company is working with other industry representatives to
advocate a risk-based scientific approach for evaluating the alleged health and
environmental risks of chlorine and chlorinated compounds which are used for a
broad range of consumer products, such as plastics, water and pharmaceuticals.
The Company believes that a risk-based approach will show that the risk
associated with not using such compounds, or the risks of other chemicals that
might be proposed to replace them, support a conclusion that there is no need
for a ban or substantial new restrictions, but the necessary studies have not
been completed with respect to all of such areas.
OSHA and Community Right-to-Know. The Company is subject to laws and
regulations concerning occupational health and safety, emergency planning and
community right-to-know disclosures. These laws include the Federal Occupational
Safety and Health Act ("OSHA") and the Emergency Planning and Community
Right-to-Know Act of 1986 ("EPCRA"). OSHA and comparable state statutes
establish workplace standards that apply generally to businesses in the
manufacturing sector, including the Company's businesses. EPCRA establishes
notification requirements for businesses, like the Company's, that use regulated
hazardous substances. The Company is not aware of any failures to comply with
OSHA or EPCRA requirements that could reasonably be expected to result in a
material adverse effect on the Company's business, properties or results of
operations on a consolidated basis.
The Company's St. Gabriel plant uses mercury in its chlorine manufacturing
process. The Company currently complies with both OSHA and industry standards
for employees who could be exposed to mercury. The Federal Occupational Safety
and Health Administration has previously proposed to lower the maximum
permissible exposure level for mercury, and the Company believes that it will be
able to comply with the new standard if it is reproposed at the same level. It
is possible, however, that even lower mercury emissions or exposure limits could
be imposed in the future by the Federal Occupational Safety and Health
Administration or the EPA and the cost of compliance with such new limits cannot
be estimated at the present time.
Hazardous and Solid Wastes. The Company's manufacturing facilities generate
hazardous and non-hazardous solid wastes which are subject to the requirements
of RCRA and comparable state statutes. Under the 1984 amendments to RCRA, the
EPA promulgated regulations banning the land disposal of certain hazardous
wastes unless the wastes meet defined treatment or disposal standards, including
certain mercury-containing wastes generated by the Company's St. Gabriel plant.
In response to these regulations, the St. Gabriel plant has substantially
reduced the quantity of wastes that are subject to the land ban. The Company has
installed an in-plant treatment system that reduces the level of mercury in its
wastes below the hazardous classification. The Company's disposal costs could
increase substantially if its present disposal sites become unavailable due to
capacity or regulatory restrictions. The Company presently believes, however,
that its current disposal arrangements, together with the new treatment system,
will allow the Company to continue to dispose of land-banned wastes with no
material adverse effect on it.
Superfund. The Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), also known as the "Superfund" law, imposes liability,
without regard to fault or the legality of the original conduct, on certain
classes of persons for the clean-up of releases of a "hazardous substance" into
the environment. These persons include the owner or operator of the disposal
site or sites where the release occurred and companies that disposed or arranged
for the disposal of hazardous substances found at the site. Persons who are or
were responsible for releases of hazardous substances under CERCLA may be
subject to joint and several liability for the costs of cleaning up the
hazardous substances that have been released into the environment and for
damages to natural resources. In the ordinary course of the Company's
operations, substances are generated that fall within the definition of
"hazardous substances," and the Company is the
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owner or operator of several sites at which hazardous substances have been
released into soil or groundwater. Under CERCLA, regulatory agencies or third
parties may incur costs to investigate or remediate such conditions and seek
reimbursement from the Company for such costs. However, no investigations or
remedial activities are currently being conducted under CERCLA by third parties
at any of the Company's facilities. Such activities are being carried out at
certain facilities under the other statutory authorities discussed above.
Indemnities
ZENECA Indemnity. The Company's Henderson plant is located within what is
known as the "Basic Complex." Soil and groundwater contamination have been
identified within and adjoining the Basic Complex, including land owned by the
Company. A groundwater treatment system has been installed at the facility and,
pursuant to a consent agreement with the Nevada Division of Environmental
Protection, a study is being conducted to further evaluate soil and groundwater
contamination at the facility and other properties within the Basic Complex and
to determine whether additional remediation will be necessary with respect to
the Company's property.
In connection with the 1988 acquisition of the Henderson and St. Gabriel
properties by PAI, the sellers agreed to indemnify the Company with respect to,
among other things, certain environmental liabilities associated with historical
operations at the Henderson site. Zeneca Delaware Holdings, Inc. and Zeneca,
Inc. (collectively, the "ZENECA Companies") have assumed the indemnity
obligations. In general, PAI is indemnified against environmental costs which
arise from or relate to pre-closing actions which involved disposal, discharge
or release of materials resulting from the former agricultural chemical and
other non-chlor-alkali manufacturing operations at the Henderson plant. The
ZENECA Companies are also responsible for costs arising out of the pre-closing
actions of Basic Investments and pre-closing actions at the Basic Complex and
for other pre-closing environmental liabilities arising at other off-site
locations. Under the ZENECA Indemnity, the Company may only recover indemnified
amounts for environmental work to the extent that such work is required to
comply with environmental laws or is reasonably required to prevent an
interruption in the production of chlor-alkali products. The ZENECA Indemnity
also covers certain claims by non-governmental third parties. The Company is
responsible for environmental costs relating to the chlor-alkali manufacturing
operations at the Henderson plant, both pre- and post-acquisition, for certain
actions taken without ZENECA's consent and for certain operation and maintenance
costs of a groundwater treatment system at the facility.
Payments for environmental liabilities under the ZENECA Indemnity, together
with other non-environmental liabilities for which the ZENECA Companies agreed
to indemnify the Company, cannot exceed approximately $65 million. Through March
31, 1997, the Company has been reimbursed for approximately $12 million of costs
covered by the ZENECA Indemnity, but the ZENECA Companies may have directly
incurred additional costs that would further reduce the total amount remaining
under the ZENECA Indemnity. In 1994, the Company recorded an additional $3.2
million environmental reserve related to pre-closing actions at sites that are
the responsibility of ZENECA. At the same time a receivable was recorded from
ZENECA for the same amount. It is the Company's policy to record such amounts
when a liability can be reasonably estimated. No additional amounts were
recorded in 1995, 1996 or 1997.
As a result of the PAI Acquisition, the ZENECA Indemnity will terminate on
April 20, 1999. 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 either the
ZENECA Companies have assumed control of such claims or the Company is
contesting the legal requirements that gave rise to such claims, or has
commenced removal, remedial or maintenance work with respect to such claims, or
has commenced an investigation which results in the commencement of such work
within ninety days. 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 concerning the effect of contractual language and that the
Company would have to subject its claims for clean-up expenses, which could be
substantial, to the contractually-established arbitration process.
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PAI Sellers' Indemnity. In the PAI Acquisition Agreement, the sellers
agreed to indemnify Pioneer, PAAC and their affiliates for certain environmental
liabilities that result from certain discharges of hazardous materials, or
violations of environmental laws, arising prior to the closing date from or
relating to the PAI plant sites or arising before or after the closing date with
respect to certain environmental liabilities relating to the Contingent Payment
Properties. Amounts payable pursuant to the PAI Sellers' Indemnity will
generally be payable as follows: (i) out of certain reserves established on PAI
balance sheet at December 31, 1994; (ii) either by offset against the amounts
payable under the Pioneer Seller Notes or from amounts held in the Contingent
Payment Account; and (iii) in certain circumstances and subject to specified
limitations, out of the personal assets of the sellers. See "Business -- Basic
Investments." The Company is required to reimburse the sellers 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. The Company has also agreed to indemnify the sellers for
certain environmental liabilities that may arise after the closing date. See
"Risk Factors -- Environmental Regulation -- Henderson Remediation Matters;
ZENECA Indemnity; PAI Sellers' Indemnity."
OCC Tacoma Indemnity. The Tacoma Facility is located adjacent to the
Hylebos Waterway, which is connected to Commencement Bay. The Hylebos Waterway
is one of the study areas included in the Commencement Bay Nearshore/Tideflats
site which has been placed on the National Priorities List for remediation under
CERCLA. OxyChem is a member of the Hylebos Cleanup Committee ("HCC"), which has
entered into a consent agreement with the EPA under which HCC will prepare a
pre-remedial design for cleanup of the Hylebos Waterway. OxyChem is
participating in a voluntary, non-binding mediation under which an arbitrator
will allocate liability for the waterway among approximately 30 participating
PRPs. The aggregate costs of the cleanup of the Hylebos Waterway will depend
upon cleanup levels established by the EPA. Such cleanup levels have been
proposed by the EPA, and are presently under discussion among the EPA, the HCC
and other interested parties.
The Tacoma Facility has a RCRA treatment, storage, and disposal facility
permit which requires the plant to investigate groundwater contamination at the
site and to treat the groundwater to standards established in the permit.
Pursuant to this requirement, the plant has installed a groundwater extraction,
treatment and injection system (not included in the Tacoma Acquisition), which
withdraws the groundwater, removes volatile organic compounds (including
trichloroethylene and perchloroethylene) and returns the treated water to the
subsurface through wells that are designed to control off-site migration of
contamination. The plant has estimated that this groundwater system will operate
for at least 30 years. Certain areas at the Tacoma Facility are currently being
voluntarily investigated under the oversight of the Washington Department of
Ecology ("DOE") or the EPA.
OxyChem has been named as a Potentially Liable Party ("PLP") under state
law for remediation of, or it is voluntarily investigating, certain off-site,
upland disposal sites used by the Tacoma Facility. OCC Tacoma has agreed to
retain responsibility for these sites. Two other properties, located immediately
adjacent to the Tacoma Facility, have allegedly been affected by operations at
the Tacoma Facility. A groundwater contamination plume under the Tacoma Facility
extends to the northwest and west. This area is being addressed by the Tacoma
Facility's groundwater treatment system. The owner of the neighboring property
to the south has alleged that waste from the Tacoma Facility was disposed of on
its property, and that the operations of the Tacoma Facility also caused
groundwater contamination. This area is currently under investigation with the
oversight of the Washington DOE.
In connection with the Tacoma Acquisition, OCC Tacoma agreed to indemnify
the Company with respect to certain environmental matters, which indemnity is
guaranteed by OxyChem. In general, the Company will be indemnified against
damages incurred for remediation of certain environmental conditions, for
certain environmental violations caused by pre-closing operations at the site
and for certain common law claims. The conditions subject to the indemnity are
sites at which hazardous materials have been released prior to closing as a
result of pre-closing operations at the site, including Commencement Bay
(outside the Hylebos area), off-site disposal sites in areas upland of the
waterways and natural resource damages (together, the "Excluded Environmental
Conditions"). In addition, OCC Tacoma will indemnify the Company for certain
costs relating to releases of hazardous materials from pre-closing operations at
the site into Hylebos
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Waterway, site groundwater containing certain volatile organic compounds that
must be remediated under the RCRA permit, and historical disposal areas on the
embankment adjacent to the site for maximum periods of 24 or 30 years, depending
upon the particular condition, after which the Company will have full
responsibility for any remaining liabilities with respect to such conditions.
OCC Tacoma may obtain an early expiration date for conditions other than the
Excluded Environmental Conditions by obtaining a discharge of liability or an
approval letter from a governmental authority. Although there can be no
assurance that the presently anticipated remediation work will be completed
prior to the expiration of the indemnity, or that additional remedial
requirements will not be imposed thereafter, the Company believes that the
residual liabilities, if any, can be managed in a manner that will not have a
material adverse effect on the Company.
OCC Tacoma will also indemnify the Company against certain other
environmental conditions and environmental violations caused by pre-closing
operations that are identified after the closing. Environmental conditions that
are subject to formal agency action within five years after closing or to an
administrative or court order within ten years after closing, and environmental
violations that are subject to formal agency action within two years after
closing or to an administrative or court order within five years after closing,
will be covered by the indemnity up to certain dollar amounts and time limits.
The Company will indemnify OCC Tacoma for environmental conditions and
environmental violations identified after the closing if (i) an order or agency
action is not imposed within the relevant time frames or (ii) applicable
expiration dates or dollar limits are reached.
The Company is responsible for remediation of environmental conditions and
correction of environmental violations caused by post-closing actions at the
site (other than post-closing actions by OCC Tacoma and its representatives) and
the Company will indemnify OCC Tacoma for such conditions and violations.
Moreover, if the Company takes certain actions which increase the cost of
remediation or result in the identification of new environmental conditions
after the closing, the Company will be liable for such costs. In particular, the
Company may not, without OCC Tacoma's consent, construct new facilities within
designated areas of the site that are being or will be remediated. In addition,
the Company must consult with OCC Tacoma prior to construction or expansion in
other areas of the site that requires the disturbance, excavation or remediation
of soil, sediment or groundwater. This could limit the Company's ability to
expand production capacity or to add material new capacity at the site.
The indemnity obtained from OCC Tacoma for the Excluded Environmental
Conditions, for expansion of or repairs to improvements at the site and for
certain other matters is personal to the Company and its affiliates and may not,
without OCC Tacoma's consent, be assigned to other persons.
The Company has reviewed the time frames currently estimated for
remediation of the known environmental conditions associated with Commencement
Bay, the Hylebos Waterway, the plant and adjacent properties and the Company
presently believes that it will have no material liability upon the termination
of OCC Tacoma's indemnity. However, the OCC Tacoma indemnity is subject to
limitations as to dollar amount and duration, as well as certain other
conditions, and there can be no assurance that such indemnity will be adequate
to protect the Company, that remediation will proceed on the present schedule,
that it will involve the presently anticipated remedial methods, or that
unanticipated conditions will not be identified. If these or other changes
occur, the Company could incur a material liability for which it is not insured
or indemnified.
Remediation Matters
General. Most of the plant sites on which the Company's manufacturing
operations are located have been used for many years. Although the Company
believes that prior operators utilized operating and disposal practices that met
industry standards at the time, state and federal laws relating to remediation
of historical disposal sites have become more stringent. As a result, to the
extent wastes have been released or disposed of at its manufacturing sites, the
Company has in the past been, and will in the future be, required to remediate
contaminated property or remove previously disposed wastes and address related
liabilities. In the past the Company has been subject to claims by neighboring
landowners and other third parties asserting claims for personal injury and
property damage allegedly caused by hazardous substances released into the
environment. However, the Company has resolved, or expects to resolve, such
claims without material liability.
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Basic Complex. Environmental contamination, including soil and groundwater
contamination, has been identified within and adjoining the Basic Complex,
including land owned and occupied by the Company. The Company is cooperating
with the NDEP with respect to the issues affecting such property. In 1983,
Stauffer Chemical, Montrose and the NDEP entered into a Consent Order requiring
Stauffer Chemical and Montrose to install a groundwater intercept system to
analyze for designated organic chemicals identified in the groundwater outside
Stauffer Chemical's plant site and to remove certain chemicals to levels
specified in the Consent Order. At that time, the NDEP made a finding that the
organic contamination that had migrated off site did not represent an imminent
or substantial endangerment to human health or the environment. In consideration
for the companies' implementation of the groundwater intercept system, the State
of Nevada and the NDEP granted the companies a release and covenant not to sue
under certain environmental statutes for any civil liabilities or claims arising
out of the presence of the organics covered by the Consent Order, subject to the
compliance by the companies with the Consent Order. The companies have
implemented the groundwater intercept system, and it meets the treatment levels
specified in the Consent Order. Although the Company is not a party to the
Consent Order, the Company contractually agreed, in connection with its
acquisition of the Henderson facility, to operate the system and to pay for 50%
of certain operating and maintenance costs for the system. Montrose agreed to
pay the other 50% of such costs, and ZENECA must pay for remaining obligations
arising as a result of the Consent Order. While it is possible that these costs
could increase substantially if the existing groundwater treatment system must
be modified or expanded, or additional groundwater remediation is required, the
Company believes that some of these costs would be borne by Montrose and ZENECA,
and the remaining costs would not have a material adverse effect on the Company.
At the present time, however, the Company cannot reasonably estimate the scope
of any other operating and maintenance requirements or their probable cost.
PCAC, along with Stauffer Management Company ("Stauffer Management") (a
ZENECA subsidiary), Montrose, Kerr McGee, Timet and Chemical Lime entered into a
Consent Agreement in 1991 with the NDEP under which the parties agreed to
provide reports summarizing documented information regarding historical waste
disposal at each of their sites at the Basic Complex. These reports were Phase I
of the "Environmental Conditions Assessment" (or "ECA") process for the Basic
Complex. PCAC and Stauffer Management submitted the required report for the PCAC
plant site in April 1993. The Phase I Report identified both present and former
waste management areas, including disposal sites for agricultural chemicals
formerly manufactured at the site and ponds used for disposal of chlor-alkali
waste water.
PCAC and Stauffer Management have entered into a Phase II agreement with
the NDEP, which would cover additional investigation of the plant site,
including additional soil and groundwater sampling. The parties have received a
Letter of Understanding which identifies the areas that will be addressed in
Phase II. Montrose also filed a report covering its leased portions of the
Henderson property and has negotiated a Phase II agreement with the NDEP. In
certain instances, PCAC, Stauffer Management and Montrose will cooperate in the
preparation of information required for Phase II.
PCAC and Stauffer Management also participated as members of the Henderson
Industrial Site Steering Committee in the submission in April 1993 of a report
regarding the Basic Complex common disposal areas. Historical waste management
areas identified in the report included a landfill, waste water transmission
ditches and waste water disposal ponds. These areas were used in the past for
disposal of wastes manufactured in the Basic Complex. A Phase II agreement
requiring additional investigations of the Basic Complex common area has also
been negotiated. It is likely that a third phase of work, including remediation
of soil or groundwater, may follow the Phase II investigations. Because the
costs of future remedial obligations cannot be determined until the
investigation is complete, it is not possible to determine whether, if at all,
such costs will exceed amounts currently reserved with respect to such
liabilities.
The EPA is not a party to the various agreements with the NDEP and
therefore is not bound by the terms of such agreements, nor is it bound by the
release and covenant not to sue set forth in the Consent Order. The EPA is not
presently pursuing any enforcement action relating to remediation of historical
waste disposal at PCAC or the Basic Complex common area. There can be no
assurance, however, that the EPA will not attempt to exercise its jurisdiction
under federal environmental statutes, including CERCLA, with respect to the
Basic Complex common areas or the individual plant sites in the future. If the
EPA elects to exercise its
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jurisdiction over the Basic Complex or the Henderson plant and pursue an
independent enforcement action, it is possible that the costs of remediation
would substantially exceed those that the Company currently anticipates under
the terms of the NDEP Consent Agreement.
The Company believes that the remediation costs related to the Company's
chlor-alkali facilities will not be material and that it will be reimbursed
under the ZENECA Indemnity or the PAI Sellers' Indemnity or by other responsible
parties for substantially all of the non-chlor-alkali related remediation costs
that may be incurred in connection with historical waste disposal at the
Henderson plant and the Basic Complex common areas. The inactive waste
management areas at the Henderson facility include a drum disposal area, ponds
and other waste disposal areas at which significant quantities of wastes from
historical non-chlor-alkali manufacturing operations were disposed of or
accumulated. Generally, these historical disposal areas have been closed by
leaving the wastes in place and capping them with a clay cover to minimize the
migration of any contaminants. Groundwater monitoring wells were installed
downgradient to detect any significant contaminant migration. To date, the
results from these wells and communications with the NDEP indicate that on-site
containment will continue to be an acceptable long-term waste management
solution for these historical wastes. However, if off-site disposal is required,
because of more stringent disposal standards in the future or unanticipated
significant groundwater impacts from these areas, the cost of such disposal
could be substantial and could, together with other remediation obligations,
approach or exceed the amount available under the ZENECA Indemnity, the PAI
Sellers' Indemnity or by other responsible parties. No assurance can be given
that the Company will not be required to incur significant expenses for remedial
and other liabilities under environmental laws in connection with the Henderson
facility or operations, whether at or near the Henderson facility or at off-site
locations, or that such expenses will be reimbursed under the ZENECA Indemnity
or the PAI Sellers' Indemnity or by other responsible parties. See "Risk
Factors -- Environmental Regulation."
Antioch Plant. Kemwater's Antioch plant received a Clean-up and Abatement
Order from the California Regional Water Quality Control Board (the "RWQCB")
relating to contaminated groundwater. The RWQCB has requested Kemwater to
prepare a work plan for additional investigation and remediation of the
groundwater. Kemwater is preparing a plan for additional investigation and is
reviewing the costs associated with remediation technologies that would meet the
state standards. In the event that treatment of the ground water is necessary,
there can be no assurance that it would not have a material adverse effect on
Kemwater.
INSURANCE
The Company maintains general liability insurance and property and business
interruption insurance, as well as worker's compensation insurance. In
accordance with customary industry practice, the Company is not fully insured
against all risks incident to its business. Because of the nature of industry
hazards, it is possible that liabilities for pollution and other damages arising
from a major occurrence could exceed insurance coverage or policy limits or that
such insurance may not be available at reasonable rates in the future. Any such
liabilities could have a material adverse effect on the Company.
LEGAL PROCEEDINGS
The Company has been named as a defendant in various legal proceedings
arising in the ordinary course of its business. In the opinion of management,
none of such litigation is material to the Company's financial statements.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF PAAC
The directors and executive officers of PAAC as of July 1, 1997 are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William R. Berkley................... 51 Chairman of the Board
Michael J. Ferris.................... 52 President and Chief Executive Officer and
Director
Philip J. Ablove..................... 57 Vice President and Chief Financial Officer and
Director
Jerry B. Bradley..................... 51 Vice President, Human Resources
Verrill M. Norwood................... 65 Vice President, Environmental and Regulatory
Affairs
Kent R. Stephenson................... 48 Vice President, General Counsel and Secretary
Ronald E. Ciora...................... 55 President of All-Pure
James E. Glattly..................... 50 President of PCAC
Andrew M. Bursky..................... 40 Director
Donald J. Donahue.................... 70 Director
Richard C. Kellogg, Jr............... 45 Director
Paul J. Kienholz..................... 66 Director
Jack H. Nusbaum...................... 56 Director
Thomas H. Schnitzius................. 54 Director
</TABLE>
The Board of Directors has an Executive Committee and an Audit Committee.
The current members of the Executive Committee are Messrs. Berkley, Bursky,
Ferris and Nusbaum. The current members of the Audit Committee are Messrs.
Donahue and Nusbaum. The current members of the Compensation and Stock Option
Committee are Messrs. Donahue and Nusbaum.
William R. Berkley has been a director of PAAC since its formation in March
1995 and Chairman of the Board and a director of Pioneer since its formation in
1987. He also serves as Chairman of the Board of several companies which he
controls or founded. These include W.R. Berkley Corporation, a property and
casualty insurance holding company, and Interlaken Capital, Inc., a private
investment and consulting firm. Mr. Berkley is also a director of Strategic
Distribution, Inc., a publicly traded distributor of maintenance and safety
products to industry.
Michael J. Ferris has served as President and Chief Executive Officer of
PAAC and Pioneer since January 5, 1997. Prior to joining PAAC and Pioneer, he
was employed by Vulcan Materials Company, a company engaged in the production of
industrial materials and commodities, from March 1974 to January 1997, where he
served as Executive Vice President, Chemicals from 1996 to 1997. Mr. Ferris is
also a director of ChemFirst, Inc., a specialty chemical company.
Philip J. Ablove has served as Vice President and Chief Financial Officer
of PAAC and Pioneer since March 1996, after serving as Acting Chief Financial
Officer since October 1995, and has been a director of PAAC since its formation
in March 1995 and a director of Pioneer and its corporate predecessor since
January 1991. He was President and Chief Executive Officer of Pioneer's
corporate predecessor from January 1991 to July 1992, and he served as a
consultant to such entity from October 1990 to January 1991. Mr. Ablove served
as a consultant to Pioneer from October 1995 to March 1996. He has served as a
consultant to various companies since 1983.
Jerry B. Bradley has served as Vice President of Human Resources of PAAC
and of Pioneer since October 1995. From May 1993 to October 1995, Mr. Bradley
was President of Tandem Partners, Inc., a human resources consulting firm. From
1978 to 1993 he was employed by Occidental Chemical Corporation, where he served
as Vice President, Human Resources from 1978 to 1993.
Verrill M. Norwood has served as Vice President of Environmental and
Regulatory Affairs of PAAC since the consummation of the PAI Acquisition on
April 20, 1995, and as Vice President of Environmental
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and Regulatory Affairs of PAI since 1990. Prior to joining PAI, Mr. Norwood was
employed by Olin Corporation from 1973 to 1990, where he served as Vice
President, Environmental Affairs from 1978 to 1990.
Kent R. Stephenson has served as Vice President, General Counsel and
Secretary of PAAC since the consummation of the PAI Acquisition on April 20,
1995, as Vice President, General Counsel and Secretary of PAI since June 1995,
and as Vice President, General Counsel and Secretary of PAI since 1993. Prior to
joining PAI, he was employed by Zapata Corporation, a publicly traded gas
services company, from 1978 to 1993. Mr. Stephenson served as Senior Vice
President, General Counsel and Secretary of Zapata from 1987 to 1993.
Ronald E. Ciora has served as President of All-Pure since November 1995.
From March 1989 to November 1995, he was President and Chief Operating Officer
of DPC Industries, Inc., DX Distribution, Inc. and DXI Industries, Inc., which
are companies engaged in chemical distribution, chlorine repackaging and bleach
manufacturing.
James E. Glattly has served as President of PCAC since December 1996, and
served as Vice President of Sales and Marketing of PAAC from April 1995 to
December 1996 and as Vice President of Sales and Marketing of PAI from 1988 to
December 1996. Prior to joining PAI, he was employed by Occidental Chemical
Corporation from 1985 to 1988 and from 1974 to 1983, where he served in various
capacities, including Western Regional Manager and various other sales
positions. From 1983 to 1985 Mr. Glattly served as General Manager of HCI
Chemical.
Andrew M. Bursky has been a director of PAAC since its formation in March
1995 and a director of Pioneer since January 1994. Mr. Bursky has been Managing
Director of Interlaken Capital, Inc. since May 1980. He has been Chairman of the
Board of Strategic Distribution, Inc. since July 1988. Mr. Bursky was an
executive officer of Idle Wild Farm, Inc., a privately owned manufacturer of
frozen food, and Blue Lustre Products, Inc., a privately owned company engaged
in the sale and leasing of carpet cleaning equipment and other carpet cleaning
products, which in October 1993 and October 1995, respectively, while he was an
executive officer, filed chapter 11 petitions for reorganization under federal
bankruptcy law.
Donald J. Donahue has been a director of PAAC since its formation in March
1995 and a director of Pioneer since February 1988. Mr. Donahue served as
Chairman of the Board of Magma Copper Company from 1987 to 1996 and as Chairman
of Nacolah Holding Co., a life and health insurance company, from 1990 to 1993.
From 1984 to 1985, Mr. Donahue served as Chairman and was a director of KMI
Continental Group, Inc., a natural resource conglomerate. From 1975 to 1984, he
was Vice Chairman and a director of Continental Group, Inc. Mr. Donahue is a
director of Chase Brass Industries, Inc. and a director of Counsellors Tandem
Securities Fund, Inc. and 15 other registered investment companies managed by
EMW Warburg Pincus Counsellors, Inc.
Richard C. Kellogg, Jr. has been a director of PAAC and Pioneer since April
1995. He served as Chairman of the Board and Chief Executive Officer of PAAC and
as President of Pioneer from April 1995 to January 1997. He was a co-founder of
PAI, serving as its Chairman of the Board and a director from its inception in
1988 to January 1997. From 1983 to 1993, Mr. Kellogg served as Vice President of
Trans Marketing Houston, Inc. ("TMHI"), an international trading company that he
co-founded dealing in refined petroleum products and chemicals. TMHI filed for
bankruptcy in April 1993 and a liquidation plan was approved by the federal
bankruptcy court in December 1993.
Paul J. Kienholz has been a director of PAAC and Pioneer since June 1996.
He served as President and Chief Operating Officer of PAAC from the consummation
of the PAI Acquisition on April 20, 1995 until his retirement in November 1996,
and as President of PAI from 1988 until his retirement. Prior to joining PAI,
Mr. Kienholz was employed by PPG Industries, Inc. from 1959 to 1988, where he
served in various capacities, including Director, Chlor-Alkali Products.
Jack H. Nusbaum has been a director of PAAC since its formation in March
1995 and a director of Pioneer since 1988. Mr. Nusbaum is a Senior Partner and
Chairman of the New York law firm of Willkie Farr & Gallagher, where he has been
a partner for more than the past twenty-five years. He is a director of
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W.R. Berkley Corporation, Fine Host Corporation, Strategic Distribution, Inc.,
The Topps Company, Inc. and Prime Hospitality Corp.
Thomas H. Schnitzius has served as a director of each of Pioneer and PAAC
since the consummation of the PAI Acquisition on April 20, 1995, and as a
director of PAI since October 1993. He has been a principal in the Houston
investment banking firm of Schnitzius & Vaughan since its formation in October
1987. Prior to 1987, he was a principal in the investment banking firm of
Schnitzius & Co., Ltd.
EXECUTIVE COMPENSATION
Executive officers of PAAC are compensated in their capacity as executive
officers of Pioneer or certain of its other subsidiaries. The following table
sets forth certain information concerning compensation for service to Pioneer
and its subsidiaries paid (i) during the last three fiscal years to William R.
Berkley, Chairman of the Board of Pioneer, who received no compensation for
acting in a capacity similar to that of a chief executive officer, (ii) during
the period from April 21, 1995 to December 31, 1995 and during 1996, to Richard
C. Kellogg, Jr., who acted in a capacity similar to that of a chief executive
officer during such period, (iii) during the period from April 21, 1995 to
December 31, 1995 and during 1996, to Pioneer's other four most highly
compensated executive officers serving during 1996 and (iv) during the period
from April 21, 1995 to December 31, 1995 and during 1996, to Paul J. Kienholz,
who retired as President and Chief Operating Officer of PAAC on November 30,
1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS ALL OTHER
NAME AND PRINCIPAL ------------------------------- OTHER ANNUAL ------------ COMPEN-
POSITION YEAR(1) SALARY($) BONUS($) COMPENSATION(2)($) OPTIONS(3) SATION($)
------------------ ------- --------- -------- ------------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
William R. Berkley 1996 8,000(4) 0 22,000 0 0
Chairman of the Board 1995 8,000(4) 0 22,000 0 0
1994 0 0 6,000 0 0
Richard C. Kellogg, Jr. 1996 300,000 75,000 0 0 3,750(6)
President(5) 1995 206,731 135,900 0 131,691 4,590(6)
James C. Glattly 1996 193,336 50,000 0 0 3,750(6)
President, PCAC(7) 1995 114,327 69,675 0 53,500 2,453(6)
Philip J. Ablove 1996 183,318 40,000 0 0 1,406(6)
Vice President and
Chief Financial Officer
Verrill M. Norwood 1996 172,497 25,000 0 0 10,890(8)
Vice President, Environmental, 1995 104,423 58,793 0 26,750 320,893(9)
Health & Safety, PCAC
Ronald E. Ciora 1996 165,000 50,000 0 0 2,062(6)
President, All-Pure 1995 18,827 -- 0 16,050 45,000(10)
Paul J. Kienholz 1996 250,000 50,000 0 0 16,623(12)
President, PCAC(11) 1995 172,243 124,125 0 56,175 539,092(13)
</TABLE>
- ---------------
(1) Each of Messrs. Kellogg, Kienholz, Glattly and Norwood were officers of PAI
on April 20, 1995, when PAI was acquired by Pioneer. After the PAI
Acquisition, each served as an executive officer of Pioneer (including
service as an executive officer of one or more subsidiaries of Pioneer),
and information with respect to 1995 compensation is provided for each only
with respect to services provided to Pioneer and its subsidiaries during
the portion of the year beginning on April 21, 1995. Information with
respect to Mr. Ablove, who became Vice President and Chief Financial
Officer of Pioneer on March 8, 1996, and Mr. Ciora, who became President of
All-Pure on December 1, 1995, is provided for the portions of the relevant
years during which each served.
(2) Mr. Berkley is not an officer of Pioneer. As a director of Pioneer he
receives an annual retainer, all or a portion of which has been paid
through the delivery of shares under Pioneer's 1993 Non-Employee Director
Stock Plan. The retainer for service as a director during each of 1995 and
1996 was $22,000 per
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year, with payment for 1996 in the form of 2,700 shares of Class A Common
Stock and $7,994 in cash, and with payment for 1995 in the form of 3,320
shares of Class A Common Stock. The $6,000 in payment of the retainer and
director's meeting fees for 1994 was paid in the form of 4,000 shares of
Class A Common Stock.
(3) Expressed in terms of the numbers of shares of Pioneer's Class A Common
Stock underlying options granted during the year. All such options were
granted under Pioneer's 1995 Stock Incentive Plan.
(4) Represents director's meeting fees.
(5) Mr. Kellogg resigned as President of Pioneer and PAAC on January 4, 1997
and no longer serves as an executive officer.
(6) Represents amounts contributed to match a portion of the employee's
contributions under a 401(k) plan.
(7) Mr. Glattly served as Vice President, Sales and Marketing of PAAC and PCAC
until December 1, 1996, when he was named President of PCAC.
(8) Includes (a) $7,140, representing payment under a supplemental pension
plan, and (b) $3,750, which was contributed to match a portion of
contributions under a 401(k) plan.
(9) Includes (a) $318,575, representing payment upon the termination of a
salary continuation agreement in effect since 1993, together with payment
for the resulting tax liability, and (b) $2,318, which was contributed to
match a portion of contributions under a 401(k) plan.
(10) Represents an amount paid as compensation for the loss of benefits from a
previous employer.
(11) Mr. Kienholz served as President of PCAC until December 1, 1996. He retired
on January 1, 1997, and no longer serves as an executive officer
(12) Includes (a) $12,873, representing payment under a supplemental pension
plan, and (b) $3,750, which was contributed to match a portion of
contributions under a 401(k) plan.
(13) Includes (a) $533,206, representing payment upon the termination of a
salary continuation agreement in effect since 1988, together with payment
for the resulting tax liability, and (b) $5,886, which was contributed to
match a portion of contributions under a 401(k) plan.
Pioneer has adopted the 1995 Stock Incentive Plan (the "1995 Stock
Incentive Plan"), under which 802,500 shares of Class A Common Stock of Pioneer
were reserved for issuance pursuant to the grant of stock based awards to
employees of Pioneer and its subsidiaries, including PAAC. Such awards may
include incentive stock options, nonqualified stock options, stock appreciation
rights ("SARs"), restricted stock awards, phantom stock unit awards, performance
share unit awards and other forms of equity-based incentive compensation, or
combinations of the foregoing. No more than 133,750 shares of Class A Common
Stock may be issued to any one person pursuant to awards of options or SARs
during any one year. Share numbers referred to above and in the following
discussions have each been adjusted as a result of the 7% stock dividend paid on
January 7, 1997. Applicable stock option exercise prices have also been adjusted
as a result of the stock dividend.
On April 20, 1995, options exercisable for approximately 535,000 shares of
Class A Common Stock of Pioneer were granted to the employees of PAAC and its
subsidiaries pursuant to the 1995 Stock Incentive Plan. Such options are
exercisable at a price of $6.07 per share, the fair market value of the Class A
Common Stock as of the date of grant. None of the options is exercisable prior
to April 20, 1998.
In 1996 Pioneer adopted the Key Executive Stock Grant Plan, under which
535,000 shares of Class A Common Stock of Pioneer were reserved for issuance
pursuant to the grant of stock based awards to senior executives of Pioneer and
its subsidiaries, including PAAC. Such awards are to be made in the form of
phantom stock awards under Pioneer's incentive compensation bonus plan, payable
upon vesting in shares of Class A Common Stock. No awards have been made under
the Key Executive Stock Grant Plan.
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OPTION GRANTS IN LAST FISCAL YEAR
In 1996, Philip J. Ablove was the only named executive officer who received
a grant of options to purchase Class A Common Stock of Pioneer. The following
table provides information with respect to such grant:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS EXERCISE PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME(1) GRANTED(#) 1996 (PER SHARE) DATE 5%($) 10%($)
------- ----------- ---------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Ablove...... 53,500 100.0 $5.61 6/04/06 $188,753 $478,378
</TABLE>
- ---------------
(1) The options were granted under Pioneer's 1995 Stock Incentive Plan at fair
market value on the date of grant. The options granted are exercisable in
17,833-share increments on June 4 in the years 1999 through 2001.
(2) These amounts represent assumed rates of appreciation in market value from
the date of grant until the end of the option term, at the rates set by the
Securities and Exchange Commission, and therefore are not intended to
forecast possible future appreciation, if any, in Pioneer's stock price.
Pioneer did not use an alternative formula for a grant date valuation, as it
is not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table shows with respect to the named executive officers the
number of shares covered by both exercisable and non-exercisable stock options
as of December 31, 1996, with respect to options to purchase Class A Common
Stock of Pioneer. Also reported are the values for in-the-money options which
represent the positive spread between the exercise price of any such existing
stock options and the year-end price of the Class A Common Stock of Pioneer. No
shares of Class A Common Stock of Pioneer were issued during 1996 to any
individual as the result of the exercise of stock options.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISABLE
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1996(#) DECEMBER 31, 1996($)(1)
---------------------------- ----------------------------
NAME(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard C. Kellogg, Jr........... -0- 131,691 -0- -0-
James E. Glattly................. -0- 53,500 -0- -0-
Philip J. Ablove................. -0- 53,500 -0- -0-
Verrill M. Norwood, Jr........... -0- 26,750 -0- -0-
Ronald E. Ciora.................. -0- 16,050 -0- -0-
Paul J. Kienholz(2).............. -0- 56,175 -0- -0-
</TABLE>
- ---------------
(1) The closing price of the Class A Common Stock of Pioneer on December 31,
1996, the last trading day of Pioneer's fiscal year, was $5.00 per share.
(2) As a result of Mr. Kienholz' retirement on December 31, 1996, the options
held by him expired on March 31, 1997.
PENSION PLAN
PCAC's pension plan provides defined benefit retirement coverage to the
executive officers of Pioneer and substantially all of PCAC's employees. At the
normal retirement age of 65, participants receive benefits based on their
credited service and their covered compensation for the average of their highest
five complete consecutive plan years out of their last ten complete consecutive
plan years. Covered compensation under the plan includes base pay, overtime and
shift differential pay and certain annual performance and sales incentive
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<PAGE> 85
programs and commissions, but excludes all other items of compensation. However,
the Internal Revenue Code limits remuneration which may be taken into account
(subject to certain grandfather rules) under the pension plan for 1995 to
$150,000. The benefits in the table set forth below are computed as a straight
life annuity at age 65. Benefits are not subject to any deduction for social
security since the basic benefit formula incorporates the average social
security breakpoint in calculating the benefit. Pioneer's other operating
subsidiaries do not have similar plans.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(1)
---------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000......................... $27,153 $36,204 $45,255 $54,306 $63,357
150,000......................... 32,778 43,704 54,630 65,556 76,482
175,000......................... 32,778 43,704 54,630 65,556 76,482
200,000......................... 32,778 43,704 54,630 65,556 76,482
225,000......................... 32,778 43,704 54,630 65,556 76,482
250,000......................... 32,778 43,704 54,630 65,556 76,482
300,000......................... 32,778 43,704 54,630 65,556 76,482
400,000......................... 32,778 43,704 54,630 65,556 76,482
450,000......................... 32,778 43,704 54,630 65,556 76,482
500,000......................... 32,778 43,704 54,630 65,556 76,482
</TABLE>
- ---------------
(1) The estimated years of credited service for each of the named executive
officers of PAAC as of December 31, 1996, were: Mr. Kellogg -- 5 years; Mr.
Kienholz -- 7 years; Mr. Glattly -- 7 years; and Mr. Norwood -- 4 years.
Messrs. Kienholz and Norwood also participate in a supplemental retirement
plan which was established by Pioneer in 1995 in order to fund amounts due to
such individuals under agreements reached when they were hired in 1988 and 1993,
respectively. Under such plan, Mr. Kienholz began receiving supplemental
retirement payments in the amount of $1,073 per month after he reached age 65 in
December 1995, and Mr. Norwood began receiving receive supplemental retirement
payments in the amount of $1,428 after he reached age 65 in July 1996.
EMPLOYMENT AGREEMENTS AND SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
On April 20, 1995, Pioneer entered into a five-year employment agreement
with Richard M. Kellogg, Jr. pursuant to which Mr. Kellogg served as President
of Pioneer through January 1997 and continues to serve as an employee of
Pioneer. Pursuant to the terms of the agreement, Pioneer will continue to pay
Mr. Kellogg's annual salary of $300,000 per year through April 20, 2000.
On April 20, 1995, PCAC extended its existing employment agreement with Mr.
Kienholz, pursuant to which Mr. Kienholz served as President of PCAC. The
agreement provided for an annual salary of at least $200,000, and for continuing
employment until October 31, 1996. Mr. Kienholz retired on December 31, 1996. On
April 20, 1995, Pioneer entered into three-year employment agreements with
Messrs. Glattly and Norwood. The employment agreement with Mr. Glattly provides
for an annual salary of at least $165,000. The employment agreement with Mr.
Norwood provides for an annual salary of at least $143,100.
On March 8, 1996, Philip J. Ablove, who is a director of Pioneer and PAAC,
was elected Vice President and Chief Financial Officer of Pioneer, after serving
as acting Chief Financial Officer and a management consultant to Pioneer since
October 1995. Pioneer has agreed to pay Mr. Ablove an annual salary of $225,000.
Following any change of control during his employment by Pioneer, he would be
entitled to a severance payment equal to at least 12 months' salary.
On January 4, 1997, Pioneer entered into a three-year employment agreement
with Michael J. Ferris, pursuant to which Mr. Ferris serves as President and
Chief Executive Officer of Pioneer and PCAC. The
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<PAGE> 86
agreement provides for an annual salary of not less than $350,000, and that
during 1997 Mr. Ferris will also receive a cash bonus of not less than $200,000,
payable quarterly in arrears.
Under each of the employment agreements currently in effect, the employee
will be entitled to receive other benefits made available to executive officers
and to receive bonus compensation in accordance with any management incentive
plan established by the Board of Directors. Each of the employment agreements
provides that if the executive's employment thereunder is terminated by the
employer without "just cause" or by the employee for "good reason" (as such
terms are defined in the employment agreement), the executive shall continue to
receive his annual salary until the last date of the employment term or, if
later, the first anniversary of the termination date, subject to certain
provisions for offset, and will continue to receive certain other benefits
provided for in the agreement. Termination following a change in control does
not constitute "just cause" or "good reason", but "good reason" does include the
failure of any successor to the employer by operation of law to assume the
employment agreement.
Pioneer and Mr. Ferris entered into a Stock Purchase Agreement dated
January 4, 1997, in connection with Mr. Ferris' employment as President and
Chief Executive Officer of Pioneer. In accordance with the terms of the
agreement, on February 13, 1997, Pioneer sold 150,000 shares of Pioneer's Class
A Common Stock to Mr. Ferris for $5.346 per share, or $801,900 in the aggregate.
The price paid was the average of the closing sale prices of the Common Stock as
reported on the NASDAQ National Market System on the days during which the
Common Stock was traded during the 30 consecutive trading days immediately
preceding the date of the agreement. The shares were sold to Mr. Ferris in
reliance on the exemption provided by Section 4(2) of the Securities Act.
On January 4, 1997, Mr. Ferris was granted an incentive stock option to
purchase 133,750 share of Class A Common Stock under Pioneer's 1995 Stock
Incentive Plan, at an exercise price of $5.00 per share, the fair market value
of a share of Class A Common Stock on the date of grant. The option is
exercisable in 20,000-share increments on January 4 in the years 1998 through
2003, with an additional 13,750 exercisable on January 4, 2004. Mr. Ferris was
also granted a non-qualified stock option to purchase 191,250 shares of Class A
Common Stock at an exercise price of $5.00 per share. The option is exercisable
in 38,250-share increments on January 4 in the years 1998 through 2002. As a
part of his compensation package, it was also agreed that Mr. Ferris will
receive a future grant of a non-qualified stock option to purchase 25,000 shares
of Class A Common Stock on January 4 in each of the years 1998, 1999 and 2000.
Shares subject to the options will have exercise prices of $6.00, $7.00 and
$8.00, respectively.
COMPENSATION OF DIRECTORS
Directors of PAAC do not receive a fee for service as directors. Directors
of PAAC are reimbursed for travel expenses incurred in attending board and
committee meetings.
All of the directors of PAAC also serve as directors of Pioneer. In 1992,
the Board of Directors of Pioneer established a policy under which each director
who is not also an employee of Pioneer receives an annual retainer and a fee for
each meeting attended. Pursuant to Pioneer's 1993 Non-Employee Director Stock
Plan, Pioneer granted each non-employee director who served throughout the year
2,700 shares of Class A Common Stock of Pioneer and $7,994 in cash in payment of
the 1996 annual retainer of $22,000, and each director was paid $2,000 for each
Board of Directors meeting attended in 1996. Mr. Ablove received 501 shares and
$1,489 in cash in payment of the retainer as a result of his service as a
non-employee director during a portion of the year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William R. Berkley, a member of the Compensation and Stock Option Committee
of PAAC and Pioneer, is a director of PAAC and the Chairman of the Board of
Directors of Pioneer. Mr. Berkley (who may be deemed to beneficially own all
shares of Pioneer common stock held by the Interlaken Partnership) may be deemed
to beneficially own approximately 59.9% of the voting power of Pioneer. See
"Stock Ownership."
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CERTAIN TRANSACTIONS
PCAC, a wholly-owned subsidiary of PAAC, is party to an agreement with
Basic Investments, an entity in which PCAC owns a minority interest (and which
constitutes part of the Basic Ownership held for the benefit of the sellers in
the PAI Acquisition), for the delivery of water to the Henderson production
facility. The agreement provides for the delivery of a minimum of eight million
gallons of water per day. The agreement expires on December 31, 2014, unless
terminated earlier in accordance with the provisions thereof. Basic Investments
also charges PCAC and other companies in the Basic Complex for power
distribution services. For the year ended December 31, 1996, Basic Investments
charged PCAC approximately $500,000 for the provision of such services. At
December 31, 1996, net receivables from Basic Investments were $300,000. See
"Business -- Basic Investments."
PCAC sells certain services to and purchases steam from Saguaro Power. For
the year ended December 31, 1996, sales to Saguaro Power totaled $1.0 million
and purchases from Saguaro Power totaled $1.8 million; as of December 31, 1996,
Saguaro Power owed PCAC $0.1 million and PCAC owed Saguaro Power $0.2 million.
See "Business -- Saguaro Power."
PCAC is also party to a development management agreement with Victory
Valley, an entity controlled by Basic Investments and in which PCAC owns a
minority interest (and which constitutes part of the Basic Ownership held for
the benefit of the sellers in the PAI Acquisition). Pursuant to the agreement,
Victory Valley manages the development of certain real property in Henderson,
Nevada which is a portion of the Excess Land owned by PCAC.
PCAC sells certain products to Kemwater at market prices. Sales to Kemwater
totaled $8.8 million during the year ended December 31, 1996. Kemwater provides
transportation services to PCAC at market prices which totaled $1.8 million for
1996.
PAI sold caustic soda to TMHI for export from 1988 to 1993 and participated
in certain joint insurance programs. Mr. Kellogg, who was an executive officer
and director of PAI, co-founded TMHI and served as a director and executive
officer of TMHI. PAI wrote off $1.3 million of receivables in 1992 and charged
an additional $1.1 million against income in 1993 related to sales to TMHI that
were deemed uncollectible. In April 1993, TMHI filed for bankruptcy.
In connection with the consummation of the PAI Acquisition, Pioneer issued
and sold (i) to the Interlaken Partnership, 3,039,772 shares of Class A Common
Stock of Pioneer for an aggregate purchase price of $15 million, and (ii) to Mr.
Kellogg, 515,000 shares of Class A Common Stock of Pioneer for an aggregate
purchase price of approximately $2.5 million. An entity controlled by Mr.
Berkley is the sole general partner of the Interlaken Partnership, and Mr.
Berkley also owns approximately 32.3% of the limited partnership interests in
the Interlaken Partnership. The Interlaken Partnership beneficially owns
approximately 34.9% of the voting power of Pioneer, and William R. Berkley,
Chairman of Pioneer and PAAC (who may be deemed to beneficially own all shares
of Pioneer common stock held by the Interlaken Partnership), may be deemed to
beneficially own approximately 56.0% of the voting power of Pioneer. Mr. Berkley
has the right to vote and otherwise act in respect of the shares of Pioneer
beneficially owned by the Interlaken Partnership in his capacity, through
controlled entities, as the sole general partner of the Interlaken Partnership.
See "Stock Ownership."
Upon consummation of the PAI Acquisition, Interlaken Capital, Inc., an
entity controlled by Mr. Berkley, received a fee of approximately $1.6 million
from PAAC in connection with financial advisory services with respect to the PAI
Acquisition and related financings. The firm was also paid a fee of $300,000,
plus reimbursement of reasonable out-of-pocket expenses, for services rendered
in connection with the KWT transaction. The firm was paid a fee of approximately
$1.3 million, plus reimbursement of reasonable out-of-pocket expenses, for
services rendered in connection with the Tacoma Acquisition.
Upon consummation of the PAI Acquisition, Pioneer and PAI entered into
employment agreements with the executive officers of PAI, and Pioneer granted to
such executive officers options to purchase shares of Pioneer's Class A Common
Stock pursuant to its 1995 Stock Incentive Plan. See "Management -- Executive
Compensation."
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PAAC and its subsidiaries (the "PAAC Group") have entered into a tax
sharing agreement (the "Tax Sharing Agreement") with Pioneer and the other
members of the consolidated group (the "Pioneer Group") of which Pioneer is the
common parent. Under the Tax Sharing Agreement, (i) Pioneer is obligated to pay
the federal income tax liability of the Pioneer Group and (ii) the PAAC Group is
required to make tax sharing payments to Pioneer in an amount equal to its share
of the Pioneer Group's consolidated cash tax liability, if any. In determining
the PAAC Group's share of the Pioneer Group's consolidated cash tax liability
(x) available net operating loss carryforwards each year will be determined as
if any prior use of those carryforwards by members of the Pioneer Group other
than the PAAC Group (the "Non-PAAC Group"), except carryforwards generated by
the Non-PAAC Group after the PAI Acquisition, had not occurred ("Previously Used
NOLs") and (y) net operating loss carryforwards, except carryforwards generated
by the Non-PAAC Group after the PAI Acquisition, will first reduce the "separate
tax liability" of the PAI Group each year to the fullest extent permitted by the
Code before any net operating loss use by the Non-PAAC Group except that
Previously Used NOLs may only be utilized by the PAAC Group.
Jack H. Nusbaum, a director of Pioneer and PAAC, is a Senior Partner and
Chairman of the law firm of Willkie Farr & Gallagher, which regularly acts as
counsel to Pioneer and PAAC and is acting as counsel to Pioneer and PAAC in
connection with the Exchange Offer.
Thomas H. Schnitzius, a director of Pioneer and PAAC, is a principal of
Schnitzius & Vaughan, an investment banking firm. PAI retained Schnitzius &
Vaughan to provide merger and acquisition and financial advisory services to
PAI. PAI paid Schnitzius & Vaughan a $250,000 fee for financial advisory
services rendered in connection with PAI's March 1995 debt refinancing. In
addition, as compensation for financial services rendered to it by Schnitzius &
Vaughan in connection with the PAI Acquisition, PAI paid that firm a fee of
approximately $1.0 million upon the consummation of the PAI Acquisition, plus
reimbursement of reasonable out-of-pocket expenses relating to such services.
The firm was also paid a fee of $300,000, plus reimbursement of reasonable
out-of-pocket expenses, for services rendered in connection with the KWT
transaction, and a fee of $150,000, plus reimbursement of reasonable
out-of-pocket expenses, for services rendered in connection with the T.C.
Products acquisition. Schnitzius & Vaughan provides financial advisory services
on an on-going basis to the Company, for which it received fees of $476,000 for
1996. The firm is currently paid a retainer for such services of $6,000 per
month. The firm was paid a fee of approximately $450,000, plus reimbursement of
reasonable out-of-pocket fees and expenses, for services rendered in connection
with the Tacoma Acquisition.
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<PAGE> 89
STOCK OWNERSHIP
Since the formation of PAAC in March 1995, all of the outstanding shares of
common stock, par value $.01 per share, of PAAC have been owned by Pioneer. The
following table sets forth, as of July 1, 1997, certain information regarding
ownership of PAAC common stock by (i) each person known by PAAC to be the
beneficial owner of more than five percent of the PAAC common stock, (ii) each
of the directors of PAAC and the executive officers of PAAC named in the Summary
Compensation Table and (iii) all directors and executive officers of PAAC as a
group. Except as otherwise indicated, each party has sole voting and investment
power over the shares beneficially owned.
<TABLE>
<CAPTION>
AMOUNT AND
TITLE OF NAME OF NATURE PERCENT
CLASS BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
-------- ---------------- ----------------------- --------
<S> <C> <C> <C>
Common Stock Pioneer Companies, Inc.......................... 1,000 100%
4200 NationsBank Center
700 Louisiana Street
Houston, TX 77002
William R. Berkley.............................. 1,000(1) 100%
c/o Pioneer Companies, Inc.
165 Mason Street
Greenwich, CT 06830
All Directors and Executive Officers as a group
(14 persons).................................... 1,000(1) 100%
</TABLE>
- ---------------
(1) Mr. Berkley, Chairman of the Board and principal shareholder of Pioneer, may
be deemed to beneficially own the shares of PAAC common stock owned by
Pioneer. Mr. Berkley disclaims beneficial ownership of all such shares.
The Interlaken Partnership beneficially owns approximately 34.9% of the
voting power of Pioneer and William R. Berkley, Chairman of Pioneer and PAAC
(who may be deemed to beneficially own all shares of Pioneer common stock held
by the Interlaken Partnership), may be deemed to beneficially own approximately
56.0% of the voting power of Pioneer. As a result of Mr. Berkley's ownership of
Pioneer voting stock, Mr. Berkley is able to control the election of PAAC's
Board of Directors and thereby direct the management and policies of PAAC, PAI
and its subsidiaries.
Pioneer's authorized and outstanding common stock consists of Class A
Common Stock, entitled to one vote per share, and Class B Common Stock, entitled
to one-tenth of one vote per share and convertible into Class A Common Stock on
a share-for-share basis. The Class B Common Stock of Pioneer was issued to
Pioneer's former lending banks under the plan of reorganization of Pioneer and
its subsidiaries in 1992. Information obtained from a Schedule 13G, dated July
21, 1992, filed with the Securities and Exchange Commission by Chemical Bank
("Chemical"), Barnett Bank of South Florida, N.A. ("Barnett") and The Chase
Manhattan Bank ("Chase") indicates that (i) Chemical had acquired 616,768 shares
of Class B Common Stock of Pioneer of which it was the beneficial owner with
sole voting and dispositive power, (ii) Barnett had acquired 122,146 shares of
Class B Common Stock of which it was the beneficial owner with sole voting and
dispositive power and (iii) Chase had acquired 84,295 shares of Class B Common
Stock of which it was the beneficial owner with sole voting and dispositive
power. In September 1995, Barnett converted its Class B Common Stock into Class
A Common Stock. The holdings of Chemical and Chase will represent approximately
0.7% and 0.1%, respectively, of the voting power of Pioneer upon consummation of
the Tacoma Acquisition and, in the aggregate, approximately 7.7% of the number
of shares of Pioneer common stock outstanding.
Upon consummation of the Tacoma Acquisition, Pioneer issued 55,000 shares
of Pioneer Preferred Stock, constituting all of the issued and outstanding
shares of Pioneer Preferred Stock, to OCC Tacoma. Each share of Pioneer
Preferred Stock is convertible at any time into eight shares of Class A Common
Stock of Pioneer. Each share of Pioneer Preferred Stock is entitled to eight
votes per share (subject to adjustment) and votes with the Pioneer common stock
on all matters. The Pioneer Preferred Stock issued to OCC Tacoma upon
consummation of the Tacoma Acquisition represents approximately 4.8% of the
voting power of Pioneer.
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<PAGE> 90
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITIES
Term Facility
Concurrent with the closing of the Initial Offering, the other Refinancings
and the Tacoma Acquisition, the Company entered into a nine and one-half year
$100.0 million Term Facility provided by a syndicate of financial institutions.
Quarterly amortization of the Term Loans will be in an aggregate annual
principal amount equal to 1% of the initial principal amount beginning September
30, 1997, with the remaining 90.75% of the initial principal amount maturing on
December 15, 2006. Indebtedness under the Term Facility will be subject to
mandatory prepayment provisions including, without limitation: (i) upon the
occurrence of a change of control (to be defined in a manner similar to "change
of control" in the Indenture) and (ii) with 100% of the net proceeds from asset
sales permitted under the Term Facility (provided that up to $35.0 million of
such proceeds since the closing of the Term Facility may be re-invested within
365 days of their receipt in the Company or its subsidiaries in their current
lines of business).
Borrowings under the Term Facility bear interest at a floating rate, based
at the Company's option on LIBOR or the administrative agent's alternate base
rate.
Indebtedness under the Term Facility is guaranteed by all direct and
indirect subsidiaries of the Company, provided that a non-U.S. subsidiary will
only be required to deliver a guarantee to the extent it would not result in
material increased tax or similar liabilities for the Company and its
subsidiaries on a consolidated basis. The Term Facility is secured on a pari
passu basis with the Notes, by (a) a first mortgage lien and security interest
in the real property, buildings, fixtures and equipment relating to the Tacoma
Facility, (b) a first-priority, perfected security interest in certain
agreements related to the Tacoma Acquisition, (c) first mortgage liens on the
Henderson, Nevada and St. Gabriel, Louisiana chlor-alkali production facilities
of PCAC, including real property, buildings, fixtures and equipment, and (d) a
first-priority, perfected pledge of all the capital stock of PCAC and All-Pure.
The Term Facility contains covenants similar to the covenants contained in
the Indenture. Events of default with respect to the Term Facility include,
among others, failure to make payment when due, defaults under certain other
agreements or instruments of indebtedness and certain other events of default
similar to those contained in the Indenture.
Revolving Facility
Concurrent with the closing of the Initial Offering, the other Refinancings
and the Tacoma Acquisition, the Company entered into the Revolving Facility
under which the agent bank (the "Bank") and the other lenders provide a
revolving loan and letter of credit facility to the Company, subject to the
conditions set forth therein.
The Bank extends credit to the Company on a revolving basis at any time and
from time to time for a period of five years following the Initial Offering in
an aggregate principal amount of Revolving Loans outstanding of not in excess of
$35.0 million, up to $10.0 million of which amount will be available for the
issuance of letters of credit ("Letters of Credit"); provided that the aggregate
amount of the Revolving Loans and the aggregate undrawn face amount of Letters
of Credit may not at any time exceed the borrowing base (the "Borrowing Base"),
which will be the sum of, subject to certain exceptions, (i) up to 85% of
eligible accounts receivable and (ii) up to 50% of eligible inventory, not to
exceed the lesser of (a) $10.0 million or (b) 35% of the amount of the foregoing
clause (i). The obligations of PAAC under the Revolving Facility are secured by
a first priority lien on all accounts receivables and inventory, and certain
assets related thereto, of the Company and certain of its subsidiaries,
including Kemwater. Borrowings under the Revolving Facility bear interest at a
rate determined by reference to the Bank's reference rate in effect from time to
time (the "Reference Rate") or, at the Company's option, the Bank's LIBOR
interest rate (the "LIBOR Rate"). The interest rate will be adjusted quarterly
based upon the ratio of total debt to earnings before interest, taxes and
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<PAGE> 91
depreciation and amortization for the preceding four quarters. If any borrowings
are not repaid when due, the outstanding principal amount of such borrowings
will bear interest at the then applicable rate plus 2.0%. The Company will pay
the Bank, monthly in arrears, a commitment fee based on the average difference
between $35.0 million and the aggregate of the Revolving Loans and the aggregate
undrawn face amount of the Letters of Credit outstanding. PAAC will also pay
other customary fees including a fee on Letters of Credit based on the average
aggregate undrawn face amount of Letters of Credit outstanding. The Revolving
Facility is guaranteed by PAI and its subsidiaries.
The Revolving Facility contains customary covenants with respect to, among
other things, (i) maintenance of a ratio of EBITDA to interest expense and (ii)
restrictions on the incurrence of additional liens or indebtedness. The Company
intends to use any borrowings under the Revolving Facility for its ongoing
working capital needs and general corporate purposes. Letters of Credit will be
used to support obligations of the Company incurred in the ordinary course of
business.
OTHER
Other long-term debt of PAAC consists of $4.5 million of outstanding
variable rate subordinated notes, with principal payments due July 31, 2001, and
$2.3 million of an outstanding variable rate tax-exempt bond, financed through
the Economic Development Corporation of Pierce County, Washington, with
principal payments due in variable annual installments through 2014.
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<PAGE> 92
DESCRIPTION OF THE NOTES
GENERAL
The Exchange Notes will be issued, and the Original Notes were issued,
under an Indenture (the "Indenture") among the Company, as issuer, all of the
Company's Subsidiaries (collectively, the "Subsidiary Guarantors") and United
States Trust Company of New York, as trustee (the "Trustee"). The terms and
conditions of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"Trust Indenture Act") as in effect on the date of the Indenture. The Notes are
subject to all such terms and conditions, and reference is made to the Indenture
and the Trust Indenture Act for a statement thereof. The following statements
are summaries of the provisions of the Notes and the Indenture and do not
purport to be complete. Such summaries make use of certain terms defined in the
Indenture and are qualified in their entirety by express reference to the
Indenture. Certain of such defined terms are set forth below under "-- Certain
Definitions." For purposes of this "Description of the Notes," the "Company"
means Pioneer Americas Acquisition Corp. A copy of the Indenture will be
available upon request to the Company.
The Notes will be limited to $200.0 million aggregate principal amount and
will be issued in fully registered form without coupons in denominations of
$1,000 and any integral multiple of $1,000. Principal of, premium and Liquidated
Damages, if any, and interest on the Notes will be payable, and the Notes will
be transferable, at the corporate trust office or agency of the Trustee
maintained for such purposes in New York, New York. Initially, the Trustee will
act as paying agent and registrar under the Indenture. The Company and its
Subsidiaries may act as paying agent and registrar under the Indenture, and the
Company may change any paying agent and registrar without notice to the Persons
who are registered holders ("Holders") of the Notes. The Company may pay
principal, premium and interest by check and may mail an interest check to a
Holder's registered address. Holders must surrender the Notes to the paying
agent to collect principal and premium payments. No service charge will be made
for any registration of transfer or exchange of the Notes, except for any tax or
other governmental charge that may be imposed in connection therewith.
PAYMENT TERMS
Interest on the Notes will initially accrue from the respective issue date,
and thereafter from the most recent date to which interest has been paid.
Interest will be payable semi-annually on June 15 and December 15 of each year,
commencing December 15, 1997, at the rate of 9 1/4% per annum to Holders of the
Notes as of the close of business on June 1 and December 1 next preceding the
applicable interest payment date. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. The Notes mature on June 15,
2007.
Payment of the Notes is guaranteed by the Subsidiary Guarantors, jointly
and severally, on a senior basis. See "-- Guarantees."
RANKING
The Notes will be senior obligations of the Company and will rank pari
passu with all existing and future Senior Indebtedness of the Company (including
the loans under the New Credit Facilities and senior to all Subordinated
Indebtedness of the Company. The Notes, however, will be effectively
subordinated to secured Senior Indebtedness of the Company and its subsidiaries
with respect to the assets securing such Indebtedness (such as the accounts
receivable, inventory and certain related assets of the Company and its
subsidiaries which are expected to secure the Indebtedness under the Revolving
Facility). The guarantee of PCAC with respect to the Notes will be secured by
(i) a first mortgage lien on the Tacoma Facility, (ii) a first priority security
interest in certain agreements related to the Tacoma Acquisition, and (iii)
first mortgage liens on PCAC's chlor-alkali production facilities located in
Henderson, Nevada and St. Gabriel, Louisiana and the guarantee of PAI with
respect to the Notes will be secured by a pledge of the Capital Stock of PCAC
and All-Pure held by PAI. Such liens will also secure, equally and ratably,
PCAC's guarantee and PAI's guarantee, respectively, of the Term Loans. In
addition, the Company and its Subsidiaries may incur up to $50.0 million of
Senior Indebtedness which will be secured on a pari passu basis with the Notes.
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<PAGE> 93
As of March 31, 1997, after giving pro forma effect to the Refinancings and
the Tacoma Acquisition, the Company and its Subsidiaries would have had
outstanding approximately $306.8 million aggregate principal amount of secured
Senior Indebtedness. It is expected that as of March 31, 1997, on a pro forma
basis, the Company and its Subsidiaries would have had, subject to certain
restrictions (including borrowing base limitations), the ability to draw up to
$32.2 million of additional secured Senior Indebtedness under the Revolving
Facility. See "Risk Factors -- Ranking of the Notes" and "Description of Other
Indebtedness."
Holders of secured Indebtedness of the Company or the Subsidiary Guarantors
have claims with respect to the assets constituting collateral for such
Indebtedness that are prior to the claims of holders of the Notes and the
Guarantees, respectively. In the event of a default on the Notes, or a
bankruptcy, liquidation or reorganization of the Company or the Subsidiary
Guarantors, such assets will be available to satisfy obligations with respect to
the Indebtedness secured thereby before any payment therefrom could be made on
the Notes or the Guarantees, as the case may be. To the extent that the value of
such collateral is not sufficient to satisfy the Indebtedness secured thereby,
amounts remaining outstanding on such Indebtedness would be entitled to share,
together with the Indebtedness under the Notes and the Guarantees, as the case
may be, with respect to any other assets of the Company and the Subsidiary
Guarantors. See "-- Security."
GUARANTEES
The Subsidiary Guarantors will, jointly and severally, unconditionally
guarantee the due and punctual payment of principal of, premium, if any, and
interest on, the Notes. Such guarantees will 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.
The guarantee of PCAC with respect to the Notes and the Term Loans will be
secured by (i) a first mortgage lien on the Tacoma Facility, (ii) a first
priority security interest in certain agreements related to the Tacoma
Acquisition, and (iii) first mortgage liens on PCAC's chlor-alkali production
facilities located in Henderson, Nevada and St. Gabriel, Louisiana. The
guarantee of PAI with respect to the Notes and the Term Loans will be secured by
a pledge of the Capital Stock of PCAC and All-Pure. See "-- Security" and "--
Intercreditor Agreement."
The Subsidiary Guarantors on the date of this Prospectus are set forth
below:
Pioneer Americas, Inc.
Pioneer Chlor Alkali Company, Inc.
Imperial West Chemical Co.
All-Pure Chemical Co.
Black Mountain Power Company
All-Pure Chemical Northwest, Inc.
Pioneer Chlor Alkali International, Inc.
G.O.W. Corporation
Pioneer (East), Inc.
T.C. Holdings, Inc.
T.C. Products, Inc.
Subsidiary Guarantors will include such other Subsidiaries of the Company
that become Subsidiary Guarantors as described under "-- Certain Covenants --
Guarantees." The Indenture provides that the obligations of the Subsidiary
Guarantors under their respective Guarantees will be reduced to the extent
necessary to prevent the Guarantees from violating or becoming voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
Upon any sale, exchange, transfer or other disposition to any Person of all
of the Company's or a Restricted Subsidiary's Equity Interests in, or all or
substantially all of the assets of, any Subsidiary Guarantor which is in
compliance with the Indenture, such Subsidiary Guarantor will be released from
all its obligations under its Guarantee.
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<PAGE> 94
Separate financial statements of the Subsidiary Guarantors are not included
herein because (i) the Company is a holding company with no independent
operations, (ii) the Guarantees are full and unconditional (except to the extent
necessary to comply with fraudulent conveyance laws), (iii) such Subsidiary
Guarantors are jointly and severally liable with respect to the Guarantees, and
(iv) all of the Subsidiaries of the Company currently in existence are
Subsidiary Guarantors and the aggregate consolidated net assets, earnings and
equity of the Subsidiary Guarantors are substantially equivalent to the net
assets, earnings and equity of the Company on a consolidated basis.
SECURITY
PCAC has granted to United States Trust Company of New York, as collateral
agent (the "Collateral Agent"), for the benefit of (x) the Trustee, for itself
and the Holders, and (y) the agent under the Term Facility (the "Term Loan
Agent"), for itself and the other Term Loan lenders, (i) a first mortgage lien
and security interest in the real property, buildings, fixtures and certain
equipment relating to the Tacoma Facility, (ii) a first priority security
interest in certain agreements related to the Tacoma Acquisition, including the
Purchase Agreement, the Chlorine Purchase Agreement, the Chlorine and Caustic
Soda Sales Agreement and the Environmental Operating Agreement, and (iii) first
mortgage liens on the Henderson and St. Gabriel chlor-alkali production
facilities (including real property, buildings, fixtures and certain equipment).
PAI will grant to the Collateral Agent for the benefit of (x) the Trustee, for
itself and the Holders, and (y) the Term Loan Agent, for itself and the other
Term Loan lenders, a pledge of the Capital Stock of PCAC and All-Pure pursuant
to a stock pledge agreement (the "Stock Pledge Agreement"). The items described
in (i) through (iii) above and the Capital Stock of PCAC and All-Pure are
collectively referred to herein as the "Note Collateral." See "The Acquisition",
"Risk Factors -- Limitations on Security Interest" and "-- Intercreditor
Agreement."
There can be no assurance that the proceeds of any sale of the Note
Collateral in whole or in part pursuant to the Indenture and the related
security documents following an Event of Default would be sufficient to satisfy
payments due on any of the Notes or the other secured Indebtedness. See "Risk
Factors -- Limitations on Security Interest." In addition, the ability of the
Collateral Agent, the Trustee, any of the Holders, the Term Loan Agent, the Term
Loan lenders (the "Secured Parties") to realize upon the Note Collateral may be
subject to certain bankruptcy law limitations in the event of a bankruptcy. See
"-- Certain Bankruptcy Limitations."
The collateral release provisions of the Indenture will permit the release
of Note Collateral without substitution of collateral of equal value under
certain circumstances. See "-- Release of Note Collateral." As described under
"-- Certain Covenants -- Limitations on Asset Sales," the Net Proceeds of
certain Asset Sales may under specified circumstances be required to be utilized
to make a pro rata offer to purchase Notes.
For so long as any of the Original Notes or the Exchange Notes, as the case
may be, are outstanding, if an Event of Default occurs under the Indenture and a
declaration of acceleration of the Original Notes or the Exchange Notes, as the
case may be, occurs as a result thereof, the Trustee, on behalf of the Holders,
and as directed by Holders of a majority of the total principal amount of the
Notes, in addition to any rights or remedies available to it under the
Indenture, may, subject to the provisions of the Intercreditor Agreement (as
defined under "-- Intercreditor Agreement"), cause the Collateral Agent to take
such action as it may deem advisable to protect and enforce the rights of the
Trustee and the Holders in the Note Collateral, including the institution of
foreclosure proceedings. The proceeds received by the Collateral Agent from any
foreclosure with respect to the Note Collateral will be applied by the
Collateral Agent first to pay the expenses of such foreclosure and fees and
other amounts then payable to the Collateral Agent under the Intercreditor
Agreement, and thereafter to pay, pro rata: (i) the obligations under the
Indenture, including amounts then payable to the Trustee under the Indenture and
the principal of, premium, if any, and interest on the Notes and any Exchange
Notes, and (ii) the obligations under the Term Facility, including amounts then
payable to the Term Loan Agent and the principal of, premium, if any, and
interest on the Term Loans.
Dispositions of Note Collateral may be subject to delay pursuant to the
Intercreditor Agreement. See "-- Intercreditor Agreement."
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<PAGE> 95
Real property pledged as security to a lender may be subject to known and
unforeseen environmental risks. Under CERCLA, a lender who does not foreclose on
a property may be held liable, in certain limited circumstances, for the costs
of remediating or preventing releases or threatened releases of hazardous
substances at a mortgaged property. There may be similar risks under various
state laws and common law theories. Such liability has seldom been imposed, and
finding a lender liable generally has been based on the lender's having become
sufficiently involved in the operations of the borrower so that its activities
are deemed to constitute "participation in the management." A lender may also be
considered to be a current owner of a property who can be held liable under
CERCLA if the lender takes title to property by foreclosure, although certain
courts have held that mere foreclosure on the borrower's property, in order to
protect the lender's security interest, does not make the lender liable under
CERCLA. The uncertain state of current law does not provide any assurance that
lenders can avoid the risk of liability under CERCLA if they foreclose on
properties or become involved in work-outs or similar situations that may entail
some involvement in, or influence over, facility operations.
INTERCREDITOR AGREEMENT
The Company, PAI, PCAC, the Trustee, the Term Loan Agent and the Collateral
Agent have entered into an Intercreditor and Collateral Agency Agreement (the
"Intercreditor Agreement"). The Intercreditor Agreement provides generally that
(i) with respect to administering the Note Collateral and amending,
supplementing or waiving the provisions of the instruments relating to the
security interests granted therein, the holders of a majority of the aggregate
outstanding principal amount of the obligations secured by the Note Collateral
(the "Majority Holders") may direct the Collateral Agent, provided that the
Majority Holders include the holders of a majority of the aggregate outstanding
principal amount of the Term Loans; (ii) with respect to releasing a substantial
portion of the Note Collateral in circumstances not otherwise permitted by the
Indenture or the Term Facility, the Majority Holders may direct the Collateral
Agent, provided that the Majority Holders include the holders of 100% of the
aggregate outstanding principal amount of the Term Loans; and (iii) with respect
to foreclosing on or otherwise pursuing remedies with respect to the Note
Collateral, the holders of a majority of the aggregate outstanding principal
amount of either (x) the Notes or (y) the Term Loans may direct the Collateral
Agent, provided that the holders taking such action hold an aggregate principal
amount of such debt representing at least 15% of the aggregate outstanding
principal amount of the obligations secured by the Note Collateral.
All cash or cash equivalents received by the Collateral Agent (x) upon the
release of Note Collateral, (y) as proceeds of insurance or condemnation or
other taking awards, or (z) as proceeds of any sale (including an Asset Sale
authorized under the terms of the Indenture) or other disposition of Note
Collateral (collectively, "Trust Moneys") shall be subject to a lien and
security interest in favor of the Collateral Agent for the benefit of the
Secured Parties in accordance with the terms of Intercreditor Agreement.
If an Event of Default shall have occurred and be continuing, and the
obligations secured by the Note Collateral shall have been accelerated, then
upon the instructions of the holders of the obligations secured by the Note
Collateral, in accordance with the terms of the Intercreditor Agreement, the
Collateral Agent shall, as soon as practicable, apply the Trust Moneys relating
to the Note Collateral first to pay amounts then payable to the Collateral Agent
under the Intercreditor Agreement, and thereafter to pay, pro rata: (i) the
obligations under the Indenture, including amounts then payable to the Trustee
under the Indenture and the principal of, premium, if any, and interest on the
Original Notes and the Exchange Notes and (ii) the obligations under the Term
Facility, including amounts then payable to the Term Loan Agent and the
principal of, premium, if any, and interest on the Term Loans.
CERTAIN BANKRUPTCY LIMITATIONS
The right of the Collateral Agent to repossess and dispose of the Note
Collateral upon the occurrence of an Event of Default is likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy case were to
be commenced by or against the Company, PAI or PCAC prior to the Collateral
Agent's having repossessed and disposed of the relevant Note Collateral. Under
the Bankruptcy Code, a secured creditor such as the Collateral Agent is
prohibited from repossessing its security from a debtor in a bankruptcy case, or
from
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disposing of security repossessed from such debtor, without bankruptcy court
approval. Moreover, the Bankruptcy Code permits the debtor to continue to retain
and to use collateral even though the debtor is in default under the applicable
debt instruments, provided that the secured creditor is given "adequate
protection." The meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value of the secured
creditor's interest in the collateral and may include cash payments or the
granting of additional security, if and at such times as the court in its
discretion determines, for any diminution in the value of the collateral as a
result of the stay of repossession or disposition or any use of the collateral
by the debtor during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how long
payments under the Original Notes, the Exchange Notes, or the other secured
indebtedness could be delayed following commencement of a bankruptcy case,
whether or when the Collateral Agent could repossess or dispose of the Note
Collateral or whether or to what extent holders of such indebtedness would be
compensated for any delay in payment or loss of value of the Note Collateral
through the requirement of "adequate protection." Furthermore, in the event that
the bankruptcy court determines the value of the collateral is not sufficient to
repay all amounts due on such indebtedness, the holders of such indebtedness
would hold "undersecured claims." Applicable federal bankruptcy laws do not
permit the payment and/or accrual of interest, costs and attorney's fees for
"undersecured claims" during the pendency of a debtor's bankruptcy case.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the option of the Company prior to June
15, 2002. On or after that date, the Notes will 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, at the following redemption prices (expressed as
percentages of the principal amount), if redeemed in the 12-month period
commencing June 15 in the year indicated below, in each case plus accrued and
unpaid interest and Liquidated Damages, if any, to the date fixed for
redemption:
<TABLE>
<CAPTION>
YEAR REDEMPTION
---- ----------
<S> <C>
2002........................................................ 104.625%
2003........................................................ 103.083%
2004........................................................ 101.542%
2005 and thereafter......................................... 100.000%
</TABLE>
The Notes will not be subject to, or entitled to the benefits of, any
sinking fund.
Notwithstanding the foregoing, at any time prior to June 15, 2000, the
Company may redeem, in part, up to 35% of the aggregate principal amount of the
Notes originally issued at a purchase price of 109.25% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date fixed for redemption, with the net proceeds of (i) any Equity Offering by
the Company or (ii) any Equity Offering by Pioneer, but only to the extent that
Pioneer contributes such net proceeds to the Company as a capital contribution;
provided that at least 65% of the aggregate principal amount of the Notes
originally issued remains outstanding immediately after giving effect to such
redemption. In order to effect the foregoing redemption, the Company will be
required to send the redemption notice not later than 60 days after the receipt
of the proceeds of such public offering.
Notes may be redeemed or repurchased as set forth below under "-- Change of
Control" and "-- Certain Covenants -- Limitations on Asset Sales" in part in
multiples of $1,000. If less than all the Notes issued under the Indenture are
to be redeemed, the Trustee will select the Notes to be redeemed pro rata, by
lot or by any other method which the Trustee deems fair and appropriate. The
Indenture provides that if any Note is to be redeemed or repurchased in part
only, the notice which relates to the redemption or repurchase of such Note will
state the portion of the principal amount of such Note to be redeemed or
repurchased and will state that on or after the date fixed for redemption or
repurchase a new Note equal to the unredeemed portion thereof will be issued.
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On and after the date fixed for redemption or repurchase, interest will
cease to accrue on the Notes or portions thereof called for redemption or
tendered for repurchase.
CHANGE OF CONTROL
The Indenture provides that in the event of a Change of Control (the date
of such occurrence being the "Change of Control Date"), the Company will notify
the Holders in writing of such occurrence and will 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 Notes then outstanding at a purchase price (the "Purchase Price")
equal to 101% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, to the Change of Control Payment Date.
Notice of a Change of Control Offer will 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 is
required to remain open for at least 20 business days and until 5:00 p.m., New
York City time, on the Change of Control Payment Date. The notice will contain
all instructions and materials necessary to enable Holders to tender (in whole
or in part in a principal amount equal to $1,000 or a whole multiple thereof)
their Notes pursuant to the Change of Control Offer. Substantially
simultaneously with mailing of the notice, the Company will 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.
The notice, which governs the terms of the Change of Control Offer, will
state, among other things: (i) that the Change of Control Offer is being made
pursuant to this covenant; (ii) the Purchase Price and the Change of Control
Payment Date; (iii) that any Notes not surrendered or accepted for payment will
continue to accrue interest; (iv) that any Notes accepted for payment pursuant
to the Change of Control Offer will cease to accrue interest after the Change of
Control Payment Date; (v) that any Holder electing to have a Note purchased (in
whole or in part) pursuant to a Change of Control Offer will be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note completed, to the Paying Agent at the address
specified in the notice (or otherwise make effective delivery of the Note
pursuant to book-entry procedures and the related rules of the applicable
depositories) at least five business days before the Change of Control Payment
Date; and (vi) that any Holder will be entitled to withdraw his election if the
Paying Agent receives, not later than three 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 Note the
Holder delivered for purchase, the certificate number of the Note and a
statement that such Holder is withdrawing his election to have such Note
purchased.
On the Change of Control Payment Date, the Company will: (i) accept for
payment the Notes, 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 Purchase Price of all the Notes, or
portions thereof, so accepted; and (iii) deliver to the Trustee the Notes so
accepted together with an officer's certificate stating that such Notes have
been accepted for payment by the Company. The Paying Agent will promptly mail or
deliver to Holders of Notes so accepted payment in an amount equal to the
Purchase Price. Holders whose Notes are purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered.
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 any of (x) William R. Berkley and
his Affiliates and/or (y) Interlaken Capital, Inc. and its Affiliates (each
individually a "Substantial Shareholder" and collectively the "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 Pioneer or the Company, (ii) the adoption of a
plan relating to the liquidation or dissolution of Pioneer or the Company, (iii)
the merger or consolidation of Pioneer or the Company with or into another
corporation with the effect that the stockholders of Pioneer 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
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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 Pioneer or the Company (together with any
new directors whose election by the Board of Directors of Pioneer or the
Company, or whose nomination for election by the shareholders of Pioneer 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 Pioneer or the Company then
in office. Notwithstanding the foregoing, a Change of Control will 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 Pioneer provided that such merger or
consolidation is permitted by the covenant described below under "-- Certain
Covenants -- Limitations on Mergers; Sales of Assets."
The Company will 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 Notes as described above.
The Company's ability to repurchase the Notes pursuant to a Change of
Control Offer will be limited by, among other things, the Company's financial
resources at the time of repurchase. There can be no assurance that sufficient
funds will be available at the time of any Change of Control to make any
required repurchases. Furthermore, there can be no assurance that the Company
will be able to fund the repurchase of Notes upon a Change of Control within the
limitations imposed by the terms of other then-existing Senior Indebtedness. The
Revolving Facility prohibits the Company from repurchasing Notes if at the time
of such repurchase an event of default under the Revolving Facility exists or
would be caused thereby. The occurrence of a Change of Control may cause an
event of default under the New Credit Facilities, upon which event of default
all amounts outstanding under the New Credit Facilities may become due and
payable. In the event a Change of Control occurs at a time when the Company is
prohibited from purchasing Notes, the Company will be required under the
Indenture, within 30 days following a Change of Control to (i) seek the consent
of its lenders to the purchase of the Notes or (ii) refinance the Indebtedness
that prohibits such purchase. If the Company does not obtain such a consent or
refinance such borrowings, the Company will remain prohibited from repurchasing
Notes. The Company's failure to purchase tendered Notes or make a Change of
Control Offer following a Change of Control would constitute an Event of Default
under the Indenture. An amendment of or waiver under the Indenture may not waive
the Company's obligation to make a Change of Control Offer without the consent
of the Holders of at least two-thirds in outstanding principal amount of the
Notes.
The existence of the right of Holders to require the Company to repurchase
their Notes upon the occurrence of a Change of Control may deter a third party
from acquiring Pioneer or the Company in a transaction which would constitute a
Change of Control. Subject to certain limitations described below in "-- Certain
Covenants", including the limitation on incurrence of additional Indebtedness,
Pioneer or the Company could, in the future, enter into certain transactions,
including acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control under the Indenture, but that could increase the
amount of Senior Indebtedness (or any other Indebtedness) outstanding at such
time or otherwise affect Pioneer's or the Company's capital structure or credit
ratings. The Change of Control provisions will not prevent a leveraged buyout
led by Pioneer or the Company management, a recapitalization of Pioneer or the
Company or a change in a majority of the members of the Board of Directors of
Pioneer or the Company which is approved by the then-present Board of Directors,
as the case may be.
The Indenture provides that the Company will not, and will 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 the New Credit Facilities) that
would materially impair the ability of the Company to make a Change of Control
Offer to purchase the Notes or, if such Change of Control Offer is made, to pay
for the Notes tendered for purchase.
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CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitations on Indebtedness. The Indenture provides that the Company will
not, and will 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 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 2.0 to 1.0.
The Indenture further provides that notwithstanding the foregoing
limitations, the incurrence of the following will not be prohibited:
(a) Indebtedness of the Company evidenced by the Notes, the Exchange
Notes and Indebtedness of the Subsidiary Guarantors evidenced by the
Guarantees and the guarantees with respect to the Exchange Notes;
(b) Indebtedness of the Company evidenced by the Term Loans and
Indebtedness of the Restricted Subsidiaries evidenced by the guarantees
with respect to the Term Loans;
(c) Indebtedness of the Company or any Restricted Subsidiary
constituting Existing Indebtedness, and any extension, deferral, renewal,
refinancing or refunding thereof;
(d) Indebtedness of the Company or any Restricted Subsidiary incurred
under one or more Credit Facilities in an aggregate principal amount at any
one time outstanding not to exceed the Borrowing Base at the time such
Indebtedness was incurred, less the aggregate amount of all permanent
repayments of revolving loans under such Credit Facilities made in
accordance with the second paragraph of the covenant described under
"-- Limitations on Asset Sales";
(e) 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 date of the Indenture; provided, however, that the
aggregate principal amount of such Capitalized Lease Obligations plus such
Indebtedness of the Company and all of the Restricted Subsidiaries does not
exceed $10.0 million outstanding at any time;
(f) 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);
(g) 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;
(h) 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;
(i) In addition to any Indebtedness otherwise permitted to be Incurred
under the Indenture, up to $10.0 million aggregate principal amount of
Indebtedness at any one time outstanding; and
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(j) 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 this covenant and clauses
(a) and (b) of the second paragraph of this covenant (the "Refinancing
Indebtedness"); provided, however, that (i) such Refinancing Indebtedness
does not exceed the aggregate principal amount of the Indebtedness so
refinanced, plus the amount of any premium required to be paid in
connection with such Refinancing in accordance with the terms of such
Indebtedness or the amount of any premium reasonably determined by the
Board of Directors as necessary to accomplish such Refinancing, plus the
amount of reasonable and customary out-of-pocket fees and expenses payable
in connection therewith, (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 Notes, the Refinancing
Indebtedness incurred to refinance, refund, defer, renew or extend such
Indebtedness is subordinated in right of payment to the Notes on terms at
least as favorable to the Holders as those contained in the documentation
governing the Indebtedness being so refinanced, refunded, deferred, renewed
or extended.
Notwithstanding anything to the contrary contained in the Indenture, the
Company and its Restricted Subsidiaries each may guarantee Indebtedness of the
Company or any Restricted Subsidiary that is permitted to be incurred under the
Indenture; provided that if such Indebtedness is subordinated in right of
payment to any other Indebtedness of the obligor, then such guarantee shall be
subordinated to Indebtedness of such guarantor to the same extent.
Limitations on Restricted Payments. The Indenture provides that the Company
will not, nor will 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 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 (3) 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 has occurred and is 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
"-- Limitations on Indebtedness;" and
(3) the aggregate amount of Restricted Payments declared, paid or
distributed subsequent to the Closing Date (including the proposed
Restricted Payment) does not exceed the sum of (i) 50% of the cumulative
Consolidated Net Income of the Company for the period subsequent to July 1,
1997 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) of the Company during the
Computation Period, (ii) the aggregate Net Cash Proceeds of the issuance or
sale or the exercise (other than to a Subsidiary or an
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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, (iv) cash contributions to the
Company's capital subsequent to the Closing Date and (v) $5.0 million.
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 the
covenant described under "-- Limitations on Asset Sales", provided, however,
that such Restricted Investments will 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 will 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 will 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 the covenant described under "-- Limitation on Indebtedness,"
provided, however, that such purchase or redemption will be excluded in the
calculation of the amount of Restricted Payments previously made for purposes of
clause (3) of the preceding paragraph; (d) the repurchase, redemption or other
acquisition or retirement for value of Capital Stock of Pioneer or the Company
held by management or other employees of Pioneer or the Company or any
Subsidiary pursuant to any shareholders agreement, management or employee stock
option agreement or management or employee equity subscription agreement, in
accordance with the provisions of any such arrangement, in an amount not greater
than $500,000 in any calendar year plus the portion of any such amounts which
remains unused at the end of the two prior calendar years, but in no event to
exceed $1.5 million in any calendar year; provided, however, that any such
purchase, redemption, acquisition or retirement for value will 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 Pioneer
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 Pioneer, provided,
however, that such payments will 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 Pioneer 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 Tacoma Acquisition, provided, however, that such payments
will 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 (vi) of the definition of Permitted Investments,
provided, however, that such Investments will 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 covenant, (a) the amount of any Restricted Payment
declared, paid or distributed in property of the Company or any Restricted
Subsidiary will 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 Company's 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
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Subsidiary will 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 will 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. The Company shall deliver to
the Trustee an officers' certificate stating that such Restricted Payment is
permitted, attaching a copy of the applicable resolution of the Company's Board
of Directors pursuant to which the value of the Restricted Payment to be made
was determined and setting forth the basis upon which the calculations required
by this covenant were computed.
Limitations on Liens. The Indenture provides that the Company will not, and
will 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, 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
or document in existence on the Closing Date, including the New Credit
Facilities and security and intercreditor documents related thereto;
(b) Permitted Liens;
(c) Liens on assets or property of the Company, or on assets or
property 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 date of the
Indenture; provided, however, that (i) the aggregate principal amount of
Indebtedness secured by such Liens does not exceed the original cost or
purchase price of the assets or property so acquired (including the
reasonable and customary costs of installation of such acquired assets) or
constructed, (ii) the Indebtedness secured by such Liens is otherwise
permitted to be incurred under the Indenture, (iii) such Liens do not
encumber any other assets or property of the Company or any of its
Restricted Subsidiaries and (iv) the Indebtedness secured by such Liens may
not be created more than 100 days after the later of the acquisition,
completion of construction, repair, improvement, addition or commencement
of full operation of the property subject to such Liens;
(d) Liens on assets or property acquired by the Company or any
Restricted Subsidiary after the date of the Indenture; provided, however,
that (i) such Liens existed on the date such assets or property were
acquired and were not incurred as a result of or in anticipation of such
acquisition and (ii) such Liens do not extend to or cover any assets or
property of the Company or any of its Restricted Subsidiaries other than
the assets or property 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 is permitted to be refinanced under the Indenture; provided,
however, that such Liens do not extend to or cover any assets or property
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 is subject to a Sale and Leaseback Transaction, provided,
however, that the aggregate principal amount of Attributable Indebtedness
in respect of all Sale and Leaseback Transactions then outstanding does not
at the time such a Lien is incurred exceed $10.0 million;
(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 are not created, incurred or assumed in contemplation of the
acquisition thereof by the Company or a Subsidiary; provided further, that
such Liens may not extend to any other property owned by the Company or a
Restricted Subsidiary;
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(h) Liens securing Indebtedness of a Restricted Subsidiary owing to
the Company or a Wholly-Owned Restricted Subsidiary;
(i) Liens on inventory, accounts receivable or related general
intangibles of any Restricted Subsidiary securing the obligations under
clause (d) of the covenant described under "-- Limitations on
Indebtedness";
(j) pari passu Liens on the Note Collateral securing up to $50.0
million aggregate principal amount of Indebtedness permitted to be incurred
under the initial paragraph of the covenant described under "-- Limitations
on Indebtedness," provided that (i) the proceeds of such Indebtedness are
used to acquire or construct additional property, plant and equipment that
will be utilized in one or more Related Businesses, (ii) the aggregate
principal amount of Indebtedness secured by such Liens does not exceed the
original cost or purchase price of the assets or property so acquired
(including the reasonable and customary costs of installation of such
acquired assets) or constructed, and (iii) the assets or property acquired
or constructed with such Indebtedness are pledged to the Collateral Agent
in accordance with the Intercreditor Agreement to become part of the
Collateral securing the Notes and the Term Loans on a pari passu basis with
such Indebtedness, and in connection therewith (A) the holders of such
Indebtedness or any trustee or other representative thereof becomes party
to the Intercreditor Agreement, as amended, and is authorized to exercise
rights and remedies in accordance therewith, and (B) the Collateral Agent
receives an endorsement to its title insurance policies relating to the
mortgage liens constituting part of the Note Collateral insuring the
continuing priority of such mortgage liens as set forth in the title
insurance policies; and
(k) Liens on assets or property of the Company, or on assets or
property of Restricted Subsidiaries of the Company, acquired or constructed
after the date of the Indenture other than in the ordinary course of
business and other than assets or property acquired or constructed in
replacement, repair or improvement of any assets or property constituting
Note Collateral; provided, however, that (i) the aggregate principal amount
of Indebtedness secured by such Liens does not exceed the original cost or
purchase price of the assets or property so acquired (including the
reasonable and customary costs of installation of such acquired assets) or
constructed, (ii) the Indebtedness secured by such Liens is otherwise
permitted to be incurred under the Indenture and (iii) such Liens do not
encumber the Note Collateral.
Limitations on Payment Restrictions Affecting Restricted Subsidiaries. The
Indenture provides that the Company will not, and will 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 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 New Credit Facilities, other Existing
Indebtedness listed on a schedule to the Indenture and security and
intercreditor documents related thereto in existence on the Closing Date, (B)
consensual encumbrances or restrictions in the Notes, the Exchange Notes 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 covenant 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 the covenant described under "-- Limitations on
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Indebtedness", 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 clause (A) or (C) of this
covenant, (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.
Limitations on Asset Sales. The Indenture provides that the Company will
not, and will 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 will 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.
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 (in the case of any optional prepayment of Term Loans, only if such
prepayment is effected on a pro rata basis in accordance with the Intercreditor
Agreement and in the case of a revolving credit facility or similar arrangement
that makes credit available, the commitment thereunder is also permanently
reduced by such amount) 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 Term Facility requires that any cumulative Net Proceeds received in excess
of $35.0 million will be used to make a mandatory prepayment of the Term Loans.
The amount of Net Proceeds neither used to permanently repay or prepay Senior
Indebtedness nor used or invested as set forth in this paragraph constitutes
"Excess Proceeds."
When the aggregate amount of Excess Proceeds from one or more Asset Sales
equals $10.0 million or more, the Company will apply 100% of such Excess
Proceeds within 365 days subsequent to the consummation of the Asset Sale which
resulted in the Excess Proceeds equalling $10.0 million or more to the purchase
of Notes tendered to the Company for purchase at a price equal to 100% of the
principal amount thereof, plus accrued interest and Liquidated Damages, 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 Notes. Any Asset Sale Offer may include
a pro rata offer under similar circumstances to purchase other Senior
Indebtedness requiring a similar offer. Any Asset Sale Offer will be made
substantially in accordance with the procedures for a Change of Control Offer
described under "-- Change of Control." Until such time as the Net Proceeds from
any Asset Sale are applied in accordance with this covenant, such Net Proceeds
will be segregated from the other assets of the Company and the 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 Revolving Facility or otherwise) without a permanent reduction
of the commitment thereunder.
The Company will cause a notice of any Asset Sale Offer to be mailed to the
Holders at their registered addresses not less than 30 days nor more than 45
days before the purchase date. Such notice will contain all instructions and
materials necessary to enable Holders to tender their Notes to the Company. Upon
receiving notice of an Asset Sale Offer, Holders may elect to tender their Notes
in whole or in part in integral multiples of $1,000 in exchange for cash. To the
extent that Holders properly tender Notes in an amount exceeding the
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Asset Sale Offer, Notes of tendering Holders will be repurchased on a pro rata
basis (based on amounts tendered).
The Company's ability to repurchase the Notes pursuant to an Asset Sale
Offer may be prohibited by the New Credit Facilities if at the time of such
repurchase an event of default under the New Credit Facilities exists or would
be caused thereby. Any future credit agreements to which the Company becomes a
party may restrict the Company's ability to repurchase the Notes pursuant to an
Asset Sale Offer. 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 will be required under the Indenture, on or prior to the date that the
Company is required to make an Asset Sale Offer, to (i) seek the consent of its
lenders to repurchase Notes pursuant to such Asset Sale Offer or (ii) refinance
the Indebtedness that prohibits such Asset Sale Offer. If the Company does not
obtain such a consent or refinance such borrowings, the Company will remain
prohibited from making such Offer. The Company's failure to purchase Notes
pursuant to an Asset Sale Offer or make such Asset Sale Offer would constitute
an Event of Default under the Indenture. See "-- Change of Control."
The Company will 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 Notes as described above.
The Company will not, and will 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 the New Credit Facilities) that
would materially impair the ability of the Company to comply with the provisions
of this "Limitations on Asset Sales" covenant.
Limitations on Sale and Leaseback Transactions. The Indenture provides that
the Company will not, and will 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 covenant
described in the initial paragraph under "-- Limitations on Indebtedness," (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 the covenant
described under "-- Limitations on Liens", 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, the covenant described under
"-- Limitations on Asset Sales."
Limitations on Mergers; Sales of Assets. The Indenture provides that the
Company will 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
Notes and the Indenture; (ii) such Person is 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 "-- Limitations on Indebtedness" (assuming a market rate
of interest with respect to such additional Indebtedness); (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 is 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, will by
supplemental indenture confirm that its Guarantee will apply to such Person's
obligations under the Notes; 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
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Subsidiary or such Person, as the case may be, at the time of such transaction,
no Default or Event of Default has occurred and is continuing.
No Subsidiary Guarantor will, and the Company will 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 is 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 is 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 to the Trustee, all
the obligations of such Guarantor under the Notes and the Indenture; and (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default has occurred and is continuing. The provisions of
this paragraph will not apply to any transaction (including any Asset Sale made
in accordance with " -- Limitations on Asset Sales" above) with respect to any
Subsidiary Guarantor if the Guarantee of such Subsidiary Guarantor is released
in connection with such transaction in accordance with the applicable provisions
of the Indenture. Upon any sale, exchange, transfer or other disposition to any
Person of all of the Company's or a Restricted Subsidiary's Equity Interests in,
or all or substantially all of the assets of, any Subsidiary Guarantor which is
in compliance with the Indenture, such Subsidiary Guarantor will be released
from all its obligations under its Guarantee.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which the Company or any Subsidiary Guarantor is not the continuing corporation,
the successor Person formed or remaining will 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, and the Company or such Subsidiary Guarantor, as
the case may be, would be discharged from its obligations under the Indenture,
the Notes or its Guarantee, as the case may be.
The governing law of the Indenture and the Notes is New York law. New York
law offers no clear guidance as to the definition of the term "all or
substantially all" in the context of the "Limitations on Mergers; Sales of
Assets" covenant in an indenture such as the Indenture. To the extent that the
law of other jurisdictions does offer guidance as to the definition of the term,
such jurisdictions have applied a qualitative test as well as quantitative tests
to determine the meaning of "all or substantially all" on a case-by-case basis.
The lack of an established meaning for the term "all or substantially all" could
lead to uncertainty as to the ability of the Holders of Notes to determine
whether or not a transaction governed by this "Limitations on Mergers; Sales of
Assets" covenant has occurred.
Subsidiary Guarantees. The Indenture provides that 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, 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 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, (iii) any Subsidiary of the Company which has a value equal to or
greater than 5% of the Company's 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, or
(iv) any Subsidiary of the Company becomes a guarantor of the Term Loans after
the Closing Date, the Company will cause such Subsidiary or Subsidiaries to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Subsidiary or Subsidiaries will unconditionally guarantee all of the
Company's obligations under the Indenture and the Notes on the same terms as the
other Subsidiary Guarantors, which Guarantee will rank pari passu with any
Senior Indebtedness of such Subsidiary.
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Transactions with Affiliates. The Indenture provides that the Company and
its Restricted Subsidiaries will 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 $750,000, the Company
delivers board resolutions to the Trustee evidencing that the Board of Directors
of the Company 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 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 $7.5 million, the Company delivers to
the Trustee board resolutions as described in clause (x)(i) of this paragraph
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 (x)(i) and (ii) 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.
The provisions of the preceding paragraph do not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the provisions of the
covenant described under "-- Limitations on Restricted Payments" other than with
respect to Investments described in the following clause (ii), (ii) any
Investment made in Kemwater during a period of three years following the Closing
Date, provided that such Investment matures or is required to be redeemed within
one year of its being made, (iii) 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, (iv) 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, (v) 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 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 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.
Limitation on Ownership of Wholly-Owned Restricted Subsidiary Stock. The
Indenture provides that the Company (a) will not, and will not permit any
Wholly-Owned Restricted Subsidiary of the Company to, transfer, convey, sell or
otherwise dispose of any Capital Stock of any Wholly-Owned Restricted Subsidiary
of the Company (other than All-Pure and its subsidiaries) to any Person (other
than the Company or a Wholly-Owned Restricted Subsidiary of the Company), unless
(i) such transfer, conveyance, sale or other disposition is of all the Capital
Stock of such Wholly-Owned Restricted Subsidiary and (ii) the Net Proceeds from
such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described under the caption "-- Limitations on
Asset Sales," and (b) will not permit any Wholly-Owned Restricted Subsidiary of
the Company (other than All-Pure and its subsidiaries) to issue any of its
Equity Interests
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(other than, if necessary, Capital Stock constituting directors' qualifying
shares or interests held by directors or shares or interests required to be held
by foreign nationals, to the extent mandated by applicable law) to any Person
other than to the Company or a Wholly-Owned Restricted Subsidiary of the
Company.
Impairment of Security Interest. The Indenture provides that the Company
will not, and will not cause or permit any Restricted Subsidiaries to, take or
omit to take any action which action or omission might or would have the result
of affecting or impairing the Liens and security interest in favor of the
Collateral Agent for the benefit of the Secured Parties with respect to the Note
Collateral and the Company will not grant to any Person, or suffer any Person to
have any interest whatsoever in the Note Collateral, in each case other than as
otherwise permitted by the Indenture, the Term Facility or the Security
Documents. The Company will not, and will not cause or permit any Restricted
Subsidiaries to, enter into any agreement or instrument that by its terms
requires that the proceeds received from any sale of Note Collateral be applied
to repay, redeem, defease or otherwise acquire or retire any Indebtedness of any
Person, other than pursuant to the Indenture, the Term Facility or any
instrument governing Indebtedness permitted to be secured by a Lien on the Note
Collateral pursuant to the covenant described under "-- Limitations on Liens." A
release of any of the Note Collateral strictly in accordance with the terms and
conditions of the Indenture and the Security Documents will not be deemed for
any purpose to be an impairment of security under the Indenture.
Amendment to Security Documents. The Indenture provides that the Company
will not amend, modify or supplement, or permit or consent to any amendment,
modification or supplement of, the Security Documents in any manner or to any
extent that would constitute an Event of Default under the Indenture or the
Security Documents; provided that the Indenture and the Security Documents may
be amended, modified or supplemented as set forth under the caption "Amendment,
Supplement or Waiver."
Stock Pledge Agreements. The Indenture provides that if (i) any Restricted
Subsidiary of the Company engages in any business activity other than the
holding of the Capital Stock of one or more Subsidiaries of the Company (or in
the case of Imperial West, engaging in any business activity other than the
holding of its Investment in Kemwater) and (ii) such Restricted Subsidiary has a
value equal to or greater than 5% of the Company's total assets determined on a
consolidated basis as of the time of determination, then the Company will, and
will cause the applicable Subsidiary or Subsidiaries of the Company (the
"Pledgor Subsidiary" or "Pledgor Subsidiaries") to, execute and deliver to the
Trustee and the Collateral Agent one or more stock pledge agreements
substantially in the form of the stock pledge agreement attached as an exhibit
to the Indenture providing for the pledge to the Collateral Agent for the
benefit of (x) the Trustee, for itself and the Holders, and (y) the Term Loan
Agent, for itself and the other Term Loan lenders, all of the Capital Stock of
such Restricted Subsidiary held by the Company and the Pledgor Subsidiary or
Pledgor Subsidiaries, together with certificates evidencing such Capital Stock,
which Capital Stock will become "Note Collateral" for purposes of the
Intercreditor Agreement.
The Indenture further provides that if (i) there are no Term Loans
outstanding, (ii) there is no Indebtedness (the "New Indebtedness") outstanding
which refinanced the Term Loans and requires pledges of Capital Stock of one or
more Restricted Subsidiaries of the Company in connection therewith, (iii) all
other amounts due and owing to the Term Loan lenders under the Term Facility or
the New Indebtedness lenders under the agreement providing for the issuance of
the New Indebtedness, as the case may be, have been paid in full, (iv) the Term
Facility agreement or the agreement providing for the issuance of the New
Indebtedness, as the case may be, has been terminated, and (v) the Company has
delivered to the Trustee and the Collateral Agent an officers' certificate
stating that the foregoing requirements have been satisfied (which officers'
certificate must also be signed by the Term Loan Agent or the agent, trustee or
other representative of the New Indebtedness, as the case may be), then (x) the
Company will be released from its obligations to comply with this covenant, (y)
the failure to comply with this covenant will not constitute a Default or Event
of Default with respect to the Notes, and (z) all stock pledge agreements
entered into by the Company and one or more Subsidiaries of the Company after
the Closing Date pursuant to this covenant will be terminated, and all
certificates evidencing Capital Stock pledged thereunder will be released, by
the Collateral Agent.
If at any time after the operation of the immediately preceding paragraph
the Company or any Subsidiary of the Company intends to incur any Indebtedness
which requires the pledge of Capital Stock of one or more
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Restricted Subsidiaries of the Company in connection therewith, neither the
Company nor such Subsidiary will incur such Indebtedness without directly
securing the Notes with such pledge of Capital Stock on an equal and ratable
basis (or prior to in the case of Indebtedness subordinated to the Notes or the
Guarantees, as the case may be) and in connection therewith the Company's
obligation to comply with the provisions of this covenant will be reinstated if
a covenant or agreement similar to this covenant is included in the agreement
providing for the issuance of such Indebtedness.
Provision of Financial Statements. The Indenture provides that, whether or
not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, the
Company will, 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 will also in any event (x)
within 15 days of each Required Filing Date (i) transmit by mail to all holders
of Notes, 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
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 Notes at the Company's cost.
Limitation on Applicability of Certain Covenants. The Indenture provides
that notwithstanding anything to the contrary therein, the covenants described
above entitled "Limitations on Indebtedness," "Limitations on Restricted
Payments," "Limitations on Liens," "Limitations on Payment Restrictions
Affecting Restricted Subsidiaries," "Limitations on Asset Sales" and
"Transactions with Affiliates" will not apply to transactions effected pursuant
to and in accordance with the Contingent Payment Agreement and amounts related
to such transactions will 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, Victory Valley, 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, Victory
Valley, the Excess Land and/or any other assets or funds held under the
Contingent Payment Agreement.
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest; (ii)
maintenance of an office or agency in the City of New York; (iii) arrangements
regarding the handling of money held in trust; (iv) maintenance of corporate
existence; (v) payment of taxes and other claims; (vi) maintenance of
properties; and (vii) maintenance of insurance.
RELEASE OF NOTE COLLATERAL
The Company will be permitted to sell Note Collateral in an Asset Sale and
obtain a release of the liens of the Security Documents in such Note Collateral
only upon compliance with the covenant described in "-- Certain
Covenants -- Limitations on Asset Sales" and only upon delivery to the Trustee
and the
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Collateral Agent of (a) a notice that, among other things, describes the
interests to be released, states the fair market value of the released interests
as of a date no later than 60 days before the date of such notice, and certifies
that the purchase price received is not less than the fair market value of such
released interest as of the date of such release, (b) the Net Proceeds of the
Asset Sale, (c) an officer's certificate certifying, among other things, the
terms of the Indenture governing Asset Sales and all other applicable terms have
been complied with, (d) an opinion of counsel as to the Asset Sale, and (e)
satisfactory evidence from a title company that the Liens of the Collateral
Agent on the remaining Note Collateral continue unimpaired as perfected first
priority liens.
To the extent Trust Moneys consist of insurance proceeds or condemnation or
other taking awards, any such moneys which may be used to effect a restoration
of the affected Note Collateral will be permitted to be withdrawn by the Company
and paid by the Collateral Agent, at the direction of the Trustee, upon a
request by the Company to reimburse the Company or PCAC for expenditures made or
costs incurred to repair, rebuild or replace the destroyed, damaged, or taken
Note Collateral, and upon delivery of (a) an officer's certificate certifying,
among other things, as to expenditures made or costs incurred, the necessity or
desirability in the conduct of the Company's business of the repaired, rebuilt,
or replaced property, and the fair market value of such property as of the date
of the expenditures, (b) an opinion of counsel as to the validity and perfection
of the Collateral Agent's lien on the repaired or replaced Note Collateral and
(c) an architect's certificate as to the costs of such restoration and
compliance with law.
To the extent Trust Moneys consist of proceeds of an Asset Sale, and the
Company intends to reinvest such proceeds in the Company or in one or more
Restricted Subsidiaries in a Related Business, such Trust Moneys will be
permitted to be withdrawn by the Company upon request to the Trustee and upon
receipt by the Trustee and the Collateral Agent of (a) notice of such
withdrawal, (b) an officer's certificate certifying compliance with the
Indenture, (c) instruments granting the Collateral Agent first priority liens,
for the benefit of the Secured Parties, on the real or personal property
interests in which the Company or its Restricted Subsidiary have invested, and
(d) an opinion of counsel as to the instruments governing such liens and
security interests.
Trust Moneys will be permitted to be applied from time to time (x) to the
payment of principal and interest on the Notes, or (y) to the extent otherwise
permitted by the Indenture, to redeem or repurchase Notes, including without
limitation pursuant to a Change of Control Offer or (to the extent such Trust
Moneys constitute proceeds from Asset Sales) an Asset Sale Offer, or (z) at the
direction of the Company and PCAC, to pay any other Senior Indebtedness secured
by liens in the Note Collateral (but only to the extent such Trust Moneys
constitute proceeds from Asset Sales), in each case upon receipt by the Trustee
and the applicable Collateral Agent of (a) resolutions of the boards of
directors of the Company and PCAC directing such application, (b) cash equaling
the accrued interest, if any, required to be paid in connection with such
payment or purchase, (c) an officer's certificate, and (d) an opinion of
counsel. Trust Moneys received by the applicable Collateral Agent or the Trustee
pursuant to an Asset Sale Offer remaining after the completion of such Asset
Sale Offer will be permitted to be withdrawn by the Company upon request of the
Company and delivery of an officer's certificate and an opinion of counsel.
The Indenture provides that any release of Note Collateral, including Trust
Moneys, will be subject to the provisions of Section 314(d) of the Trust
Indenture Act relating to, among other things, the delivery of a certificate or
an opinion of an engineer, appraiser or other expert as to the fair value of
Note Collateral being released from the Liens of the Security Documents.
CERTAIN DEFINITIONS
"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 will be deemed to be control.
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"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 date of the Indenture or
subsequently acquired, in one transaction or a series of related transactions:
provided, however, that the following will not constitute Asset Sales: (i)
transactions (other than transactions described in clause (y) above and
transactions involving Collateral as defined in the Stock Pledge Agreement) 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 $1.0 million; (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 the covenant described under "Certain Covenants -- Limitations
on Mergers; Sales of Assets"; (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 will be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated.
"Basic Investments" means Basic Investments, Inc., a Nevada corporation.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"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, (b) 50% of the net book value of all
inventory owned by the Company and its Restricted Subsidiaries as of such date,
and (c) the lesser of (x) $10.0 million and (y) 85% of the net book value of all
accounts receivable of Kemwater as of such date plus 50% of the net book value
of all inventory as of such date owned by Kemwater, 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 as of a
specific date, the Company may utilize the most recent available quarterly or
annual financial report for purposes of calculating the Borrowing Base.
"Capital Stock" means, with respect to any Person, any common stock,
preferred stock and any other capital stock of such Person and shares,
interests, 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
will be the capitalized amount of such obligations determined in accordance with
GAAP.
"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.
"Closing Date" means June 17, 1997.
"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 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 will 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 will 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 will 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 will 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 Expense attributable to any
Indebtedness incurred under any revolving credit facility will 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 will 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 will 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, 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 issuance cost, (iii)
capitalized interest, (iv) non-cash interest
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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 will be included only to the extent of the amount of cash dividends
or cash distributions paid to such Person or a Wholly-Owned Restricted
Subsidiary of 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 will 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 will 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 will 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
will 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) will 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, will be excluded from such Person's aggregate
Net Income; provided that in the case of the Company the foregoing exclusion
will not apply to cash dividends or cash distributions paid to the Company in
respect of its 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).
"Contingent Payment Agreement" means the Contingent Payment Agreement dated
as of April 20, 1995 among Pioneer, the Company and the Sellers named therein.
"Credit Facility" means any revolving credit facility or similar
arrangement that makes credit available entered into by and among the Company
and/or any of its Subsidiaries that is a Guarantor and the lending institutions
party thereto, including any credit agreement, related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time.
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"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 $500.0 million,
whose debt has a rating at the time of any such investment of at least "A-2" or
the equivalent thereof by Standard & Poor's Ratings Group or at least "P-2" or
the equivalent thereof by Moody's Investors Service, Inc., or any bank or
financial institution party to the Term Facility or the Revolving Facility,
(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 $500.0 million 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 Standard & Poor's Ratings Group or at least "P-2"
or the equivalent thereof by Moody's Investors Service, Inc., or any bank or
financial institution party to the Term Facility or the Revolving Facility, 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 $500.0 million 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 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).
"Equity Offering" means an offering of Equity Interests (other than
Redeemable Stock) of any Person made on a primary basis by such Person
(including a rights offering to existing stockholders of such Person), which
yields gross proceeds to such Person of $15.0 million or more.
"Excess Land" means certain real property adjoining the sites of PCAC's
Henderson, Nevada and St. Gabriel, Louisiana plants and the Mojave, California
property owned by 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 notes issued pursuant to any Exchange Offer
Registration Statement.
"Exchange Offer Registration Statement" means the registration statement
filed by the Company and the Subsidiary Guarantors with the Securities and
Exchange Commission (the "Commission") with respect to an offer to exchange the
Original Notes for the Exchange Notes.
"Existing Affiliate Agreements" means (i) agreements between Pioneer
Americas, Inc. or any of its subsidiaries and Saguaro Power Company, a Limited
Partnership, relating to the delivery of steam and other services, existing on
the date of the Indenture and listed on a schedule thereto, (ii) the Tax Sharing
Agreement of Pioneer and its subsidiaries, (iii) agreements between Pioneer
Americas, Inc. or any of its subsidiaries and Basic Investments relating to the
delivery of water and power, power transmission services, and other services,
existing on the date of the Indenture and listed on a schedule thereto and (iv)
any other agreements with affiliates of the Company, existing on the date of the
Indenture and listed on a schedule thereto.
"Existing Indebtedness" means all Indebtedness (other than the Term Loans
and the Revolving Loans outstanding) of the Company or any Restricted Subsidiary
existing on the date of the Indenture and listed on a schedule thereto.
"Fair Market Value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length 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 will be determined by
a
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majority of the members of the Board of Directors of the Company, and a majority
of the disinterested members of such Board of Directors, if any, acting in good
faith and will 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.
"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.
"incur" has the meaning ascribed thereto in the covenant described under
"-- Certain Covenants -- Limitations on Indebtedness"; provided that (a) with
respect to any Indebtedness of any Restricted Subsidiary of the Company that is
owing to the Company or another Restricted Subsidiary of the Company, any
disposition, pledge or transfer of such Indebtedness to any Person (other than
the Company or a Wholly-Owned Restricted Subsidiary) will 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 will be deemed to be an incurrence of such Indebtedness,
and provided, further that any Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary will 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 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 clauses (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 will be calculated in
accordance with the terms of such Redeemable Stock as if such
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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
will 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 will be
deemed to include any renewals, extensions and refundings of any such
indebtedness or any indebtedness issued in exchange for such indebtedness.
"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.
"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. If the Company or any Subsidiary
of the Company sells or otherwise disposes of any Equity Interests of any direct
or indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the Fair Market Value of the Equity Interests of such
Subsidiary not sold or disposed of determined as provided in the final paragraph
of the covenant described under "-- Certain Covenants -- Limitations on
Restricted Payments."
"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).
"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 "-- Certain Covenants -- Limitations on
Restricted Payments," 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 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
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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 will be the amount thereof as determined in good
faith by the Board of Directors of the Company.
"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, Basic Land Company, Basic
Management, Inc., Basic Water Company or Victory Valley 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 (f) of the
covenant described under "-- Certain Covenants -- Limitations on Indebtedness,"
(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, and (vi) other Investments after the Closing Date in joint ventures,
corporations, limited liability companies, partnerships or Unrestricted
Subsidiaries engaged in a Related Business that do not at any one time
outstanding exceed $5.0 million; provided that the amount of Investments
pursuant to clause (vi) will be included in the calculation of Restricted
Payments pursuant to the covenant described under "-- Certain
Covenants -- Limitations on Restricted Payments."
"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, 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, (iii) rights of financial institutions to set off 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 will 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 date of the Indenture; 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
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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.
"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.
"Redeemable Stock" means any Equity Interest that by its terms or otherwise
(i) is required to be redeemed prior to the maturity of the Notes, (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 Notes, or (iii) is convertible into or
exchangeable for debt securities which provide for any scheduled payment of
principal prior to the maturity of the Notes at the option of the issuer at any
time prior to the maturity of the Notes, until the right to so convert or
exchange is irrevocably relinquished.
"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 and other chlorides and aluminum sulfate,
and in lines of business reasonably related thereto.
"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 date of the Indenture, (iii) any Subsidiary
of the Company organized or acquired after the date of the Indenture, 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 covenant described in the initial
paragraph under "-- Certain Covenants -- Limitations on Indebtedness," on a pro
forma basis taking into account such designation. The Company will 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 will be a
Restricted Subsidiary.
"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.
"Security Documents" means the Intercreditor Agreement and all security
agreements, mortgages, deeds of trust, pledge agreements, collateral assignments
or any other instrument evidencing or creating any security interest in favor of
the Collateral Agent in all or any portion of the Note Collateral, in each case
as amended, supplemented or otherwise modified from time to time.
"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 date of the Indenture or thereafter incurred as permitted by
the Indenture, 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 the Company from time to time owed under
the New Credit Facilities. Notwithstanding the foregoing, "Senior
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Indebtedness" does not include (i) in the case of the obligation of the Company
in respect of each Note, the obligation of the Company in respect of the other
Notes, (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 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).
"Subordinated Indebtedness" means Indebtedness of the Company or any
Subsidiary Guarantor subordinated in right of payment to the Notes 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.
"Trust Moneys" means all cash or Eligible Investments received by the
Collateral Agent: (a) in exchange for the release of property from the Lien of
any of the Security Documents; or (b) as compensation for or proceeds of the
sale of all or any part of the Note Collateral taken by eminent domain or
purchased by, or sold pursuant to any order of, a governmental authority or
otherwise disposed of; or (c) as proceeds of insurance upon any, all or part of
the Note Collateral (other than any liability insurance proceeds payable to the
Collateral Agent for any loss, liability or expense incurred by it); or (d) as
proceeds of any other sale or other disposition of all or any part of the Note
Collateral by or on behalf of the Collateral Agent or any collection, recovery,
receipt, appropriation or other realization of or from all or any part of the
Note Collateral pursuant to the Security Documents or otherwise; or (e) for
application under the Indenture as provided in the Indenture or any Security
Document, or whose disposition is not otherwise specifically provided for in the
Indenture or in any Security Document.
"Unrestricted Subsidiary" means, until such time as it may be designated as
a Restricted Subsidiary by the Board of Directors of the Company as provided in
and in compliance with the definition of "Restricted Subsidiary," (i) any
Subsidiary of the Company organized or acquired after the date of the Indenture
designated as an Unrestricted Subsidiary by the Board of Directors of the
Company 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 "-- Certain Covenants -- Limitations on Restricted Payments" and
(ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company 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 (w) 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, (x) immediately after giving effect to such designation
no Default or Event of Default has occurred and is continuing, (y) all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid in cash) in the Subsidiary so designated will be deemed to
be Restricted Payments at the time of such designation equal in amount to the
Fair Market Value of such Investments at the time of such designation and would
be Restricted Payments permitted to be paid pursuant to the provisions of the
covenant described under "-- Certain Covenants -- Limitations on Restricted
Payments" and (z) the amount of such Restricted Payments will be included in the
calculation of the amount of Restricted Payments previously made pursuant to
such covenant. The Company will evidence any such designation by promptly filing
with the Trustee an
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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.
"Victory Valley" means Victory Valley Land Company, L.P., a Delaware
limited partnership.
"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 of securities has such voting power by reason of any contingency.
"Wholly-Owned Restricted Subsidiary" means, with respect to any Person, a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than capital stock constituting
directors' qualifying shares or interests held by directors or shares or
interests required to be held by foreign nationals, to the extent mandated by
applicable law) are owned by such Person or by one or more Wholly-Owned
Restricted Subsidiaries of such Person and one or more Wholly-Owned Restricted
Subsidiaries of such Person.
DEFAULTS AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in payment of interest on the Notes; (ii)
default in payment of principal of, or premium with respect to, the Notes; (iii)
failure by the Company or a Subsidiary Guarantor, if applicable, to comply with
the covenants entitled "Limitations on Restricted Payments," "Limitations on
Indebtedness," "Subsidiary Guarantees," "Limitations on Liens," "Limitations on
Asset Sales," "Limitations on Sale and Leaseback Transactions," "Limitations on
Ownership of Restricted Subsidiary Stock," "Change of Control," and "Limitation
on Mergers; Sales of Assets;" (iv) failure by the Company or a Subsidiary
Guarantor, if applicable, to comply with any of its other agreements in the
Indenture, the Security Documents or the Notes for a period that continues for
60 days after receipt of written notice from the Trustee or from the Holders of
at least 25% of the aggregate principal amount of the Notes then outstanding,
specifying such default; (v) the Company denies or disaffirms in writing its
obligations under the Indenture or the Notes; (vi) a Subsidiary Guarantor denies
or disaffirms in writing 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; (vii) a default under any Indebtedness of the Company or
any of its Subsidiaries, which default (A) is caused by a failure to pay the
final scheduled principal installment on such Indebtedness on the stated
maturity date thereof (which failure continues beyond any applicable grace
period) or (B) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness with respect
to which the principal amount remains unpaid at its final maturity or the
maturity of which has been so accelerated, aggregates $5.0 million or more;
(viii) final judgments rendered against the Company or any of its Restricted
Subsidiaries (other than any judgment as to which and only to the extent, a
reputable insurance company has acknowledged coverage of such claim in writing)
of $5.0 million or more which remain undischarged or unstayed for a period of 60
days; (ix) any of the Security Documents ceases to be in full force and effect
(other than in accordance with their respective terms), or any of the Security
Documents ceases to give either Collateral Agent the Liens, rights, powers and
privileges purported to be created thereby, or any Security Document is declared
null and void, or the Company or PCAC or PAI denies any of its obligations under
any Security Document or any Note Collateral becomes subject to any Lien other
than the Liens created or permitted by the Indenture or the Security Documents;
and (x) certain events of bankruptcy or insolvency of the Company or any of its
Restricted Subsidiaries.
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If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the Notes may declare the Notes due and
payable immediately. However, if an Event of Default resulting from bankruptcy
or insolvency occurs, such amount will be due and payable without any
declaration or any act on the part of the Trustee or the Holders. Such
declaration or acceleration may be rescinded and past defaults may be waived by
the Holders of a majority in principal amount of the Notes upon conditions
provided in the Indenture.
Holders may not enforce the Indenture, the Security Documents or the Notes,
except as provided therein. The Trustee may require an indemnity satisfactory to
it before enforcing the Indenture, the Security Documents or the Notes. Subject
to certain limitations, Holders of a majority in principal amount of the Notes
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture, that is unduly prejudicial
to the rights of any Holder or that would subject the Trustee to personal
liability. The Trustee may withhold from the Holders of the Notes notice of any
continuing default (except a default in payment of principal, premium, if any,
or interest) if it determines in good faith that withholding notice is in their
interest. The Company is required to file periodic reports with the Trustee as
to the absence of Default. If a Default exists, the Company is required to
describe the Default and efforts undertaken to remedy the Default.
Directors, officers, employees or stockholders, as such, of the Company,
the Subsidiary Guarantors and the other Subsidiaries of the Company will not
have any liability for any obligations of the Company or any Subsidiary
Guarantors under the Notes, any Guarantee or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations. Each Holder of a
Note by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws and
it is the view of the Commission that such a waiver is against public policy.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law. The Registrar need not transfer or exchange any Note previously selected
for redemption. A registered Holder of a Note will be treated as the owner
thereof for all purposes. No Note will be valid until the Trustee or an
authenticating agent manually signs the certificate of authentication on the
Note. Each Note will become effective on the date upon which it is so signed.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented, and any past default or compliance with any provision may be
waived, with the consent of the Holders of a majority in principal amount of the
Notes then outstanding. Without the consent of any Holder, the Company and the
Subsidiary Guarantors will be permitted to amend or supplement the Indenture,
the Security Documents or the Notes to comply with the provisions of the
Indenture in the case of a consolidation, merger or sale of all or substantially
all of the assets of the Company and its Subsidiaries taken as a whole, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to cure any ambiguity, defect or inconsistency, to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act, to comply with any requirement of the
Commission or applicable law to effectuate the Exchange Offer, to add additional
guarantees with respect to the Notes, to further secure the Notes or the
Guarantees, to add to the covenants of the Company or any Subsidiary for the
benefit of the holders of the Notes, to surrender any right or power conferred
upon the Company or any Subsidiary or to make any other change that does not
adversely affect the rights of any Holder.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder) (i) reduce the
principal amount of Notes whose holders must consent to an amendment or waiver
of the Indenture or the Security Documents; (ii) reduce the rate of, or
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change the time for payment of, interest, including default interest, on any
Note; (iii) reduce the principal of or change the fixed maturity of any Note, or
alter the optional redemption provisions, or alter the price at which the
Company will offer to purchase such Note pursuant to an Asset Sale Offer or a
Change of Control Offer; (iv) make any Note payable in money other than that
stated in such Note; (v) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of the Notes to
receive payments of principal of or interest on the Notes; (vi) waive a Default
or Event of Default in the payment of principal of, premium if any, or interest
on the Notes, including any such obligation arising pursuant to an Asset Sale
Offer, a Change of Control Offer (except a rescission of acceleration of the
Notes 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 principal amount of the Notes
then outstanding and a waiver of the payment default that resulted from such
acceleration); (vii) waive the obligation to make an Asset Sale Offer or any
payment required to be made pursuant to an Asset Sale Offer, a Change of Control
Offer or a Guarantee; (viii) affect the ranking of the Notes; (ix) release all
or substantially all of the Note Collateral other than pursuant to the terms of
the Indenture or the Security Documents; or (x) make any change in the foregoing
amendment and waiver provisions. An amendment or waiver may not waive the
Company's obligation to make a Change of Control Offer without the consent of
the Holders of at least two-thirds in outstanding principal amount of the Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of the
obligations of the Company and each Subsidiary Guarantor discharged with respect
to the outstanding Notes ("Legal Defeasance") except for (i) the rights of
Holders of outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due but only
from assets deposited by the Company pursuant to clause (i) of the following
paragraph, (ii) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration or transfer of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and any Subsidiary Guarantor released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations will not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to effect either a Legal Defeasance or a Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable U.S. Government
Obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
of such principal or installment of principal of, premium, if any, or interest
on the outstanding Notes; (ii) in the case of Legal Defeasance, the Company will
deliver to the Trustee an opinion of counsel reasonably acceptable to the
Trustee confirming that (A) the Company has received from the Internal Revenue
Service a ruling or (B) since the date of the 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 counsel will confirm that, the holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal 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 Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company will deliver to the Trustee an opinion
of counsel reasonably acceptable to the Trustee confirming that the holders of
the outstanding Notes 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; (iv)
no Default or Event of Default has occurred and is
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continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the Indenture) to which
the Company or any Subsidiary Guarantor is a party or by which the Company or
any Subsidiary Guarantor is bound; (vi) the Company will deliver to the Trustee
an opinion of 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 and that the Trustee has a perfected security interest in such
trust funds for the ratable benefit of the Holders of the outstanding Notes;
(vii) the Company will deliver 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 Notes or any Guarantee over the other creditors of the Company or
any Subsidiary Guarantor or with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or any Subsidiary Guarantor or others; and
(viii) the Company will deliver to the Trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in their exercise as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company or any Subsidiary Guarantor, to obtain payment
of claims in certain cases or to realize on certain property received by it in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest, it must eliminate such conflict or resign.
The Company or any Subsidiary Guarantor may have customary banking
relationships with the Trustee in the ordinary course of business. The Trustee
acts as trustee under the indenture with respect to the First Mortgage Notes.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form. The Company expects that the Exchange Notes initially will each be
represented by a single global certificate in fully registered form (the "Global
Note") and will be deposited with the Trustee as custodian for The Depository
Trust Company ("DTC") and registered in the name of a nominee of DTC.
Global Note. The Company expects that upon the issuance of the Global Note,
DTC or its custodian will credit, on its book-entry registration and transfer
system, the respective principal amount of Exchange Notes of the individual
beneficial interests represented by such Global Note to the accounts of Persons
who have accounts with such depositary. Ownership of beneficial interests in the
Global Note will be limited to Persons who have accounts with DTC
("participants") or Persons who hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of Persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner of
an interest in the Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture.
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Payments of the principal of, premium (if any) and interest on, the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Company, the Trustee nor any Paying Agent will have
any responsibility or liability for any aspect of the record relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any record relating to such beneficial
ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
The Company expects that transfers between participants in DTC will be
effected in the ordinary way in accordance with DTC rules and will be settled in
same day funds. If a holder requires physical delivery of a Certificated Note
for any reason, including to sell Exchange Notes to Persons in states which
require physical delivery of such Notes or to pledge such Notes, such holder
must transfer its interest in the Global Note in accordance with the normal
procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Note is credited
and only in respect of such portion of the aggregate principal amount of
Exchange Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the Notes or the
Indenture, DTC will exchange the Global Note for Certificated Notes, which it
will distribute to its participants.
To the Company's knowledge, DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers (including
the Initial Purchasers), banks, trust companies and clearing corporations and
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although DTC customarily agrees to the foregoing procedures in order to
facilitate transfers of interests in global notes among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Notes will be issued in
exchange for the Global Note.
120
<PAGE> 125
ORIGINAL NOTES REGISTRATION RIGHTS
The Company, the Subsidiary Guarantors and the Initial Purchasers entered
into the Registration Rights Agreement on the Closing Date pursuant to which the
Company and the Subsidiary Guarantors agreed, for the benefit of holders of the
Original Notes, to, at their expense (i) on or prior to the 30th day following
the Closing Date, file the Exchange Offer Registration Statement with the
Commission with respect to the Exchange Offer pursuant to which the Original
Notes will be exchanged for the Exchange Notes, which will have terms identical
to the Original Notes and will be guaranteed by the Subsidiary Guarantors on the
same terms as the Guarantees (except that the Exchange Notes will not contain
terms with respect to transfer restrictions or any provision relating to this
paragraph) and (ii) use their best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act by the
150th day after the Closing Date. Upon effectiveness of the Exchange Offer
Registration Statement, the Company and the Subsidiary Guarantors agreed to
offer to all holders of the Notes an opportunity to exchange their securities
for a like principal amount of the Exchange Notes. The Company and the
Subsidiary Guarantors agreed to keep the Exchange Offer open for acceptance for
not less than 20 business days after the date the Exchange Offer Registration
Statement is declared effective, and to comply with Regulation 14E and Rule
13e-4 under the Exchange Act (other than the filing requirements of Rule 13e-4).
For each Original Note surrendered to the Company for exchange pursuant to the
Exchange Offer, the holder of such Original Note will receive an Exchange Note
having a principal amount at maturity equal to that of the surrendered Original
Note. Interest on each Exchange Note will accrue from the last interest payment
date on which interest was paid on the Original Note surrendered in exchange
therefor or, if no interest has been paid on such Original Note, from the date
of original issuance.
Under existing interpretations of the staff of the Commission's Division of
Corporation Finance (the "Staff"), the Exchange Notes will generally be freely
transferable after the Exchange Offer without further registration under the
Securities Act; provided that broker-dealers ("Participating Broker-Dealers")
receiving Exchange Notes in the Exchange Offer will be subject to a prospectus
delivery requirement with respect to resales of such Exchange Notes. To date,
the Staff has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Notes to the
Initial Purchasers) with the prospectus contained in the Exchange Offer
Registration Statement. Pursuant to the Registration Rights Agreement, the
Company has agreed to permit Participating Broker-Dealers and other persons, if
any, subject to similar prospectus delivery requirements to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such Exchange Notes for a period of 180 days.
Each holder of the Original Notes who wishes to exchange its Original Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company, including that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii) it
has no arrangement with any person to participate in a public distribution
(within the meaning of the Securities Act) of the Exchange Notes and (iii) it is
not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company
or the Subsidiary Guarantors, or if it is such an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable to it.
In addition, each holder who is not a broker-dealer will be required to
represent that it is not engaged in, and does not intend to engage in, a public
distribution of the Exchange Notes. Each holder who is a broker-dealer and who
receives Exchange Notes for its own account in exchange for Original Notes that
were acquired by it as a result of market-making activities or other trading
activities, will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of such Exchange Notes.
In the event that applicable interpretations of the Staff do not permit the
Company and the Subsidiary Guarantors to effect the Exchange Offer or if for any
other reason the Exchange Offer is not consummated by the 30th business day
following the date the Exchange Offer Registration Statement is declared
effective, or if the Initial Purchasers so request with respect to the Original
Notes not eligible to be exchanged for Exchange Notes in the Exchange Offer or
if any holder of Original Notes is not eligible to participate in the Exchange
121
<PAGE> 126
Offer or does not receive freely tradeable Exchange Notes in the Exchange Offer,
the Company and the Subsidiary Guarantors will, at their expense, (a) promptly
file a shelf registration statement (a "Shelf Registration Statement" and
together with the Exchange Offer Registration Statement, the "Registration
Statements") permitting resales from time to time of the Original Notes, (b) use
their best efforts to cause such registration statement to become effective and
(d) use their best efforts to keep such registration statement current and
effective until two years from the date it becomes effective or such shorter
period that will terminate when all the Original Notes covered by such
registration statement have been sold pursuant thereto. The Company and the
Subsidiary Guarantors, at their expense, will provide to each holder of the
Original Notes copies of the prospectus, which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required to
permit unrestricted resales of the Original Notes from time to time. A holder of
Original Notes who sells such Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration Rights
Agreement which are applicable to such holder (including certain indemnification
obligations).
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 150th day after the Closing Date, (ii) the
Exchange Offer is not consummated on or prior to the 30th business day following
the date the Exchange Offer Registration Statement is declared effective, (iii)
the Shelf Registration Statement is not filed or declared effective 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"), then the Company will pay liquidated damages
("Liquidated Damages") to each holder of Original Notes, with respect to the
first 90-day period immediately following the occurrence of such Registration
Default in an amount equal to $.05 per week per $1,000 principal amount of
Original Notes held by such holder. The amount of the Liquidated Damages will
increase by an additional $.05 per week per $1,000 principal amount of Original
Notes at the beginning of each subsequent 90-day period, up to a maximum amount
of $.50 per week per $1,000 principal amount of Original Notes. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will cease.
The exchange of Original Notes for Exchange Notes by holders will not be a
taxable event for federal income tax purposes, and holders should not recognize
any taxable gain or loss or any interest income as a result of such exchange.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
122
<PAGE> 127
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Issuers believe that Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Original Notes directly from
the Issuers or (iii) broker-dealers who acquired Original Notes as a result of
market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes; provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resales of
such Exchange Notes. To date, the Staff has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to transactions involving an exchange of securities such as the
exchange pursuant to the Exchange Offer (other than a resale of an unsold
allotment from the sale of the Original Notes to the Initial Purchasers) with
the prospectus contained in the Exchange Offer Registration Statement. Pursuant
to the Registration Rights Agreement, the Company has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such Exchange Notes. The Issuers have agreed that, for a period not to
exceed 180 days after the Exchange Date, they will make this Prospectus, and any
amendment or supplement to this Prospectus, available to any broker-dealer that
requests such documents in the Letter of Transmittal.
Each holder of the Original Notes who wishes to exchange its Original Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer -- Terms and
Conditions of the Letter of Transmittal." In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Original Notes that were acquired by it as a result of market-making
activities or other trading activities, will be required to acknowledge that it
will deliver a prospectus in connection with any resale by it of such Exchange
Notes.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
123
<PAGE> 128
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes will be passed
upon for PAAC by Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022. Jack H. Nusbaum, a Senior Partner and Chairman
of Willkie Farr & Gallagher, is a director of Pioneer and PAAC and beneficially
owns 13,652 shares of Pioneer's Class A Common Stock.
EXPERTS
The consolidated financial statements and schedule of Pioneer Americas
Acquisition Corp. as of December 31, 1995 and 1996 and for the period from March
6, 1995 through December 31, 1995, included in this Prospectus, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is included herein. The consolidated financial statements and
schedule of Pioneer Americas Acquisition Corp. are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements and schedule of Pioneer Americas,
Inc. (the Predecessor Company) as of December 31, 1994 and for the period from
January 1, 1995 through April 20, 1995 and for the year ended December 31, 1994,
included in this Prospectus, have been audited by Ernst & Young LLP, independent
auditors, as stated in their reports, which are included herein, which are based
in part on the reports of Piercy, Bowler, Taylor & Kern, independent auditors of
Basic Investments, Inc. The consolidated financial statements and schedule of
Pioneer Americas, Inc. (the Predecessor Company) are included in reliance upon
such reports given upon the authority of such firms as experts in accounting and
auditing.
The financial statements of the Tacoma Plant as of December 31, 1996 and
December 31, 1995 and for each of the three years in the period ended December
31, 1996, included in this Prospectus and elsewhere in this Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their reports, with respect thereto, and/or included
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
CHANGE IN INDEPENDENT PUBLIC AUDITORS
Effective October 16, 1995, each of the Subsidiary Guarantors, by action of
its board of directors, engaged Deloitte & Touche LLP as its independent
accountants. Deloitte & Touche LLP has acted as independent accountants of PAAC
since the inception of PAAC and it was determined that, following the
acquisition of the Subsidiary Guarantors by PAAC, Deloitte & Touche LLP should
act as independent accountants of the Subsidiary Guarantors as well.
Ernst & Young LLP had been the independent accountants for PAI prior to its
dismissal, effective October 16, 1995. The reports of Ernst & Young LLP on the
financial statements of PAI for the past two fiscal years did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. In connection with the
audits of the financial statements of PAI for each of the two fiscal years ended
December 31, 1994, and in the subsequent interim period, there were no
disagreements with Ernst & Young LLP on any matters of accounting principles or
practices, financial statement disclosure or auditing scope and procedures
which, if not resolved to the satisfaction of Ernst & Young LLP, would have
caused Ernst & Young LLP to make reference to the matter in their report.
124
<PAGE> 129
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(1) Pioneer Americas Acquisition Corp. and subsidiary
companies:
Report of Deloitte & Touche LLP, independent
auditors.......................................... F- 2
Report of Ernst & Young LLP, independent
auditors.......................................... F- 3
Report of Piercy, Bowler, Taylor & Kern,
independent public accountants.................... F- 4
Consolidated balance sheets of the Company as of
December 31, 1996 and 1995........................ F- 5
Consolidated statements of operations of the
Company for the year ended December 31, 1996 and
the period from March 6, 1995 ("Inception")
through December 31, 1995 and of the Predecessor
Company for the period from January 1, 1995
through April 20, 1995 and for the year ended
December 31, 1994................................. F- 6
Consolidated statements of stockholders' equity
of the Company for the period from Inception
through December 31, 1995 and for the year ended
December 31, 1996 and of the Predecessor Company
for the year ended December 31, 1994 and for
the period from January 1, 1995 through April
20, 1995.......................................... F- 7
Consolidated statements of cash flows of the
Company for the year ended December 31, 1996 and
the period from Inception through December 31,
1995 and of the Predecessor Company for the
period from January 1, 1995 through April 20,
1995 and for the year ended December 31, 1994..... F- 8
Notes to consolidated financial statements.......... F- 9
Consolidated balance sheets of the Company as of
March 31, 1997 (unaudited) and December 31,
1996.............................................. F-25
Unaudited consolidated statements of operations of
the Company for the three months ended March 31,
1997 and March 31, 1996........................... F-26
Unaudited consolidated statements of cash flows of
the Company for the three months ended March 31,
1997 and March 31, 1996........................... F-27
Notes to unaudited consolidated financial
statements........................................ F-28
(2) Tacoma Plant:
Report of Arthur Andersen LLP, independent public
accountants....................................... F-32
Balance sheets for the Tacoma Plant at December
31, 1996 and 1995................................. F-33
Statements of operations and changes in owner's
investment for the Tacoma Plant for the years
ended December 31, 1996, 1995 and 1994............ F-34
Statements of cash flows of the Tacoma Plant for
the years ended December 31, 1996, 1995 and
1994.............................................. F-35
Notes to financial statements....................... F-36
Unaudited balance sheets for the Tacoma Plant at
March 31, 1997 and 1996........................... F-46
Unaudited statements of operations and changes in
owner's investment for the Tacoma Plant for the
three months ended March 31, 1997 and 1996........ F-47
Unaudited statements of cash flows of the Tacoma
Plant for the three months ended March 31, 1997
and 1996.......................................... F-48
Notes to unaudited financial statements............. F-49
</TABLE>
F-1
<PAGE> 130
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Pioneer Americas Acquisition Corp.
We have audited the accompanying consolidated balance sheets of Pioneer
Americas Acquisition Corp. and its subsidiaries (the "Company"), as of December
31, 1996 and 1995, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for the year ended December 31,
1996 and for the period from March 6, 1995 (Inception) through December 31,
1995. Our audit also includes the consolidated financial statement schedule II.
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company at December 31, 1996 and 1995, and the results of their operations
and their cash flows for the year ended December 31, 1996 and the period from
Inception through December 31, 1995 in conformity with generally accepted
accounting principles. Also, in our opinion the related consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects,
the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
March 7, 1997
F-2
<PAGE> 131
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pioneer Americas, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity, and cash flows of Pioneer Americas, Inc. (the "Predecessor
Company") for the period from January 1, 1995 through April 20, 1995 and for the
year ended December 31, 1994. Our audits also included the related financial
statement schedule II. These financial statements and schedule are the
responsibility of the Predecessor Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits. The financial statements of certain of the Predecessor Company's
investments (as described in Note 5) have been audited by other auditors whose
report has been furnished to us; insofar as our opinion on the consolidated
financial statements relates to data included for these investments, it is based
solely on their report.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated results of operations and cash flows of the
Predecessor Company for the period from January 1, 1995 through April 20, 1995
and for the year ended December 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects, the information set forth
therein.
ERNST & YOUNG LLP
Houston, Texas
June 26, 1995
F-3
<PAGE> 132
INDEPENDENT AUDITORS' REPORT
Board of Directors
Basic Investments, Inc.
Henderson, Nevada
We have audited the combined statements of income, equity and cash flows of
Basic Investments, Inc. and affiliates (the Company) for the year ended December
31, 1994. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of combined operations and cash
flows of Basic Investments, Inc. and affiliates for the year ended December 31,
1994 in conformity with generally accepted accounting principles.
Piercy, Bowler, Taylor & Kern
Certified Public Accountants and
Business Advisors
A Professional Corporation
Las Vegas, Nevada
January 30, 1995
F-4
<PAGE> 133
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 14,417 $ 11,218
Accounts receivable, less allowance for doubtful accounts:
1996, $1,311; 1995, $1,424............................. 18,830 27,825
Due from parent........................................... 2,547 574
Inventories............................................... 6,247 11,347
Prepaid expenses.......................................... 1,156 3,766
-------- --------
Total current assets.............................. 43,197 54,730
Property, plant, and equipment, at cost:
Land................................................... 3,735 1,711
Buildings and improvements............................. 17,062 13,997
Machinery and equipment................................ 71,704 67,587
Cylinders and tanks.................................... 4,540 4,503
Construction in progress............................... 11,871 9,394
-------- --------
108,912 97,192
Less accumulated depreciation.......................... (16,429) (7,795)
-------- --------
92,483 89,397
Investment in and advances to unconsolidated subsidiary..... 28,586 --
Other assets, net of accumulated amortization: 1996, $2,458;
1995, $1,068.............................................. 19,621 11,664
Excess cost over the fair value of net assets acquired, net
of accumulated amortization: 1996, $7,556; 1995, $3,311... 107,123 108,940
-------- --------
Total assets...................................... $291,010 $264,731
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 17,221 $ 20,183
Accrued liabilities....................................... 19,276 20,660
Returnable deposits....................................... 3,238 3,437
Current portion of long-term debt......................... 128 --
-------- --------
Total current liabilities......................... 39,863 44,280
Long-term debt, less current maturities..................... 141,629 135,000
Returnable deposits......................................... 3,272 3,281
Accrued pension and other employee benefits................. 14,100 13,573
Other long-term liabilities................................. 17,823 13,170
Commitments and contingencies (Note 10)
Stockholder's equity:
Common stock, $.01 par value, authorized 1,000 shares,
issued and outstanding 1,000 shares.................... 1 1
Additional paid-in capital................................ 61,124 49,652
Retained earnings......................................... 13,198 5,774
-------- --------
Total stockholder's equity........................ 74,323 55,427
-------- --------
Total liabilities and stockholder's equity........ $291,010 $264,731
======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 134
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------------------
PERIOD FROM PERIOD FROM
INCEPTION JANUARY 1, 1995
YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, APRIL 20, DECEMBER 31,
1996 1995 1995 1994
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
Revenues................................ $183,326 $142,908 $57,848 $167,217
Cost of sales........................... 126,739 98,175 37,400 134,556
-------- -------- ------- --------
Gross profit............................ 56,587 44,733 20,448 32,661
Selling, general and administrative
expenses.............................. 23,528 19,836 7,047 22,529
-------- -------- ------- --------
Operating income........................ 33,059 24,897 13,401 10,132
Equity in net loss of unconsolidated
subsidiary............................ (2,607) -- -- --
Interest expense, net................... (17,290) (12,905) (1,665) (6,407)
Settlement of litigation and insurance
claims, net........................... -- -- -- 3,326
Other income (expense), net............. 1,684 637 (115) 1,337
-------- -------- ------- --------
Income before taxes and extraordinary
item.................................. 14,846 12,629 11,621 8,388
Income tax provision.................... 6,735 6,208 4,809 3,242
-------- -------- ------- --------
Income before extraordinary item........ 8,111 6,421 6,812 5,146
Extraordinary item, early extinguishment
of debt (net of income tax benefit of
$2,140)............................... -- -- 3,420 --
-------- -------- ------- --------
Net income.............................. 8,111 6,421 3,392 5,146
Accretion of dividends on preferred
stock and adjustment to redeemable
stock put warrants.................... -- -- -- (1,824)
-------- -------- ------- --------
Net income applicable to common stock... $ 8,111 $ 6,421 $ 3,392 $ 3,322
======== ======== ======= ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 135
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF
COMMON ADDITIONAL
SHARES COMMON PAID-IN RETAINED
OUTSTANDING STOCK CAPITAL EARNINGS TOTAL
----------- ------ ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Post Acquisition
Balance at Acquisition.................. 1 $ 1 $46,062 $ -- $46,063
Recognition of the NOL benefit........ -- -- 3,590 -- 3,590
Dividend paid to parent............... -- -- -- (647) (647)
Net income............................ -- -- -- 6,421 6,421
----- --- ------- ------- -------
Balance at December 31, 1995............ 1 1 49,652 5,774 55,427
Recognition of the NOL benefit........ -- -- 11,472 -- 11,472
Dividend paid to parent............... -- -- -- (687) (687)
Net income............................ -- -- -- 8,111 8,111
----- --- ------- ------- -------
Balance at December 31, 1996............ 1 $ 1 $61,124 $13,198 $74,323
===== === ======= ======= =======
Predecessor Company
Balance at December 31, 1993............ 1,453 $14 $ 4,028 $15,679 $19,721
Common Stock issuance................. 56 1 158 -- 159
Adjust carrying value of stock
warrants........................... -- -- -- (1,424) (1,424)
Accretion of excess redemption value
of redeemable preferred stock over
carrying value and amount of
dividends not declared or paid..... -- -- -- (500) (500)
Net income............................ -- -- -- 5,146 5,146
----- --- ------- ------- -------
Balance at December 31, 1994............ 1,509 15 4,186 18,901 23,102
Accretion of excess redemption value
of redeemable preferred stock over
carrying value and amount of
dividends not declared or paid..... -- -- -- (124) (124)
Net income............................ -- -- -- 3,392 3,392
----- --- ------- ------- -------
Balance at April 20, 1995............... 1,509 $15 $ 4,186 $22,169 $26,370
===== === ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 136
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
PERIOD FROM -------------------------------
INCEPTION PERIOD FROM
YEAR ENDED THROUGH JANUARY 1, 1995 YEAR ENDED
DECEMBER 31, DECEMBER 31, THROUGH DECEMBER 31,
1996 1995 APRIL 20, 1995 1994
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................. $ 8,111 $ 6,421 $ 3,392 $ 5,146
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ 15,695 12,274 4,490 13,595
Provision for bad debts.............. -- 138 47 1,235
Write-off of previous finance
costs............................. -- -- 1,282 --
Gain on disposal of property, plant
and equipment..................... -- -- 13 (4)
Provision for SAR's.................. -- -- -- 968
Equity in net loss (earnings) of
unconsolidated subsidiaries....... 2,607 -- (204) (183)
Net change in deferred taxes......... 4,339 3,590 (2,086) (1,256)
Net effect of changes in operating
assets and liabilities (net of
acquisitions)..................... 1,701 5,865 (4,323) 2,918
-------- --------- --------- --------
Net cash flows from operating
activities........................... 32,453 28,288 2,611 22,419
-------- --------- --------- --------
INVESTING ACTIVITIES:
Acquisitions of businesses........... (5,459) (152,318) -- --
Investment in and advances to
unconsolidated subsidiaries....... (6,645) -- -- --
Capital expenditures................. (17,121) (13,556) (3,447) (5,681)
Proceeds from sale of property, plant
and equipment..................... -- -- 58 694
-------- --------- --------- --------
Net cash flows from investing
activities........................... (29,225) (165,874) (3,389) (4,987)
-------- --------- --------- --------
FINANCING ACTIVITIES:
Borrowings:
Proceeds.......................... -- 153,500 106,000 83,900
Repayments........................ (70) (27,500) (103,971) (99,961)
Dividends paid to parent............. (687) (416) -- --
Dividends paid on preferred stock and
purchase of stock put warrant..... -- -- (2,341) --
Proceeds from issuance of common
stock............................. -- 21,000 -- 170
-------- --------- --------- --------
Net cash flows from financing
activities........................... (757) 146,584 (312) (15,891)
-------- --------- --------- --------
Net increase (decrease) in cash........ 2,471 8,998 (1,090) 1,541
Cash at beginning of period............ 11,218 -- 3,310 1,769
Cash acquired in acquisition........... 728 2,220 -- --
-------- --------- --------- --------
Cash at end of period.................. $ 14,417 $ 11,218 $ 2,220 $ 3,310
======== ========= ========= ========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 137
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Pioneer Americas Acquisition Corp. (Pioneer) is a Delaware corporation
formed on March 6, 1995 (Inception). Pioneer is 100% owned by Pioneer Companies,
Inc. (PCI).
On April 20, 1995, Pioneer acquired Pioneer Americas, Inc. (Pioneer
Americas or the Predecessor Company) for approximately $177 million (the
Acquisition). Pioneer Americas manufactured chlorine, caustic soda and related
products used in a variety of applications including water treatment, plastics,
detergents, and agricultural chemicals. Consideration for the Acquisition
included cash, assumption of certain liabilities and repayment of debt of the
Predecessor Company, redemption of preferred stock of the Predecessor Company
and fees and expenses related to the Acquisition. In connection with the
Acquisition, PCI sold common stock, issued long-term debt and entered into a new
bank revolving credit facility. The Acquisition was accounted for as a purchase;
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based upon their fair market value and the operations of the
Predecessor Company were included in the consolidated financial statements from
the date acquired. The Acquisition resulted in $112 million of excess cost over
the fair value of the net assets acquired, which is being amortized on a
straight line basis over 25 years.
In February 1996, Pioneer acquired an interest in Kemwater North America
Company (Kemwater) for $0.3 million of cash and a contribution of the assets and
liabilities of its subsidiary Imperial West Chemical Co. (Imperial West).
Kemwater was formed to conduct the operations of Imperial West and KWT, Inc.
(acquired by PCI in February 1996). Kemwater, which manufactures and supplies
iron chlorides that are used to remove solids from water streams and to control
hydrogen sulfide emissions by the potable and waste water markets, is owned 50%
by Pioneer and 50% by PCI. Since it does not own a controlling interest in
Kemwater, Pioneer accounts for Kemwater using the equity method. In the 1996
consolidated financial statements, Pioneer's investment in Kemwater is presented
as Investment in and advances to unconsolidated subsidiary and its equity in the
loss of Kemwater is shown as Equity in net loss of unconsolidated subsidiary. In
the 1995 consolidated financial statements of Pioneer, Imperial West is
consolidated and includes the following: total assets of $25.7 million, total
revenues of $23.7 million and net loss of $0.6 million. Had the acquisition been
made as of January 1, 1996 and 1995, it would not have had a significant impact
on the consolidated financial statements for 1996 and 1995. The acquisition did
not have a material impact on Pioneer s financial statements, and therefore pro
forma information is not presented.
Pioneer acquired T.C. Products in July 1996 for $10.0 million. T.C.
Products manufactures bleach and related products. The acquisitions was
accounted for as a purchase; accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based upon their fair market value
and the operations for the acquired company was included in the consolidated
financial statements from the date acquired. The acquisition resulted in $7.0
million of excess cost over the fair value of the net assets acquired, which is
being amortized on a straight line basis over 25 years. Had the acquisition been
made as of January 1, 1996 and 1995, it would not have had a significant impact
upon the consolidated financial statements for 1996 and 1995. The acquisition
did not have a material impact on Pioneer's financial statements, and therefore
pro forma information is not presented.
The consolidated financial statements include the accounts of Pioneer and
its consolidated subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated in consolidation. All dollar
amounts in tabulations in the notes to the consolidated financial statements are
stated in thousands of dollars unless otherwise indicated.
Amounts presented in the notes to the consolidated financial statements for
the Predecessor Company are based upon its historical accounting basis for the
periods presented. Such amounts do not include effects of the purchase of the
Predecessor Company by Pioneer. Amounts presented in the notes to the
consolidated financial statements for the Predecessor Company for the period
from January 1, 1995 through April 20, 1995
F-9
<PAGE> 138
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and for the year ended December 31, 1994 are included under the captions
Predecessor Company, 1995 and Predecessor Company, 1994, respectively.
The Company operates in one industry segment and one geographic area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents. Interest income is netted
against interest expense for the periods presented. The Company had interest
income for the year ended December 31, 1996 and the period from Inception
through December 31, 1995 of $0.7 million and $0.3 million, respectively. The
Predecessor Company had interest income of $0.1 million for each of the period
from January 1, 1995 through April 20, 1995 and the year ended December 31,
1994.
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 Company enters into agreements with other companies to
exchange chemical inventories in order to minimize working capital requirements
and to facilitate distribution logistics. Balances related to quantities due to
or payable by the Company are included in inventory. The results of operations
for the period from Inception through December 31, 1995 include the effects of
an increase of $1.7 million to cost of sales due to the step-up in value of
inventory in connection with the Acquisition.
Property, Plant, and Equipment
Depreciation for financial reporting purposes is computed primarily under
the straight-line method over the estimated remaining useful lives of the
assets. Asset lives range from 5 years to 15 years with a predominant life of 10
years.
Other Assets
Other assets include amounts for deferred financing costs which are being
amortized on a straightline basis over the term of the related debt.
Amortization of such costs using the interest method would not result in
material differences in the amounts amortized during the periods presented.
Amortization expense for other assets for the year ended December 31, 1996 was
$1.3 million and for the period from Inception through December 31, 1995 was
approximately $1.1 million.
Other assets of the Predecessor Company included amounts for organization
costs, deferred financing costs, non-compete agreements, permits, licenses, and
customer lists obtained in conjunction with the acquisitions of All-Pure
Chemical Co. ("All-Pure"), GPS Pool Supply, Inc. ("GPS") and Imperial West,
which were being amortized on a straight-line basis over their estimated useful
lives. The Predecessor Company s deferred financing costs were being amortized
on a straight-line basis over the term of the related debt. Amortization of such
costs using the interest method would not result in material differences in the
amounts amortized during the periods presented. Amortization expense for other
assets was approximately $0.8 million for the period from January 1, 1995
through April 20, 1995 and $1.7 million for the year ending December 31, 1994.
F-10
<PAGE> 139
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Excess Cost Over the Fair Value of Net Assets Acquired
Excess cost over the fair value of net assets acquired of approximately
$115 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 annually and if this review indicates that such excess cost
will not be recoverable, as determined based on the estimated future
undiscounted cash flows of the entity acquired over the remaining amortization
period, the Company's carrying value of excess cost over the fair value of net
assets acquired will be reduced by the estimated shortfall of discounted cash
flows or the fair value of the related entity. No such reductions were made in
1996 or 1995. Amortization expense for excess cost over the fair value of net
assets acquired was approximately $4.7 million for the year ended December 31,
1996 and $3.3 million for the period from Inception through December 31, 1995.
The Predecessor Company's excess cost over the fair value of net assets
acquired of approximately $12.8 million and is amortized on a straight-line
basis over 20 years. Amortization expense was approximately $0.2 million for the
period from January 1, 1995 through April 20, 1995 and $0.6 million for 1994.
Environmental Expenditures
Remediation costs are accrued based on estimates of known environmental
remediation exposure. Such accruals are based upon management's best estimate of
the ultimate cost and are recorded even if significant uncertainties exist over
the ultimate cost of the remediation. Ongoing environmental compliance cost,
including maintenance and monitoring costs, are charged to operations as
incurred.
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 files a consolidated tax return with PCI. Pioneer has entered
into a tax sharing agreement with PCI whereby the Company will make tax sharing
payments to PCI with respect to federal cash income taxes reflecting the
consolidated cash tax liability of PCI. The tax sharing agreement has the effect
of presenting the income tax provision on a separate return basis. For financial
reporting purposes, deferred income taxes are determined utilizing an asset and
liability approach. This method gives consideration to the future tax
consequences associated with differences between the financial accounting basis
and tax basis of the assets and liabilities, and the ultimate realization of any
deferred tax asset resulting from such differences. State income taxes are
included in income taxes payable.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Impairment of Long-Lived Assets
During 1996, the Company adopted a new accounting standard for the
impairment of long-lived assets. This standard requires that certain assets be
reviewed for impairment whenever events or circumstances indicate that the
carrying amount of the assets may not be recovered. If it is determined that the
asset's carrying amount is not recoverable, the new accounting standard requires
that the carrying value be reduced to
F-11
<PAGE> 140
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the fair value of the assets. Implementation of this standard did not have a
significant impact on the Company's 1996 consolidated financial statements.
Reclassification
Certain amounts have been reclassified in prior years to conform to the
current year presentation. All reclassifications have been applied consistently
for the periods presented.
3. SUPPLEMENTAL CASH FLOW INFORMATION
Net effect of changes in operating assets and liabilities (net of
acquisitions) are as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------------
1996 1995 1995 1994
------- ------- -------- --------
<S> <C> <C> <C> <C>
Accounts receivable............................ $ 5,228 $ 802 $(3,617) $(4,889)
Due from parent................................ (1,973) 111 -- 535
Receivable from insurance carriers and
agents....................................... -- -- -- (102)
Income taxes receivable........................ -- -- -- 2,738
Inventories.................................... 3,151 1,541 (638) (876)
Prepaid expenses............................... 76 (1,404) 722 (371)
Other assets................................... (1,254) (3,104) (1,342) (305)
Accounts payable............................... (4,168) (1,030) 4,899 862
Accrued liabilities............................ (4,457) 8,777 (3,784) 3,783
Returnable deposits............................ (199) (234) (259) (323)
Other long-term liabilities.................... 4,770 (71) (726) 1,079
Accrued pension and other employee benefits.... 527 477 422 787
------- ------- ------- -------
Net change in operating accounts............... $ 1,701 $ 5,865 $(4,323) $ 2,918
======= ======= ======= =======
</TABLE>
Following is supplemental cash information:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
---------------
1996 1995 1995 1994
------- -------- ------ ------
<S> <C> <C> <C> <C>
Cash paid during the period for:
Interest...................................... $18,297 $ 8,288 $3,067 $4,482
------- -------- ------ ------
Income taxes.................................. $ 3,556 $ 1,707 $1,852 $3,730
======= ======== ====== ======
Investing activities of acquisitions during the
period:
Cash paid for acquisition..................... $ 5,459 $152,318 $ -- $ 238
Long-term debt issued......................... 4,500 11,463 -- 3,254
Liabilities assumed........................... 3,994 90,596 -- --
NOL benefit recognized........................ -- 13,600 -- --
------- -------- ------ ------
Fair value of assets acquired................. $13,953 $267,977 $ -- $3,492
======= ======== ====== ======
</TABLE>
Included in the above table are the acquisitions of T.C. Products in 1996;
Pioneer Americas, Inc. in 1995; and GPS in 1994 by the Predecessor Company.
Other non-cash items included in the consolidated financial statements
include: increase in stockholders' equity of $11.5 million and $3.6 million in
1996 and 1995, respectively, due to recognizing the benefit of the net operating
loss carryforward; and exchange of $135 million of 13 3/8% First Mortgage Notes
for $135 million of 13 3/8% First Mortgage Notes in 1996.
F-12
<PAGE> 141
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVENTORIES
Inventories consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Raw materials, supplies and parts........................... $ 7,512 $ 9,849
Finished goods and work-in-process.......................... 2,668 3,155
Inventories under exchange agreements....................... (3,933) (1,657)
------- -------
$ 6,247 $11,347
======= =======
</TABLE>
5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES
Kemwater
Pioneer and PCI each own a 50% interest in Kemwater which was formed in
February 1996 to continue the business activities previously conducted by
Pioneer's subsidiary, Imperial West and to operate the business acquired by PCI
through the acquisition of KWT, Inc. At December 31, 1996, Pioneer's investment
in and advances to Kemwater aggregated $28.6 million. Advances to Kemwater are
primarily for purchase of product and to fund Kemwater's current operations and
capital requirements. Pioneer and PCI have funded, and intend to continue
funding in the foreseeable future, Kemwater's operations and capital
requirements; accordingly, Pioneer has reduced its investment at December 31,
1996 to a deficit of $0.3 million. Following is a summary of selected items from
Kemwater's balance sheet at December 31, 1996 and operations for the year ended
December 31, 1996 (in thousands):
<TABLE>
<S> <C>
Current assets............................................. $13,004
Non-current assets......................................... 32,224
Current liabilities........................................ 7,294
Non-current liabilities.................................... 40,498
Revenues................................................... 36,142
Gross profit............................................... 1,865
Net loss................................................... (5,214)
</TABLE>
BII and VVLC
The Company, through its subsidiary Pioneer Chlor Alkali Company, Inc.
("PCAC"), owns approximately 32% of the common stock of Basic Investments, Inc.
( BII ), which owns and maintains the water and power distribution network
within the Henderson, Nevada industrial complex and which is a large landowner
in Clark County, Nevada. The remainder of the common stock of BII is owned by
other companies located in the industrial complex. Prior to the Acquisition, the
investment in BII was accounted for by the Predecessor Company under the equity
method after adjustment to reflect PCAC's basis.
PCAC has an approximate 21% limited partnership interest in Victory Valley
Land Company ("VVLC"). The purpose of the business is to receive, hold and
develop the lands, water rights, and other assets contributed by the partners
for investment. A wholly owned subsidiary of BII, acting as general partner with
a 50% interest in VVLC, contributed all rights, title, and interest in and to
certain land to VVLC. PCAC assigned certain water rights to VVLC. Prior to the
Acquisition, the investment in VVLC was accounted for by the Predecessor Company
under the equity method.
The Company s interests in BII and in VVLC (referred to as the Basic
Ownership) constitute assets that, pursuant to the Acquisition Agreement and a
related Contingent Payment Agreement, will be held for the economic benefit of
the Sellers for a period of 20 years. Dividends and distributions received by
the Company on account of the Basic Ownership (including amounts payable as a
result of sales of land or other assets
F-13
<PAGE> 142
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
owned by BII or VVLC) are deposited into a Contingent Payment Account and used
to satisfy certain obligations of the Sellers under environmental and other
indemnities in favor of the Company. After payment or provision for payment of
such obligations in accordance with the provisions of the Contingent Payment
Agreement, amounts received by the Company subsequent to April 20, 1995 on
account of the Basic Ownership will be remitted to the Sellers under the
Contingent Payment Agreement for such 20-year period. The Sellers also have
certain rights during such period with respect to determinations affecting the
Basic Ownership, including the right (subject to certain limited conditions) to
direct the sales or disposition of interests constituting the Basic Ownership
and the right (with certain limited exceptions) to vote the interests
constituting the Basic Ownership, notwithstanding the ownership of such
interests by the Company. Since the Sellers maintain the economic benefit of the
Basic Ownership, and the Company has not received, nor expects to receive in the
future, any economic benefit from BII or VVLC, the Company has not maintained
these balances in its consolidated financial statements since the Acquisition.
The BII financial information includes the accounts of VVLC. The following
is a summary of financial information pertaining to BII and VVLC for the
Predecessor Company for the year ended December 31, 1994:
<TABLE>
<S> <C>
Revenues.................................................... $5,659
Costs and expenses.......................................... 4,834
------
Income before taxes......................................... 825
Income tax expenses......................................... (274)
------
Net income........................................ $ 551
======
Equity in earnings (included in other income)..... $ 183
======
</TABLE>
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Payroll, benefits, and pension.............................. $ 2,371 $ 5,371
Interest and bank fees...................................... 4,595 4,941
Future tax effects.......................................... 2,237 2,293
Miscellaneous accrued liabilities........................... 10,073 8,055
------- -------
Accrued liabilities....................................... $19,276 $20,660
======= =======
</TABLE>
7. PENSION AND OTHER EMPLOYEE BENEFITS
Annual pension costs and liabilities for the Company under its two
defined-benefit plans covering all of its employees are determined by actuaries
using various methods and assumptions. The Company has agreed to voluntarily
contribute such amounts as are necessary to provide assets sufficient to meet
the benefits to be paid to its employees. The Company s present intent is to
make annual contributions, which are actuarially computed, in amounts not more
than the maximum nor less than the minimum allowable under the Internal Revenue
Code. For purposes of determining annual expenses and funding contributions, the
following assumptions were used for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Rate of return of plan assets............................... 8.0% 8.0% 8.0%
Discount rate............................................... 7.5% 7.5% 7.5%
Annual compensation increase................................ 4.0% 4.0% 5.0%
</TABLE>
F-14
<PAGE> 143
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pension expense for the periods presented was comprised of:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
---------------
1996 1995 1995 1994
------- ----- ----- ------
<S> <C> <C> <C> <C>
Service cost.................................... $ 597 $ 410 $ 178 $ 571
Interest cost................................... 892 566 260 770
Return on plan assets........................... (1,132) (394) (149) (537)
Amortization of prior service and other......... 462 56 (7) 225
------- ----- ----- ------
Total pension expense................. $ 819 $ 638 $ 282 $1,029
======= ===== ===== ======
</TABLE>
The funded status of the pension plans for which assets exceed accumulated
benefits and the plan for which accumulated benefits exceed assets as of the
actuarial valuation dates of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------- ---------------
ACCUMULATED ASSETS EXCEED ACCUMULATED
BENEFITS EARNED ACCUMULATED BENEFITS EARNED
ASSETS BENEFITS ASSETS
--------------- ------------- ---------------
<S> <C> <C> <C>
Actuarial present value of benefits based
on service to date and present pay
levels:
Vested benefit obligation............... $ 3,823 $ 6,122 $ 8,488
Non-vested benefit obligation........... 212 389 1,513
------- ------- -------
Accumulated benefit obligation.......... 4,035 6,511 10,001
Plan assets at fair value............... 3,318 6,963 7,293
------- ------- -------
Plan assets in excess (less than)
accumulated benefit obligation....... 717 (452) (2,708)
Additional amounts related to projected
salary increases..................... 2,171 911 2,199
------- ------- -------
Plan assets less than total projected
benefit obligation................... (1,454) (1,363) (4,907)
Unrecognized gain....................... 236 1,254 185
Unrecognized prior service cost......... (372 220 (202)
------- ------- -------
Pension obligation...................... $ 1,318 $ 2,837 $ 4,890
======= ======= =======
</TABLE>
Plan assets at December 31, 1996 and 1995 consist primarily of fixed income
investments and equity investments.
The Company offers defined-contribution plans for its employees with the
employees generally contributing from 1% to 15% of their compensation. Aggregate
contributions by the Company to such plans were $0.4 million and $0.2 million in
1996 and 1995, respectively. Aggregate contributions by the Predecessor Company
for such plans were $0.1 million for the period from January 1, 1995 through
April 20, 1995 and none for 1994.
F-15
<PAGE> 144
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition to providing pension benefits, PCAC provides certain health
care and life insurance benefits for retired employees. Substantially all of
PCAC s employees may become eligible for those benefits if they reach normal
retirement age while working for the Company. The following table presents the
plan's funded status reconciled with amounts recognized in the Company's balance
sheet at December 31:
<TABLE>
<CAPTION>
1996 1995
------- ------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees.................................................. $ 3,737 $3,669
Fully eligible active plan participants................... 1,483 1,380
Other active plan participants............................ 4,986 4,169
------- ------
10,206 9,218
Unrecognized net loss....................................... (125) --
------- ------
Accrued post retirement benefit cost...................... $10,081 $9,218
======= ======
</TABLE>
Net periodic post-retirement benefit cost for the periods presented
includes the following components:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
-----------
1996 1995 1995 1994
------ ---- ---- ----
<S> <C> <C> <C> <C>
Service cost.............................................. $ 369 $243 $109 $324
Interest cost............................................. 693 449 176 519
Amortization of transition obligation over 20 years....... -- 15 8 32
Other components.......................................... -- 48 -- --
------ ---- ---- ----
Net periodic post-retirement benefit cost....... $1,062 $755 $293 $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 10.0% for 1996 (the
same as the rate previously assumed for 1995 and 1994) 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 post-retirement
benefit obligation as of December 31, 1996, 1995 and 1994 by $0.8 million, $0.7
million, and $0.6 million, respectively, and the aggregate of the service and
interest cost components of the net periodic post-retirement benefit cost for
each of 1996, 1995 and 1994 by $0.1 million.
The weighted-average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.5% at December 31, 1996, 1995, and
1994.
As a result of the Acquisition, the unrecognized net loss and unrecognized
transition obligation amounts as of that date were recognized.
8. BANK CREDIT FACILITY
In April 1995, the Company entered into a credit agreement which provides
for the three-year Bank Credit Facility with Bank of America, Illinois ("BAI").
The Company may borrow up to $30.0 million, subject to certain borrowing base
limitations. At December 31, 1996, no amounts were outstanding under the Bank
Credit Facility. The revolving loans bear interest at a rate equal to, at the
Company s option, (i) the reference rate set by BAI or (ii) the LIBOR Base Rate.
The Bank Credit Facility requires the Company 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 the inventory, accounts receivable and certain other assets of PCAC and
All-Pure. Up to $10.0 million of the Borrowing Base, as defined by the Bank
Credit Facility, can be utilized for letters of credit. The Borrowing Base at
December 31, 1996 was approximately $18.6 million. After consideration of
applicable outstanding letters of credit of
F-16
<PAGE> 145
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $2.9 million, the unused availability of the Borrowing Base was
approximately $15.7 million at December 31, 1996.
The Bank Credit Facility contains restrictive covenants that, among other
things and under certain conditions, limit the ability of the Company to incur
additional indebtedness, to acquire or dispose of assets or operations and to
pay dividends or redeem shares of stock.
9. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
13 3/8% First Mortgage Notes, due
2005.................................. $135,000 $135,000
Subordinated notes payable to sellers of
T.C. Products, principal payments due
July 31, 2001, with a variable
interest rate based on a bank's prime
rate plus 1%, interest is paid
monthly............................... 4,500 --
Tax-exempt bond financed through the
Economic Development Corporation of
Pierce County, Washington, principal
payments due in variable annual
installments through 2014, with a
variable interest rate based on
current market values of comparable
securities, interest is paid
monthly............................... 2,257 --
-------- --------
Total................................... 141,757 135,000
Current maturities of long-term debt.... (128) --
-------- --------
Long-term debt.......................... $141,629 $135,000
======== ========
</TABLE>
Long-term debt matures as follows: $0.1 million in 1997; $0.1 million in
1998; $0.1 million in 1999; $0.1 million in 2000; $4.6 million in 2001; and
$136.6 million thereafter.
As part of the Acquisition in April 1995, the Company issued and sold $135
million of 13 3/8% Senior Notes due in 2005. In January 1996, the Company
exchanged, as part of a public offering, the $135 million of Notes for $135
Million of 13 3/8% First Mortgage Notes due in 2005. Like the Senior Notes, the
Mortgage Notes are senior secured obligations of the Company, ranking senior in
right of payment to all subordinated indebtedness. The Mortgage Notes are fully
and unconditionally guaranteed on a joint and several basis by all of the
Company's direct and indirect wholly-owned subsidiaries and are secured by the
first mortgage liens on certain manufacturing facilities. The Company is a
holding company with no operating assets or operations. Financial statements of
the Company's direct and indirect wholly-owned subsidiaries are not separately
included as the Company's management does not believe this information would be
material to investors.
The Mortgage Notes are redeemable at the Company's option starting in 2000.
Before 1998, the Company may redeem a maximum of $35 million of the Mortgage
Notes at 113% of the principal amount due with funds from a public offering of
common stock of the Company or PCI (to the extent such funds are contributed to
the Company). Upon a change of control, as defined in the agreement, the Company
is required to offer to purchase the Mortgage Notes for 101% of the principal
due.
The Mortgage Notes and other long-term debt contain various restrictions on
the Company, which, among other things, limit the ability of the Company to
incur additional indebtedness, to acquire or dispose of assets or operations and
to pay dividends or redeem shares of stock.
F-17
<PAGE> 146
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. FINANCIAL INSTRUMENTS
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. The Company's sales are primarily to customers in the western and
southeastern regions of the United States. Credit losses relating to these
customers have been within management's expectations.
The Company maintains cash deposits with major banks, which from time to
time may exceed federally insured limits. The Company periodically assesses the
financial condition of the institutions and believes that any possible loss is
minimal.
Net sales of the Company included sales to a major customer of
approximately $23.5 million for the year ended December 31, 1996. Net sales of
the Predecessor Company included sales to a major customer of approximately $7.5
million for the period from January 1, 1995 through April 20, 1995 and $18.7
million in 1994.
Investments
It is the policy of the Company to invest its excess cash in investment
instruments or securities whose value is not subject to market fluctuations such
as master notes of issuers rated at the time of 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 Company's Bank Credit
Facility with Bank of America.
Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial instruments, the
Company has assumed that the carrying amount approximates fair value for cash
and cash equivalents, receivables, short-term borrowings, accounts payable and
certain accrued expenses because of the short maturities of those instruments.
The fair values of long-term debt instruments are estimated based upon quoted
market values (if applicable), or on the current interest rates available to the
Company for debt with similar terms and remaining maturities. Considerable
judgment is required in developing these estimates and, accordingly, no
assurance can be given that the estimated values presented herein are indicative
of the amounts that would be realized in a free market exchange. The Company
held no derivative financial instruments as of December 31, 1996 and 1995.
At December 31, 1996, the fair market value of all of the Company's
financial instruments approximated the book value, except its 13 3/8% First
Mortgage Notes Due 2005, which had a book value of $135 million and a fair value
based upon its current quoted market price of $153 million.
11. COMMITMENTS AND CONTINGENCIES
Letters of Credit
At December 31, 1996 the Company had letters of credit and performance
bonds outstanding of approximately $5.2 million and $2.5 million, respectively.
These letters of credit and performance bonds were issued for the benefit of:
customers under sales agreements securing delivery of products sold, a power
company as a deposit for the supply of electricity, and a state environmental
agency as required for manufacturers in the state. The letters of credit expire
at various dates in 1997 and 1998. No amounts were drawn on the letters of
credit at December 31, 1996.
F-18
<PAGE> 147
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Purchase Commitments
The Company 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 563,111 tons of salt are to be purchased in 1997, 280,000
tons in 1998 and 225,000 tons in each of the years 1999 through 2003. The future
minimum salt commitments are as follows (in thousands):
<TABLE>
<S> <C>
1997....................................................... $ 4,402
1998....................................................... 2,480
1999....................................................... 1,903
2000....................................................... 1,960
2001....................................................... 2,019
Thereafter................................................. 4,221
-------
Total purchase commitments....................... $16,985
=======
</TABLE>
Operating Leases
The Company leases certain 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 December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997.................................... $ 8,318
1998.................................... 7,960
1999.................................... 7,916
2000.................................... 6,267
2001.................................... 5,786
Thereafter.............................. 4,685
-------
Total minimum obligations..... $40,932
=======
</TABLE>
Lease expense charged to operations for the year ended December 31, 1996
and for the period from Inception through December 31, 1995 was approximately
$7.8 million and $6.3 million, respectively. Lease expense charged to the
Predecessor Company's operations for the period from January 1, 1995 through
April 20, 1995 and the year ended December 31, 1994 was approximately $3.3
million and $8.4 million, respectively.
Litigation
During 1993, Imperial West was awarded $1.4 million as the result of a
breach of contract claim it had asserted against the lessor of one of the
Imperial West plants. Appeals of the judgment were upheld and the award together
with interest was paid in January 1996. The consolidated financial statements at
December 31, 1995 included a receivable for the award. The lessor also filed
suit alleging that Imperial West was required to remediate alleged contamination
prior to the termination of the lease in July 1995. The parties settled that
action under terms pursuant to which (i) Imperial West paid the lessor $900,000
upon the termination of the lease in July 1995, and (ii) the lessor transferred
title to the property to Imperial West. In addition, Imperial West agreed to
indemnify the lessor against any future environmental liability with respect to
the property. Certain insurers paid a portion of Imperial West's defense costs
in connection with the lawsuit by the lessor.
In 1994, the trustee in the bankruptcy of a company which was a customer of
the Predecessor Company filed suit against the Predecessor Company, seeking the
recovery of up to $2.2 million in payments made to the Predecessor Company on a
basis which the trustee alleges was preferential to other creditors' claims.
F-19
<PAGE> 148
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 the Company is vigorously contesting the action. The Company does
not believe this action will have a significant effect on its financial position
or results of operations.
The Company is party to other legal proceedings and potential claims
arising in the ordinary course of its business. In the opinion of management,
the Company has 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.
12. 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 deferred tax liabilities and assets are as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Deferred tax liabilities:
Tax over book basis -- property, plant
and equipment...................... $20,006 $ 22,063
Other -- net.......................... 399 1,435
------- --------
Total deferred tax
liabilities................. 20,405 23,498
------- --------
Deferred tax assets:
Post employment benefits.............. 5,552 5,791
Alternative minimum tax credit
carryforward....................... 671 --
Allowance for doubtful accounts....... 511 569
Other accrued liabilities............. 6,165 6,530
Net operating loss carry forward of
PCI................................ 14,391 22,091
------- --------
Total deferred tax assets..... 27,290 34,981
Valuation allowance for deferred tax
assets................................ -- (11,433)
------- --------
Net deferred tax assets................. 27,290 23,498
------- --------
Net deferred taxes...................... $ 6,885 $ --
======= ========
</TABLE>
Significant components of the provision for income taxes for the periods
presented are as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------
1996 1995 1995 1994
------ ------ -------- --------
<S> <C> <C> <C> <C>
Current:
Federal............................... $ 614 $ 799 $ 5,938 $ 3,930
State................................. 1,528 1,830 957 568
------ ------ ------- -------
Total current................. 2,142 2,629 6,895 4,498
------ ------ ------- -------
Deferred:
Federal............................... 5,032 4,180 (1,816) (1,010)
State................................. (439) (601) (270) (246)
------ ------ ------- -------
Total current................. 4,593 3,579 (2,086) (1,256)
------ ------ ------- -------
Total income tax provision.... $6,735 $6,208 $ 4,809 $ 3,242
====== ====== ======= =======
</TABLE>
F-20
<PAGE> 149
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-----------------------------------
1996 1995 1995 1994
---------------- ---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rates............. $4,390 35% $4,420 35% $4,068 35% $2,936 35%
State income taxes, net of federal tax
benefits.............................. 708 6 799 6 407 3 321 4
Amortization of excess cost over the
fair value of net assets acquired..... 1,591 14 1,159 9 69 1 221 2
Adjustment of previously provided
taxes................................. -- -- -- -- -- -- (285) (3)
Other, net.............................. 46 -- (170) (1) 265 2 49 1
------ -- ------ -- ------ -- ------ --
$6,735 55% $6,208 49% $4,809 41% $3,242 39%
====== == ====== == ====== == ====== ==
</TABLE>
At December 31, 1996, PCI had available to it on a consolidated tax return
basis approximately $35.6 million of net operating loss carryforward ("NOL") for
income tax purposes (expiring 2003 to 2010). The NOL is available for offset
against future taxable income if generated during the carryforward period. A tax
sharing agreement provides that the Company will be liable to PCI for its
separate tax liability only to the extent the consolidated group has a tax
liability. However as long as PCI's NOL is available to the consolidated group
to reduce taxable income, the Company s tax liability to PCI will be
substantially reduced. As a result of the tax sharing agreement, the NOL is
reflected by the Company for financial reporting purposes.
For the year ended December 31, 1996 and the period from Inception through
December 31, 1995, the benefit of the utilization of the NOL of $11.5 million
and $3.6 million, respectively was recognized as an increase to additional
paid-in capital. Approximately $13.6 million was recognized as an increase to
additional paid-in capital as part of the purchase price allocation of the
Acquisition.
13. 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. At several of the Company s facilities, investigations or remediations
are underway and at some of these locations regulatory agencies are considering
whether additional actions are necessary to protect or remediate surface or
groundwater resources, and the Company could be required to incur additional
costs to construct and operate remediation systems in the future. In addition,
at several of its facilities, the Company is in the process of replacing or
closing ponds for the collection of wastewater. The Company plans to spend
approximately $1.3 million during the next fifteen years for closure of eight
chlor-alkali waste water disposal ponds at the Henderson plant. The Company
believes that it is in substantial compliance with existing governmental
regulations.
PCAC's Henderson plant is located within what is known as the "Basic
Complex." Soil and groundwater contamination have been identified within and
adjoining the Basic Complex, including land owned by PCAC. A groundwater
treatment system was installed at the facility in 1983 and, pursuant to a
Consent Agreement with the Nevada Division of Environmental Protection, a study
is being conducted to further evaluate soil and groundwater contamination at the
facility and other properties within the Basic Complex and to determine whether
additional remediation will be necessary with respect to PCAC's property.
In connection with the October 1988 acquisition of the chlor-alkali
business by the Predecessor Company, ICI Delaware Holdings, Inc. and ICI
Americas, Inc. (such companies or their successors, the "ZENECA Companies")
agreed to indemnify the Predecessor Company for certain environmental
liabilities
F-21
<PAGE> 150
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(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 change in ownership resulting from the Acquisition, the ZENECA
Indemnity will terminate on April 20, 1999. 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
opinion of management, any environmental liability in excess of the amount
indemnified and accrued on the consolidated balance sheet, if any, would not
have a material adverse effect on the consolidated financial statements.
In the Acquisition Agreement, the Sellers agreed to indemnify the Company
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 certain properties held for the benefit of the Sellers
("Sellers' Indemnity"). Amounts payable pursuant to the Sellers' Indemnity will
generally be payable as follows: (i) out of certain reserves established on the
Predecessor Company 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 of the Closing Date.
PCI 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. PCI and the Sellers have agreed that they will cooperate in matters
relating to the ZENECA Indemnity.
Remediation costs are accrued based on estimates of known environmental
remediation exposure. Such accruals are based upon management s best estimate of
the ultimate cost and are recorded even if significant uncertainties exist over
the ultimate cost of the remediation. Ongoing environmental compliance cost,
including maintenance and monitoring costs, are charge to operations as
incurred. 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, totaled approximately $1.7 million and $1.2 million for the year
ended December 31, 1996 and for the period from Inception through December 31,
1995, respectively, and $0.4 million and $1.8 million for the Predecessor
Company for the period from January 1, 1995 through April 20, 1995 and the year
ended December 31, 1994, respectively. Capital expenditures for
environmental-related matters at existing facilities were approximately $4.3
million and $2.2 million for the year ended December 31, 1996 and for the period
from Inception through December 31, 1995, respectively, and $0.2 million and
$0.5 million for the Predecessor Company for the period from January 1, 1995
through April 20, 1995 and the year ended December 31, 1994, respectively.
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
F-22
<PAGE> 151
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 the Company
for chlor-alkali-related remediation of the Henderson and St. Gabriel
facilities. The recorded accrual included certain amounts related to anticipated
closure and post-closure actions that may be required in the event that
operation of the present chlor-alkali plants ceases. Such accrual is recorded in
the Company's consolidated balance sheets at December 31, 1996 and 1995.
However, complete analysis and study has 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. Such accrual is reflected in the
Company's consolidated balance sheets at December 31, 1996 and 1995. Other
assets include an account receivable of the same amount from the ZENECA
Companies. 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
other properties within the same industrial complex. 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.
14. 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's interest in Saguaro is accounted for using the cost method of
accounting. The Company sells certain products and services to and purchases
steam from Saguaro at market prices. Transactions with Saguaro are as follows:
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
--------------
1996 1995 1995 1994
------ ------ ---- ------
<S> <C> <C> <C> <C>
Sales to Saguaro.................................. $1,005 $ 754 $353 $1,286
Purchases from Saguaro............................ 1,840 1,388 616 2,096
Partnership distribution from Saguaro (included in
other income)................................... 735 637 -- 1,290
</TABLE>
Accounts receivable from and accounts payable to Saguaro are at the
Company's normal terms and are generally not significant to the Company's
consolidated balance sheet.
The Company is a party to an agreement negotiated on an arms-length basis
with BII for the delivery of the Company's water to the Henderson production
facility. The agreement provides for the delivery of a minimum of eight million
gallons of water per day. The agreement expires on December 31, 2014, unless
terminated earlier in accordance with the provisions of the agreement. For the
year ended December 31, 1996 and the period from Inception through December 31,
1995, BII charged expenses to the Company of approximately $0.2 million and $0.2
million, respectively. For the period from January 1, 1995 through April 20,
1995 and the year ended December 31, 1994, BII charged expenses to the
Predecessor Company of approximately $0.2 million and $0.5 million,
respectively.
F-23
<PAGE> 152
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company sells certain products to Kemwater at market prices. Sales to
Kemwater totaled $8.8 million during the year ended December 31, 1996. Kemwater
provides transportation services to the Company at market prices which totaled
$1.8 million for 1996.
F-24
<PAGE> 153
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 14,640 $ 14,417
Accounts receivable, less allowance for doubtful accounts
of $1,440 at March 31, 1997 and $1,311 at December 31,
1996................................................... 18,438 18,830
Due from parent........................................... 2,840 2,547
Inventories............................................... 8,896 6,247
Prepaid expenses.......................................... 806 1,156
-------- --------
Total current assets.............................. 45,620 43,197
Property, plant and equipment:
Land...................................................... 3,735 3,735
Buildings and improvements................................ 17,218 17,062
Machinery and equipment................................... 73,194 71,704
Cylinders and tanks....................................... 4,583 4,540
Construction in progress.................................. 12,501 11,871
-------- --------
111,231 108,912
Less accumulated depreciation............................. (19,007) (16,429)
-------- --------
92,224 92,483
Investment in and advances to unconsolidated subsidiary..... 28,553 28,586
Other assets, net of accumulated amortization of $2,803 at
March 31, 1997 and $2,458 at December 31, 1996............ 19,268 19,621
Excess cost over fair value of net assets acquired, net of
accumulated amortization of $8,749 at March 31, 1997 and
$7,556 at December 31, 1996............................... 105,930 107,123
-------- --------
Total assets...................................... $291,595 $291,010
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 17,677 $ 17,221
Accrued liabilities....................................... 21,614 19,276
Returnable deposits....................................... 3,175 3,238
Current portion of long-term debt......................... 128 128
-------- --------
Total current liabilities......................... 42,594 39,863
Long-term debt.............................................. 141,629 141,629
Returnable deposits......................................... 3,272 3,272
Accrued pension and other employee benefits................. 14,555 14,100
Other long-term liabilities................................. 17,112 17,823
Commitments and contingencies
Stockholder's equity:
Common stock, $.01 par value, authorized 1,000 shares,
issued and outstanding 1,000 shares.................... 1 1
Additional paid-in capital................................ 61,124 61,124
Retained earnings......................................... 11,308 13,198
-------- --------
Total stockholders' equity........................ 72,433 74,323
-------- --------
Total liabilities and stockholders' equity........ $291,595 $291,010
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
F-25
<PAGE> 154
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Revenues.................................................... $38,743 $44,292
Cost of sales............................................... 29,003 30,797
------- -------
Gross profit................................................ 9,740 13,495
Selling, general and administrative expense................. 6,170 6,090
------- -------
Operating income............................................ 3,570 7,405
Equity in net loss of unconsolidated subsidiary............. (1,055) (110)
Interest expense, net....................................... (4,458) (3,944)
Other income, net........................................... 231 89
------- -------
Income (loss) before taxes.................................. (1,712) 3,440
Income tax provision........................................ 178 2,028
------- -------
Net income (loss)........................................... $(1,890) $ 1,412
======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
F-26
<PAGE> 155
PIONEER AMERICAS ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Operating activities:
Net income (loss)......................................... $(1,890) $ 1,411
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 4,080 4,217
Equity in net loss of unconsolidated subsidiaries...... 1,055 110
Net change in deferred taxes........................... (42) 1,425
Net effect of changes in operating assets and
liabilities (net of acquisitions)..................... 379 (2,088)
------- -------
Net cash flows from operating activities.................... 3,582 5,075
------- -------
Investing activities:
Investment in and advances to unconsolidated subsidiary... (1,022) (600)
Capital expenditures...................................... (2,337) (3,907)
------- -------
Net cash flows from investing activities.................... (3,359) (4,507)
------- -------
Net increase in cash........................................ 223 568
Cash acquired in purchase................................... -- 505
Cash at beginning of period................................. 14,417 11,218
------- -------
Cash at end of period....................................... $14,640 $12,291
======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
F-27
<PAGE> 156
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated balance sheet as of March 31, 1997 and the statements of
operations and cash flows for all periods presented are unaudited and reflect
all adjustments, consisting of normal recurring items, which management
considers necessary for a fair presentation. Operating results for the first
three months of 1997 are not necessarily indicative of results to be expected
for the year ending December 31, 1997. The consolidated statements include the
accounts of Pioneer Americas Acquisition Corp. and its consolidated subsidiaries
(collectively referred to as the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation. All dollar
amounts in the tabulations in the notes to the consolidated financial statements
are stated in thousands of dollars unless otherwise indicated.
The consolidated balance sheet at December 31, 1996 is derived from the
December 31, 1996 audited consolidated financial statements, but does not
include all disclosures required by generally accepted accounting principles,
since certain information and disclosures normally included in the notes to the
financial statements have been condensed or omitted as permitted by the rules
and regulations of the Securities and Exchange Commission. The accompanying
unaudited financial statements should be read in conjunction with the financial
statements contained in the Annual Report on Form 10-K for the year ended
December 31, 1996.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Net effect of changes in operating assets and liabilities (net of
acquisitions) are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
Accounts receivable......................................... $ 392 $ 1,584
Due from parent............................................. (293) (766)
Inventories................................................. (2,649) (682)
Prepaid expenses............................................ 350 1,659
Other assets................................................ 98 (121)
Accounts payable............................................ 456 (7,971)
Accrued liabilities......................................... 2,345 295
Returnable deposits......................................... (63) (120)
Other long-term liabilities................................. (256) 4,034
------- -------
Net change in operating accounts.................. $ 379 $(2,088)
======= =======
</TABLE>
F-28
<PAGE> 157
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Following is supplemental cash information:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash payments for:
Interest............................................... $ 605 $ 231
Income taxes........................................... 135 2,150
Acquisition of KWT, Inc. during the period:
Cash paid for acquisition.............................. $ 1,572
Long-term debt issued.................................. 8,017
Liabilities assumed.................................... 2,167
-------
Fair value of assets acquired.......................... $11,756
=======
</TABLE>
Other non-cash items included in the consolidated financial statements
include an increase in shareholder's equity of $1.4 million for the three months
ended March 31, 1996 due to the recognition of the net operating loss
carryforward.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
Raw materials, supplies and parts........................... $ 7,914 $ 7,512
Finished goods and work-in-process.......................... 4,407 2,668
Inventories under exchange agreements....................... (3,425) (3,933)
------- -------
$ 8,896 $ 6,247
======= =======
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The Company is subject to various legal proceedings and potential claims
arising in the ordinary course of its business. In the opinion of management,
the Company has 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.
F-29
<PAGE> 158
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Revenues.................................................... $38,743 $44,292
Cost of sales............................................... 29,003 30,797
------- -------
Gross profit................................................ 9,740 13,495
Selling, general and administrative expense................. 6,170 6,090
------- -------
Operating income............................................ 3,570 7,405
Equity in net loss of unconsolidated subsidiary............. (1,055) (110)
Interest expense, net....................................... (4,458) (3,944)
Other income, net........................................... 231 89
------- -------
Income (loss) before taxes.................................. (1,712) 3,440
Income tax provision........................................ 178 2,028
------- -------
Net income (loss)........................................... $(1,890) $ 1,412
======= =======
</TABLE>
Revenues
Revenues decreased by $5.5 million or approximately 13% to $38.7 million
for the three months ended March 31, 1997. Electrochemical unit (ECU) prices
decreased approximately 3% while caustic soda and chlorine sales volumes
decreased by 21% and 3%, respectively. The decrease in caustic soda sales was
due to the weather-related delays in Mississippi River barge shipments. Revenues
for All-Pure Chemical Co. (All-Pure) increased 13% or $1.2 million in the first
quarter of 1997 compared to the same quarter a year ago. This increase was due
to the revenues associated with the acquisition of T.C. Products, Inc. which the
Company acquired in the second quarter of 1996.
Cost of Sales
Cost of sales decreased by $1.8 million or almost 6% to $29.0 million for
the three months ended March 31, 1997. This decrease was the result of lower
cost of sales for caustic soda and chlorine due to lower sales volumes,
partially offset by the acquisitions mentioned above.
Gross Profit
Gross profit margin decreased from 30% during the first quarter of 1996 to
approximately 25% during the first quarter of 1997. This decrease was a result
of lower ECU prices described above along with somewhat higher ECU manufacturing
costs. In addition, gross profit of All-Pure decreased due to higher raw
material costs.
Equity in Net Loss of Unconsolidated Subsidiary
Equity in net loss of unconsolidated subsidiary increased by approximately
$0.9 million due to losses sustained by the unconsolidated subsidiary during the
first quarter of 1997. These losses were attributable to decreased gross margins
as a result of higher raw material costs.
Income (Loss) Before Taxes
As a result of the above, income (loss) before income taxes decreased $5.1
million to a loss of $1.7 million for the three months ended March 31, 1997 from
income of $3.4 million for the three months ended March 31, 1996.
F-30
<PAGE> 159
PIONEER AMERICAS ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SUBSEQUENT EVENT
As of May 14, 1997, PCI entered into an Asset Purchase Agreement (the
"Purchase Agreement") with OCC Tacoma, Inc. ("OCC Tacoma"), a subsidiary of
Occidental Chemical Corporation, pursuant to which the Company will acquire
substantially all of the assets and properties used by OCC Tacoma in the chlor-
alkali business at Tacoma, Washington (the "Tacoma Acquisition"), including the
Tacoma chlor-alkali production facility. The purchase price is equal to the sum
of (i) $97.0 million, payable in cash, (ii) 55,000 shares of Convertible
Redeemable Preferred Stock, par value $.01 per share, of PCI, having a
liquidation preference of $100 per share, and (iii) assumption of certain
obligations related to the acquired chlor-alkali business. The amount of cash to
be paid is subject to adjustment under the terms of the Purchase Agreement.
In connection with the Tacoma Acquisition, on May 15, 1997, the Board of
Directors of Pioneer approved the offering of Senior Secured Notes due 2007, to
be issued and sold in reliance upon an exemption from registration under the
Securities Act of 1933, as amended. On May 9, 1997, the Board of Directors of
Pioneer approved Pioneer's offer to purchase all of its existing Mortgage Notes
(the "Tender Offer") and related consent solicitation (the "Consent
Solicitation"). Proceeds from the offering would be used, among other things, to
pay the cash portion of the Tacoma Acquisition and to repurchase Mortgage Notes
in the Tender Offer. On May 19, 1997, Pioneer commenced the Tender Offer and
Consent Solicitation. On June 17, 1997, Pioneer repurchased all outstanding
Mortgage Notes in the Tender Offer and consummated the Tacoma Acquisition.
F-31
<PAGE> 160
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors,
OCCIDENTAL CHEMICAL CORPORATION:
We have audited the accompanying balance sheets of the Tacoma Plant (as
defined in Note 1) of Occidental Chemical Corporation, an indirect wholly-owned
subsidiary of Occidental Petroleum Corporation, as of December 31, 1996 and
1995, and the related statements of operations and changes in owner's investment
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of Occidental Chemical
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Tacoma Plant of
Occidental Chemical Corporation as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
February 28, 1997
F-32
<PAGE> 161
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
CURRENT ASSETS
Cash........................................................ $ 6 $ 6
Inventories................................................. 4,818 4,790
Deferred income taxes....................................... 1,287 2,389
Other current assets........................................ 1,009 95
------- -------
Total current assets.............................. 7,120 7,280
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated
depreciation of $80,650 in 1996 and $74,768 in 1995....... 61,512 62,857
OTHER ASSETS, net........................................... 795 973
------- -------
TOTAL ASSETS...................................... $69,427 $71,110
======= =======
CURRENT LIABILITIES
Accounts payable............................................ $ 2,720 $ 2,919
Accrued liabilities......................................... 4,510 8,248
------- -------
Total current liabilities......................... 7,230 11,167
DEFERRED INCOME TAXES....................................... 1,961 2,727
ACCRUED ENVIRONMENTAL LIABILITIES........................... 20,481 21,242
OTHER LIABILITIES........................................... 7,791 8,244
------- -------
Total liabilities................................. 37,463 43,380
COMMITMENTS AND CONTINGENT LIABILITIES (Note 6)
OWNER'S INVESTMENT.......................................... 31,964 27,730
------- -------
TOTAL LIABILITIES AND OWNER'S INVESTMENT.......... $69,427 $71,110
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-33
<PAGE> 162
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
STATEMENTS OF OPERATIONS AND CHANGES IN OWNER'S INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
EXTERNAL SALES, net......................................... $61,848 $60,871 $40,588
SALES TO OWNER AT MARKET VALUE.............................. 11,867 9,270 10,069
------- ------- -------
TOTAL SALES, net............................................ 73,715 70,141 50,657
OPERATING COSTS AND EXPENSES:
Cost of Sales............................................. 52,420 53,252 53,420
Selling, general and administrative expenses.............. 1,782 1,995 1,782
Other operating expense................................... 2,209 2,607 2,254
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES........................... 17,304 12,287 (6,799)
Income tax expense (benefit).............................. 6,059 4,301 (2,377)
------- ------- -------
NET INCOME (LOSS)........................................... 11,245 7,986 (4,422)
PENSION LIABILITY ADJUSTMENT................................ 439 643 (105)
INCREASE (DECREASE) IN OWNER'S INVESTMENT................... (7,450) (4,567) 8,646
OWNER'S INVESTMENT, beginning of year....................... 27,730 23,668 19,549
------- ------- -------
OWNER'S INVESTMENT, end of year............................. $31,964 $27,730 $23,668
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-34
<PAGE> 163
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $11,245 $ 7,986 $(4,422)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization of assets................ 6,247 5,928 5,587
Deferred income taxes.................................. 99 1,088 1,073
Other noncash charges to income........................ 1,941 2,039 1,630
Changes in operating assets and liabilities:
Increase in inventories................................ (28) (851) (193)
Decrease (increase) in other current assets............ (914) (93) 3
Decrease in accounts payable and accrued liabilities... (3,937) (204) (3,588)
Other, net................................................ (2,589) (4,794) (3,723)
------- ------- -------
Net cash provided (used) by operating activities............ 12,064 11,099 (3,633)
------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (4,614) (6,532) (5,011)
------- ------- -------
Net cash used by investing activities....................... (4,614) (6,532) (5,011)
------- ------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in owner's investment................. (7,450) (4,567) 8,646
------- ------- -------
Net cash provided (used) by financing activities............ (7,450) (4,567) 8,646
------- ------- -------
Change in cash.............................................. -- -- 2
Cash -- beginning of year................................... 6 6 4
------- ------- -------
Cash -- end of year......................................... $ 6 $ 6 $ 6
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-35
<PAGE> 164
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
Organization, business and basis of presentation --
The accompanying financial statements present the financial position,
results of operations and cash flows of the Tacoma plant (the Tacoma Plant) of
Occidental Chemical Corporation (OCC), a New York corporation. The financial
statements are prepared for a proposed acquisition by Pioneer Companies, Inc.
(Pioneer) of the Tacoma Plant (see Note 11).
All of the outstanding common shares of OCC are owned indirectly by
Occidental Petroleum Corporation (Occidental). Certain amounts in the
accompanying financial statements have been allocated in a reasonable and
consistent manner in order to depict the financial position, results of
operations and cash flows of the Tacoma Plant on a stand-alone basis.
The Tacoma Plant, located in Tacoma, Washington, consists of a chlor-alkali
process which manufactures chlorine, sodium hydroxide and related products, and
a discontinued ammonia process that has not operated since 1992. The Tacoma
Plant's products are sold to national and international markets as well as to
other plants and affiliates of OCC. The accompanying financial statements
exclude the previously discontinued manufacturing processes associated with
unrelated product lines, including chlorinated organic compounds. Additionally,
the Tacoma Plant does business as OCC and enters into operating and sales
contracts administered by OCC. These include national sales agreements as well
as purchase and energy agreements.
Occidental utilizes a centralized cash management system for its
operations, including the Tacoma Plant. Cash distributed to or advanced from
Occidental has been reflected in Owner's investment in the accompanying balance
sheets. In addition, settlements of transactions with OCC and other Occidental
affiliates are recorded through Owner's investment.
Supplemental cash flow information --
For the years ended December 31, 1996, 1995 and 1994, all cash payments for
income taxes were made by Occidental. For the same periods, there were no cash
payments for interest.
As of December 31, 1996 and 1995, net trade receivables of $7,604,000 and
$8,952,000, respectively, were transferred to an affiliate (see Note 2).
Property, plant and equipment --
Property, plant and equipment additions, major renewals and improvements
are capitalized at cost. Maintenance and repair costs are charged to expense as
incurred. The cost and related accumulated depreciation, depletion and
amortization of property, plant and equipment sold or retired are removed from
the property, plant and equipment accounts and any resulting gain or loss is
recorded.
Depreciation of plant and equipment is primarily provided using the
units-of-production method.
Costs incurred during the construction period of major projects are
capitalized and accumulated in Construction in progress (see Note 5). Upon
completion, the costs are transferred to the appropriate Property, plant and
equipment accounts. Interest costs incurred during the construction period of
major projects which extend longer than one year are capitalized and amortized
over the lives of the related assets. There were no such major projects during
1996, 1995 or 1994.
F-36
<PAGE> 165
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Income taxes --
The Tacoma Plant is included in the consolidated U.S. federal income tax
return of Occidental. The Tacoma Plant uses the asset and liability method
required by Statement of Financial Accounting Standards (SFAS) No.
109 -- "Accounting for Income Taxes." Deferred income taxes are recorded at
enacted rates to recognize the future effects of temporary differences which
arise between financial statement assets and liabilities and their basis for
income tax reporting purposes. A portion of the income tax provision for this
return is allocated to the Tacoma Plant on the basis of a tax sharing
arrangement between OCC and Occidental Chemical Holding Corporation (OCHC), an
indirect parent of OCC. Current and deferred income tax provisions allocated by
OCC are based on taxable income determined as though the Tacoma Plant filed as
an independent company, making the same tax return elections used in
Occidental's consolidated return. However, this arrangement also permits the
Tacoma Plant to recognize income tax benefits for current year operating losses
and deductible temporary differences without limiting such benefits. Amounts due
to Occidental for current income tax provisions are netted in Owner's investment
in the accompanying balance sheets.
Risks and uncertainties --
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts, generally not by material amounts. Management
believes that these estimates and assumptions provide a reasonable basis for the
fair presentation of the Tacoma Plant's financial position and results of
operations.
Included in the accompanying balance sheets are deferred income tax assets
of $11,061,000 and $12,555,000 as of December 31, 1996 and 1995, respectively,
consisting of the current portion of $1,287,000 and $2,389,000, shown as current
deferred income tax assets and the noncurrent portion which is netted against
deferred income tax liabilities (see Note 7). Realization of that asset is
dependent upon the generation of sufficient future taxable income. It is
expected that the recorded deferred income tax asset will be realized through
future operating income and reversal of taxable temporary differences.
Since the Tacoma Plant's two principal products are commodities,
significant changes in the prices of chlorine and sodium hydroxide could have a
significant impact on the Tacoma Plant's results of operations for any
particular year.
Fair value of financial instruments --
The Tacoma Plant values financial instruments as required by SFAS No. 107
-- "Disclosures About Fair Value of Financial Instruments." The carrying value
of on-balance sheet financial instruments approximates fair value.
(2) RECEIVABLES --
As of December 31, 1996 and 1995, OCC transferred, with limited recourse,
to an Occidental affiliate net trade receivables of the Tacoma Plant under a
revolving sale program, in connection with the ultimate sale for cash of such
receivables. The net trade receivables transferred amounted to $7,604,000 and
$8,952,000 as of December 31, 1996 and 1995, respectively. OCC transferred the
receivables to the affiliate in a noncash transaction that was reflected as a
reduction in the Tacoma Plant's Owner's investment. OCC has retained the
F-37
<PAGE> 166
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(2) RECEIVABLES -- (CONTINUED)
collection responsibility with respect to the receivables sold. An interest in
newly created receivables is transferred monthly, net of collections made from
customers. Fees related to the sales of receivables under this program, which
are allocated from OCC, were $377,000, $425,000 and $333,000 for the years ended
December 31, 1996, 1995 and 1994, respectively, and are included in Other
operating expense.
(3) INVENTORIES --
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) cost method was used in determining the costs of raw materials
and finished goods. Materials and supplies inventories were determined using the
weighted-average cost method. Inventories consisted of the following as of
December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Raw materials............................................... $ 1,291 $ 1,653
Materials and supplies...................................... 3,338 3,152
Finished goods.............................................. 2,071 2,519
------- -------
6,700 7,324
LIFO reserve................................................ (1,882) (2,534)
------- -------
Inventory at lower of cost or market........................ $ 4,818 $ 4,790
======= =======
</TABLE>
During the years ended December 31, 1996 and 1994, certain inventory
quantities carried at LIFO were reduced. These reductions resulted in a
liquidation of LIFO inventory quantities, the effect of which did not have a
material impact on Cost of sales.
(4) CHANGE IN ACCOUNTING PRINCIPLE --
In December 1992, the Financial Accounting Standards Board issued SFAS No.
112 -- "Employers' Accounting for Postemployment Benefits," which substantially
changed the existing method of accounting for employer benefits provided to
inactive or former employees after active employment but before retirement. This
statement requires that the cost of postemployment benefits (principally medical
benefits for inactive employees) be recognized in the financial statements
during employees' active working careers. OCC adopted SFAS No. 112 effective
January 1, 1994, but the adoption did not have a material impact on the Tacoma
Plant's financial position or results of operations.
(5) PROPERTY, PLANT AND EQUIPMENT --
Property, plant and equipment at December 31, 1996 and 1995 consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land and land improvements.................................. $ 2,951 $ 2,875
Buildings................................................... 9,173 8,915
Machinery and equipment..................................... 118,212 114,530
Construction in progress.................................... 11,826 11,305
-------- --------
142,162 137,625
Accumulated depreciation.................................... (80,650) (74,768)
-------- --------
$ 61,512 $ 62,857
======== ========
</TABLE>
F-38
<PAGE> 167
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(6) COMMITMENTS AND CONTINGENT LIABILITIES --
Commitments --
The Tacoma Plant leases railcars as well as certain machinery and equipment
under noncancelable operating leases. The operating lease for machinery and
equipment expires in 2001, at which time the property can be purchased for the
then fair market value or the lease can be renewed at the then fair rental value
for two years.
At December 31, 1996, future minimum lease payments under noncancelable
operating leases were as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 3,784
1998........................................................ 3,561
1999........................................................ 3,412
2000........................................................ 3,560
2001........................................................ 3,178
Thereafter.................................................. 16,582
-------
Total minimum lease payments.............................. $34,077
=======
</TABLE>
Rental expense totaled approximately $4,156,000, $4,164,000 and $4,262,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
OCC purchases the entire requirement of salt for the Tacoma Plant from
Mitsubishi International Corporation (MIC) under the terms of a contract ending
on December 31, 1996. The contract requires OCC to purchase a predetermined
annual quantity of salt at an established price. Payments are made to MIC each
month in the amount of one-twelfth of the annual quantity at the established
price for that year. Total purchases under this contract were $8,202,000,
$7,712,000 and $6,339,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. In May 1996, OCC entered into a new contract with MIC to purchase
salt for the Tacoma Plant under similar terms for 1997 through 1999.
OCC purchases electric power for the Tacoma Plant from the City of Tacoma,
Department of Public Utilities, Light Division (the City) under the terms of a
contract expiring in September 2001. The contract has three monthly levels of
commitment. The first two take-or-pay levels are for fixed quantities of power
at predetermined prices. The third level is for power consumed above the
take-or-pay quantities at market prices. Under the terms of the contract, any
power committed to but not consumed by the Tacoma Plant can be resold by the
City, the proceeds of which will be applied against the Tacoma Plant's
commitment. Total purchases under this contract were $13,621,000, $13,894,000
and $13,643,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
Lawsuits --
An individual brought a lawsuit in 1995 against OCC alleging personal
injury from exposure to chlorine gas released from the Tacoma Plant in 1994.
Although a release did occur, the alleged causation and damages are denied. It
is impossible at this time to determine the ultimate legal liabilities that may
arise from this lawsuit. However, in management's opinion, the lawsuit should
not have a material adverse effect upon the financial position or results of
operations of the Tacoma Plant.
F-39
<PAGE> 168
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(7) INCOME TAXES --
Income tax expense (benefit) for the years ended December 31, 1996, 1995
and 1994 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Current U.S. federal.................................... $5,960 $3,213 $(3,450)
Deferred U.S. federal................................... 99 1,088 1,073
------ ------ -------
$6,059 $4,301 $(2,377)
====== ====== =======
</TABLE>
The following table reconciles the maximum statutory U.S. federal income
tax rate multiplied by the Tacoma Plant's income (loss) before income taxes to
the recorded income tax expense (benefit) (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
U.S. federal income tax at 35%.......................... $6,056 $4,300 $(2,380)
Nondeductible expenses and other........................ 3 1 3
------ ------ -------
$6,059 $4,301 $(2,377)
====== ====== =======
</TABLE>
Pension liability adjustments charged directly to Owner's investment in
1996, 1995 and 1994 were net of tax charges (benefits) of $237,000, $347,000 and
($23,000), respectively.
Deferred income taxes reflect the future tax consequences of temporary
differences between the tax basis of assets and liabilities and their financial
reporting amounts. Temporary differences are associated with the financial
statement assets and liabilities shown in the table below. Deferred income tax
assets and liabilities have been recorded in the following amounts as of
December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Inventories................................ $ 371 $ -- $ 340 $ --
Property, plant and equipment, net......... -- 11,565 -- 12,592
Other assets............................... -- 170 -- 301
Accrued liabilities........................ 916 -- 2,049 --
Other liabilities.......................... 9,774 -- 10,166 --
------- ------- ------- -------
$11,061 $11,735 $12,555 $12,893
======= ======= ======= =======
</TABLE>
(8) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS --
The Tacoma Plant participates in various defined contribution retirement
plans sponsored by Occidental for its salaried, union and nonunion hourly
employees that provide for periodic contributions by OCC based on plan-specific
criteria, such as base pay, age level, and employee contributions. OCC
contributed and the Tacoma Plant expensed $250,000, $255,000 and $240,000 under
the provisions of these plans during the years ended December 31, 1996, 1995 and
1994, respectively.
Also, the Tacoma Plant's retirement and postretirement defined benefit
plans for union hourly employees are accrued based on various assumptions and
discount rates, as described below. The actuarial assumptions
F-40
<PAGE> 169
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(8) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS -- (CONTINUED)
used could change in the near term as a result of changes in expected future
trends and other factors which, depending on the nature of the changes, could
cause increases or decreases in the liabilities accrued.
Pension costs for the Tacoma Plant defined benefit pension plan, for union
hourly employees determined by independent actuarial valuations, are funded by
payments to trust funds that are administered by independent trustees. The
components of the net pension cost for the years ended December 31, 1996, 1995
and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -----
<S> <C> <C> <C>
Service cost -- benefits earned during the period........ $ 374 $ 389 $ 347
Interest cost on projected benefit obligation............ 660 676 674
Estimated return on plan assets.......................... (1,492) (1,699) (252)
Net amortization and deferral............................ 891 1,348 (133)
------- ------- -----
Net pension cost............................... $ 433 $ 714 $ 636
======= ======= =====
</TABLE>
The Tacoma Plant recorded adjustments to Owner's investment of an increase
of $439,000 in 1996 and $643,000 in 1995 and a decrease of $105,000 in 1994 to
reflect the net-of-tax difference between the additional liability required
under pension accounting provisions and the corresponding intangible asset.
The following table sets forth the defined benefit plan's funded status and
amounts recognized in the Tacoma Plant balance sheets at December 31, 1996 and
1995 (in thousands):
<TABLE>
<CAPTION>
ACCUMULATED BENEFITS
EXCEED ASSETS
---------------------
1996 1995
-------- ---------
<S> <C> <C>
Present value of the estimated pension benefits to be paid
in the future:
Vested benefits........................................... $9,043 $ 8,473
Nonvested benefits........................................ 437 410
------ -------
Accumulated benefit obligation.............................. 9,480 8,883
Excess of projected benefit obligation over accumulated
benefit obligation..................................... 426 399
------ -------
Total projected benefit obligations......................... 9,906 9,282
Plan assets at fair value................................... 9,701 8,085
------ -------
Projected benefit obligation in excess of plan assets....... $ 205 $ 1,197
====== =======
Projected benefit obligation in excess of plan assets....... $ 205 $ 1,197
Unrecognized net asset...................................... 160 192
Unrecognized prior service cost............................. (195) (215)
Unrecognized net loss....................................... (363) (1,266)
Additional minimum liability(a)............................. -- 891
------ -------
Pension liability (prepaid pension)......................... $ (193) $ 799
====== =======
</TABLE>
(a) A related amount up to the limit allowable under SFAS No. 87 -- "Employers'
Accounting for Pensions" has been included in Other assets. Amounts
exceeding such limits have been charged to Owner's investment.
F-41
<PAGE> 170
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(8) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS -- (CONTINUED)
In 1996 and 1995, the discount rate used in determining the actuarial
present value of the projected benefit obligations was 7.5 percent. The rate of
increase in future compensation levels used in determining the actuarial present
value of the projected benefit obligations was 4.5 percent in 1996 and 1995. The
expected long-term rate of return on assets was 8 percent in 1996 and 1995.
OCC provides medical, dental and life insurance for certain active,
retired, and disabled employees of the Tacoma Plant and their eligible
dependents. Beginning in 1993, certain salaried participants pay for all medical
cost increases in excess of increases in the Consumer Price Index (CPI). The
benefits generally are funded by OCC as the benefits are paid during the year.
The cost of providing these benefits is based on claims filed and insurance
premiums paid for the period.
To reflect the Tacoma Plant's participation in the OCC plan, the net
periodic postretirement benefit costs and the postretirement benefit obligations
are based on an allocation of the OCC actuarial study using participant counts
at the Tacoma Plant for each of the years presented in the tables below. This
allocation excludes amounts attributable to salaried retirees and surviving
spouses because nonunion retiree information is not maintained for such
participants by plant location.
The OCC postretirement benefit obligation as of December 31, 1996 and 1995
was determined by application of the terms of medical, dental, and life
insurance plans, including the effect of established maximums on covered costs,
together with relevant actuarial assumptions and health care cost trend rates
projected at a CPI increase of 3 percent and 4 percent in 1996 and 1995,
respectively (except for union employees). For union employees, the health care
cost trend rates were projected at annual rates ranging ratably from 9 percent
in 1996 to 6 percent through the year 2002 and level thereafter. The effect of a
one percent annual increase in these assumed cost trend rates would increase the
allocated accumulated postretirement benefit obligation by approximately
$660,000 and the allocated annual service and interest costs by approximately
$95,000 in 1996. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation as of December 31, 1996 and 1995
was 7.5 percent. The plans are unfunded.
The following table sets forth the allocation of OCC postretirement plans'
combined status, reconciled with the amounts included in the accompanying
balance sheets at December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................. $3,924 $3,820
Fully eligible active plan participants................... 642 630
Other active plan participants............................ 3,573 3,310
------ ------
Total accumulated postretirement benefit obligation......... 8,139 7,760
Unrecognized prior service cost............................. (109) (156)
Unrecognized net loss....................................... (586) (691)
------ ------
Allocated accrued postretirement benefit cost............... $7,444 $6,913
====== ======
</TABLE>
F-42
<PAGE> 171
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(8) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS -- (CONTINUED)
The allocated net periodic postretirement benefit cost included the
following components for the years ended December 31, 1996, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost -- benefits attributed to service during the
period.................................................... $202 $194 $190
Interest cost on accumulated postretirement benefit
obligation................................................ 582 572 570
Net amortization and deferral............................... 47 47 47
---- ---- ----
Allocated net periodic postretirement benefit cost.......... $831 $813 $807
==== ==== ====
</TABLE>
(9) RELATED PARTY TRANSACTIONS --
The Tacoma Plant has been charged for certain financial and operational
support services provided by OCC, such as marketing, sales and customer service,
transportation and distribution, and technical services. Charges for such
support services included in the accompanying statements of operations totaled
$8,759,000, $8,806,000 and $10,151,000 for the years ended December 31, 1996,
1995 and 1994, respectively. These charges were allocated based on ratios
including such factors as revenues, operating income, fixed assets, and working
capital in a reasonable and consistent manner.
Included in the above allocations are research and development costs, which
are charged to operations by OCC as incurred, and were $70,000, $96,000 and
$143,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
These charges are included in Selling, general and administrative expenses in
the accompanying statements of operations.
See Note 1 regarding the centralized cash management system of Occidental.
See Note 2 regarding the transfer of receivables to an affiliate.
(10) ENVIRONMENTAL COSTS --
General --
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to existing conditions
caused by past operations, and that do not contribute to current or future
revenue generation, are expensed. Reserves for estimated costs are recorded when
environmental remedial efforts are probable and the costs can be reasonably
estimated. In determining the reserves, the Tacoma Plant uses the most current
information available, including similar past experiences, available technology,
regulations in effect, the timing of remediation and cost-sharing arrangements.
The environmental reserves are based on management's estimate of the most likely
costs to be incurred and are reviewed periodically and adjusted as additional or
new information becomes available.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 96-1 "Environmental Remediation Liabilities,"
which provides authoritative guidance on specific accounting issues that are
present in the recognition, measurement, display, and disclosure of
environmental remediation liabilities. The provisions of this SOP are effective
for fiscal years beginning after December 15, 1996. OCC plans to adopt the
provisions of this SOP in 1997. The impact of adopting this SOP, if any, on the
financial statements of the Tacoma Plant has not been determined.
F-43
<PAGE> 172
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(10) ENVIRONMENTAL COSTS -- (CONTINUED)
Tacoma Plant site --
Historic operations of various discontinued processes and equipment at the
Tacoma Plant site, including past activities of other owners or operators of all
or a portion of the Tacoma Plant site, have resulted in releases of certain
hazardous and nonhazardous substances and materials into the soil, surface
water, groundwater and intertidal and subtidal sediments at and in the vicinity
of the Tacoma Plant site.
The Tacoma Plant is permitted under the Resource Conservation and Recovery
Act (RCRA). Although permitted waste management units at the Tacoma Plant site
have been closed in accordance with RCRA, the current RCRA permit requires the
owner and operator of the Tacoma Plant to take corrective action to address the
presence of certain substances in groundwater associated with past practices at
the Tacoma Plant site. The Tacoma Plant is controlling migration of and
remediating substances in groundwater through extraction, treatment and
reinjection (see Reserves and expenditures for the Tacoma Plant site section of
Note 10 below).
In addition, governmental authorities have identified OCC as a "potentially
responsible party" for the Commencement Bay Nearshore/Tideflats Superfund Site
(the CB/NT site), which includes the Hylebos Waterway, pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act. The CB/NT
site covers in excess of ten square miles and includes the Tacoma Plant site and
other properties along the Hylebos Waterway and in the vicinity of Commencement
Bay. More than 100 potentially responsible parties have been identified with
respect to the Hylebos Waterway area of the CB/NT site. OCC is participating
with a group of entities in performing a pre-remedial design investigation to
evaluate potential alternatives for remediation of sediments in the Hylebos
Waterway.
It is reasonably possible that the activities of the Tacoma plant
chlor-alkali process and discontinued processes have contributed to the presence
of hazardous and nonhazardous substances and materials at and in the vicinity of
the Tacoma Plant site. It is impossible at this time to determine the quantity
of such substances and materials, if any, attributable to these processes, and
OCC does not have sufficient information available to determine a range of
potential liability.
Reserves and expenditures for the Tacoma Plant site --
At December 31, 1996 and 1995, the current portion of the reserve for
groundwater remediation at the Tacoma Plant site included in Accrued liabilities
was $2,550,000 and $5,200,000, respectively. The reserve for remediation was
originally established in 1990. Additions to the remediation reserve of
$1,932,000, $2,030,000 and $1,530,000 for the years ended December 31, 1996,
1995 and 1994, respectively, are included in Other operating expense.
The Tacoma Plant's estimated operating expenses relating to compliance with
environmental laws and regulations governing ongoing operations on the Tacoma
Plant site were approximately $901,000, $983,000 and $958,000 for the years
ended December 31, 1996, 1995 and 1994, respectively. In addition, estimated
capital expenditures for environmental compliance on the Tacoma Plant site for
the years ended December 31, 1996, 1995 and 1994 were approximately $1,175,000,
$693,000 and $82,000, respectively.
(11) SALE OF TACOMA PLANT --
Pioneer is currently negotiating to purchase selected assets, liabilities
and operations of the Tacoma Plant primarily including, but not limited to,
property, plant and equipment and inventories. As of February 1, 1997,
F-44
<PAGE> 173
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(11) SALE OF TACOMA PLANT -- (CONTINUED)
OCC transferred substantially all of the Tacoma Plant's assets and liabilities
into OCC Tacoma, Inc., a newly created, wholly-owned subsidiary of OCC.
The assets, liabilities and operations included in these financial
statements are those required to present the Tacoma Plant as a stand-alone
entity and include certain assets, liabilities and operations that are not
included in the proposed sale to Pioneer, such as certain railcar and equipment
leases. Excluded operations include, among other things, support services such
as marketing, sales and customer service, transportation and distribution, and
technical services. In addition, OCC will retain various chlorine and caustic
soda account contracts which will be supplied in part by a proposed arrangement
between Pioneer and OCC.
Negotiations are ongoing concerning a mutually acceptable method of
acquisition by Pioneer. As currently contemplated, in addition to the primary
asset conveyance instrument, related agreements would allocate responsibility,
as between OCC and Pioneer, for environmental costs and obligations associated
with the Tacoma Plant site arising from pre-closing events or occurrences,
including any investigation, monitoring, treatment or remediation of substances
and materials in water, soils and sediments at and in the vicinity of the Tacoma
Plant site, the Hylebos Waterway and the CB/NT site. This allocation of
responsibility is expected to include cost and time limitations, above or after
which OCC's responsibility for environmental costs and obligations associated
with the Tacoma Plant site between the parties would terminate.
F-45
<PAGE> 174
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
BALANCE SHEETS
MARCH 31, 1997 AND 1996
UNAUDITED
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 6 $ 6
Inventories............................................... 5,181 4,265
Deferred income taxes..................................... 1,249 1,794
Other current assets...................................... 741 1,114
------- -------
Total current assets.............................. 7,177 7,179
PROPERTY, PLANT AND EQUIPMENT, at cost, net of accumulated
depreciation of $82,207 in 1997 and $76,010 in 1996....... 60,695 62,617
OTHER ASSETS, net........................................... 794 928
------- -------
TOTAL ASSETS...................................... $68,666 $70,724
======= =======
CURRENT LIABILITIES:
Accounts payable.......................................... $ 2,104 $ 3,316
Accrued liabilities....................................... 3,037 5,008
------- -------
Total current liabilities......................... 5,141 8,324
DEFERRED INCOME TAXES....................................... 2,384 2,497
ACCRUED ENVIRONMENTAL LIABILITIES........................... 20,001 21,102
OTHER LIABILITIES........................................... 7,923 8,337
------- -------
Total liabilities................................. 35,449 40,260
COMMITMENTS AND CONTINGENT LIABILITIES (Note 5)
OWNER'S INVESTMENT.......................................... 33,217 30,464
------- -------
TOTAL LIABILITIES AND OWNER'S INVESTMENT.......... $68,666 $70,724
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-46
<PAGE> 175
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
STATEMENTS OF OPERATIONS AND CHANGES IN OWNER'S INVESTMENT
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
UNAUDITED
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
EXTERNAL SALES, net......................................... $13,770 $15,059
SALES TO OWNER AT MARKET VALUE.............................. 4,968 2,445
------- -------
TOTAL SALES, net.................................. 18,738 17,504
OPERATING COSTS AND EXPENSES:
Cost of sales............................................. 13,590 13,065
Selling, general and administrative expenses.............. 269 446
Other operating (income) expense.......................... (542) 599
------- -------
INCOME BEFORE INCOME TAXES.................................. 5,421 3,394
Income tax expense........................................ 1,898 1,189
------- -------
NET INCOME.................................................. 3,523 2,205
PENSION LIABILITY ADJUSTMENT................................ -- 8
INCREASE (DECREASE) IN OWNER'S INVESTMENT................... (2,270) 521
OWNER'S INVESTMENT, beginning of period..................... 31,964 27,730
------- -------
OWNER'S INVESTMENT, end of period........................... $33,217 $30,464
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-47
<PAGE> 176
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
UNAUDITED
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income................................................ $ 3,523 $ 2,205
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of assets................ 1,613 1,436
Deferred income taxes.................................. 461 361
Other noncash charges to income........................ -- 519
Changes in operating assets and liabilities:
Decrease (increase) in inventories..................... (363) 525
Decrease (increase) in other current assets............ 268 (1,019)
Decrease in accounts payable and accrued liabilities... (2,089) (2,843)
Other, net................................................ (242) (613)
------- -------
Net cash provided by operating activities................... 3,171 571
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (901) (1,092)
------- -------
Net cash used by investing activities....................... (901) (1,092)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase (decrease) in owner's investment................. (2,270) 521
------- -------
Net cash provided (used) by financing activities............ (2,270) 521
------- -------
Change in cash.............................................. -- --
Cash -- beginning of period................................. 6 6
------- -------
Cash -- end of period....................................... $ 6 $ 6
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-48
<PAGE> 177
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
MARCH 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
Organization, business and basis of presentation --
The accompanying unaudited interim financial statements present the
financial position, results of operations and changes in owner's investment and
cash flows of the Tacoma plant (the Tacoma Plant) of Occidental Chemical
Corporation (OCC-NY), a New York corporation, and of OCC Tacoma, Inc., a
Delaware corporation (OCC-NY alone or together with its subsidiary, OCC Tacoma,
Inc. herein referred to as OCC). As of February 1, 1997, OCC-NY transferred
substantially all of the Tacoma Plant's assets and liabilities into OCC Tacoma,
Inc., a newly created, wholly-owned subsidiary of OCC-NY. The financial
statements are prepared for a proposed acquisition by Pioneer Companies, Inc.
(Pioneer) of the Tacoma Plant (see Note 10).
Certain information and disclosures normally included in the notes to
financial statements have been condensed or omitted pursuant to such rules and
regulations, but resultant disclosures are in accordance with generally accepted
accounting principles as they apply to interim reporting. These interim
financial statements should be read in conjunction with the Tacoma Plant's
audited financial statements for the year ended December 31, 1996 (1996
Financial Statements).
The Tacoma Plant, located in Tacoma, Washington, consists of a chlor-alkali
process which manufactures chlorine, sodium hydroxide and related products, and
a discontinued ammonia process that has not operated since 1992. The Tacoma
Plant's products are sold to national and international markets as well as to
other plants and affiliates of OCC. The accompanying financial statements
exclude the previously discontinued manufacturing processes associated with
unrelated product lines, including chlorinated organic compounds. Additionally,
the Tacoma Plant does business as OCC and enters into operating and sales
contracts administered by OCC. These include national sales agreements as well
as purchase and energy agreements.
In the opinion of OCC's management, the accompanying interim financial
statements contain all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the Tacoma Plant's financial position as of March
31, 1997 and 1996 and the results of operations and changes in owner's
investment and cash flows for the three months then ended. The results of
operations and cash flows for the period ended March 31, 1997 are not
necessarily indicative of the results of operations or cash flows to be expected
for the full year.
Reference is made to Note 1 to the 1996 Financial Statements for a summary
of significant accounting policies.
Supplemental cash flow information --
For the three months ended March 31, 1997 and 1996, all cash payments for
income taxes were made by Occidental Petroleum Corporation (Occidental). For the
same periods, there were no cash payments for interest.
As of March 31, 1997 and 1996, net trade receivables of $5,021,000 and
$7,671,000, respectively, were transferred to an affiliate (see Note 2).
F-49
<PAGE> 178
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
MARCH 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Risks and uncertainties --
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts, generally not by material amounts. Management
believes that these estimates and assumptions provide a reasonable basis for the
fair presentation of the Tacoma Plant's financial position and results of
operations.
Included in the accompanying balance sheets are deferred income tax assets
of $10,892,000 and $11,952,000 as of March 31, 1997 and 1996, respectively,
consisting of a current portion of $1,249,000 and $1,794,000, shown as current
deferred income tax assets and the noncurrent portion which is netted against
deferred income tax liabilities. Realization of that asset is dependent upon the
generation of sufficient future taxable income. It is expected that the recorded
deferred income tax asset will be realized through future operating income and
reversal of taxable temporary differences.
Since the Tacoma Plant's two principal products are commodities,
significant changes in the prices of chlorine and sodium hydroxide could have a
significant impact on the Tacoma Plant's results of operations for any
particular period.
(2) RECEIVABLES --
As of March 31, 1997 and 1996, OCC transferred, with limited recourse, to
an Occidental affiliate net trade receivables of the Tacoma Plant under a
revolving sale program, in connection with the ultimate sale for cash of such
receivables. The net trade receivables transferred amounted to $5,021,000 and
$7,671,000 as of March 31, 1997 and 1996, respectively. OCC transferred the
receivables to the affiliate in a noncash transaction that was reflected as a
reduction in the Tacoma Plant's Owner's investment. OCC has retained the
collection responsibility with respect to the receivables sold. An interest in
newly created receivables is transferred monthly, net of collections made from
customers. Fees related to the sales of receivables under this program, which
are allocated from OCC, were $69,000 and $96,000 for the three months ended
March 31, 1997 and 1996, respectively, and are included in Other operating
expense.
(3) INVENTORIES --
Inventories are valued at the lower of cost or market. The last-in,
first-out (LIFO) cost method was used in determining the costs of raw materials
and finished goods. Materials and supplies inventories were determined using the
weighted-average cost method. Inventories consisted of the following as of March
31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials............................................... $ 1,221 $ 817
Materials and supplies...................................... 3,422 3,095
Finished goods.............................................. 2,319 2,962
------- -------
6,962 6,874
LIFO reserve................................................ (1,781) (2,609)
------- -------
Inventory at lower of cost or market........................ $ 5,181 $ 4,265
======= =======
</TABLE>
F-50
<PAGE> 179
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
MARCH 31, 1997 AND 1996
(3) INVENTORIES -- (CONTINUED)
During the three months ended March 31, 1997 and 1996, certain inventory
quantities carried at LIFO were reduced. These reductions resulted in a
liquidation of LIFO inventory quantities, the effect of which did not have a
material impact on Cost of sales.
(4) PROPERTY, PLANT AND EQUIPMENT --
Property, plant and equipment at March 31, 1997 and 1996 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land and land improvements.................................. $ 3,017 $ 2,875
Buildings................................................... 9,653 8,915
Machinery and equipment..................................... 118,593 114,417
Construction in progress.................................... 11,639 12,420
-------- --------
142,902 138,627
Accumulated depreciation.................................... (82,207) (76,010)
-------- --------
$ 60,695 $ 62,617
======== ========
</TABLE>
(5) COMMITMENTS AND CONTINGENT LIABILITIES --
Commitments --
Reference is made to Note 6 to the 1996 Financial Statements for a
description of lease commitments, as well as salt and electric power purchase
commitments.
Total purchases under the salt contract were $1,379,000 and $2,050,000 for
the three months ended March 31, 1997 and 1996, respectively.
Total purchases under the electric power contract were $3,143,000 and
$3,314,000 for the three months ended March 31, 1997 and 1996, respectively.
Lawsuits --
Reference is made to Note 6 to the 1996 Financial Statements for a
description of lawsuits.
(6) INCOME TAXES --
Income tax expense for the three months ended March 31, 1997 and 1996
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Current U.S. federal........................................ $1,437 $ 828
Deferred U.S. federal....................................... 461 361
------ ------
$1,898 $1,189
====== ======
</TABLE>
Reference is made to Note 7 to the 1996 Financial Statements for a
description of income taxes.
F-51
<PAGE> 180
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
MARCH 31, 1997 AND 1996
(7) RETIREMENT PLANS AND POSTRETIREMENT BENEFITS --
Reference is made to Note 8 to the 1996 Financial Statements for a
description of retirement plans and postretirement benefits.
(8) RELATED PARTY TRANSACTIONS --
The Tacoma Plant has been charged for certain financial and operational
support services provided by OCC-NY, such as marketing, sales and customer
service, transportation and distribution, and technical services. Charges for
such support services included in the accompanying statements of operations
totaled $2,162,000 and $2,319,000 for the three months ended March 31, 1997 and
1996, respectively. These charges were allocated based on ratios including such
factors as revenues, operating income, fixed assets, and working capital in a
reasonable and consistent manner.
Included in the above allocations are research and development costs, which
are charged to operations by OCC-NY as incurred, and were $3,000 and $7,000 for
the three months ended March 31, 1997 and 1996, respectively. These charges are
included in Selling, general and administrative expenses in the accompanying
statements of operations.
Reference is made to Note 1 to the 1996 Financial Statements regarding the
centralized cash management system of Occidental.
See Note 2 regarding the transfer of receivables to an affiliate.
(9) ENVIRONMENTAL COSTS --
General --
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to existing conditions
caused by past operations, and that do not contribute to current or future
revenue generation, are expensed. Reserves for estimated costs are recorded when
environmental remedial efforts are probable and the costs can be reasonably
estimated. In determining the reserves, the Tacoma Plant uses the most current
information available, including similar past experiences, available technology,
regulations in effect, the timing of remediation and cost-sharing arrangements.
The environmental reserves are based on management's estimate of the most likely
costs to be incurred and are reviewed periodically and adjusted as additional or
new information becomes available.
Tacoma Plant site --
Historic operations of various discontinued processes and equipment at the
Tacoma Plant site, including past activities of other owners or operators of all
or a portion of the Tacoma Plant site, have resulted in releases of certain
hazardous and nonhazardous substances and materials into the soil, surface
water, groundwater and intertidal and subtidal sediments at and in the vicinity
of the Tacoma Plant site.
The Tacoma Plant is permitted under the Resource Conservation and Recovery
Act (RCRA). Although permitted waste management units at the Tacoma Plant site
have been closed in accordance with RCRA, the current RCRA permit requires the
owner and operator of the Tacoma Plant to take corrective action to address the
presence of certain substances in groundwater associated with past practices at
the Tacoma Plant site. The Tacoma Plant is controlling migration of and
remediating substances in groundwater through extraction, treatment and
reinjection (see Reserves and expenditures for the Tacoma Plant site section of
Note 9 below).
F-52
<PAGE> 181
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
MARCH 31, 1997 AND 1996
(9) ENVIRONMENTAL COSTS -- (CONTINUED)
In addition, governmental authorities have identified OCC-NY as a
"potentially responsible party" for the Commencement Bay Nearshore/Tideflats
Superfund Site (the CB/NT site), which includes the Hylebos Waterway, pursuant
to the Comprehensive Environmental Response, Compensation, and Liability Act.
The CB/NT site covers in excess of ten square miles and includes the Tacoma
Plant site and other properties along the Hylebos Waterway and in the vicinity
of Commencement Bay. More than 100 potentially responsible parties have been
identified with respect to the Hylebos Waterway area of the CB/NT site. OCC is
participating with a group of entities in performing a pre-remedial design
investigation to evaluate potential alternatives for remediation of sediments in
the Hylebos Waterway.
It is reasonably possible that the activities of the Tacoma plant
chlor-alkali process and discontinued processes have contributed to the presence
of hazardous and nonhazardous substances and materials at and in the vicinity of
the Tacoma Plant site. It is impossible at this time to determine the quantity
of such substances and materials, if any, attributable to these processes, and
OCC does not have sufficient information available to determine a range of
potential liability.
Reserves and expenditures for the Tacoma Plant site --
At March 31, 1997 and 1996, the current portion of the reserve for
groundwater remediation at the Tacoma Plant site included in Accrued liabilities
was $2,550,000 and $3,335,000, respectively. The reserve for remediation was
originally established in 1990. An addition to the remediation reserve of
$483,000 for the three months ended March 31, 1996 is included in Other
operating expense.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position No. 96-1 "Environmental Remediation Liabilities"
(SOP 96-1), which provides authoritative guidance on specific accounting issues
that are present in the recognition, measurement, display and disclosure of
environmental remediation liabilities. OCC implemented SOP 96-1 effective
January 1, 1997. The implementation of SOP 96-1 resulted in a $367,000 increase
in Income before taxes for the Tacoma Plant for the three months ended March 31,
1997.
(10) SALE OF TACOMA PLANT --
Pioneer is currently negotiating to purchase selected assets, liabilities
and operations of the Tacoma Plant primarily including, but not limited to,
property, plant and equipment and inventories.
The assets, liabilities and operations included in these financial
statements are those required to present the Tacoma Plant as a stand-alone
entity and include certain assets, liabilities and operations that are not
included in the proposed sale to Pioneer, such as certain railcar and equipment
leases. Excluded operations include, among other things, support services such
as marketing, sales and customer service, transportation and distribution, and
technical services. In addition, OCC-NY will retain various chlorine and caustic
soda account contracts which will be supplied in part by a proposed arrangement
between Pioneer and OCC-NY.
Negotiations are ongoing concerning a mutually acceptable method of
acquisition by Pioneer. As currently contemplated, in addition to the primary
asset conveyance instrument, related agreements would allocate responsibility,
as between OCC and Pioneer, for environmental costs and obligations associated
with the Tacoma Plant site arising from pre-closing events or occurrences,
including any investigation, monitoring, treatment or remediation of substances
and materials in water, soils and sediments at and in the vicinity of the Tacoma
Plant site, the Hylebos Waterway and the CB/NT site. This allocation of
responsibility is expected to
F-53
<PAGE> 182
OCCIDENTAL CHEMICAL CORPORATION
TACOMA PLANT
NOTES TO FINANCIAL STATEMENTS
UNAUDITED
MARCH 31, 1997 AND 1996
(10) SALE OF TACOMA PLANT -- (CONTINUED)
include cost and time limitations, above or after which OCC's responsibility for
environmental costs and obligations associated with the Tacoma Plant site would
terminate.
In connection with the proposed sale to Pioneer, OCC has signed a letter of
intent to terminate a certain operating lease by acquiring the machinery and
equipment currently under lease.
F-54
<PAGE> 183
PIONEER AMERICAS ACQUISITION CORP.
All tendered Original Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
>The Exchange Agent
for the Exchange Offer is
UNITED STATES TRUST COMPANY OF NEW YORK
By Facsimile:
(212) 420-6152
ATTENTION: CUSTOMER SERVICE
Confirm by telephone:
(800) 548-6565
By Registered or Certified Mail:
UNITED STATES TRUST COMPANY OF NEW YORK
P.O. BOX 844 COOPER STATION
>NEW YORK, NEW YORK 10276
By Hand:
UNITED STATES TRUST COMPANY OF NEW YORK
111 BROADWAY
NEW YORK, NEW YORK 10006
ATTENTION: CORPORATE TRUST OPERATIONS
By Overnight Courier:
UNITED STATES TRUST COMPANY OF NEW YORK
770 BROADWAY
NEW YORK, NEW YORK 10003
ATTENTION: CORPORATE TRUST OPERATIONS
<PAGE> 184
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
PAAC, which is a Delaware corporation, is empowered by the Delaware General
Corporation Law, subject to the procedures and limitations stated therein, to
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit or proceeding
in which such person is made a party by reason of his being or having been a
director, officer, employee or agent of PAAC. The statute provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors, or otherwise. The Certificate
of Incorporation and by-laws of PAAC provide for indemnification of the
directors and officers of such entities to the full extent permitted by the
Delaware General Corporation Law.
PAAC maintains an insurance policy providing for indemnification of its
officers, directors and certain other persons against liabilities and expenses
incurred by any of them in certain stated proceedings and under certain stated
conditions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
<C> <S>
2.1 -- Asset Purchase Agreement, dated as of May 14, 1997, by
and among OCC Tacoma, Inc. and Pioneer (incorporated by
reference to Exhibit 2 to the Company's Current Report on
Form 8-K, dated June 17, 1997).
3.1 -- Certificate of Incorporation of PAAC (incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.2 -- By-laws of PAAC (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-4 (File
No. 33-98828) declared effective by the Commission on
December 22, 1995).
3.3 -- Certificate of Incorporation of PAI (incorporated by
reference to Exhibit 3.3 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.4 -- By-laws of PAI (incorporated by reference to Exhibit 3.4
to the Company's Registration Statement on Form S-4 (File
No. 33-98828) declared effective by the Commission on
December 22, 1995).
3.5 -- Certificate of Incorporation of PCAC (incorporated by
reference to Exhibit 3.5 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.6 -- By-laws of PCAC (Incorporated by reference to Exhibit 3.6
to the Company's Registration Statement on Form S-4 (File
No. 33-98828) declared effective by the Commission on
December 22, 1995).
3.7 -- Certificate of Incorporation of Imperial West
(incorporated by reference to Exhibit 3.7 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.8 -- By-laws of Imperial West (incorporated by reference to
Exhibit 3.8 to the Company's Registration Statement on
Form S-4 (File No. 33-98828) declared effective by the
Commission on December 22, 1995).
3.9 -- Certificate of Incorporation of All-Pure (incorporated by
reference to Exhibit 3.9 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
II-1
</TABLE>
<PAGE> 185
<TABLE>
<CAPTION>
<C> <S>
3.10 -- By-laws of All-Pure (incorporated by reference to Exhibit
3.10 to the Company's Registration Statement on Form S-4
(File No. 33-98828) declared effective by the Commission
on December 22, 1995).
3.11 -- Certificate of Incorporation of Black Mountain Power
Company (incorporated by reference to Exhibit 3.11 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.12 -- By-laws of Black Mountain Power Company (incorporated by
reference to Exhibit 3.12 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.13 -- Certificate of Incorporation of All-Pure Chemical
Northwest, Inc. (incorporated by reference to Exhibit
3.13 to the Company's Registration Statement on Form S-4
(File No. 33-98828) declared effective by the Commission
on December 22, 1995).
3.14 -- By-laws of All-Pure Chemical Northwest, Inc.
(incorporated by reference to Exhibit 3.14 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.15 -- Certificate of Incorporation of Pioneer Chlor Alkali
International, Inc. (incorporated by reference to Exhibit
3.15 to the Company's Registration Statement on Form S-4
(File No. 33-98828) declared effective by the Commission
on December 22, 1995).
3.16 -- By-laws of Pioneer Chlor Alkali International, Inc.
(incorporated by reference to Exhibit 3.16 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.17 -- Certificate of Incorporation of G.O.W. Corporation
(incorporated by reference to Exhibit 3.17 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.18 -- By-laws of G.O.W. Corporation (incorporated by reference
to Exhibit 3.18 to the Company's Registration Statement
on Form S-4 (File No. 33-98828) declared effective by the
Commission on December 22, 1995).
3.19 -- Certificate of Incorporation of Pioneer (East), Inc.
3.20 -- By-laws of Pioneer (East), Inc.
3.21 -- Certificate of Incorporation of T.C. Holdings, Inc.
3.22 -- By-laws of T.C. Holdings, Inc.
3.23 -- Certificate of Incorporation of T.C. Products, Inc.
3.22 -- By-laws of T.C. Products, Inc.
4.1 -- Indenture, dated as of June 17, 1997, by and among PAAC,
the Subsidiary Guarantors defined therein and United
States Trust Company of New York, as Trustee, relating to
$200,000,000 principal amount of 9 1/4% Series A Senior
Notes due 2007, including form of Note and Guarantees.
4.2(a) -- Deed of Trust, Assignment of Leases and Rents, Security
Agreement, Fixture Filing and Financing Statement by PCAC
(Tacoma, Washington).
4.2(b) -- Mortgage, Assignment of Leases and Rents, Security
Agreement, Fixture Filing and Financing Statement by PCAC
(St. Gabriel, Louisiana).
4.2(c) -- Deed of Trust, Assignment of Leases and Rents, Security
Agreement, Fixture Filing and Financing Statement by PCAC
(Henderson, Nevada).
4.3(a) -- Term Loan Agreement, dated as of June 17, 1997, among
PAAC, Various Financial Institutions, as Lenders, DLJ
Capital Funding, Inc., as the Syndication Agent, Salomon
Brothers Holding Company Inc, as the Documentation Agent
and Bank of America Illinois, as the Administrative Agent
(the "Term Loan Agreement").
</TABLE>
II-2
<PAGE> 186
<TABLE>
<CAPTION>
<C> <S>
4.3(b) -- Subsidiary Guaranty, dated June 17, 1997, executed by
each of the Subsidiaries party thereto, as guarantor,
respectively, in favor of the Lenders, guaranteeing the
obligations of one another under the Term Loan Agreement.
4.4 -- Security Agreement, dated as of June 17, 1997, among PCAC
and United States Trust Company of New York, as
Collateral Agent.
4.5 -- Stock Pledge Agreement, dated as of June 17, 1997, among
PAI and United States Trust Company of New York, as
Collateral Agent.
4.6(a) -- Loan and Security Agreement, dated as of June 17, 1997,
by and among PAAC, Bank of America Illinois, as Agent and
Lender and the other Lenders party thereto (the
"Revolving Loan Agreement").
4.6(b) -- Master Corporate Guaranty, dated June 17, 1997, executed
by each of the Subsidiaries 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
Revolving Loan Agreement.
4.6(c) -- Master Security Agreement, dated June 17, 1997, executed
by each of the Subsidiaries party thereto, as debtor,
respectively, in favor of Bank of America Illinois, as
Agent, for the ratable benefit of the lenders.
4.7 -- Intercreditor and Collateral Agency Agreement, dated as
of June 17, 1997 by and among United States Trust Company
of New York, as Trustee and Collateral Agent, Bank of
America Illinois, as Agent, PAAC, PAI and PCAC.
4.8 -- Exchange and Registration Rights Agreement, dated as of
June 17, 1997, by and among PAAC, the Subsidiary
Guarantors and the Initial Purchasers.
*5.1 -- Opinion of Willkie Farr & Gallagher.
*5.2 -- Opinion of Kent R. Stephenson, Esq.
*8.1 -- Opinion of Willkie Farr & Gallagher with respect to
certain tax matters.
10.1 -- Contingent Payment Agreement, dated as of April 20, 1995,
by and among Pioneer (formerly, GEV corporation), PAAC
and the Sellers defined therein (incorporated by
reference to Exhibit 10.2 to the Current Report on Form
8-K of Pioneer, dated April 20, 1995).
10.2 -- Tax Sharing Agreement, dated as of April 20, 1995, by and
among Pioneer, PAAC and the Subsidiary Guarantors defined
therein (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
10.3 -- Pioneer Companies, Inc. 1995 Stock Incentive Plan
(incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
10.4 -- Pioneer Companies, Inc. Key Executive Stock Grant Plan
(incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q of Pioneer for the
quarterly period ended June 30, 1996).
10.5 -- Pioneer Chlor Alkali Company, Inc. Supplemental
Retirement Plan (incorporated by reference to Exhibit
10.5 to the Annual Report on Form 10-K of Pioneer for the
fiscal year ended December 31, 1995).
10.6 -- Employment Agreement, dated as of April 20, 1995, between
Pioneer and Richard C. Kellogg, Jr. (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form
10-Q of Pioneer for the quarterly period ended June 30,
1995).
</TABLE>
II-3
<PAGE> 187
<TABLE>
<CAPTION>
<S> <C>
10.7 -- Employment Agreement, dated November 1, 1992, and
First Amendment to Employment Agreement, dated as of April 20, 1995, between
Pioneer Chlor Alkali Company, Inc. and Paul J. Kienholz (incorporated by
reference to Exhibit 10.7 to Pioneer's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.8 -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc.
and James E. Glattly (incorporated by reference to Exhibit 10.8 to Pioneer's
Annual Report on Form 10-K for the year ended December 31, 1995).
10.9 -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc.
and Verrill M. Norwood, Jr. (incorporated by reference to Exhibit 10.9 to
Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995).
10.10 -- Executive Employment Agreement, dated January 4, 1997, between Pioneer
Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit
10.10 to the Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1996).
10.11 -- Stock Purchase Agreement, dated January 4, 1997, between Pioneer Companies,
Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.11 to the
Annual Report on Form 10-K of the Company for the fiscal year ended December
31, 1996).
10.12 -- Non-Qualified Stock Option Agreement, dated January 4, 1997, between Pioneer
Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit
10.12 to the Annual Report on Form 10-K of the Company for the fiscal year
ended December 31, 1996).
*10.13 -- Chlorine and Caustic Soda Sales Agreement, dated as of June 17, 1997, between
Occidental Chemical Corporation and PCAC.
*10.14 -- Chlorine Purchase Agreement, dated as of June 17, 1997, between OCC Tacoma,
Inc. and PCAC.
*10.15 -- Environmental Operating Agreement, dated as of June 17, 1997, between OCC
Tacoma and PCAC.
12.1 -- Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
16.1 -- Letter from Ernst & Young LLP regarding change in independent accountants
(incorporated by reference to Exhibit 16.1 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared effective by the
Commission on December 22, 1995).
21.1 -- Subsidiaries of the Registrants.
23.1 -- Independent Auditors' Consent of Deloitte & Touche LLP.
23.2 -- Independent Auditors' Consent of Ernst & Young LLP.
23.3 -- Independent Auditors' Consent of Piercy, Bowler, Taylor & Kern.
23.4 -- Independent Public Accountants' Consent of Arthur Andersen LLP.
*23.5 -- Consents of Willkie Farr & Gallagher (included in their opinions filed as
Exhibits 5.1 and 8.1).
*23.6 -- Consent of Kent R. Stephenson, Esq. (included in his opinion filed as Exhibit
5.2).
24.1 -- Powers of Attorney (included in the signature pages hereto).
25.1 -- Statement on Form T-1 of Eligibility of Trustee.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Clients.
99.4 -- Form of Letter to Nominees.
</TABLE>
II-4
<PAGE> 188
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules:
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
All other schedules have been omitted because they are not applicable or
not required or the required information is included in the financial statements
or notes thereto.
ITEM 22. UNDERTAKINGS.
The undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Registrants
pursuant to the provisions, described under Item 20 above, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrants will, unless in
the opinion of their counsel the matter has been settled by controlling
precedent, submit to court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-5
<PAGE> 189
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
PIONEER AMERICAS ACQUISITION CORP.
By: /s/ PHILIP J. ABLOVE
----------------------------------
Name: Philip J. Ablove
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL J. FERRIS President, Chief Executive Officer July 2, 1997
- ----------------------------------------------------- and Director (principal executive
Michael J. Ferris officer)
/s/ PHILIP J. ABLOVE Vice President, Chief Financial July 2, 1997
- ----------------------------------------------------- Officer and Director (principal
Philip J. Ablove financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ WILLIAM R. BERKLEY Director July 2, 1997
- -----------------------------------------------------
William R. Berkley
/s/ ANDREW M. BURSKY Director July 2, 1997
- -----------------------------------------------------
Andrew M. Bursky
/s/ DONALD J. DONAHUE Director July 2, 1997
- -----------------------------------------------------
Donald J. Donahue
/s/ RICHARD C. KELLOGG, JR. Director July 2, 1997
- -----------------------------------------------------
Richard C. Kellogg, Jr.
</TABLE>
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<PAGE> 190
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ PAUL J. KIENHOLZ Director July 2, 1997
- -----------------------------------------------------
Paul J. Kienholz
/s/ JACK H. NUSBAUM Director July 2, 1997
- -----------------------------------------------------
Jack H. Nusbaum
/s/ THOMAS H. SCHNITZIUS Director July 2, 1997
- -----------------------------------------------------
Thomas H. Schnitzius
</TABLE>
II-7
<PAGE> 191
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
PIONEER AMERICAS, INC.
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL J. FERRIS Chairman of the Board and President July 2, 1997
- ----------------------------------------------------- (principal executive officer)
Michael J. Ferris
/s/ PHILIP J. ABLOVE Vice President, Chief Financial July 2, 1997
- ----------------------------------------------------- Officer, Treasurer and Director
Philip J. Ablove (principal financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ WILLIAM L. MAHONE Director July 2, 1997
- -----------------------------------------------------
William L. Mahone
</TABLE>
II-8
<PAGE> 192
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
PIONEER CHLOR ALKALI COMPANY, INC.
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES E. GLATTLY President and Director (principal July 2, 1997
- ----------------------------------------------------- executive officer)
James E. Glattly
/s/ PHILIP J. ABLOVE Vice President and Chief Financial July 2, 1997
- ----------------------------------------------------- Officer and Director (principal
Philip J. Ablove financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ MICHAEL J. FERRIS Chairman of the Board July 2, 1997
- -----------------------------------------------------
Michael J. Ferris
/s/ WILLIAM L. MAHONE Director July 2, 1997
- -----------------------------------------------------
William L. Mahone
</TABLE>
II-9
<PAGE> 193
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
IMPERIAL WEST CHEMICAL CO.
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES M. WINGARD President and Director (principal July 2, 1997
- ----------------------------------------------------- executive officer)
James M. Wingard
/s/ PHILIP J. ABLOVE Vice President and Chief Financial July 2, 1997
- ----------------------------------------------------- Officer and Director (principal
Philip J. Ablove financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ MICHAEL J. FERRIS Chairman of the Board July 2, 1997
- -----------------------------------------------------
Michael J. Ferris
/s/ WILLIAM L. MAHONE Director July 2, 1997
- -----------------------------------------------------
William L. Mahone
</TABLE>
II-10
<PAGE> 194
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
ALL-PURE CHEMICAL CO.
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ RONALD E. CIORA President and Director (principal July 2, 1997
- ----------------------------------------------------- executive officer)
Ronald E. Ciora
/s/ PHILIP J. ABLOVE Vice President and Chief Financial July 2, 1997
- ----------------------------------------------------- Officer and Director (principal
Philip J. Ablove financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ MICHAEL J. FERRIS Chairman of the Board July 2, 1997
- -----------------------------------------------------
Michael J. Ferris
/s/ WILLIAM L. MAHONE Director July 2, 1997
- -----------------------------------------------------
William L. Mahone
</TABLE>
II-11
<PAGE> 195
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
BLACK MOUNTAIN POWER COMPANY
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ TERRY K. GRAVES President and Director (principal July 2, 1997
- ----------------------------------------------------- executive officer)
Terry K. Graves
/s/ PHILIP J. ABLOVE Vice President and Chief Financial July 2, 1997
- ----------------------------------------------------- Officer and Director (principal
Philip J. Ablove financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ MICHAEL J. FERRIS Chairman of the Board July 2, 1997
- -----------------------------------------------------
Michael J. Ferris
/s/ JAMES E. GLATTLY Director July 2, 1997
- -----------------------------------------------------
James E. Glattly
</TABLE>
II-12
<PAGE> 196
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
ALL-PURE CHEMICAL NORTHWEST, INC.
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ RONALD E. CIORA President and Director (principal July 2, 1997
- ----------------------------------------------------- executive officer)
Ronald E. Ciora
/s/ PHILIP J. ABLOVE Vice President and Chief Financial July 2, 1997
- ----------------------------------------------------- Officer and Director (principal
Philip J. Ablove financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ MICHAEL J. FERRIS Chairman of the Board July 2, 1997
- -----------------------------------------------------
Michael J. Ferris
</TABLE>
II-13
<PAGE> 197
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
PIONEER CHLOR ALKALI INTERNATIONAL, INC.
By: /s/ KENT R. STEPHENSON
----------------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MICHAEL J. FERRIS Chairman of the Board (principal July 2, 1997
- ----------------------------------------------------- executive officer)
Michael J. Ferris
/s/ PHILIP J. ABLOVE Vice President (principal financial July 2, 1997
- ----------------------------------------------------- officer)
Philip J. Ablove
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ DAVID F. CALLAGHAN Director July 2, 1997
- -----------------------------------------------------
David F. Callaghan
/s/ JAMES A. FIELDS Director July 2, 1997
- -----------------------------------------------------
James A. Fields
/s/ DAVID A. LESLIE Director July 2, 1997
- -----------------------------------------------------
David A. Leslie
</TABLE>
II-14
<PAGE> 198
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
G. O. W. CORPORATION
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ TERRY K. GRAVES President and Director (principal July 2, 1997
- ----------------------------------------------------- executive officer)
Terry K. Graves
/s/ PHILIP J. ABLOVE Vice President and Chief Financial July 2, 1997
- ----------------------------------------------------- Officer (principal financial
Philip J. Ablove officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
</TABLE>
II-15
<PAGE> 199
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
PIONEER (EAST), INC.
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KENT R. STEPHENSON President, Secretary and Chairman of July 2, 1997
- ----------------------------------------------------- the Board (principal executive
Kent R. Stephenson officer)
/s/ ROBERT C. WILLIAMS Treasurer and Director (principal July 2, 1997
- ----------------------------------------------------- financial and accounting officer)
Robert C. Williams
/s/ VICTORIA L. GARRETT Director July 2, 1997
- -----------------------------------------------------
Victoria L. Garrett
</TABLE>
II-16
<PAGE> 200
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
T.C. HOLDINGS, INC.
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ RONALD E. CIORA President and Director (principal July 2, 1997
- ----------------------------------------------------- executive officer)
Ronald E. Ciora
/s/ PHILIP J. ABLOVE Vice President and Chief Financial July 2, 1997
- ----------------------------------------------------- Officer and Director (principal
Philip J. Ablove financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ MICHAEL J. FERRIS Chairman of the Board July 2, 1997
- -----------------------------------------------------
Michael J. Ferris
/s/ WILLIAM L. MAHONE Director July 2, 1997
- -----------------------------------------------------
William L. Mahone
</TABLE>
II-17
<PAGE> 201
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on the 2nd day of July, 1997.
T.C. PRODUCTS, INC.
By: /s/ KENT R. STEPHENSON
----------------------------------
Name: Kent R. Stephenson
Title: Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Philip J. Ablove and Kent R. Stephenson, and each
of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Registration Statement, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ RONALD E. CIORA President and Director (principal July 2, 1997
- ----------------------------------------------------- executive officer)
Ronald E. Ciora
/s/ PHILIP J. ABLOVE Vice President and Chief Financial July 2, 1997
- ----------------------------------------------------- Officer and Director (principal
Philip J. Ablove financial officer)
/s/ JOHN R. BEAVER Controller (principal accounting July 2, 1997
- ----------------------------------------------------- officer)
John R. Beaver
/s/ MICHAEL J. FERRIS Chairman of the Board July 2, 1997
- -----------------------------------------------------
Michael J. Ferris
/s/ WILLIAM L. MAHONE Director July 2, 1997
- -----------------------------------------------------
William L. Mahone
</TABLE>
II-18
<PAGE> 202
SCHEDULE II
PIONEER AMERICAS ACQUISITION CORP.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSE ADDITIONS DEDUCTIONS PERIOD
----------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Period from March 6, 1995 through
December 31, 1995:
Allowance for doubtful accounts....... $ -- $255 $1,416(C) $(247)(A) $1,424
Year ended December 31, 1996:
Allowance for doubtful accounts....... 1,424 (98) -- (15)(A) 1,311
Quarter ended March 31, 1997:
Allowance for doubtful accounts....... 1,311 27 102 -- 1,440
</TABLE>
PREDECESSOR COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSE ADDITIONS DEDUCTIONS PERIOD
----------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts....... 521 1,235 300(B) (18)(A) 2,038
Period from January 1, 1995 through
April 20, 1995:
Allowance for doubtful accounts....... 2,038 47 -- (169)(A) 1,916
</TABLE>
- ---------------
(A) Uncollectible accounts written off, net of recoveries.
(B) Allowance balance established in May 1994 for the acquisition of GPS.
(C) Allowance balance established on April 20, 1995 for the acquisition of
Pioneer Americas, Inc.
<PAGE> 203
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
2.1 -- Asset Purchase Agreement, dated as of May 14, 1997, by
and among OCC Tacoma, Inc. and Pioneer (incorporated by
reference to Exhibit 2 to the Company's Current Report on
Form 8-K, dated June 17, 1997).
3.1 -- Certificate of Incorporation of PAAC (incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.2 -- By-laws of PAAC (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-4 (File
No. 33-98828) declared effective by the Commission on
December 22, 1995).
3.3 -- Certificate of Incorporation of PAI (incorporated by
reference to Exhibit 3.3 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.4 -- By-laws of PAI (incorporated by reference to Exhibit 3.4
to the Company's Registration Statement on Form S-4 (File
No. 33-98828) declared effective by the Commission on
December 22, 1995).
3.5 -- Certificate of Incorporation of PCAC (incorporated by
reference to Exhibit 3.5 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.6 -- By-laws of PCAC (Incorporated by reference to Exhibit 3.6
to the Company's Registration Statement on Form S-4 (File
No. 33-98828) declared effective by the Commission on
December 22, 1995).
3.7 -- Certificate of Incorporation of Imperial West
(incorporated by reference to Exhibit 3.7 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.8 -- By-laws of Imperial West (incorporated by reference to
Exhibit 3.8 to the Company's Registration Statement on
Form S-4 (File No. 33-98828) declared effective by the
Commission on December 22, 1995).
3.9 -- Certificate of Incorporation of All-Pure (incorporated by
reference to Exhibit 3.9 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.10 -- By-laws of All-Pure (incorporated by reference to Exhibit
3.10 to the Company's Registration Statement on Form S-4
(File No. 33-98828) declared effective by the Commission
on December 22, 1995).
3.11 -- Certificate of Incorporation of Black Mountain Power
Company (incorporated by reference to Exhibit 3.11 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.12 -- By-laws of Black Mountain Power Company (incorporated by
reference to Exhibit 3.12 to the Company's Registration
Statement on Form S-4 (File No. 33-98828) declared
effective by the Commission on December 22, 1995).
3.13 -- Certificate of Incorporation of All-Pure Chemical
Northwest, Inc. (incorporated by reference to Exhibit
3.13 to the Company's Registration Statement on Form S-4
(File No. 33-98828) declared effective by the Commission
on December 22, 1995).
3.14 -- By-laws of All-Pure Chemical Northwest, Inc.
(incorporated by reference to Exhibit 3.14 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
</TABLE>
<PAGE> 204
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<C> <S>
3.15 -- Certificate of Incorporation of Pioneer Chlor Alkali
International, Inc. (incorporated by reference to Exhibit
3.15 to the Company's Registration Statement on Form S-4
(File No. 33-98828) declared effective by the Commission
on December 22, 1995).
3.16 -- By-laws of Pioneer Chlor Alkali International, Inc.
(incorporated by reference to Exhibit 3.16 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.17 -- Certificate of Incorporation of G.O.W. Corporation
(incorporated by reference to Exhibit 3.17 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
3.18 -- By-laws of G.O.W. Corporation (incorporated by reference
to Exhibit 3.18 to the Company's Registration Statement
on Form S-4 (File No. 33-98828) declared effective by the
Commission on December 22, 1995).
3.19 -- Certificate of Incorporation of Pioneer (East), Inc.
3.20 -- By-laws of Pioneer (East), Inc.
3.21 -- Certificate of Incorporation of T.C. Holdings, Inc.
3.22 -- By-laws of T.C. Holdings, Inc.
3.23 -- Certificate of Incorporation of T.C. Products, Inc.
3.24 -- By-laws of T.C. Products, Inc.
4.1 -- Indenture, dated as of June 17, 1997, by and among PAAC,
the Subsidiary Guarantors defined therein and United
States Trust Company of New York, as Trustee, relating to
$200,000,000 principal amount of 9 1/4% Series A Senior
Notes due 2007, including form of Note and Guarantees.
4.2(a) -- Deed of Trust, Assignment of Leases and Rents, Security
Agreement, Fixture Filing and Financing Statement by PCAC
(Tacoma, Washington).
4.2(b) -- Mortgage, Assignment of Leases and Rents, Security
Agreement, Fixture Filing and Financing Statement by PCAC
(St. Gabriel, Louisiana).
4.2(c) -- Deed of Trust, Assignment of Leases and Rents, Security
Agreement, Fixture Filing and Financing Statement by PCAC
(Henderson, Nevada).
4.3(a) -- Term Loan Agreement, dated as of June 17, 1997, among
PAAC, Various Financial Institutions, as Lenders, DLJ
Capital Funding, Inc., as the Syndication Agent, Salomon
Brothers Holding Company Inc, as the Documentation Agent
and Bank of America Illinois, as the Administrative Agent
(the "Term Loan Agreement").
4.3(b) -- Subsidiary Guaranty, dated June 17, 1997, executed by
each of the Subsidiaries party thereto, as guarantor,
respectively, in favor of the Lenders, guaranteeing the
obligations of one another under the Term Loan Agreement.
4.4 -- Security Agreement, dated as of June 17, 1997, among PCAC
and United States Trust Company of New York, as
Collateral Agent.
4.5 -- Stock Pledge Agreement, dated as of June 17, 1997, among
PAI and United States Trust Company of New York, as
Collateral Agent.
4.6(a) -- Loan and Security Agreement, dated as of June 17, 1997,
by and among PAAC, Bank of America Illinois, as Agent and
Lender and the other Lenders party thereto (the
"Revolving Loan Agreement").
4.6(b) -- Master Corporate Guaranty, dated June 17, 1997, executed
by each of the Subsidiaries 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
Revolving Loan Agreement.
</TABLE>
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EXHIBIT DESCRIPTION
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4.6(c) -- Master Security Agreement, dated June 17, 1997, executed
by each of the Subsidiaries party thereto, as debtor,
respectively, in favor of Bank of America Illinois, as
Agent, for the ratable benefit of the lenders
4.7 -- Intercreditor and Collateral Agency Agreement, dated as
of June 17, 1997 by and among United States Trust Company
of New York, as Trustee and Collateral Agent, Bank of
America Illinois, as Agent, PAAC, PAI and PCAC.
4.8 -- Exchange and Registration Rights Agreement, dated as of
June 17, 1997, by and among PAAC, the Subsidiary
Guarantors and the Initial Purchasers.
*5.1 -- Opinion of Willkie Farr & Gallagher.
*5.2 -- Opinion of Kent R. Stephenson, Esq.
*8.1 -- Opinion of Willkie Farr & Gallagher with respect to
certain tax matters.
10.1 -- Contingent Payment Agreement, dated as of April 20, 1995,
by and among Pioneer (formerly, GEV corporation), PAAC
and the Sellers defined therein (incorporated by
reference to Exhibit 10.2 to the Current Report on Form
8-K of Pioneer, dated April 20, 1995).
10.2 -- Tax Sharing Agreement, dated as of April 20, 1995, by and
among Pioneer, PAAC and the Subsidiary Guarantors defined
therein (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
10.3 -- Pioneer Companies, Inc. 1995 Stock Incentive Plan
(incorporated by reference to Exhibit 10.4 to the
Company's Registration Statement on Form S-4 (File No.
33-98828) declared effective by the Commission on
December 22, 1995).
10.4 -- Pioneer Companies, Inc. Key Executive Stock Grant Plan
(incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q of Pioneer for the
quarterly period ended June 30, 1996).
10.5 -- Pioneer Chlor Alkali Company, Inc. Supplemental
Retirement Plan (incorporated by reference to Exhibit
10.5 to the Annual Report on Form 10-K of Pioneer for the
fiscal year ended December 31, 1995).
10.6 -- Employment Agreement, dated as of April 20, 1995, between
Pioneer and Richard C. Kellogg, Jr. (incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form
10-Q of Pioneer for the quarterly period ended June 30,
1995).
10.7 -- Employment Agreement, dated November 1, 1992, and First
Amendment to Employment Agreement, dated as of April 20,
1995, between Pioneer Chlor Alkali Company, Inc. and Paul
J. Kienholz (incorporated by reference to Exhibit 10.7 to
Pioneer's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.8 -- Employment Agreement, dated April 20, 1995, between
Pioneer Americas, Inc. and James E. Glattly (incorporated
by reference to Exhibit 10.8 to Pioneer's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.9 -- Employment Agreement, dated April 20, 1995, between
Pioneer Americas, Inc. and Verrill M. Norwood, Jr.
(incorporated by reference to Exhibit 10.9 to Pioneer's
Annual Report on Form 10-K for the year ended December
31, 1995).
10.10 -- Executive Employment Agreement, dated January 4, 1997,
between Pioneer Companies, Inc. and Michael J. Ferris
(incorporated by reference to Exhibit 10.10 to the Annual
Report on Form 10-K of the Company for the fiscal year
ended December 31, 1996).
</TABLE>
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10.11 -- Stock Purchase Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and
Michael J. Ferris (incorporated by reference to Exhibit 10.11 to the Annual Report on
Form 10-K of the Company for the fiscal year ended December 31, 1996).
10.12 -- Non-Qualified Stock Option Agreement, dated January 4, 1997, between Pioneer Companies,
Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.12 to the Annual
Report on Form 10-K of the Company for the fiscal year ended December 31, 1996).
*10.13 -- Chlorine and Caustic Soda Sales Agreement, dated as of June 17, 1997, between
Occidental Chemical Corporation and PCAC.
*10.14 -- Chlorine Purchase Agreement, dated as of June 17, 1997, between OCC Tacoma, Inc. and
PCAC.
*10.15 -- Environmental Operating Agreement, dated as of June 17, 1997, between OCC Tacoma and
PCAC
12.1 -- Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
16.1 -- Letter from Ernst & Young LLP regarding change in independent accountants (incorporated
by reference to Exhibit 16.1 to the Company's Registration Statement on Form S-4 (File
No. 33-98828) declared effective by the Commission on December 22, 1995).
21.1 -- Subsidiaries of the Registrants.
23.1 -- Independent Auditors' Consent of Deloitte & Touche LLP.
23.2 -- Independent Auditors' Consent of Ernst & Young LLP.
23.3 -- Independent Auditors' Consent of Piercy, Bowler, Taylor & Kern.
23.4 -- Independent Public Accountants' Consent of Arthur Andersen LLP.
*23.5 -- Consents of Willkie Farr & Gallagher (included in their opinions filed as Exhibits 5.1
and 8.1).
*23.6 -- Consent of Kent R. Stephenson, Esq. (included in his opinion filed as Exhibit 5.2).
24.1 -- Powers of Attorney (included in the signature pages hereto).
25.1 -- Statement on Form T-1 of Eligibility of Trustee.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Clients.
99.4 -- Form of Letter to Nominees.
</TABLE>
<PAGE> 1
EXHIBIT 3.19
CERTIFICATE OF INCORPORATION
OF
PIONEER (EAST), INC.
FIRST: The name of the Corporation is Pioneer (East), Inc.
(the "Corporation").
SECOND: The registered office of the Corporation in the State
of Delaware is located at 900 Market Street, Suite 200, Wilmington, County of
New Castle, Delaware 19801. The registered agent of the Corporation at that
address is Griffin Corporate Services, Inc.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporation may be organized under the General
Corporation Law of the State of Delaware; provided that the Corporation's
activities shall be confined to the management and maintenance of its
intangible investments and the collection and distribution of the income from
such investments or from tangible property physically located outside Delaware,
all as defined in, and in such manner to qualify for exemption from income
taxation under, Section 1902(b)(8) of Title 30 of the Delaware Code, or under
the corresponding provision of any subsequent law.
<PAGE> 2
FOURTH: The Corporation shall have authority to issue 1,000
shares of common stock, having a par value of $.01 (one cent) per share.
FIFTH: The Corporation shall indemnify directors and officers
of the Corporation to the fullest extent permissible by law.
SIXTH: The directors of the Corporation shall incur no
personal liability to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty as a director; provided, however, that the
directors of the Corporation shall continue to be subject to liability (i) for
any breach of their duty of loyalty to the Corporation or stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the directors derived any improper personal benefit. In discharging the
duties of their respective positions, the board of directors, committees of the
board, individual directors and individual officers may, in considering the
best interest of the Corporation, consider the effects of any actions upon
employees, suppliers and customers of the Corporation, communities in which
offices or other establishments of the Corporation are located, and all other
pertinent factors. In addition, the personal liability of the directors shall
further be limited to the fullest extent permitted by any future amendments to
Delaware law.
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<PAGE> 3
SEVENTH: The business and affairs of the Corporation shall be
managed by or under the direction of the board of directors, the number of
members of which shall be set forth in the by-laws of the Corporation. The
directors need not be elected by ballot unless required by the by-laws of the
Corporation.
EIGHTH: Meetings of the stockholders will be held within the
State of Delaware. The books of the Corporation will be kept (subject to the
provisions contained in the General Corporation Law) in the State of Delaware
at such place or places as may be designated from time to time by the board of
directors or in the by-laws of the Corporation.
NINTH: In the furtherance and not in limitation of the
objects, purposes and powers prescribed herein and conferred by the laws of the
State of Delaware, the board of directors is expressly authorized to make,
amend and repeal the by-laws.
TENTH: The Corporation reserves the right to amend or repeal
any provision contained in the Certificate of Incorporation in the manner now
or hereinafter prescribed by the laws of the State of Delaware. All rights
herein conferred are granted subject to the reservation.
ELEVENTH: The Corporation shall have no power and may not be
authorized by its stockholders or directors (i) to perform or omit to do any
act that would cause the Corporation to lose its status as a corporation exempt
from the Delaware Corporation
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<PAGE> 4
income tax under Section 1902(b)(8) of Title 30 of the Delaware Code, or under
the corresponding provision of any subsequent law, or (ii) to conduct any
activities outside of Delaware which could result in the Corporation being
subject to tax outside of Delaware.
TWELFTH: The name and mailing address of the incorporator is
Barbara A. Steen, 900 Market Street, Suite 200, Wilmington, Delaware 19801.
THIRTEENTH: The powers of the incorporator shall terminate upon
election of directors.
I, THE UNDERSIGNED, being the incorporator hereinbefore named for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 5th day of June, 1996.
/s/ Barbara A. Steen
--------------------------------
Barbara A. Steen, Incorporator
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<PAGE> 1
EXHIBIT 3.20
PIONEER (EAST), INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the Board of Directors shall each year fix,
which date shall be within thirteen (13) months subsequent to the later of the
date of incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of
Directors or the chief executive officer and shall be held at such place, on
such date, and at such time as they or he or she shall fix.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time
by the Delaware General Corporation Law or the Certificate of Incorporation of
the Corporation).
<PAGE> 2
When a meeting is adjourned to another place, date, or time, written
notice need not be given of the adjourned meeting if the place, date, and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty (30) days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all
of the shares of the stock entitled to vote at the meeting, present in person
or by proxy, shall constitute a quorum for all purposes, unless or except to
the extent that the presence of a larger number may be required by law. Where
a separate vote by a class or classes is required, a majority of the shares of
such class or classes present in person or represented by proxy shall
constitute a quorum entitled to take action with respect to that vote on that
matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
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<PAGE> 3
If a notice of any adjourned special meeting or stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization.
Such person as the Board of Directors may have designate and/or, in
the absence of such a person, the chief executive officer of the Corporation
or, in his or her absence, such person as may be chosen by the holders of a
majority of the shares entitled to vote who are present, in person or by proxy,
shall call to order any meeting of the stockholders and act as chairman of the
meeting. In the absence of the Secretary of the Corporation, the secretary of
the meeting shall be such person as the chairman appoints.
Section 6. Conduct of Business.
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an
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<PAGE> 4
instrument in writing filed in accordance with the procedure established for
the meeting.
Each stockholder shall have one (1) vote for every share of stock
entitled to vote which is registered in his or her name on the record date for
the meeting, except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast,
and except as otherwise required by law, all other matters shall be determined
by a majority of the votes cast.
Section 8. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any propose germane to the meeting, during ordinary business
hours for a
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<PAGE> 5
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting
is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.
Section 9. Consent of Stockholders in Lieu of Meeting.
Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be made by hand or by certified or
registered mail, return receipt requested.
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<PAGE> 6
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the date the earliest dated consent is delivered to the Corporation, a written
consent or consents signed by a sufficient number of holders to take action are
delivered to the Corporation in the manner prescribed in the first paragraph of
this Section.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Officer.
The number of directors who shall constitute the whole Board shall be
such number as the Board of Directors shall from time to time have designated,
except that in the absence of any such designation, such number shall be three
(3). Each director shall be elected for a term of one year and until his or
her successor is elected and qualified, except as otherwise provided herein or
required by law.
Whenever the authorized number of directors is increased between
annual meetings of the stockholders, a majority of the directors then in office
shall have the power to elect such new directors for the balance of a term and
until their successors are elected and qualified. Any decrease in the
authorized number of directors shall not become effective until the expiration
of the term of the directors then in office unless, at the time of such
decrease, there shall be vacancies on the board which are being eliminated by
the decrease.
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<PAGE> 7
Section 2. Vacancies.
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his or her successor is elected and
qualified.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third
(1/3) of the directors then in office (rounded up to the nearest whole number)
or by the chief executive officer and shall be held at such place, on such
date, and at such time as they or he or she shall fix. Notice of the place,
date, and time of each such special meeting shall be given each director by
whom it is not waived by mailing written notice not less than five (5) days
before the meeting or by telegraphing or telexing or by facsimile transmission
of the same not less than twenty-four (24) hours before the meeting. Unless
otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
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<PAGE> 8
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the total
number of the whole Board shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those present may
adjourn the meeting to another place, date, or time, without further notice or
waiver thereof
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 8. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as
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<PAGE> 9
may be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
Section (1) To declare dividends from time to time in accordance
with law;
Section (2) To purchase or otherwise acquire any property, rights
or privileges on such terms as it shall determine;
Section (3) To authorize the creation, making and issuance, in
such form as it may determine, or written obligations
of every kind, negotiable or non-negotiable, secured
or unsecured, and to do all things necessary in
connection therewith;
Section (4) To remove any officer of the Corporation with or
without cause, and from time to time to confer the
powers and duties of any officer upon any other
person for the time being;
Section (5) To confer upon any officer of the Corporation the
power to appoint, remove and suspend subordinate
officers, employees and agents;
Section (6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for
directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
Section (7) To adopt from time to time such insurance,
retirement, and other benefit plans for directors,
officers, employees and agents of the Corporation and
its subsidiaries as it may determine; and,
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<PAGE> 10
Section (8) To adopt from time to time regulations, not
inconsistent with these By-laws, for the management
of the Corporation's business and affairs.
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the whole Board,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating,
if it desires, other directors as alternate members who may replace any absent
or disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253 of the Delaware
General Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or
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<PAGE> 11
disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third (1/3) of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event, one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
ARTICLE IV
OFFICERS
Section 1. Officers.
The officers of the Corporation shall be elected by the Board of
Directors, and shall include a President, a Secretary, a Treasurer, and such
other officers, employees and agents as appointed, from time to time, in
accordance with these By-laws. Additionally, the President shall have the
power to appoint such Vice Presidents and other officers equivalent or junior
thereto as the President may deem appropriate.
Section 2. Term.
Each officer of the Corporation shall serve at the pleasure of the
Board of Directors, and the Board may remove any officer
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<PAGE> 12
at any time with or without cause. Any officer, if appointed by the President
of the Corporation, may likewise be removed by the President of the
Corporation.
Section 3. Authority and Duties.
All officers and agents of the Corporation shall have such authority
and perform such duties in the management of the property and affairs of the
Corporation as generally pertain to their respective offices, as well as such
authority and duties as may be determined by the Board of Directors.
Section 4. Execution of Instruments.
Checks, notes, drafts, other commercial instruments, assignments,
guarantees of signatures, and contracts (except as otherwise provided herein or
by law) shall be executed by the President, any Vice President, the Secretary,
the Treasurer, or such officers or employees or agents as the Board of
Directors or any of such designated officers may direct.
Section 5. Compensation.
The Board of Directors shall have power to fix, or to delegate the
power to fix, the compensation for services in any capacity of all officers,
employees or agents of the Corporation. The Board of Directors shall have the
authority to establish, within legal limits, such pension, retirement, stock
purchase and stock option plans, and such other fringe benefit plans for the
benefit of officers, employees, or agents as it deems to be in the best
interest of the Corporation.
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<PAGE> 13
Section 6. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President,
any Vice President, the Secretary, the Treasurer or any officer of the
Corporation authorized by such officers shall have power to vote and otherwise
act on behalf of the Corporation, in person or by proxy, at any meeting of
stockholders of or with respect to any action of stockholders of any other
corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V
STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these
By-Laws, an outstanding certificate for the number of shares involved shall
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<PAGE> 14
be surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, or to receive payment
of any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion, or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
-14-
<PAGE> 15
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which record date shall be not more than ten (10) days after the date upon
which the resolution fixing the record date is adopted. If no record date has
been fixed by the Board of Directors and no prior action by the Board of
Directors is required by the Delaware General Corporation Law, the record date
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation in the
manner prescribed by Article I, Section 9 hereof. If no record date has been
fixed by the Board of Directors and prior action by the Board of Directors is
required by the Delaware General Corporation Law with respect to the proposed
action by written consent of the stockholders, the record date for determining
stockholders entitled to consent to corporate action in writing shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
-15-
<PAGE> 16
Section 4. Lost, Stolen, or Destroyed Certificates.
In the event of the loss, theft, or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft, or
destruction and concerning the giving of a satisfactory bond or bonds or
indemnity.
Section 5. Regulations.
The issue, transfer, conversion, and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI
NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer,
employee, or agent shall be in writing and may in every instance be effectively
given by hand delivery to the recipient thereof, by depositing such notice in
the mails, postage paid, or by sending such notice by prepaid telegram or
mailgram. Any such notice shall be addressed to such stockholder, director,
officer, employee, or agent at his or her last known address as the same
appears on the books of the Corporation. The time when such notice is
received, if hand-delivered, or dispatched, if delivered through the mails or
by telegram or mailgram, shall be the time of the giving of the notice.
-16-
<PAGE> 17
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director,
officer, employee, or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee, or agent.
Neither the business nor the purpose of any meeting need be specified in such a
waiver.
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these By- Laws, facsimile signatures of
any officer or officers of the Corporation may be used whenever and as
authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the
name of the Corporation, which seal shall be in the charge of the Secretary.
If and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by an Assistant
Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports, and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully
-17-
<PAGE> 18
protected in relying in good faith upon the books of account or other records
of the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees, or committees
of the Board of Directors so designated or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these By-Laws which requires that an act
be done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative, or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or an officer of the
-18-
<PAGE> 19
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation or of a
partnership, joint venture, trust, or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee, or agent or in any other capacity while serving as
a director, officer, employee, or agent, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes, or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section 3 of this Article VIII with respect to
proceedings to enforce rights to indemnification, the corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
-19-
<PAGE> 20
Section 2. Right to Advancement of Expenses.
The right to indemnification conferred in Section 1 of this Article
VIII shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 2 or otherwise. The rights to indemnification and to the
advancement of expenses conferred in Sections 1 and 2 of this Article VIII
shall be contract rights and such rights shall continue as to an indemnitee who
has ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the indemnitee's heirs, executors, and administrators.
Section 3. Right of Indemnitee to Bring Suit.
If a claim under Section 1 or 2 of this Article VIII is not paid in
full by the Corporation within sixty (60) days after a
-20-
<PAGE> 21
written claim has been received by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period shall
be twenty (20) days, the indemnitee may at any time thereafter bring, suit
against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee
to enforce a right to indemnification hereunder (but not in a suit brought by
the indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final
adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable
-21-
<PAGE> 22
standard of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit brought by
the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that
the indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article VIII or otherwise shall be on the Corporation.
Section 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses
conferred in this Article VIII shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, By-Laws, agreement, vote of stockholders, or
disinterested directors or otherwise.
Section 5. Insurance.
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee, or agent of the Corporation or
another corporation, partnership, joint venture, trust, or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
-22-
<PAGE> 23
Section 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
These By-Laws may be amended or repealed by the Board of Directors at
any meeting or by the stockholders at any meeting.
-23-
<PAGE> 1
EXHIBIT 3.21
ARTICLES OF INCORPORATION
The undersigned acting as an Incorporator of a corporation under the
New Mexico Business Corporation Act adopts the following Articles of
Incorporation for the corporation:
ARTICLE I
Its corporate name will be: WESTERN STATES CHEMICAL SUPPLY CORP.
ARTICLE II
It is organized to buy and sell chemicals and for every other purpose
permitted by the Business Corporation Act.
ARTICLE III
It will have authority to issue one class of 50,000 shares of $1.00
par value common.
ARTICLE IV
Its initial registered office address will be 600 First Plaza,
Albuquerque, New Mexico, and its initial registered agent at that address will
be Graham Browne.
ARTICLE V
The names and address of the six Directors who will constitute its
initial Board of Directors are:
<TABLE>
<S> <C> <C>
Charles E. Graves Fred L. Taylor George De Morales
2602 N. 27th Avenue 2602 N. 27th Avenue 2602 N. 27th Avenue
Phoenix, Arizona Phoenix, Arizona Phoenix, Arizona
Richard H. Newton Graham Browne Richard F. Kolt
2602 N. 27th Avenue 600 First Plaza P.O. Box 5621
Phoenix, Arizona Albuquerque, N.M. Tucson, Arizona
</TABLE>
DATED: January 15, 1976
/s/ Graham Browne
------------------------------------
Graham Browne
600 First Plaza
Albuquerque, New Mexico
<PAGE> 2
STATEMENT OF CANCELLATION
OF REACQUIRED SHARES
WESTERN STATES CHEMICAL SUPPLY CORP., submits the following
statement of cancellation by resolution of its Board of Directors of shares of
the Corporation reacquired by it other than redeemable shares redeemed or
purchased:
1. The Board of Directors duly adopted on May 1, 1979, a
resolution cancelling 760 reacquired shares of $1.00 par value common.
2. The aggregate number of issued shares after giving
effect to the cancellation is 240.
3. The amount of the stated capital of the Corporation
after giving effect to such cancellation is $240.00.
DATED: May 1, 1979.
WESTERN STATES CHEMICAL SUPPLY CORP.
By /s/ Dick Belveal
-----------------------
Dick Belveal, President
and
By /s/ Al Clerc
---------------------
Al Clerc, Secretary
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
I certify that on May 1, 1979, Dick Belveal and Al Clerc, being duly
sworn, declared he is one of the corporate officers who signed the foregoing
document executed by the Corporation and that the statements contained therein
are true.
/s/
-----------------------------------
Notary Pubic
My commission expires: 10/21/81
<PAGE> 3
STATEMENT OF CORRECTION
OF
STATEMENT OF CANCELLATION
OF REACQUIRED SHARES
WESTERN STATES CHEMICAL SUPPLY CORP., submits the following
statement of correction of a statement of cancellation of shares of the
Corporation, filed in the office of the New Mexico State Corporation Commission
on August 31, 1979:
1. The Board of Directors resolution set forth in the
statement of cancellation was erroneous and is null and void.
2. The correct aggregate number of issued shares is
1,000 shares of $1.00 par value common.
3. The correct amount of the stated capital of the
Corporation is $1,000,00.
DATED: September 27, 1979.
WESTERN STATES CHEMICAL SUPPLY CORP.
By /s/ Dick Belveal
-----------------------
Dick Belveal, President
and
By /s/ Al Clerc
---------------------
Al Clerc, Secretary
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
I certify that on September 27, 1979, DICK BELVEAL, being duly sworn,
declared he is one of the corporate officers who signed the foregoing document
executed by the Corporation and that the statements contained therein are true.
/s/
----------------------------------------
Notary Pubic
My commission expires: 10/21/81
<PAGE> 4
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
WESTERN STATES CHEMICAL SUPPLY CORP.
0866335
Pursuant to the provisions of Section 53-13-4, NMSA 1978, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The corporate name of the corporation is
WESTERN STATES CHEMICAL SUPPLY CORP.
SECOND: The following amendment to the Articles of Incorporation was
adopted by the Shareholders of the corporation on June 25, 1996, in the manner
prescribed by the New Mexico Business Corporation Act:
"ARTICLE I
"Its corporate name will be: T.C. HOLDINGS, INC."
THIRD: The number of shares of the corporation outstanding at the time
of such adoption was 1,000, and the number of shares entitled to vote thereon
was 1,000.
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows:
Class Number of Shares
----- ----------------
Common 1,000
FIFTH: The number of shares voting for such amendment was 1,000, and the
number of shares voting against such amendment was zero.
SIXTH: The number of shares of each class entitled to vote thereon as a
class for and against such amendment, respectively, was:
Class Number of Shares
----- --------------------
For Against
--- -------
Common 1,000 0
SEVENTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows:
No change.
<PAGE> 5
DATED: June 26, 1996
WESTERN STATES CHEMICAL SUPPLY CORP.:
By: /s/ Albert J. Clerc
------------------------------------
ALBERT J. CLERC, Vice President/
Secretary
Under penalty of perjury, the undersigned declares that the foregoing document
executed by the corporation and that the statements contained therein are true
and correct to the best of my knowledge.
By:/s/ Albert J. Clerc
------------------------------------
ALBERT J. CLERC, Vice President/
Secretary
2
<PAGE> 1
EXHIBIT 3.22
BY-LAWS
OF
WESTERN STATES CHEMICAL SUPPLY CORP.
I
SHAREHOLDERS
1. Meetings: The Annual Meeting of Shareholders will be
held on the second Wednesday in January at 10:00 a.m. at the place fixed by the
Board. Special Meetings of Shareholders may be called by the President, the
Board, or the holders of one-tenth of the shares entitled to vote at the
meeting, and will be held at the time and place fixed by the person calling the
Special Meeting. If the place of meeting is not fixed, the meeting will be
held at the registered office of the Corporation.
2. Notice: Written Notice stating the time, place, and,
if a Special Meeting, the purpose, will be delivered not less than ten nor more
than fifty days before the meeting date either personally or by mail at the
direction of the President, the Secretary, or the persons calling the meeting,
to each Shareholder of record entitled to vote at the meeting. If mailed, a
Notice is deemed delivered when deposited postage prepaid in the United States
mail addressed to the Shareholder at the address shown by the Corporation
transfer books.
3. Quorum - Voting: A majority of the shares entitled
to vote represented in person or by proxy will constitute a quorum at a meeting
of Shareholders. A quorum once attained continues until adjournment despite
voluntary withdrawal of enough shares to leave less than a quorum. If a quorum
is present, the affirmative
<PAGE> 2
vote of the majority of the shares represented at the meeting and entitled to
vote on the subject matter will be the act of the Shareholders unless the vote
of a greater number or class voting is required by the Business Corporation
Act.
II
DIRECTORS
1. Number, Tenure, Qualification, Election: The Board
will consist of six Directors each of whom will be elected annually by the
Shareholders at their Annual Meeting to serve until their successors have been
elected and qualified. Directors need not be Shareholders or New Mexico
residents. A Director may be removed with or without cause by the
Shareholders, or may resign. Vacancies may be filled by a majority of the
remaining Directors though less than a quorum.
2. Meetings: An Annual Meeting of the Board will be
held without notice immediately following the Shareholders' Annual Meeting.
Special Meetings of the Board may be called by any Director or Officer, and
will be held at the time and place fixed by the person calling the Special
Meeting. Written Notice stating the time, place and purpose of the Special
Meeting will be delivered either personally, by mail, or by telegram at the
direction of the person calling the meeting, to each Director at least 24 hours
before the Special Meeting time. If mailed or telegraphed, a Notice is deemed
delivered when deposited, postage or charges prepaid, with the transmitting
agency, addressed to the Director.
2
<PAGE> 3
3. Quorum - Action: A majority of the number of
Directors fixed by the By-laws will constitute a quorum at Board Meetings. A
quorum once attained continues until adjournment despite voluntary withdrawal
of enough Directors to leave less than a quorum. The act of a majority of
Directors present at a meeting at which a quorum is present will be the act of
the Board. The Directors will manage the business and affairs of the
Corporation, and may act only as a Board with each Director having one vote.
III
OFFICERS
1. Number, Tenure, Qualification and Election: The
officers of the Corporation will be a Chairman of the Board, President, Vice
President, Secretary and Treasurer, and such other officers as the Board may
decide, each of whom will be elected annually by the Board at its Annual
Meeting to serve until their successors are elected and qualified. Officers
need not be Shareholders, or Directors, or New Mexico residents. An officer
may be removed with or without cause by the Board, or may resign. Vacancies
and newly created offices will be filled by the Board. One person may hold
more than one office, but no person may be both President and Secretary.
Officers will perform the duties, and will have the power and authority,
assigned by the Board, incident to the office, and provided in these By-laws.
2. Chairman of the Board: The Chairman of the Board
will, if present, preside at all meetings of the Shareholders and of the Board
of Directors, will have the same powers as the
3
<PAGE> 4
President, including the power to sign documents on behalf of the Corporation,
and will be Chief Executive Officer of the Corporation.
3. President and Vice President: The President, or the
Vice President during the absence, disability, or failure to act of both the
President and the Chairman of the Board, will preside at all Corporation
meetings except meetings at which the Chairman of the Board is present, and
when authorized will sign all documents of the corporation.
4. Secretary and Assistants: The Secretary, or any
Assistant Secretary during the absence, disability, or failure to act, of the
Secretary, will keep and have custody of, the record of Shareholders, the stock
transfer books, and the minutes of the proceedings of the Shareholders and
Directors, will give all Notices required, and when authorized will execute,
attest, seal, and deliver documents of the Corporation.
5. Treasurer and Assistants. The Treasurer, or any
Assistant Treasurer during the absence, disability, or failure to act, of the
Treasurer, will have custody of the property of, and will keep correct and
complete books and records of account for, the Corporation.
IV
ACTION WITHOUT A MEETING
Any action required or permitted to be taken at a meeting of
Shareholders or Directors may be taken without a meeting if a consent in
writing setting forth the action so taken is signed by all of the Shareholders
entitled to vote with respect
4
<PAGE> 5
to the subject matter thereof, or by all the Directors, as the case may be.
V
WAIVER OF NOTICE
Whenever any notice is required to be given to any Shareholder
or Director, a waiver thereof in writing signed by the person entitled to the
notice is equivalent to the giving of the notice. The attendance of a
Shareholder in person or by proxy, or of a Director, at a meeting constitutes a
waiver of notice of the meeting except when attendance is for the sole purpose
of objecting because the meeting is not lawfully called or convened.
VI
SEAL
The Board may adopt a corporate seal which the Corporation may
use by impressing or affixing it or a facsimile thereof, but the failure to
have or affix a corporate seal does not affect the validity of any instrument
or any action taken in reliance thereon or in pursuance thereof.
VII
SHARE CERTIFICATES AND TRANSFER
The Board will adopt the form of certificate to represent the
shares of the Corporation. Each Shareholder is entitled to a certificate,
signed by the President or Vice President, and the Secretary or an Assistant
Secretary, and representing the number of full and fractional fully paid shares
owned by the Shareholder. Share transfer and issuance will be done by the
Secretary, or the designee thereof, in the manner
5
<PAGE> 6
provided by the Business Corporation Act and Uniform Commercial Code of New
Mexico. The name and address of the Shareholder to which the certificate is
issued, the number and class of shares represented, and the date of original
issue or from whom transferred shall be entered on the record of Shareholders
of the Corporation. The person or entity in whose name shares stand on the
record of Shareholders of the Corporation will be Shareholders and will be
deemed by the Corporation to be the owner of the shares for all purposes
whether or not the Corporation has other knowledge. Shares will be transferred
only on the stock transfer books of the Corporation.
VIII
MONETARY MATTERS
1. Funds and Borrowing: The depository for corporate
funds, the persons entitled to draw against these funds, the persons entitled
to borrow on behalf of the Corporation, and the manner of accomplishing these
matters will be determined by the Board.
2. Compensation: The compensation for Directors and
Officers will be established by the Board. Compensation of employees will be
established by the President subject to review by the Board.
3. Fiscal Year: The fiscal year of the Corporation will
be established by the Board.
6
<PAGE> 7
IX
INTERESTED PARTIES
No transaction of the Corporation will be affected because a
Shareholder, Director, Officer or Employee of the Corporation is interested in
the transaction. Such interested parties will be counted for quorum purposes,
and may vote, when the Corporation considers the transaction. Such interested
parties will not be liable to the Corporation for the party's profits, or the
Corporation's losses, from the transaction.
X
AMENDMENTS
These By-laws may be altered, amended, or repealed by the
Board unless the power to do so is reserved to the Shareholders by the Articles
of Incorporation.
SECRETARY'S CERTIFICATE
I certify the foregoing to be the true copy of the By-laws
duly adopted by the Corporation on January 23, 1976.
/s/
---------------
Secretary
7
<PAGE> 8
FIRST AMENDMENT
TO
BY-LAWS
OF
WESTERN STATES CHEMICAL SUPPLY CORP.
I certify that on July 1, 1976, the Directors amended the
first grammatical sentence of Section 1, Article I of the Corporation's By-laws
to change the Annual Meeting date to the third Wednesday in September.
/s/
----------------
Secretary
<PAGE> 9
SECOND AMENDMENT
TO
BY-LAWS
OF
WESTERN STATES CHEMICAL SUPPLY CORP.
I certify that on September 15, 1976, the Directors amended
the first grammatical sentence of Section 1, Article II of the Corporation's
By-laws to change the number of Directors from six to five.
/s/
-------------
Secretary
<PAGE> 10
THIRD AMENDMENT
TO
BY-LAWS
OF
WESTERN STATES CHEMICAL SUPPLY CORP.
The following amendment to the By-laws of the Corporation was
adopted by the Directors on September 1, 1977:
The By-laws of the Corporation are amended by deleting the
first sentence of Article II, Section 1, and substituting the following
therefor:
"The Board will consist of one Director, who will be elected
annually by the Shareholders at their Annual Meeting to serve
until his successor is elected and qualified."
<PAGE> 11
FOURTH AMENDMENT
TO
BY-LAWS
OF
WESTERN STATES CHEMICAL-SUPPLY CORP.
The following amendment to the By-laws of the Corporation was
adopted by the Directors on May 1, 1979:
The By-laws of the Corporation are amended by deleting the first
sentence of Article II, Section 1, and substituting the following therefor:
"The Board will consist of three Directors, who will be elected
annually by the Shareholders at their Annual Meeting to serve
until their successors are elected and qualified."
/s/
---------------
Secretary
<PAGE> 12
FIFTH AMENDMENT
TO
BY-LAWS
OF
WESTERN STATES CHEMICAL SUPPLY CORP.
The following amendment to the By-laws of the Corporation was
adopted, by the Directors on September 17, 1980:
The By-Laws of the Corporation are amended by deleting the
first sentence of Article II, Section 1, and substituting the following
therefor:
"The Board will consist of two Directors, who will be elected
annually by the Shareholders at their Annual Meeting to serve
until their successors are elected and qualified."
/s/
-------------
Secretary
<PAGE> 13
SIXTH AMENDMENT
TO
BY-LAWS
OF
T.C. HOLDINGS, INC.
An amendment to the By-Laws of the Company was adopted by the
Directors by adoption of the following resolution on August 1, 1996:
RESOLVED, that the By-Laws of the Company be, and they hereby
are, amended by deleting the first sentence of Article II,
Section 1, and substituting the following therefor:
The Board will consist of three Directors, who will
be elected annually by the Shareholders at their
Annual Meeting to serve until their successors are
elected and qualified.
/s/
-------------
Secretary
<PAGE> 1
EXHIBIT 3.23
ARTICLES OF INCORPORATION
OF
T.C. PRODUCTS, INC.
ARTICLE I - NAME
The name of this corporation is T.C. PRODUCTS, INC.
ARTICLE II - PURPOSES
This corporation is organized for the following purposes:
A. To manufacture and/or sell plastics, household products and
industrial products.
B. To engage in any business, trade or activity which may be
conducted lawfully by a corporation organized under the Washington Business
Corporation Act, as said Act may be amended from time to time.
ARTICLE III - SHARES
This corporation is authorized to issue 1,000,000 shares of common
stock and each share shall have a par value of $1.00.
ARTICLE IV - PREEMPTIVE RIGHTS
Each shareholder shall have preemptive rights to acquire additional
shares which may be issued by this corporation to the extent preemptive rights
apply to such shares under the Washington Business Corporation Act and upon the
following terms and conditions:
A. Preempted Shares. Before any unissued shares (at any time
authorized) of this corporation are offered for sale or otherwise disposed of,
the shareholders shall have the first
<PAGE> 2
right to purchase such shares ("preempted shares"). Each shareholder shall be
entitled to purchase a percentage of such preempted shares equal to the
percentage he, she, or it owns of all shares then outstanding, or such lesser
number of the preempted shares as the shareholder elects to purchase. Such
allocation of shares shall be subject to adjustments as determined by the Board
of Directors which are necessary to avoid the issue of fractional shares.
B. Terms and Conditions. The purchase of preempted shares by
existing shareholders shall be on terms and conditions, including purchase
price, not less favorable than those under which it is proposed they be offered
for sale or otherwise disposed of to others.
C. Notice of Proposed Disposition; Waiver of Preemptive Rights.
Written notice shall be given to each shareholder of each proposal for the sale
or other disposition of the preempted shares, which notice shall set forth the
number of shares involved and the terms of such proposed sale or other
disposition. The preemptive rights of any shareholders shall be deemed waived
as follows:
1. If the shareholder at any time agrees in writing to
waive his, her, or its rights as to any specific preempted shares, the waiver
shall be deemed effective as to those shares;
2. If, within fourteen (14) days after the written
notice is given to a shareholder as provided in this Section C, such
shareholder does not agree in writing to purchase all the preempted shares he,
she, or it is entitled to purchase, the
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<PAGE> 3
waiver shall be deemed effective as to those shares such shareholder has not
agreed to purchase.
D. Sale Pursuant to Waiver. If there is a waiver of rights under
Section C of this Article, this corporation may sell the shares to which such
waiver pertains to anyone during the one year period immediately following the
date such shareholder is given the notice contemplated by Section C of this
Article, at a price to the purchaser of not less than the price set forth in
such notice, and otherwise on terms and conditions not less favorable to this
corporation than those set forth in such notice, but this corporation may pay,
or there may be deducted from such price, such reasonable compensation to
underwriters or dealers as may be lawfully paid by this corporation. If such
shares are not sold during such one year period, they shall again become
subject to the preemptive rights of this Article.
E. Notices. Notices shall be deemed given hereunder when mailed,
postage prepaid, to either the last known address of a shareholder or the
latest address shown on this corporation's stock records for such shareholder.
F. Limitation on Preemptive Rights. There shall exist no
preemptive rights with respect to shares of this corporation except as provided
in this Article.
G. Written Demand to Exercise Preemptive Rights. Regardless of
whether the notice provisions of this Article have been observed, a shareholder
who fails to make written demand upon this corporation to exercise his, her, or
its preemptive rights within two years after the preempted shares have been
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<PAGE> 4
issued and recorded in this corporation's stock transfer books shall be deemed
to have waived any preemptive rights to such shares.
ARTICLE V - NO CUMULATIVE VOTING
At each election for directors, every shareholder entitled to vote at
such election has the right to vote in person or by proxy the number of shares
held by such shareholder for as many persons as there are directors to be
elected. No cumulative voting for directors shall be permitted.
ARTICLE VI - BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws or adopt new Bylaws. Nothing herein shall deny the concurrent power
of the shareholders to adopt, alter, amend or repeal the Bylaws.
ARTICLE VII - REGISTERED OFFICE AND AGENT
The name of the initial registered agent of this corporation and the
address of its initial registered office is as follows:
Roy F. Kussmann
1102 Broadway, Suite 500
Tacoma, Washington 98402
ARTICLE VIII - DIRECTORS
A. The number of directors of this corporation shall be
determined in the manner specified by the Bylaws and may be increased or
decreased from time to time in the manner provided therein. The initial Board
of Directors shall consist of Three (3) directors and their names and addresses
are as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Richard L. Belveal 2001 Thorne Road
Tacoma, WA. 98421
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
Albert J. Clerc 2001 Thorne Road
Tacoma WA. 98421
Sally A. Harler 2001 Thorne Road
Tacoma WA. 98421
</TABLE>
B. The term of the initial directors shall be until the first
annual meeting of the shareholders or until their respective successors are
elected and qualified, unless removed in accordance with the provisions of the
Bylaws.
ARTICLE IX - INCORPORATOR
The name and address of the incorporator is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Roy F. Kussmann 1102 Broadway, Suite 500
Tacoma, WA 98402
</TABLE>
ARTICLE X - LIMITATION OF DIRECTORS' LIABILITY
A director shall have no liability to the corporation or its
shareholders for monetary damages for conduct as a director, except for acts or
omissions that involve intentional misconduct by the director, or a knowing
violation of law by the director, or for conduct violating RCW 23B.08.310, or
for any transaction from which the director will personally receive a benefit
in money, property or services to which the director is not legally entitled.
If the Washington Business Corporation Act is hereafter amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director shall be eliminated or limited to
the full extent permitted by the Washington Business Corporation Act, as so
amended. Any repeal or modification of this Article shall not adversely affect
any right or protection of a director of the
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<PAGE> 6
corporation existing at the time of such repeal or modification for or with
respect to an act or omission of such director occurring prior to such repeal
or modification.
ARTICLE XI - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification. Each person who was, or is
threatened to be made a party to or is otherwise involved (including, without
limitation, as a witness) in any actual or threatened action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was a director or officer of the corporation
or, while a director or officer, he or she is or was serving at the request of
the corporation as a director, trustee, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
trustee, officer, employee or agent or in any other capacity while serving as a
director, trustee, officer, employee or agent, shall be indemnified and held
harmless by the corporation, to the full extent permitted by applicable law as
then in effect, against all expense, liability and loss (including attorney's
fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid
in settlement) actually and reasonably incurred or suffered by such person in
connection therewith, and such indemnification shall continue as to a person
who has ceased to be a director, trustee, officer, employee or agent and shall
inure to the benefit of their respective heirs, executors and
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<PAGE> 7
administrators; provided, however, that except as provided in Section 2 of this
Article with respect to proceedings seeking to enforce rights to
indemnification, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the corporation. The right to indemnification conferred
in this Section 1 shall be a contract right and shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that the payment of
such expenses in advance of the final disposition of a proceeding shall be made
only upon delivery to the corporation of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section 1 or otherwise.
Section 2. Right of Claimant to Bring Suit. If a claim under Section
1 of this Article is not paid in full by the corporation within sixty (60) days
after a written claim has been received by the corporation, except in the case
of a claim for expenses incurred in defending a proceeding in advance of its
final disposition, in which case the applicable period shall be twenty (20)
days, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, to the extent
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of
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<PAGE> 8
prosecuting such claim. The claimant shall be presumed to be entitled to
indemnification under this Article upon submission of a written claim (and, in
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition, where the required undertaking
has been tendered to the corporation), and thereafter the corporation shall
have the burden of proof to overcome the presumption that the claimant is not
so entitled. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
or reimbursement or advancement of expenses to the claimant is proper in the
circumstances nor an actual determination by the corporation (including its
Board of Directors, independent legal counsel or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses shall be a defense to the action or create a
presumption that the claimant is not so entitled.
Section 3. Nonexclusivity of Rights. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.
Section 4. Insurance, Contracts and Funding. The corporation may
maintain insurance, at its expense, to protect
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<PAGE> 9
itself and any director, trustee, officer, employee or agent (and their
respective heirs, executors and administrators) of the corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the corporation would have the power
to indemnify such person against such expense, liability or loss under the
Washington Business Corporation Act. The corporation may, without further
shareholder action, enter into contracts with any director or officer of the
corporation in furtherance of the provisions of this Article and may create a
trust fund, grant a security interest or use other means (including, without
limitation, a letter of credit) to ensure the payment of such amounts as may be
necessary to effect indemnification as provided in this Article.
Section 5. Indemnification of Employees and Agents of the
Corporation. The corporation may, by action of its Board of Directors from
time to time, provide indemnification and pay expenses in advance of the final
disposition of a proceeding to employees and agents of the corporation with the
same scope and effect as the provisions of this Article with respect to the
indemnification and advancement of expenses of directors and officers of the
corporation or pursuant to rights granted pursuant to, or provided by, the
Washington Business Corporation Act or otherwise.
9
<PAGE> 10
The undersigned person, of the age of eighteen years or more, as
incorporator of this corporation under the Washington Business Corporation Act,
adopts these Articles of Incorporation.
DATED: November 8, 1991.
/s/ Roy F. Kussman
----------------------------------------
Roy F. Kussmann, Incorporator
10
<PAGE> 11
CONSENT TO SERVE AS REGISTERED AGENT
I, Roy F. Kussmann, hereby consent to serve as Registered Agent, in
the State of Washington, for the following corporation, T.C. Products, Inc. I
understand that as agent for the corporation, it will be my responsibility to
receive service of process in the name of the corporation; to forward all mail
to the corporation; and to immediately notify the office of the Secretary of
State in the event of my resignation, or of any changes in the registered
office address of the corporation for which I am agent.
DATED: November 8, 1991.
/s/ Roy F. Kussmann
----------------------------------------
Roy F. Kussmann
1102 Broadway, Suite 500
Tacoma, WA 98402
rfk\tc.art
11
<PAGE> 1
EXHIBIT 3.24
BYLAWS
OF
T. C. PRODUCTS, INC.
ARTICLE I.
Registered Office and Registered Agent
The registered office of the corporation shall be located in the State
of Washington at such place as may be fixed from time to time by the Board of
Directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office. Any change in the registered agent or registered office shall be
effective upon filing such change with the office of the Secretary of State of
the State of Washington.
ARTICLE II.
Shareholders' Meetings
Section 1. Annual Meetings. The annual meeting of the
shareholders of this corporation, for the purpose of election of directors and
for such other business as may come before it, shall be held at the registered
office of the corporation, or such other place as may be designated by the
notice of the meeting, on the 100 day of each and every year, at 10 a.m., but
in case such day shall be a legal holiday, the meeting shall be held at the
same hour and place on the next succeeding day not a holiday.
Section 2. Special Meetings. Special meetings of the
shareholders of this corporation may be called at any time by the holders of
50% of the voting shares of the corporation, or by the President, or by a
majority of the Board of Directors. No business shall be transacted at any
special meeting of shareholders except as is specified in the notice calling
for said meeting. The Board of Directors may designate any place as the place
of any special meeting called by the President or the Board of Directors, and
special meetings called at the request of shareholders shall be held at such
place as may be determined by the Board of Directors and placed in the notice
of such meetings.
Section 3. Notice of Meetings. Written notice of annual or
special meetings of shareholders stating the place, day, and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be given by the secretary or persons
authorized to call the meeting to each shareholder of record entitled to vote
at the meeting. Such notice shall be given not less than ten (10) days nor
more
<PAGE> 2
than sixty (60) days prior to the date of the meeting, except that notice of a
meeting to act on an amendment to the Articles of Incorporation, a plan of
merger or share exchange, a proposed sale, lease, exchange, or other
disposition of all or substantially all of the assets of the corporation other
than in the usual or regular course of business, or the dissolution of the
corporation shall be given no fewer than twenty (20) days or no more than sixty
(60) days before the meeting date. Notice may be transmitted by: mail, private
carrier or personal delivery; telegraph or teletype; or telephone, wire, or
wireless equipment which transmits a facsimile of the notice. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation.
Section 4. Waiver of Notice. Notice of the time, place and
purpose of any meeting may be waived in writing (either before or after such
meeting) and will be waived by any shareholder by his attendance thereat in
person or by proxy, unless the shareholder, at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting. Any
shareholder so waiving shall be bound by the proceedings of any such meeting in
all respects as if due notice thereof had been given.
Section 5. Quorum and Adjourned Meetings. A majority of the
outstanding shares of the corporation entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. A
majority of the shares represented at a meeting, even if less than a quorum,
may adjourn the meeting from time to time without further notice. At such
reconvened meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at a duly organized
meeting and at any adjournment of such meeting (unless a new record date is or
must be set for the adjourned meeting), notwithstanding the withdrawal of
enough shareholders from either meeting to leave less than a quorum.
Section 6. Proxies. At all meetings of shareholders, a
shareholder may vote by proxy executed in writing by the shareholder or by his
duly authorized attorney in fact. Such proxy shall be filed with the secretary
of the corporation before or at the time of the meeting. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy.
Section 7. Voting Record. After fixing a record date for a
shareholders' meeting, the corporation shall prepare an alphabetical list of
the names of all shareholders on the record date who are entitled to notice of
the shareholders' meeting. The list shall be arranged by voting group, and
within each voting group by class or series of shares, and show the address of
and number of shares held by each shareholder. A shareholder, shareholder's
agent, or a shareholder's attorney may inspect the shareholder's list,
beginning ten (10) days prior to the
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shareholders' meeting and continuing through the meeting, at the corporation's
principal office or at a place identified in the meeting notice in the city
where the meeting will be held during regular business hours and at the
shareholder's expense. The shareholders' list shall be kept open for
inspection during such meeting or any adjournment.
Section 8. Voting of Shares. Except as otherwise provided in
the Articles of Incorporation or in these Bylaws, every shareholder of record
shall have the right at every shareholders' meeting to one vote for every share
standing in his name on the books of the corporation. If a quorum exists,
action on a matter, other than election of directors, is approved by a voting
group of shareholders if the votes cast within the voting group favoring the
action exceed the votes cast within the voting group opposing the action,
unless the Articles of Incorporation or the Washington Business Corporation Act
require a greater number of affirmative votes.
Section 9. Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders,
or any adjournment thereof, or entitled to receive payment of any dividend, the
board of directors may fix in advance a record date for any such determination
of shareholder, such date to be not more than seventy (70) days prior to the
date on which the particular action requiring such determination of
shareholders is to be taken. If no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the day before the
date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, unless the board of directors fixes a
new record date, which it must do if the meeting is adjourned more than one
hundred twenty (120) days after the date is fixed for the original meeting.
ARTICLE III.
Directors
Section 1. General Powers. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, the board of directors
except as otherwise provided by the laws under which this corporation is formed
or in the Articles of Incorporation.
Section 2. Number. The number of directors of the corporation
shall be Three (3). The number of directors can be
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<PAGE> 4
increased or decreased from time to time by amending this Section 2, provided
that the number shall not be less than one (1) nor more than nine (9)
directors, the specific number to be set by resolution of the Board of
Directors or the shareholders; and provided further, that no decrease shall
shorten the term of any incumbent director.
Section 3. Tenure and Qualifications. Each directors shall hold
office until the next annual meeting of shareholders. Despite the expiration
of a director's term, the director continues to serve until the director's
successor shall have been elected and qualified or until there is a decrease in
the number of directors. Directors need not be residents of the state or
shareholders of the corporation.
Section 4. Election. The directors shall be elected by the
shareholders at their annual meeting each year; and if, for any cause, the
directors shall not have been elected at an annual meeting, they may be elected
at a special meeting of shareholders called for that purpose in the manner
provided by these Bylaws.
Section 5. Vacancies. In case of any vacancy in the board of
directors, including a vacancy resulting from an increase in the number of
directors, the board of directors; a majority of the remaining directors, if
they do not constitute a quorum; or the shareholders may fill the vacancy.
Section 6. Resignation. Any director may resign at any time by
delivering written notice to the board of directors, its chairperson, the
president or the secretary of the corporation. A resignation shall be
effective when the notice is delivered unless the notice specifies a later
effective date.
Section 7. Removal of Directors. At a meeting of shareholders
called expressly for that purpose, the entire board of directors, or any member
thereof, may be removed, with or without cause, by a vote of the holders of a
majority of shares then entitled to vote at an election of such directors.
Section 8. Meetings.
(a) The annual meeting of the board of directors shall be
held immediately after the annual shareholders' meeting at the same place as
the annual shareholders' meeting or at such other place and at such time as may
be determined by the directors. No notice of the annual meeting of the board
of directors shall be necessary.
(b) Special meetings may be called at any time and place
upon the call of the president, secretary, or any of the directors. Notice of
the time and place of each special meeting shall be given by the secretary, or
the persons calling the meeting, by mail, private carrier, radio, telegraph,
the telegram, facsimile transmission, personal communication by
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<PAGE> 5
telephone or otherwise at least two (2) days in advance of the time of the
meeting. The purpose of the meeting need not be given in the notice. Notice
of any special meeting may be waived in writing or by telegram (either before
or after such meeting) and will be waived by any director by attendance
thereat.
(c) Regular meetings of the board of directors shall be
held at such place and on such day and hour as shall from time to time be fixed
by resolution of the board of directors. No notice of regular meetings of the
board of directors shall be necessary.
(d) At any meeting of the board of directors, any
business may be transacted, and the board of directors may exercise all of its
powers.
Section 9. Quorum and Voting.
(a) A majority of the directors presently in office shall
constitute a quorum, but a lesser number may adjourn any meeting from time to
time until a quorum is obtained, and no further notice thereof need be given.
(b) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present at the meeting is the
act of the board of directors.
Section 10. Compensation. By resolution of the board of
directors, the directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 11. Presumption of Assent. A director of the corporation
who is present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless:
(a) The director objects at the beginning of the meeting,
or promptly upon the director's arrival, to holding it or transacting business
at the meeting;
(b) The director delivers written notice of the
director's dissent or abstention to the presiding officer of the meeting before
its adjournment or to the corporation within a reasonable time after
adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
Section 12. Committees. The board of directors, by resolution
adopted by a majority of the full board of directors,
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may designate from among its members one or more committees, each of which must
have two or more members and, to the extent provided in such resolution, shall
have and may exercise all the authority of the board of directors, except that
no such committee shall have the authority to: authorize or approve a
distribution except according to a general formula or method prescribed by the
board of directors; approve or propose to shareholders action that the
Washington Business Corporation Act requires to be approved by shareholders;
fill vacancies on the board of directors or on any of its committees; amend any
Articles of Incorporation not requiring shareholder approval; adopt, amend or
repeal Bylaws; approve a plan of merger not requiring shareholder approval; or
authorize or approve the issuance or sale or contract for sale of shares, or
determine the designation and relative rights, preferences and limitations of a
class or series of shares, except that the board of directors may authorize a
committee, or a senior executive officer of the corporation, to do so within
limits specifically prescribed by the board of directors.
ARTICLE IV.
Special Measures for Corporate Action
Section 1. Actions by Written Consent. Any corporate action
required or permitted by the Articles of Incorporation, Bylaws, or the laws
under which this corporation is formed, to be voted upon or approved at a duly
called meeting of the directors, committee of directors, or shareholders may be
accomplished without a meeting if one or more unanimous written consents of the
respective directors or shareholders, setting forth the actions so taken, shall
be signed, either before or after the action taken, by all the directors,
committee members, or shareholders, as the case may be. Action taken by
unanimous written consent is effective when the last director or committee
member signs the consent, unless the consent specifies a later effective date.
Action taken by unanimous written consent of the shareholders is effective when
all consents are in possession of the corporation, unless the consent specifies
a later effective date.
Section 2. Meetings by Conference Telephone. Members of the
board of directors, members of a committee of directors, or shareholders may
participate in their respective meetings by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time; participation in a meeting by
such means shall constitute presence in person at such meeting.
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<PAGE> 7
ARTICLE V.
Officers
Section 1. Officers Designated. The officers of the corporation
shall be a president, one or more vice presidents (the number thereof to be
determined by the Board of Directors), a secretary, and a treasurer, each of
whom shall be elected by the board of directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by
the board of directors. Any two or more offices may be held by the same person
unless otherwise prohibited by the laws of the State of Washington.
The board of directors may, in its discretion, elect a chairperson of
the board of directors; and, if a chairperson has been elected, the chairperson
shall, when present, preside at all meetings of the board of directors and the
shareholders and shall have such other powers as the board may prescribe.
Section 2. Election, Qualification and Term of Office. Each of
the officers shall be elected by the board of directors. None of said
officers, except the president and the chairperson of the board of directors,
need be a director, but a vice president who is not a director cannot succeed
to or fill the office of president. The officers shall be elected by the board
of directors at each annual meeting of the board of directors. Except as
hereinafter provided, each of said officers shall hold office from the date of
his election until the next annual meeting of the board of directors and until
his successor shall have been duly elected and qualified.
Section 3. Powers and Duties.
(a) President. The president shall be the chief
executive officer of the corporation and, subject to the direction and control
of the board of directors, shall have general charge and supervision over its
property, business, and affairs. He shall, unless a chairperson of the board
of directors has been elected and is present, preside at meetings of the
shareholders and the board of directors.
(b) Vice President. In the absence of the president or
his inability to act, the senior vice president shall act in his place and
stead and shall have all the powers and authority of the president, except as
limited by resolution of the board of directors.
(c) Secretary. The secretary shall: (1) keep the minutes
of the shareholders' and of the board of directors' meetings in one or more
books provided for that purpose; (2) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (3) be
custodian of the corporate records and of the seal of the corporation and affix
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the seal of the corporation to all documents as may be required; (4) keep a
register of the post office address of each shareholder which shall be
furnished to the secretary by such shareholder; (5) sign with the president, or
a vice president, certificate for shares of the corporation, the issuance of
which shall have been authorized by resolution of the board of directors; (6)
have general charge of the stock transfer books of the corporation; and (7) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president or by the
board of directors.
(d) Treasurer. Subject to the direction and control of
the board of directors, the treasurer shall have the custody, control, and
disposition of the funds and securities of the corporation and shall account
for the same; and, at the expiration of his term of office, he shall turn over
to his successor all property of the corporation in his possession.
Section 4. Assistant Secretaries and Assistant Treasurers. The
assistant secretaries, when authorized by the board of directors, may sign with
the president, or a vice president, certificates for shares of the corporation,
the issuance of which shall have been authorized by resolution of the board of
directors. The assistant treasurers shall, respectively, if required by the
board of directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the board of directors shall determine.
The assistant secretaries and assistant treasurers, in general, shall perform
such duties as shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the board of directors.
Section 5. Removal. The board of directors shall have the
right to remove any officer whenever in its judgment the best interests of the
corporation will be served thereby.
Section 6. Vacancies. The board of directors shall fill any
office which becomes vacant with a successor who shall hold office for the
unexpired term and until his successor shall have been duly elected and
qualified.
Section 7. Salaries. The salaries of all officers of the
corporation shall be fixed by the board of directors.
ARTICLE VI.
Share Certificates
Section 1. Issuance, Form and Execution of Certificates. No
shares of the corporation shall be issued unless authorized by the board. Such
authorization shall include the maximum number of shares to be issued, the
consideration to be received for each share, the value of noncash
consideration, and a statement that
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<PAGE> 9
the board has determined that such consideration is adequate. Certificates for
shares of the corporation shall be in such form as is consistent with the
provisions of the Washington Business Corporation Act and shall state:
(a) The name of the corporation and that the corporation
is organized under the laws of this state;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of
the series, if any, which such certificate represents.
They shall be signed by two officers of the corporation, and the seal of the
corporation may be affixed thereto. Certificates may be issued for fractional
shares. No certificates shall be issued for any share until the consideration
established for its issuance has been paid.
Section 2. Transfers. Shares may be transferred by delivery of
the certificate therefor, accompanied either by an assignment in writing on the
back of the certificate or by a written power of attorney to assign and
transfer the same, signed by the record holder of the certificate. The board
of directors may, by resolution, provide that beneficial owners of shares shall
be deemed holders of record for certain specified purposes. Except as
otherwise specifically provided in these Bylaws, no shares shall be transferred
on the books of the corporation until the outstanding certificate therefor has
been surrendered to the corporation.
Section 3. Loss or Destruction of Certificates. In case of loss
or destruction of any certificate of shares, another may be issued in its place
upon proof of such loss or destruction and upon the giving of a satisfactory
indemnity bond to the corporation. A new certificate may be issued without
requiring any bond, when in the judgment of the board of directors it is proper
to do so.
ARTICLE VII.
Books and Records
Section 1. Books of Account, Minutes and Share Register. The
corporation shall keep as permanent records minutes of all meetings of its
shareholders and board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, and a record of all
actions taken by a committee of the board of directors exercising the authority
of the board of directors on behalf of the corporation. The corporation shall
maintain appropriate accounting records. The corporation or its agent shall
maintain a record of its shareholders, in a form that permits preparation of a
list of the names and addresses of all shareholders, in alphabetical order by
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<PAGE> 10
class of shares showing the number and class of shares held by each. The
corporation shall keep a copy of the following records at its principal office:
the Articles or Restated Articles of Incorporation and all amendments to them
currently in effect; the Bylaws or Restated Bylaws and all amendments to them
currently in effect; the minute of all shareholders' meetings, and records of
all actions taken by shareholders without a meeting, for the past three years;
its financial statements for the past three years, including balance sheets
showing in reasonable detail the financial condition of the corporation as of
the close of each fiscal year, and an income statement showing the results of
its operation during each fiscal year prepared on the basis of generally
accepted accounting principles or, if not, prepared on a basis explained
therein; all written communications to shareholders generally within the past
three years; a list of the names and business addresses of its current
directors and officers; and its most recent annual report delivered to the
Secretary of State of Washington.
Section 2. Copies of Resolutions. Any person dealing with the
corporation must rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the board of directors or shareholders, when certified
by the president or secretary.
ARTICLE VIII.
Amendment of Bylaws
Section 1. By the Shareholders. These Bylaws may be amended,
altered, or repealed at any regular or special meeting of the shareholders if
notice of the proposed alteration or amendment is contained in the notice of
the meeting.
Section 2. By the Board of Directors. These Bylaws may be
amended, altered, or repealed by the affirmative vote of a majority of the
whole board of directors at any regular or special meeting of the board.
ARTICLE IX.
Fiscal Year
The fiscal year of the corporation shall be set by resolution of the
board of directors.
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ARTICLE X.
Rules of Order
The rules contained in the most recent edition of Robert's Rules of
Order, Newly Revised, shall govern all meetings of shareholders and directors
where those rules are not inconsistent with the Articles of Incorporation,
Bylaws, or special rules of order of the corporation.
T.C. PRODUCTS, INC.
By /s/ Sally A. Harler
-------------------
Secretary
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<PAGE> 1
EXHIBIT 4.1
PIONEER AMERICAS ACQUISITION CORP.
as Issuer,
PIONEER AMERICAS, INC.,
PIONEER CHLOR ALKALI COMPANY, INC.,
IMPERIAL WEST CHEMICAL CO.,
ALL-PURE CHEMICAL CO.,
BLACK MOUNTAIN POWER COMPANY,
ALL PURE CHEMICAL NORTHWEST, INC.,
PIONEER CHLOR ALKALI INTERNATIONAL, INC.,
G.O.W. CORPORATION,
PIONEER (EAST), INC.,
T.C. HOLDINGS, INC.,
T.C. PRODUCTS, INC.,
as Subsidiary Guarantors
and
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
------------------------
INDENTURE
Dated as of June 17, 1997
------------------------
$200,000,000
9 1/4% Senior Secured Notes due 2007
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 101. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
All-Pure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Asset Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Attributable Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Capitalized Lease Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Collateral Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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Company Request" or "Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Cash Flow Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consolidated Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Contingent Payment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Eligible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Equity Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Equity Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Excess Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Offer Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Existing Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Existing Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Hedging Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Imperial West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
incur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Indenture Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Independent Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Initial Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Initial Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Institutional Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Kemwater . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Majority Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Net Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Net Cash Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Net Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
New Credit Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Offering Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Opinion of Independent Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PAI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PCAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Permitted Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Pioneer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Private Placement Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
QIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Redeemable Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Related Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Resale Restriction Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Restricted Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Revolving Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Sale and Leaseback Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Secured Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Security Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Security Register" and "Security Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Seller Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Shelf Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Stock Pledge Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Subordinated Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Subsidiary Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Substantial Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Tacoma Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Tax Sharing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Term Loan Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Term Loan Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Trust Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Unrestricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Wholly-Owned Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 102. Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 103. Compliance Certificates and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 104. Form of Documents Delivered to
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 105. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 106. Notices, etc., to Trustee, the Company
and any Subsidiary Guarantor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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Section 107. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 108. Conflict with Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 109. Effect of Headings and Table of
Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 110. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 111. Separability Clause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 112. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 113. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 114. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 115. Schedules and Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 116. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 117. Communication by Holders with Other
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 118. No Recourse Against Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 202. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 203. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 204. Form of Reverse of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 205. Form of Trustee's Certificate of
Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 206. Form of Guarantee of Each of the
Subsidiary Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 303. Execution, Authentication, Delivery and
Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 305. Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 306. Book-Entry Provisions for U.S. Global
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
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Section 307. Special Transfer Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 308. Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 309. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 310. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 311. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 312. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 313. Deposit of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 314. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance
or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 402. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 403. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 404. Conditions to Defeasance or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 405. Deposited Money and U.S. Government
Obligations to Be Held in Trust; Other
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 406. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 407. Repayment of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE FIVE
REMEDIES
Section 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 502. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 503. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 504. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 505. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 506. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 507. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 508. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
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Section 509. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 510. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 511. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 512. Waiver of Stay, Extension or Usury
Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE SIX
THE TRUSTEE
Section 601. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 602. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 603. Trustee Not Responsible for Recitals,
Dispositions of Securities or
Application of Proceeds Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 604. Trustee and Agents May Hold Securities;
Collections; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 605. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 606. Compensation and Indemnification of
Trustee and Its Prior Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 607. Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 608. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 609. Resignation and Removal; Appointment of
Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 610. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 611. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 612. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 613. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and
Addresses of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 702. Disclosure of Names and Addresses of
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
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Section 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 704. Reports by Company and Subsidiary
Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE EIGHT
CONSOLIDATION, MERGER,
CONVEYANCE, TRANSFER OR LEASE
Section 801. When the Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements
without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 902. Supplemental Indentures and Agreements
with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 903. Execution of Supplemental Indentures
and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 904. Revocation Effect of Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 906. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 1003. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 1004. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 1005. [Intentionally omitted.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 1006. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 1007. Limitations on Payment Restrictions
Affecting Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
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Section 1008. Limitations on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 1009. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 1010. Limitation on Sale and Leaseback
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 1011. Limitation on Transactions With
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 1012. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 1013. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 1014. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section 1015. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Section 1016. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 1017. Stock Pledge Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 1018. Money for Security Payments to Be Held
in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Section 1019. Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Section 1020. Limitation on Ownership of Wholly-Owned
Restricted Subsidiary Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Section 1021. Impairment of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Section 1022. Amendment to Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Section 1023. Limitation on Applicability of Certain
Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Section 1102. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Section 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Section 1104. Selection by Trustee of Securities to
Be Redeemed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Section 1105. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Section 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 1107. Securities Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 1108. Securities Redeemed or Purchased in
Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Section 1109. Asset Sale Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
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ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Section 1202. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
ARTICLE THIRTEEN
GUARANTEE
Section 1301. Subsidiary Guarantors' Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Section 1302. Continuing Guarantee; No Right of Set
Off; Independent Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Section 1303. Guarantee Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Section 1304. Right to Demand Full Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Section 1305. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Section 1306. The Subsidiary Guarantors Remain
Obligated in Event the Company Is
No Longer Obligated to Discharge
Indenture Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section 1307. Fraudulent Conveyance; Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section 1308. Guarantee Is in Addition to Other
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Section 1309. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Section 1310. No Bar to Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Section 1311. Failure to Exercise Rights Shall Not
Operate as a Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 1312. Trustee's Duties; Notice to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 1313. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 1314. Release of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 1315. Execution of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Section 1316. Payment Permitted by Each of the
Subsidiary Guarantors if No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Section 1317. Notice to Trustee by Each of the
Subsidiary Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Section 1318. Article Applicable to Paying Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Section 1319. No Suspension of Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
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ARTICLE FOURTEEN
SECURITY
Section 1401. Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Section 1402. Recording; Priority; Opinions, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Section 1403. Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Section 1404. Trust Indenture Act Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Section 1405. Suits to Protect Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Section 1406. Determinations Relating to Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Section 1407. Trust Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
SCHEDULE 1 Existing Affiliate Agreements
SCHEDULE 2 Existing Indebtedness
EXHIBIT A Form of Certificate to be Delivered in Connection
with Transfers to Non-QIB Accredited Investors
EXHIBIT B Form of Mortgage
EXHIBIT C Form of Intercreditor Agreement
EXHIBIT D Form of Stock Pledge Agreement
</TABLE>
(xi)
<PAGE> 13
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of June 17, 1997
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- --------------- ---------
<S> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . 608
(a)(2) . . . . . . . . . . . . . . . . . . 608
(a)(3) . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . 607, 609
(c) . . . . . . . . . . . . . . . . . . N.A.
Section 311 (a) . . . . . . . . . . . . . . . . . . 612
(b) . . . . . . . . . . . . . . . . . . 612
(c) . . . . . . . . . . . . . . . . . . N.A.
Section 312 (a) . . . . . . . . . . . . . . . . . . 701
(b) . . . . . . . . . . . . . . . . . . 117
(c) . . . . . . . . . . . . . . . . . . 117
Section 313 (a) . . . . . . . . . . . . . . . . . . 703
(b)(1) . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . . . . 703
(d) . . . . . . . . . . . . . . . . . . 703
Section 314 (a) . . . . . . . . . . . . . . . . . . 704, 1003
(b) . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . 103
(c)(2) . . . . . . . . . . . . . . . . . . 103
(c)(3) . . . . . . . . . . . . . . . . . . 103
(d) . . . . . . . . . . . . . . . . . . 103
(e) . . . . . . . . . . . . . . . . . . 103
(f) . . . . . . . . . . . . . . . . . . N.A.
Section 315 (a) . . . . . . . . . . . . . . . . . . 602, 613, 903
(b) . . . . . . . . . . . . . . . . . . 601, 602, 903
(c) . . . . . . . . . . . . . . . . . . 602, 903
(d) . . . . . . . . . . . . . . . . . . 602, 903
(e) . . . . . . . . . . . . . . . . . . 512
Section 316 (a)(last sentence) . . . . . . . . . . . . . . . . . . 101 ("Outstanding")
(a)(1)(A) . . . . . . . . . . . . . . . . . . 502, 505
(a)(1)(B) . . . . . . . . . . . . . . . . . . 504
(a)(2) . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . 507
(c) . . . . . . . . . . . . . . . . . . 105
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . 508
(a)(2) . . . . . . . . . . . . . . . . . . 509
(b) . . . . . . . . . . . . . . . . . . N.A.
Section 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> 14
INDENTURE, dated as of June 17, 1997, (the "Indenture") among
PIONEER AMERICAS ACQUISITION CORP., a Delaware corporation (the "Company"),
PIONEER AMERICAS, INC., PIONEER CHLOR ALKALI COMPANY, INC., each a Delaware
corporation, IMPERIAL WEST CHEMICAL CO., a Nevada corporation, ALL-PURE
CHEMICAL CO., a California corporation, BLACK MOUNTAIN POWER COMPANY, a Texas
corporation, ALL PURE CHEMICAL NORTHWEST, INC., a Washington corporation,
PIONEER CHLOR ALKALI INTERNATIONAL, INC., a Barbados corporation, G.O.W.
CORPORATION, a Nevada corporation, PIONEER (EAST), INC., a Delaware
corporation, T.C. HOLDINGS, INC., a New Mexico corporation, T.C. PRODUCTS,
INC., a Washington corporation (collectively, the "Subsidiary Guarantors"), and
UNITED STATES TRUST COMPANY OF NEW YORK, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
9 1/4% Senior Secured Notes due 2007, Series A (the "Initial Securities") and
9 1/4% Senior Secured Notes due 2007, Series B (the "Exchange Notes" and
together with the Initial Securities, 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
<PAGE> 15
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:
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.
- 2 -
<PAGE> 16
"Acquisition" means the acquisition by Pioneer of all the
assets of a chlor-alkali production facility and related businesses located in
Tacoma, Washington pursuant to the Asset Purchase Agreement.
"Acquisition Agreements" means the Asset Purchase Agreement,
the Chlorine Purchase Agreement dated as of June 17, 1997 between PCAC and OCC
Tacoma, Inc., the Chlorine and Caustic Soda Sales Agreement dated as of June
17, 1997 between PCAC and Occidental Chemical Corporation, and the
Environmental Operating Agreement dated as of June 17, 1997 between PCAC and
OCC Tacoma, Inc.
"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.
"All-Pure" means All-Pure Chemical Co., a California
corporation, and any successor thereto.
"Asset Purchase Agreement" means the Asset Purchase Agreement
dated as of May 14, 1997 between Pioneer and the Seller named therein, and
their successors and assigns.
"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 hereunder), 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 and transactions involving the Collateral as defined in the
Stock Pledge Agreement) in any calendar year with aggregate cash and/or Fair
Market Value of any other
- 3 -
<PAGE> 17
consideration received (including, without limitation, the unconditional
assumption of Indebtedness) of less than $1,000,000; (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.
- 4 -
<PAGE> 18
"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, (b) 50% of the net book value
of all inventory owned by the Company and its Restricted Subsidiaries as of
such date, and (c) the lesser of (x) $10,000,000 and (y) 85% of the net book
value of all accounts receivable of Kemwater as of such date plus 50% of the
net book value of all inventory as of such date owned by Kemwater, 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 as of a specific date, the Company 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
- 5 -
<PAGE> 19
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.
"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.
- 6 -
<PAGE> 20
"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 Pioneer or the Company, (ii) the
adoption of a plan relating to the liquidation or dissolution of Pioneer or the
Company, (iii) the merger or consolidation of Pioneer or the Company with or
into another corporation with the effect that the stockholders of Pioneer 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 Pioneer or the Company
(together with any new directors whose election by the board of directors of
Pioneer or the Company, or whose nomination for election by the shareholders of
Pioneer 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 Pioneer 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 Pioneer
provided that such merger or consolidation is permitted by Article Eight of
this Indenture.
- 7 -
<PAGE> 21
"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.
"Collateral" means (i) a first mortgage lien and security
interest in PCAC's interest in real property, buildings, fixtures, and certain
equipment relating to the Tacoma Facility, (ii) a first priority security
interest in PCAC's interest in the Acquisition Agreements, (iii) first mortgage
liens on PCAC's chlor-alkali production facilities located in Henderson, Nevada
and St. Gabriel, Louisiana (including real property, buildings, fixtures and
certain equipment), and (iv) a pledge of PAI's interest in the Capital Stock of
PCAC and All-Pure, each as further described in the respective Security
Documents with respect thereto.
"Collateral Agent" means United States Trust Company of New
York, as collateral agent under the Intercreditor Agreement, and any successor
thereto.
"Collateral Proceeds" has the meaning specified in Section
1009 of the Indenture.
"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.
- 8 -
<PAGE> 22
"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 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
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
- 9 -
<PAGE> 23
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 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 Interest Expense" means, for any period,
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
issuance 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 of the Company
and (ix) the cash
- 10 -
<PAGE> 24
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
Restricted Subsidiary of 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
- 11 -
<PAGE> 25
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 (other than, in the case of the Company, the Unrestricted
Subsidiaries of the Company), 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).
"Contingent Payment Agreement" means the Contingent Payment
Agreement dated as of April 20, 1995 among the Company, Pioneer 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 114 West
47th Street, New York, New York 10036-1532, Attention: Corporate Trust
Division.
"Credit Facility" means any revolving credit facility or
similar arrangement that makes credit available entered into by and among the
Company and/or any of its Subsidiaries that is a Guarantor and the lending
institutions party thereto, including any credit agreement, related notes,
guarantees, collateral
- 12 -
<PAGE> 26
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time.
"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 Term Loan Agreement
or the Revolving Credit Agreement, (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 Term Loan Agreement or the Revolving Credit
Agreement, 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).
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<PAGE> 27
"Equity Interests" means shares, interests, participations or
other equivalents (however designated) of 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).
"Equity Offering" means an offering of Equity Interests (other
than Redeemable Stock) of any Person made on a primary basis by such Person
(including a rights offering to existing stockholders of such Person), which
yields gross proceeds to such Person of $15,000,000 or more.
"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 property owned by 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 Securities 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 secured notes of the Company and guarantees by the Subsidiary
Guarantors registered under the Securities Act with substantially identical
terms to the Initial Securities.
"Existing Affiliate Agreements" means (i) agreements between
the Company or any of its subsidiaries and Saguaro Power
- 14 -
<PAGE> 28
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 and (iv) any other agreements with
affiliates of the Company, existing on the Closing Date and listed on Schedule
1 hereto.
"Existing Indebtedness" means all Indebtedness (other than
Indebtedness outstanding under the Term Loan Agreement and the Revolving Credit
Agreement) 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 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.
"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
- 15 -
<PAGE> 29
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.
"incur" has the meaning ascribed in Section 1008 hereof;
provided that (a) with respect to any Indebtedness of any Restricted Subsidiary
of the Company that is owing to the Company or another Restricted Subsidiary of
the Company, 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 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
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<PAGE> 30
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
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 clauses (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
- 17 -
<PAGE> 31
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, interest and
Liquidated Damages, if any, 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 Purchasers" means Donaldson, Lufkin & Jenrette
Securities Corporation and Salomon Brothers Inc.
"Initial Securities" means the Securities issued on the
Closing Date and guaranteed by the Subsidiary Guarantors.
"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.
"Insurance Proceeds" has the meaning specified in each
Mortgage.
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<PAGE> 32
"Intercreditor Agreement" means the Intercreditor and
Collateral Agency Agreement dated as of June 17, 1997 among the Company, PAI,
PCAC, the Trustee, the Term Loan Agent, Bank of America Illinois as agent under
the Revolving Credit Agreement and the Collateral Agent.
"Intercreditor Collateral Account" means the Collateral
Account as defined in the Intercreditor Agreement.
"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. In the event
the Company or any Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the Fair Market
Value of the Equity Interests of such Subsidiary not sold or disposed of
determined as provided in the final paragraph of Section 1006 hereof.
"Kemwater" means Kemwater North America Company, a Delaware
corporation, and any successor thereto.
"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).
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<PAGE> 33
"Liquidated Damages" means all liquidated damages owing to the
Holders pursuant to the Registration Rights Agreement.
"Majority Holders" has the meaning specified in the
Intercreditor Agreement.
"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.
"Mortgage" means each mortgage, deed of trust, or similar
security instrument which from time to time affects any property that secures
PCAC's obligations in respect of its Guarantee under this Indenture and the
Term Loan Agreement, as such instruments may be amended, supplemented or
otherwise modified from time to time.
"Mortgaged Property" has the meaning specified in each
Mortgage.
"Net Award" has the meaning specified in each Mortgage.
"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 than, in the case of
the Company, its Unrestricted Subsidiaries) determined in accordance with GAAP.
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<PAGE> 34
"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.
"New Credit Facilities" means the Term Loan Agreement and the
Revolving Credit Agreement.
"Offering Memorandum" means the offering memorandum of the
Company, dated June 11, 1997, in connection with the offer and sale of the
Initial 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.
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<PAGE> 35
"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.
"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;
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<PAGE> 36
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.
"PAI" means Pioneer Americas, Inc., a Delaware corporation,
and any successor thereto.
"Paying Agent" means any person authorized by the Company to
pay the principal of, premium, if any, interest or Liquidated Damages, if any,
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, the Exchange Notes and Indebtedness of any Subsidiary
Guarantor evidenced by the Guarantees with respect thereto;
(b) Indebtedness of the Company evidenced by the Term Loan
Notes and Indebtedness of the Restricted Subsidiaries evidenced by the
guarantees with respect to the Term Loan Notes.
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<PAGE> 37
(c) Indebtedness of the Company or any Restricted Subsidiary
constituting Existing Indebtedness and any extension, deferral,
renewal, refinancing or refunding thereof;
(d) Indebtedness of the Company or any Restricted Subsidiary
incurred under one or more Credit Facilities in an aggregate principal
amount at any one time outstanding not to exceed the Borrowing Base at
the time such Indebtedness was incurred, less the aggregate amount of
all permanent repayments of revolving loans under such Credit
Facilities made in accordance with Section 1009(b)(i) hereof.
(e) 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 Obligations plus such Indebtedness of the Company
and all of the Restricted Subsidiaries does not exceed $10,000,000
outstanding at any time;
(f) 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);
(g) 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;
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<PAGE> 38
(h) 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;
(i) In addition to any Indebtedness otherwise permitted to be
Incurred under the Indenture, up to $10,000,000 aggregate principal
amount of Indebtedness at any one time outstanding; and
(j) 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 or described in clauses (a) and (b) of this definition
(the "Refinancing Indebtedness"); provided, however, that (i) such
Refinancing Indebtedness does not exceed the aggregate principal
amount of Indebtedness so refinanced, plus the amount of any premium
required to be paid in connection with such Refinancing in accordance
with the terms of such Indebtedness or the amount of any premium
reasonably determined by the Board of Directors as necessary to
accomplish such Refinancing, plus the amount of reasonable and
customary out-of-pocket fees and expenses payable in connection
therewith, (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 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,
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<PAGE> 39
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 (f) of the
definition of "Permitted Indebtedness" herein, (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, and (vi)
other Investments after the Closing Date in joint ventures, corporations,
limited liability companies, partnerships or Unrestricted Subsidiaries engaged
in a Related Business that do not at any one time outstanding exceed $5,000,000
; provided that the amount of Investments pursuant to this clause (vi) 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, leases, progress payments, contracts (other than for the
payment of money) or to secure public or statutory
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<PAGE> 40
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, (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.
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<PAGE> 41
"Pioneer" means Pioneer Companies, Inc., a Delaware
corporation, and any successor thereto.
"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 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.
"Real Property" means any interest in any real property or any
portion thereof, whether owned in fee or leased or otherwise owned.
"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.
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<PAGE> 42
"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 June 17, 1997, by and among the
Company, the Subsidiary Guarantors and the Initial Purchasers, 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.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the June 1 or December 1 (whether or not a Business Day), as
the case may be, 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 and other chlorides and
aluminum sulfate, and in lines of business reasonably related thereto.
"Resale Restriction Termination Date" means the date which is
two 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
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<PAGE> 43
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.
"Restoration" has the meaning set forth in each Mortgage.
"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.
"Revolving Credit Agreement" means the Loan and Security
Agreement dated as of June 17, 1997, among the Company and Bank of America
Illinois, as agent and a lender, and the other lenders named therein, as
amended from time to time.
"Rule 144A" means Rule 144A under the Securities Act.
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<PAGE> 44
"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.
"Secured Indebtedness" means any Senior Indebtedness (other
than the Securities) which by its terms is secured, and by the terms of this
Indenture is permitted to be secured, by Liens on the Collateral.
"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 Agreement" means the security agreement dated as of
June 17, 1997 by PCAC, as debtor, to the Collateral Agent, as secured party in
respect of the Acquisition Agreements.
"Security Documents" means (i) each Mortgage, (ii) the
Security Agreement, (iii) the Stock Pledge Agreement, (iv) the Intercreditor
Agreement, (v) the documentation relating to the Intercreditor Collateral
Account, and (vi) all security agreements, mortgages, deeds of trust, pledges,
collateral assignments or any other instrument evidencing or creating any
security interest in favor of the Collateral Agent in all or any portion of the
Collateral, in each case as amended, supplemented or otherwise modified from
time to time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305 hereof.
- 31 -
<PAGE> 45
"Seller Notes" means the subordinated installment notes of
Pioneer issued in connection with the acquisition by Pioneer of PAI.
"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 the Company from time to time owed
to the lenders (or their agents) under the New Credit Facilities or any
Refinancing thereof permitted under clause (d) 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 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.
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<PAGE> 46
"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.
"Stock Pledge Agreement" means the pledge agreement from PAI,
as debtor, to the Collateral Agent, as secured party, in respect of all the
issued and outstanding Capital Stock owned by PAI of PCAC and All-Pure.
"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 (i) William R. Berkley
and his Affiliates and/or (ii) Interlaken Capital, Inc. and its Affiliates.
"Survey" has the meaning specified in the Intercreditor
Agreement.
"Tacoma Facility" means PCAC's chlor-alkali production
facility in Tacoma, Washington.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated
as of April 20, 1995 among Pioneer and its subsidiaries.
- 33 -
<PAGE> 47
"Term Loan Agent" means Bank of America Illinois as
administrative agent under the Term Loan Agreement and any successor thereto.
"Term Loan Agreement" means the loan agreement dated as of
June 17, 1997, among the Company, the Term Loan Agent and the lenders named
therein, including and together with any and all related notes, guarantees,
instruments and agreements executed in connection therewith, as such loan
agreement and/or related documents may be amended, restated, supplemented,
renewed, replaced or otherwise modified from time to time.
"Term Loan Notes" means the notes representing loans in an
initial aggregate principal amount of $100,000,000 made to the Company pursuant
to the Term Loan Agreement, as such notes may be exchanged, replaced, amended,
restated, supplemented or otherwise modified from time to time.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended.
"Trust Moneys" means all cash or Eligible Investments received
by the Collateral Agent: (a) in exchange for the release of property from the
Lien of any of the Security Documents; or (b) as compensation for or proceeds
of the sale of all or any part of the Collateral taken by eminent domain or
purchased by, or sold pursuant to any order of, a governmental authority or
otherwise disposed of; or (c) as proceeds of insurance upon any, all or part of
the Collateral (other than any liability insurance proceeds payable to the
Collateral Agent for any loss, liability or expense incurred by it); or (d) as
proceeds of any other sale or other disposition of all or any part of the
Collateral by or on behalf of the Collateral Agent or any collection, recovery,
receipt, appropriation or other realization of or from all or any part of the
Collateral pursuant to the Security Documents or otherwise; or (f) for
application under the Indenture as provided in the Indenture or any Security
Document, or whose disposition is not otherwise specifically provided for in
the Indenture or in any Security Document.
"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.
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<PAGE> 48
"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 (w) 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, (x) immediately after giving effect to
such designation no Default or Event of Default has occurred and is continuing,
(y) all outstanding Investments by the Company and its Restricted Subsidiaries
(except to the extent repaid in cash) in the Subsidiary so designated shall be
deemed to be Restricted Payments at the time of such designation equal in
amount to the Fair Market Value of such Investments at the time of such
designation and would be Restricted Payments permitted to be paid pursuant to
the provisions of Section 1006 hereof and (z) the amount of such Restricted
Payments shall be included in the calculation of the amount of Restricted
Payments previously made pursuant to Section 1006 hereof. 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
- 35 -
<PAGE> 49
(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 of securities has such voting power by reason
of any contingency.
"Wholly-Owned Restricted Subsidiary" means, with respect to
any Person, a Restricted Subsidiary of such Person all of the outstanding
Capital Stock or other ownership interests of which (other than capital stock
constituting directors' qualifying shares or interests held by directors or
shares or interests required to be held by foreign nationals, to the extent
mandated by applicable law) are owned by such Person or by one or more
Wholly-Owned Restricted Subsidiaries of such Person.
Section 102. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Act" 105
"Additional Collateral" 1401
"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
"Collateral Proceeds" 1009
"Commencement Date" 1109
"Computation Date" 1006
"Computation Period" 1006
</TABLE>
- 36 -
<PAGE> 50
<TABLE>
<S> <C>
"covenant defeasance" 403
"Custodian" 501
"Defaulted Interest" 309
"defeasance" 402
"Defeasance Redemption Date" 404
"Defeased Securities" 401
"Excess Proceeds" 1009
"Funding Subsidiary Guarantor" 1309
"New Indebtedness" 1017
"Physical Securities" 201
"Pledgor Subsidiary" or "Pledgor
Subsidiaries" 1017
"Refinancing" 101*
"Refinancing Indebtedness" 101*
"Registration Default" 203
"Required Filing Date" 704
"Restricted Payment" 1006
"Senior Collateral" 204, 1401
"U.S. Global Security" 201
- -----------------
* See "Permitted Indebtedness", paragraph (j) of Section 101
</TABLE>
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 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.
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<PAGE> 51
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
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<PAGE> 52
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company, any 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.
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<PAGE> 53
(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 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
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<PAGE> 54
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.
(e) If at any time a request, demand, authorization, direction,
notice, consent, waiver or other action to be given or taken by the Majority
Holders is required pursuant to the terms of the Intercreditor Agreement, the
Trustee shall solicit the direction of the Holders as to such request, demand,
authorization, direction, notice, consent, waiver or other action. The Holders
of a majority in principal amount of the Securities then Outstanding may direct
the Trustee's response to such request, demand, authorization, direction,
notice, consent, waiver or other action.
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 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 114 West 47th Street, New York, New York, 10036-1532,
Attention: Corporate Trust Division, telecopy: 212-852-1625 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
- 41 -
<PAGE> 55
(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.
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.
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<PAGE> 56
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.
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<PAGE> 57
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, principal, premium, if any, or Liquidated Damages, 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 or Liquidated
Damages, if any, 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).
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<PAGE> 58
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 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.
- 45 -
<PAGE> 59
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 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. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
NOT TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE THAT
IS TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE
144(k) AS PERMITTING THE RESALE BY NON-AFFILIATES OF RESTRICTED SECURITIES
WITHOUT RESTRICTION) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATED PERSON OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) (THE "RESALE
RESTRICTION TERMINATION DATE"), EXCEPT (A) TO THE COMPANY; (B) PURSUANT TO A
REGISTRATION
- 46 -
<PAGE> 60
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT; (C)
PURSUANT TO RULE 144A, FOR SO LONG AS IT IS AVAILABLE, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A; (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) or (7) OF THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," 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; OR (E) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATIONS AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
TRUSTEE.
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.
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<PAGE> 61
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.
___________________
9 1/4% SENIOR SECURED NOTES DUE 2007
CUSIP No:
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 dollars on June 15, 2007, 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 June 15, and December 15, in
each year, commencing December 15, 1997 at the rate of 9 1/4% per annum
(subject to adjustment as provided below), in United States dollars, until the
principal hereof is paid or duly provided for.
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 or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be June 1, or December 1 (whether or not a
Business
- 48 -
<PAGE> 62
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, interest and
Liquidated Damages, if any, 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 shall rank pari passu with all existing and future Senior
Indebtedness of such Subsidiary Guarantor and senior to all Subordinated
Indebtedness of such Subsidiary Guarantor. The Guarantees of PCAC and PAI
shall be secured by Collateral. 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.
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<PAGE> 63
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.
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
------------------------------------
[SEAL]
Attest:
- ------------------------------------
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 9 1/4% Senior Secured Notes due 2007 (herein
called the "Securities"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $200,000,000,
which may be issued under an indenture (herein called the "Indenture") dated as
of June 17, 1997, among the Company, the Subsidiary Guarantors and United
States Trust Company of New York, as trustee (herein
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<PAGE> 64
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 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.
The Securities shall not be redeemable at the option of the
Company prior to June 15, 2002. 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, 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 June 15 in the year indicated below:
Year Redemption
---- ----------
2002 104.625%
2003 103.083%
2004 101.542%
2005 and thereafter 100.000%
in each case together with accrued and unpaid interest and Liquidated Damages,
if any, to the Redemption Date (subject to the right of Holders of record on
relevant record dates to receive interest and Liquidated Damages, if any, 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.
- 51 -
<PAGE> 65
Notwithstanding the foregoing, at any time on or prior to June
15, 2000, the Company may redeem, in part, up to $70,000,000 in aggregate
principal amount of Securities at a purchase price of 109.25% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, to the date fixed for redemption, with the net proceeds of (i) any Equity
Offering by the Company or (ii) any Equity Offering by Pioneer, but only to the
extent that Pioneer contributes such net proceeds to the Company as a capital
contribution; provided that at least $130,000,000 aggregate principal amount of
the Securities must remain outstanding after such redemption.
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 and Liquidated Damages, 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 or in one or more Restricted Subsidiaries in a Related Business,
exceed $10,000,000 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 and
Liquidated Damages, 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.
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<PAGE> 66
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 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.
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<PAGE> 67
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 Security
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 June 17, 1997 (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, and (ii) use their best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act on or
prior to 150 days after the Closing Date. The Holders of the Initial
Securities shall be entitled to receive Liquidated Damages in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the Registration Rights Agreement.
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.(1)
- -------------------
(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.
- 54 -
<PAGE> 68
In order to secure the due and punctual payment of principal
of and interest and Liquidated Damages, if any, on the Securities when and as
the same shall become due and payable, whether on an Interest Payment Date, at
maturity, by acceleration, repurchase, redemption or otherwise, and interest on
the overdue principal of and interest (to the extent permitted by law), if any,
on the Securities, and performance of all other obligations of the Company to
the Holders or the Trustee under this Indenture and the Securities and of all
obligations of PCAC and PAI under their respective Guarantees and under this
Indenture and the Securities, the Company, PCAC and PAI have entered into the
Security Documents with the Collateral Agent. The Securities shall be secured
by Liens on and security interests in the Collateral subject to pari passu
Liens and security interests and other permitted encumbrances as described
further in the Security Documents.
Each Holder, by accepting a Security, agrees to all of the
terms and provisions of the Security Documents as the same may be amended from
time to time pursuant to the respective provisions thereof and of the
Indenture.
Each Holder acknowledges that a release of any of the
Collateral or any Lien strictly in accordance with the terms and provisions of
the Security Documents and the terms and provisions of the Indenture will not
be deemed for any purpose to be an impairment of the security under the
Indenture.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and the Security Documents.
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.
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<PAGE> 69
[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
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<PAGE> 70
the conditions to any such transfer of registration set forth 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.
Date:
---------------------------
------------------------------------
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: [ ].
- 57 -
<PAGE> 71
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.
UNITED STATES TRUST COMPANY OF
NEW YORK
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,
- 58 -
<PAGE> 72
interest and Liquidated Damages, if any, 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 manually
executes the certificate of authentication on this Security.
PIONEER AMERICAS, INC.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
PIONEER CHLOR ALKALI COMPANY,
INC.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
IMPERIAL WEST CHEMICAL CO.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
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<PAGE> 73
ALL-PURE CHEMICAL CO.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
BLACK MOUNTAIN POWER COMPANY
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
ALL PURE CHEMICAL NORTHWEST,
INC.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
PIONEER CHLOR ALKALI
INTERNATIONAL, INC.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
G.O.W. CORPORATION
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
- 60 -
<PAGE> 74
PIONEER (EAST), INC.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
T.C. HOLDINGS, INC.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
T.C. PRODUCTS, INC.
Attest By
------------------------ ----------------------------
Name: Name:
Title: Title:
- 61 -
<PAGE> 75
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 $200,000,000 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 "9 1/4%
Senior Secured Notes due 2007" of the Company. The Stated Maturity of the
principal amount of the Securities shall be June 15, 2007, and the Securities
shall each bear interest at the rate of 9 1/4% 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 December 15, 1997 and semiannually thereafter on June
15, and December 15, in each year, until the principal thereof is paid or duly
provided for.
The principal of, premium, if any, interest and Liquidated
Damages, if any, 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, interest and Liquidated Damages, if any, 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.
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.
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<PAGE> 76
Section 302. Denominations.
The Securities shall be issuable only in fully 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 $200,000,000 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.
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Each Security shall be dated the date of its authentication.
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.
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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 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
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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 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.
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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.
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
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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
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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.
(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:
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(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 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
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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 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
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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 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
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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.
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
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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 on or prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit
of the Persons entitled to such
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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 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 and
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Liquidated Damages, if any, 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
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.
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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 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, including
obligations to the Trustee, if any (and the Trustee, at the expense of the
Company, and, upon written request, shall
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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, interest and
Liquidated Damages, if any, 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 1003, 1004, 1005, 1006, 1007,
1008, 1009, 1010, 1011, 1012, 1014, 1015, 1016, 1019, 1020, 1021 and 1022
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 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.
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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, interest and Liquidated Damages, if any, 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(10) or (11) 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.
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(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 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
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to become due thereon in respect of principal, premium, if any, interest and
Liquidated Damages, if any, 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 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, interest or Liquidated Damages, if any, 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.
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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, interest or Liquidated Damages, if any, on any Security and
remaining unclaimed for two years after such principal, and premium, if any,
interest or Liquidated Damages, if any, 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.
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
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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, the Securities or the Security Documents 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, 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;
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(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) equals or exceeds $5,000,000;
(9) any representation, warranty or certification made or
deemed made in any of the Security Documents is untrue or incorrect in
any material respect when made, any of the Security Documents ceases
to be in full force and effect and valid, binding and enforceable
(other than in accordance with their respective terms), or any of the
Security Documents ceases to give either of the Collateral Agents a
valid and perfected Lien of the priority required thereby or the
rights, powers and privileges purported to be created thereby (other
than in accordance with their respective terms), or any of the
Security Documents is declared null and void, or the Company, PCAC or
PAI denies any of its obligations under any of the Security Documents
or any Collateral becomes subject to any Lien other than the Liens
created or permitted by the Security Documents or the Indenture;
(10) 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,
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(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
(11) 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,
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.
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Section 502. Acceleration.
If an Event of Default (other than an Event of Default
specified in clauses (10) and (11) 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 and Liquidated Damages, if any, on all the Securities to be
due and payable. Upon such declaration the principal and interest and
Liquidated Damages, if any, shall be due and payable immediately. If an Event
of Default specified in clause (10) or (11) 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,
(iii) the principal of and premium, if any, and
Liquidated Damages, 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
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(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, interest or Liquidated Damages, if
any, 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
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cease to exist, and any Event of Default arising therefrom shall 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.
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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
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,
interest and Liquidated Damages, if any, 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.
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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 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
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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 (i) 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 and (ii)
the Collateral Agent, pursuant to the terms of the Intercreditor
Agreement;
Second: subject to Article Thirteen, to (i) Holders for
amounts due and unpaid on the Securities for principal, premium, if
any, interest and Liquidated Damages, if any, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for principal, premium, if any, interest and
Liquidated Damages, if any, respectively, and (ii) subject to the
Intercreditor Agreement, to the Term Loan Agent for obligations under
the Term Loan Agreement, including amounts of principal of, premium,
if any, and interest on such obligations;
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
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.
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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, interest or Liquidated Damages, if any, 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, interest or Liquidated Damages, if any, 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 or under any Security Document in
good faith and in reliance thereon in accordance with such advice or
Opinion of Counsel;
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(d) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or any Security
Document 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;
(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 or any Security Document 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;
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(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder or under any Security
Document 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;
(h) no provision of this Indenture or any Security Document
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;
(i) notwithstanding anything to the contrary set forth herein
or in any Security Document, under no circumstances shall the Trustee
be required to take possession of or maintain an action to foreclose
upon any Mortgaged Property; and
(j) no implied covenants or obligations shall be read into
this Indenture or any other Security Document against the Trustee.
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 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.
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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 expenses,
disbursements and advances incurred or made by or on behalf of it in accordance
with any of the provisions of this
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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 any
Security Document 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 or Liquidated
Damages, if any, 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.
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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 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
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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.
(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
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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.
(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
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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 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
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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
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(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;
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.
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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 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.
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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);
(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
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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 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.
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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).
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 additional collateral for the Securities or
the Guarantees or other Indebtedness permitted to be secured by the
Collateral, including in connection with the additional Liens referred
to in Section 1012(j) hereof, and in connection therewith, to modify
covenants, to provide additional indemnity to the Trustee, and to
modify
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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, intercreditor and collateral agency agreements relating to
Liens on such collateral on a pari passu basis in favor of the Trustee
for the benefit of the Holders;
(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;
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(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 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;
(viii) affect the ranking of the Securities;
(ix) release all or substantially all of the Collateral
other than pursuant to the terms of the Indenture or the Security
Documents; or
(x) 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
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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.
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.
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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 surrendered for payment.
The Company also shall maintain (or
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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).
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(ii) The Company shall deliver to the Trustee, within sixty
(60) days after the end of the first three quarters of each fiscal year, an
Officers' Certificate stating that a review of the activities of the Company
and its Subsidiaries during the preceding fiscal quarter 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).
(iii) 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 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.
(iv) 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.
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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. [Intentionally omitted.]
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 or paid by
a Wholly-Owned Restricted Subsidiary of the Company on account of its Equity
Interests held by the Company or another Restricted Subsidiary or payable or
paid 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 or any
Restricted Subsidiary (all of the foregoing 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 (3) 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
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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; and
(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 July 1, 1997 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 of the Company during the Computation Period), (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, (iv) cash
contributions to the Company's capital subsequent to the Closing Date
and (v) $5,000,000.
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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 repurchase, redemption or other acquisition or retirement for value of
Capital Stock of the Company or Pioneer held by management or other employees
of the Company, Pioneer or any Subsidiary pursuant to any shareholders
agreement, management or employee stock option agreement or management or
employee equity subscription agreement in accordance with the provisions of any
such arrangement, in an amount not greater than $500,000 in any calendar year
plus the portion of any such amounts which remains unused at the end of the two
prior calendar years, but in no event to exceed $1,500,000 in any calendar
year, provided, however, that any such repurchase, redemption, acquisition or
retirement for value 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 Pioneer pursuant to any tax sharing arrangement so
long as payments
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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 Pioneer, 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; (f) payments to Pioneer 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 (vi) 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
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consideration, if any, received therefor. Not later than the date of the
making of any such Restricted Payment, the Company shall deliver to the Trustee
an officers' certificate stating that such Restricted Payment is permitted,
attaching a copy of the applicable resolution of the Company's Board of
Directors pursuant to which the value of the Restricted Payment to be made was
determined and setting forth the basis upon which the calculations required by
this Section 1006 were computed.
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 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 Term Loan Agreement,
the Revolving Credit Agreement, the Intercreditor Agreement, the Security
Documents 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
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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 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 2.0 to 1.0. For purposes of determining the
Company's Consolidated Cash Flow Coverage Ratio, Cash Flow and Consolidated
Interest Expense for all periods prior to the Closing Date shall be calculated
on a consolidated basis including each of the Company's and its subsidiaries'
predecessors.
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Notwithstanding the foregoing limitations, the limitations of
this Section 1008 shall not apply to the incurrence of Permitted Indebtedness.
Notwithstanding anything to the contrary contained herein, the
Company and its Restricted Subsidiaries each may guarantee Indebtedness of the
Company or any Restricted Subsidiary that is permitted to be incurred
hereunder; provided, however, that in the event such Indebtedness guaranteed is
subordinated in right of payment to any other Indebtedness of the obligor
thereof, then such guarantee shall be subordinated to Indebtedness of such
guarantor to the same extent.
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 and no portion thereof
shall consist of inventory or accounts receivable or other property that would
become subject to a Lien held by any other creditor of the Company or of any
Restricted Subsidiary of the Company; 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;
(ii) to the extent such Asset Sale involves Collateral, (x) the consent of the
Majority Holders shall be obtained prior to the consummation of such sale and
(y) the Company shall cause the aggregate cash proceeds received by the Company
or such Restricted Subsidiary in respect of such Asset Sale which are allocated
to the Collateral, net of the items set forth in clauses (i) through (vi) of
the definition of Net Proceeds (the "Collateral Proceeds") to be deposited with
the Collateral Agent in the Intercreditor Collateral Account as and when
received by the Company or any of its Restricted Subsidiaries and shall
otherwise comply with the Intercreditor Agreements and Article Fourteen hereof
applicable
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to such sale of Collateral, provided, that no Senior Indebtedness other than
the Securities and any Secured Indebtedness may be permanently repaid or
prepaid out of any Collateral Proceeds; and (iii) the Net Proceeds or the
Collateral Proceeds received by the Company or such Restricted Subsidiary from
any Asset Sale are applied in accordance with the Intercreditor Agreement, as
applicable, and with the following paragraphs.
(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. (Any optional prepayment of the
Term Loan Notes with the Net Proceeds of an Asset Sale shall be permitted only
if the amount of such prepayment is limited to the Pro Rata Share (as defined
in the Intercreditor Agreement) with respect to the Term Loan Notes, and the
Pro Rata Share with respect to the Securities is used to make an Asset Sale
Offer (as described below), and any repayment of a revolving credit facility or
similar agreement that makes credit available with the Net Proceeds of an Asset
Sale shall be permitted only if the commitment thereunder is also permanently
reduced by such amount.) 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 $10,000,000 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 $10,000,000 or more to the purchase of Securities tendered
to the Company for purchase at a price (the "Asset Sale Purchase
Price") equal to 100% of the principal amount thereof, plus accrued
interest and Liquidated Damages, 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.
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(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 Revolving Credit Agreement 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 shall set forth the
basis of calculation used in determining the amount of Excess Proceeds to be
applied to the purchase of such Securities.
In the case of a sale of Collateral, the notice of Asset Sale
Offer shall contain the following additional information: (i) a description of
the interests to be released, (ii) the Fair Market Value of the released
interests as of a date no later than 60 days before the date of such notice,
and (iii) certification that the purchase price received is not less than the
fair market value of such released interest as of the date of such release.
Such notice to the Trustee shall be accompanied by an Officers' Certificate
setting forth (i) a statement to the effect that (x) the Company has made an
Asset Sale and/or (y) there has occurred a destruction or condemnation in
respect of Collateral resulting in Insurance Proceeds or Net Awards which are
not required to be applied to effect a Restoration of the affected Collateral
under the applicable Security Document. The notice shall also be accompanied
by an Opinion of Counsel as to the Asset Sale Offer, and satisfactory evidence
from a title company that the Liens of the Collateral Agent or the remaining
Collateral continue unimpaired as perfected first priority liens.
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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.
(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 New Credit Facilities) that would materially impair the ability of
the Company to comply with the provisions of this Section 1009.
(h) If at any time any non-cash consideration (other than any
such consideration consisting of inventory, accounts receivable and certain
related assets securing or permitted to secure the Revolving Credit Agreement)
is received by the Company or any Restricted Subsidiary, as the case may be, in
connection with any Asset Sale of assets which includes Collateral, such
non-cash consideration shall be made subject to the Lien of the Security
Documents in the manner contemplated in the Intercreditor Agreements, as
applicable, to the extent of the purchase price allocated to the Collateral.
If and when any such non-cash consideration received from any Asset Sale
(whether or not relating to Collateral) is converted into or sold or
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otherwise disposed of for cash, then such conversion or disposition shall be
deemed to constitute an Asset Sale hereunder and the Net Proceeds thereof shall
be applied in accordance with this Section 1009 and this Indenture.
(i) All Insurance Proceeds and all Net Awards required to be
delivered to the Collateral Agent pursuant to any Security Document shall
constitute Trust Moneys and shall be delivered by the Company or a Restricted
Subsidiary, as the case may be, to the Collateral Agent contemporaneously with
receipt by the Company or such Restricted Subsidiary and be deposited into the
appropriate Intercreditor Collateral Account and applied in accordance with the
applicable provisions of the Intercreditor Agreements. Insurance Proceeds and
Net Awards so deposited that may be applied by the Company or a Restricted
Subsidiary to effect a Restoration of the affected Collateral under the
applicable Security Document may be withdrawn from the Intercreditor Collateral
Account only in accordance with the applicable provisions of the Intercreditor
Agreement. Insurance Proceeds and Net Awards so deposited that are not applied
to effect a Restoration of the affected Collateral under the applicable
Security Document may only be withdrawn in accordance with applicable
provisions of the Intercreditor Agreement.
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.
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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 $750,000, 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 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 $7,500,000, 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
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(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 Investment made in Kemwater during a period of
three years following the Closing Date, provided that such Investment matures
or is required to be redeemed within one year of its being made, (iii) 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, (iv)
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, (v) 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 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 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, 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 New Credit
Facilities and security documents relating thereto and the Security
Documents;
(b) Permitted Liens;
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(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 (including the reasonable and customary costs of
installation of such acquired assets) or constructed, (ii) the
Indebtedness secured by such Liens shall be otherwise permitted to be
incurred hereunder, (iii) such Liens shall not encumber any other
assets or property of the Company or any of its Restricted
Subsidiaries and (iv) the Indebtedness secured by the Lien shall not
be created more than 100 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 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 $10,000,000;
(g) Liens on property or shares of Capital Stock of a Person
at the time such Person becomes a Restricted
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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, accounts receivable or related
general intangibles of any Restricted Subsidiary securing the
obligations under clause (d) of the definition of "Permitted
Indebtedness" in Section 101 hereof;
(j) pari passu Liens on the Collateral securing up to
$50,000,000 aggregate principal amount of Indebtedness permitted to be
incurred under the initial paragraph of Section 1008 hereof, provided
that (i) the proceeds of such Indebtedness are used to acquire or
construct additional property, plant and equipment that will be
utilized in one or more Related Businesses, (ii) the aggregate
principal amount of Indebtedness secured by such Liens does not exceed
the original cost or purchase price of the assets or property so
acquired (including the reasonable and customary costs of installation
of such acquired assets) or constructed, and (iii) the assets or
property acquired or constructed with such Indebtedness are pledged to
the Collateral Agent in accordance with the Intercreditor Agreement to
become part of the Collateral securing the Securities and the Term
Loan Notes on a pari passu basis with such Indebtedness, and in
connection therewith (A) the holders of such Indebtedness or any
trustee or other representative thereof becomes party to the
Intercreditor Agreement, as amended, and is authorized to exercise
rights and remedies in accordance therewith, and (B) the Collateral
Agent receives an endorsement to its title insurance policies relating
to the mortgage liens constituting part of the Collateral insuring the
continuing priority of such mortgage liens as set forth in the title
insurance policies; and
(k) Liens on assets or property of the Company, or on assets
or property of Restricted Subsidiaries of the Company, acquired or
constructed after the date of the
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Indenture other than in the ordinary course of business and other than
assets or property acquired or constructed in replacement, repair or
improvement of any assets or property constituting Collateral;
provided, however, that (i) the aggregate principal amount of
Indebtedness secured by such Liens does not exceed the original cost
or purchase price of the assets or property so acquired (including the
reasonable and customary costs of installation of such acquired
assets) or constructed, (ii) the Indebtedness secured by such Liens is
otherwise permitted to be incurred under the Indenture and (iii) such
Liens do not encumber the Collateral.
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.
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 and Liquidated Damages, 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
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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 and Liquidated Damages, if
any;
(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
or Liquidated Damages, if any, 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 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
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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 Company's written
request return to the Company any cash that remains unclaimed, together with
interest or dividends, if any,
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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 New
Credit Facilities) 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
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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 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. Stock Pledge Agreements.
(a) If (i) any Restricted Subsidiary of the Company engages in
any business activity other than the holding of the Capital Stock of one or
more Subsidiaries of the Company (or in the case of Imperial West, engages in
any business activity other than the holding of its Investment in Kemwater) and
(ii) such Restricted Subsidiary has a value equal to or greater than 5% of the
Company's total assets determined on a consolidated basis as of the time of
determination, then the Company shall, and shall cause the applicable
Subsidiary or Subsidiaries of the Company (the "Pledgor Subsidiary" or "Pledgor
Subsidiaries") to, execute and deliver to the Trustee and the Collateral Agent
one or more stock pledge agreements substantially in the form of the stock
pledge agreement attached as an exhibit to the Indenture providing for the
pledge to the Collateral Agent for the benefit of (x) the Trustee, for itself
and the Holders, and (y) the Term Loan Agent, for itself and the other lenders
under the Term Loan Agreement, of all the Capital Stock of such Restricted
Subsidiary held by the Company and the Pledgor Subsidiary or Pledgor
Subsidiaries, together with certificates evidencing such Capital Stock, which
Capital Stock shall become "Collateral" for purposes of the Intercreditor
Agreement.
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(b) If (i) there are no Term Loan Notes outstanding, (ii)
there is no Indebtedness (the "New Indebtedness") outstanding which refinanced
the Term Loan Notes and requires pledges of Capital Stock of one or more
Restricted Subsidiaries of the Company in connection therewith, (iii) all other
amounts due and owing to the lenders under the Term Loan Agreement or the New
Indebtedness lenders under the agreement providing for the issuance of the New
Indebtedness, as the case may be, have been paid in full, (iv) the Term Loan
Agreement or the agreement providing for the issuance of the New Indebtedness,
as the case may be, has been terminated, and (v) the Company has delivered to
the Trustee and the Collateral Agent an officers' certificate stating that the
foregoing requirements have been satisfied (which officers' certificate must
also be signed by the Term Loan Agent or the agent, trustee or other
representative of the New Indebtedness, as the case may be), then (x) the
Company shall be released from its obligations to comply with this Section
1017, (y) the failure to comply with this Section 1017 shall not constitute a
Default or Event of Default with respect to the Notes, and (z) all stock pledge
agreements entered into by the Company and one or more Subsidiaries of the
Company after the Closing Date pursuant to this Section 1017 shall be
terminated, and all certificates evidencing Capital Stock pledged thereunder
shall be released, by the Collateral Agent.
(c) If at any time after the operation of the immediately
preceding paragraph the Company or any Subsidiary of the Company intends to
incur any Indebtedness which requires the pledge of Capital Stock of one or
more Restricted Subsidiaries of the Company in connection therewith, neither
the Company nor such Subsidiary shall incur such Indebtedness without directly
securing the Notes with such pledge of Capital Stock on an equal and ratable
basis (or prior to in the case of Indebtedness subordinated to the Notes or the
Guarantees, as the case may be) and in connection therewith the Company's
obligation to comply with the provisions of this Section 1017 shall be
reinstated if a covenant or agreement similar to this covenant is included in
the agreement providing for the issuance of such Indebtedness.
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,
interest or Liquidated Damages, if any, on any
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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,
interest or Liquidated Damages, if any, 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, interest or Liquidated Damages, if any, on any Securities,
deposit with a Paying Agent a sum in same day funds sufficient to pay the
principal, premium, if any, interest or Liquidated Damages, if any, so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium, interest or Liquidated Damages, if any, 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, interest or Liquidated Damages, if any, 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;
(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, interest or
Liquidated Damages, if any;
(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.
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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, interest or Liquidated Damages, if any, on any Security and
remaining unclaimed for two years after such principal and premium, if any,
interest or Liquidated Damages, if any, 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, 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,
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(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, or (iv) any Subsidiary of the Company becomes a
guarantor of the Term Loan Notes after the Closing Date, 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.
(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, transfer or other disposition
to any Person 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 Wholly-Owned
Restricted Subsidiary Stock.
The Company (a) shall not, and shall not permit any
Wholly-Owned Restricted Subsidiary of the Company to, transfer, convey, sell or
otherwise dispose of any Capital Stock of any Wholly-Owned Restricted
Subsidiary of the Company (other than All-Pure and its subsidiaries) to any
Person (other than the Company or a Wholly-Owned Restricted Subsidiary of the
Company), unless (i) such transfer, conveyance, sale or other disposition is of
all the Capital Stock of such Wholly-Owned Restricted Subsidiary and (ii) the
Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with Section 1009 hereof, and (b) shall not permit
any Wholly-Owned Restricted Subsidiary of the Company (other than All-Pure and
its subsidiaries) to issue any of its Equity
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Interests (other than, if necessary, Capital Stock constituting directors'
qualifying shares or interests held by directors or shares or interests
required to be held by foreign nationals, to the extent mandated by applicable
law) to any Person other than to the Company or a Wholly-Owned Restricted
Subsidiary of the Company.
Section 1021. Impairment of Security Interest.
The Company shall not, and shall not cause or permit any
Restricted Subsidiaries to, take or omit to take any action which action or
omission might or would have the result of affecting or impairing the Liens and
security interest in favor of the Collateral Agent for the benefit of the
Holders and the holders of Secured Indebtedness with respect to the Collateral
and the Company shall not grant to any Person, or suffer any Person to have any
interest whatsoever in the Collateral, in each case other than as otherwise
permitted by the Indenture, the Term Loan Agreement or the Security Documents.
The Company shall not, and shall not cause or permit any Restricted
Subsidiaries to, enter into any agreement or instrument that by its terms
requires that the proceeds received from any sale of Collateral be applied to
repay, redeem, defease or otherwise acquire or retire any Indebtedness of any
Person, other than pursuant to the Indenture, the Term Loan Agreement or any
instrument governing Indebtedness permitted to be secured by a Lien on the
Collateral pursuant to Section 1012 hereof. A release of any of the Collateral
strictly in accordance with the terms and conditions of the Indenture and the
Security Documents will not be deemed for any purpose to be an impairment of
security under the Indenture.
Section 1022. Amendment to Security Documents.
The Company shall not amend, modify or supplement, or permit
or consent to any amendment, modification or supplement of, the Security
Documents in any manner or to any extent that would constitute an Event of
Default hereunder or under the Security Documents; provided that the Indenture
and the Security Documents may be amended, modified or supplemented in
accordance with Article Nine hereof.
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Section 1023. Limitation on Applicability of Certain
Covenants.
Notwithstanding anything to the contrary herein, the covenants
set forth in Sections 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.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
The Securities shall not be redeemable at the option of the
Company prior to June 15, 2002. 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, 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 June 15 in the year indicated below:
Year Redemption
---- ----------
2002 104.625%
2003 103.083%
2004 101.542%
2005 and thereafter 100.000%
in each case together with accrued and unpaid interest and Liquidated Damages,
if any, to the Redemption Date (subject to the right of Holders of record on
relevant record dates to receive interest and Liquidated Damages, if any, 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.
Notwithstanding the foregoing, at any time on or prior to June
15, 2000, the Company may redeem, in part, up to $70,000,000 in aggregate
principal amount of Securities at a purchase price of 109.25% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, to the date fixed for redemption, with the net proceeds of (i) any Equity
Offering by the Company or (ii) any Equity Offering by Pioneer, but only to the
extent that Pioneer contributes such net proceeds to the Company as a capital
contribution; provided that at least $130,000,000 aggregate principal amount of
the Securities must remain outstanding after such redemption.
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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.
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.
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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;
(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 and Liquidated Damages, if any, 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
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(i) the CUSIP number, if any, relating to such Securities (as
to the accuracy of which the Trustee shall make no representation).
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 and Liquidated Damages, if
any, 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 and Liquidated Damages, if any, 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 and Liquidated Damages, if any) such Securities shall cease to
bear interest. Upon surrender of any such Security for redemption in
accordance with said notice, such Security shall be paid by the Company at the
Redemption Price together with accrued interest and Liquidated Damages, if any,
to the Redemption Date; provided,
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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 and other pari passu Senior
Indebtedness that is required by its
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terms 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 or Liquidated Damages, if any, shall be paid to the Person in whose
name a Security is registered at the close of business on such Regular Record
Date, and no additional interest or Liquidated Damages, if any, 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 and Liquidated Damages, if any, 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 and
Liquidated Damages, if any, 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;
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(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 together with any other pari passu Senior
Indebtedness that is required by its terms to be purchased in such
Asset Sale Offer exceeds the Asset Sale Offer Amount, the Company
shall select the Securities to be 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 and Liquidated Damages, if any, 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
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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 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.
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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 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 and Liquidated
Damages, if any, at such Stated Maturity or Redemption Date;
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(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, interest and Liquidated Damages,
if any, 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
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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 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:
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(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
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;
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(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;
(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;
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(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 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
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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 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
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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 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
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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.
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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
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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.
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
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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, interest or Liquidated Damages, if any, on any
Security or any other Indenture Obligations), then, anything herein contained
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.
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<PAGE> 177
ARTICLE FOURTEEN
SECURITY
Section 1401. Security.
(a) In order to secure the due and punctual payment of
principal of and interest on the Securities when and as the same shall become
due and payable, whether on an Interest Payment Date, at maturity, by
acceleration, repurchase, redemption or otherwise, and interest on the overdue
principal of and interest (to the extent permitted by law) and Liquidated
Damages, if any, on the Securities, and performance of all other obligations of
the Company to the Holders or the Trustee under this Indenture and the
Securities and of all obligations of PCAC and PAI under their respective
Guarantees and under this Indenture and the Securities, the Company, PCAC and
PAI have entered into the respective Security Documents to which each is a
party.
(b) Each Holder, by accepting a Security, consents and agrees
to all of the terms and provisions of the Security Documents, as the same may
be in effect from time to time or may be amended from time to time in
accordance with the provisions of the Security Documents and this Indenture,
and authorizes and directs the Collateral Agent to act as mortgagee or secured
party with respect thereto or to act as collateral agent pursuant to the
Intercreditor Agreement.
(c) As set forth in and governed by the Security Documents,
as among the Holders, the Collateral as now or hereafter constituted shall be
held for the equal and ratable benefit of the Holders without preference,
priority or distinction of any thereof over any other by reason of difference
in time of issuance, sale or otherwise, as security for the Securities.
Section 1402. Recording; Priority; Opinions, Etc.
(a) The Company, PCAC and PAI shall at their sole cost and
expense perform any and all acts and execute any and all documents (including,
without limitation, the execution,
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amendment or supplementation of any financing statement and continuation
statement or other statement) for filing under the provisions of the UCC and
the rules and regulations thereunder, or any other statute, rule or regulation
of any applicable federal, state or local jurisdiction, including any filings
in local real estate land record offices, which are necessary or advisable and
shall do such other acts and execute such other documents as may be required
under any of the Security Documents, from time to time, in order to grant and
maintain valid and perfected Liens on the Collateral in favor of the Collateral
Agents in the priorities purported to be created by the Security Documents,
subject only to Liens permitted under the Security Documents to be senior or
pari passu to the Liens of the Collateral Agents, and to fully preserve and
protect the rights of the Trustee and the Holders under this Indenture.
The Company, PCAC, and PAI shall from time to time promptly
pay and satisfy all mortgage and financing and continuation statement recording
and/or filing fees, charges and taxes relating to this Indenture and the
Security Documents, any amendments thereto and any other instruments of further
assurance.
(b) The Company, PCAC, and PAI shall, with respect to clause
(i) below, on or prior to the Closing Date, and, with respect to clause (ii)
below, at such times as contemplated therein, furnish to the Trustee:
(i) Opinion(s) of Counsel either (a) to the effect that, in
the opinion of such counsel, this Indenture and the grants of security
interests in the Collateral intended to be made by the Security
Documents and all other instruments of further assurance, have been
properly registered, recorded and filed to the extent necessary to
perfect the Lien on the Collateral created by the Security Documents
and reciting the details of such action, and stating that as to the
Liens created pursuant to the Security Documents, such recordings,
registrations and filings are the only recordings, registrations and
filings necessary to give notice thereof and that no re-recordings,
re-registrations or refilings are necessary to maintain such notice
(other than as stated in such opinion), or (b) to the effect that, in
the opinion of such counsel, no such action is necessary to perfect
such Lien; and
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(ii) on each anniversary of the Closing Date beginning in the
year 1998, an Opinion of Counsel, dated as of such date, either (a) to
the effect that, in the opinion of such counsel, such action has been
taken with respect to the recordings, registerings, filings,
re-recordings, re-registerings and refilings of all financing
statements, continuation statements or other instruments of further
assurance as is necessary to maintain the Lien of each of the Security
Documents and reciting with respect to such Liens the details of such
action or referencing prior Opinions of Counsel in which such details
are given, and stating that all financing statements and continuation
statements have been executed and filed that are necessary as of such
date and during the succeeding twelve months fully to preserve and
protect the rights of the Collateral Agent, the Holders and the
Trustee hereunder and under each of the Security Documents with
respect to the Liens, or (b) to the effect that, in the opinion of
such counsel, no such action is necessary to maintain such Liens.
Section 1403. Release of Collateral.
The Trustee shall not direct the Collateral Agent to release
Collateral from the Lien of the Security Documents unless such release is in
accordance with the provisions of the Security Documents and Trust Indenture
Act Section 314(d).
Section 1404. Trust Indenture Act Requirements.
The release of any Collateral from any of the Security
Documents or the release of, in whole or in part, the Liens created by any of
the Security Documents, will not be deemed to impair the Lien of the Security
Documents in contravention of the provisions hereof if and to the extent the
Collateral or Liens are released pursuant to the terms of the Security
Documents. The Trustee and each of the Holders acknowledge that a release of
Collateral or Liens strictly in accordance with the terms of the Security
Documents and the terms hereof will not be deemed for any purpose to be an
impairment of the Liens created pursuant to the Security Documents in
contravention of the terms of this Indenture. Without limitation, the Company
and each other obligor on the Securities shall cause Trust Indenture Act
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<PAGE> 180
Section 314(d) relating to the release of property or securities from the Liens
of the Security Documents to be complied with. Any certificate or opinion
required by Trust Indenture Act Section 314(d) may be made by an Officer of the
Company, PCAC or PAI, as the case may be, except in cases where Trust Indenture
Act Section 314(d) requires that such certificate or opinion be made by an
independent person.
Section 1405. Suits to Protect Collateral.
Subject to the provisions of the Intercreditor Agreements, the
Trustee, acting at the written direction of the Holders, shall have power to
institute and to maintain, or direct each Collateral Agent to institute and
maintain, such suits and proceeds as the Trustee may deem expedient to prevent
any impairment of the Collateral by any acts which may be unlawful or in
violation of any of the Security Documents or this Indenture, and such suits
and proceedings as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders in the Collateral (including power
to institute and maintain suits or proceedings to restrain the enforcement of
or compliance with any legislative or other governmental enactment, rule or
order that may be unconstitutional or otherwise invalid if the enforcement of,
or compliance with, such enactment, rule or order would impair the Liens of
each Collateral Agent in the Collateral or be prejudicial to the interests of
the Holders or the Trustee).
Section 1406. Determinations Relating to Collateral.
In the event (i) the Trustee shall receive any written request
from the Company, PCAC or PAI under any Security Document for consent or
approval with respect to any matter or thing relating to any Collateral or the
Company's, PCAC's or PAI's obligations with respect thereto or (ii) there shall
be due to or from the Trustee under the provisions of any Security Document any
performance or the delivery of any instrument or (iii) the Trustee shall become
aware of any nonperformance by the Company, PCAC or PAI of any covenant or any
breach of any representation or warranty of the Company, PCAC or PAI set forth
in any Security Document, then, in each such event, the Trustee shall be
entitled, at the expense of the Company and subject to Sections 602(d) and (h)
hereof, to hire experts, consultants, agents and attorneys to advise the
Trustee on the manner in which the Trustee should respond to such request or
render any requested performance or response to such nonperformance or breach.
The Trustee shall be fully protected in the taking of any action recommended or
approved by any such expert, consultant, agent or attorney or agreed to by the
Majority Holders pursuant to Section 505 hereof.
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<PAGE> 181
Section 1407. Trust Moneys.
To the extent Trust Moneys consist of insurance proceeds or
condemnation or other taking awards, any such moneys which may be used to
effect a restoration of the affected Collateral shall be permitted to be
withdrawn by the Company and paid by the Collateral Agent, upon a Company Order
to reimburse the Company, PCAC or PAI for expenditures made or costs incurred
to repair, rebuild or replace the destroyed, damaged, or taken Collateral, upon
confirmation by the Trustee that it has received the appropriate documentation.
The Company shall deliver (a) an Officers' Certificate certifying as to
expenditures made or costs incurred, the necessity or desirability in the
conduct of the Company's business of the repaired, rebuilt, or replaced
property, and the fair market value of such property as of the date of the
expenditures, (b) an Opinion of Counsel as to the validity and perfection of
the Collateral Agent's lien on the repaired or replaced Collateral and (c) an
architect's certificate as to the costs of such restoration and compliance with
law, all in accordance with the Intercreditor Agreements.
To the extent Trust Moneys consist of Collateral Proceeds, and
the Company intends to reinvest such proceeds in the Company or in one or more
Restricted Subsidiaries in a Related Business, such Trust Moneys shall be
permitted to be withdrawn by the Company upon delivery to the Trustee and the
Collateral Agent of (a) a Company Order regarding such withdrawal, (b) an
officer's certificate certifying compliance with the Indenture, (c) instruments
granting the Collateral Agent first priority liens, for the benefit of (i) the
Trustee, for itself and the Holders, and the Term Loan Agent, for itself and
the other Term Loan Agreement lenders on the real or personal property
interests in which the Company or any Restricted Subsidiary have invested, and
(d) an opinion of counsel as to the instruments governing such Liens and
security interests, all in accordance with the Intercreditor Agreement.
Trust Moneys shall be permitted to be applied from time to
time (x) to the payment of principal, premium, if any, interest and Liquidated
Damages, if any, on the Securities, or (y) to the extent otherwise permitted by
the Indenture, to redeem or repurchase Securities, including without limitation
pursuant
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<PAGE> 182
to a Change of Control Offer or (to the extent such Trust Moneys constitute
proceeds from Asset Sales) an Asset Sale Offer, or (z) at the direction of the
Company, PCAC and PAI to pay any other Senior Indebtedness secured by liens in
the Collateral (but only to the extent such Trust Moneys constitute Collateral
Proceeds). In each case the Trustee and each Collateral Agent shall receive
(a) resolutions of the boards of directors of the Company, PCAC and PAI
directing such application, (b) an Officers' Certificate, and (c) an Opinion of
Counsel, and the Collateral Agent shall receive cash equaling the accrued
interest, if any, required to be paid in connection with such payment or
purchase. Trust Moneys received by each Collateral Agent or the Trustee
pursuant to an Asset Sale Offer remaining after the completion of such Asset
Sale Offer shall be permitted to be withdrawn by the Company upon request of
the Company and delivery of an Officers' Certificate and an Opinion of Counsel,
all in accordance with the Intercreditor Agreements.
Any release of Collateral, including Trust Moneys, will be
subject to the provisions of Section 314(d) of the Trust Indenture Act relating
to, among other things, the delivery of a certificate or an opinion of an
engineer, appraiser or other expert as to the fair value of Collateral being
released from the Liens of the Security Documents.
[signature pages follow]
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<PAGE> 183
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/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
PIONEER AMERICAS, INC.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
PIONEER CHLOR ALKALI COMPANY,
INC.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
IMPERIAL WEST CHEMICAL CO.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
ALL-PURE CHEMICAL CO.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
<PAGE> 184
BLACK MOUNTAIN POWER COMPANY
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
ALL PURE CHEMICAL NORTHWEST, INC.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
PIONEER CHLOR ALKALI
INTERNATIONAL, INC.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President Title: Vice President
G.O.W. CORPORATION
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
PIONEER (EAST), INC.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: President Title: Vice President
T.C. HOLDINGS, INC.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
<PAGE> 185
T.C. PRODUCTS, INC.
Attest /s/ Kent R. Stephenson By /s/ Philip J. Ablove
------------------------ ----------------------------
Name: Kent R. Stephenson Name: Philip J. Ablove
Title: Vice President, Title: Vice President and Chief
General Counsel Financial Officer
and Secretary
UNITED STATES TRUST COMPANY OF
NEW YORK
Attest /s/ James J. McGinley By /s/ Gerard F. Ganey
------------------------ ----------------------------
Name: James J. McGinley Name: Gerard F. Ganey
Title: Vice President Title: Senior Vice President
<PAGE> 1
EXHIBIT 4.2(a)
WHEN RECORDED OR FILED RETURN TO:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
Title: DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
Grantor: PIONEER CHLOR ALKALI COMPANY, INC.
(Taxpayer I.D. No. 51-0302028)
Grantee #1
(Trustee): Transnation Title Insurance Company
Grantee #2
(Beneficiary): UNITED STATES TRUST COMPANY OF NEW YORK,
as Collateral Agent
(Taxpayer I.D. No. 13-3818954)
Abbreviated
Legal
Description: Portions of Blocks 1 and 12 of Ashton's Replat
Full Legal
Description on: Page 51
Assessor's Tax
Parcel Numbers: 227520-004-0
227520-005-0
227520-056-0
Reference
Numbers of Related
Documents: N/A
Washington
<PAGE> 2
BE ADVISED THAT THE TERM LOAN NOTES SECURED BY THIS DEED OF TRUST PROVIDE FOR A
VARIABLE RATE OF INTEREST.
THIS INSTRUMENT COVERS, AMONG OTHER PROPERTY, GOODS WHICH ARE OR MAY BECOME
FIXTURES ON CERTAIN REAL PROPERTY DESCRIBED ON EXHIBIT A HERETO, AND IS TO BE
FILED FOR RECORD IN THE REAL ESTATE RECORDS AS BOTH A DEED OF TRUST OF REAL
PROPERTY AND A FIXTURES FINANCING STATEMENT UNDER THE UNIFORM COMMERCIAL CODE.
A CARBON, PHOTOGRAPHIC, FACSIMILE OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF
FUTURE ADVANCES AND COVERS PROCEEDS OF COLLATERAL.
DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT (this "Deed of Trust"), dated
as of June 17, 1997, by and between PIONEER CHLOR ALKALI COMPANY, INC., a
Delaware corporation, whose address for notice hereunder is 700 Louisiana
Street, Suite 4200, Houston, Texas 77002 ("Trustor") to Transnation Title
Insurance Company, an Arizona corporation having an address at 6111 100th
Street S.W., Lakewood, Washington 98499, as trustee (the "Deed of Trust
Trustee"), in favor of UNITED STATES TRUST COMPANY OF NEW YORK, with offices at
114 West 47th Street, New York, New York 10036, as Collateral Agent under the
Intercreditor Agreement (as hereinafter defined) (in such capacity and together
with any successors and assigns in such capacity, "Beneficiary"), for (i)
itself, as Trustee under the Indenture (as hereinafter defined) (in such
capacity, the "Note Trustee"), (ii) for the Term Loan Agent (as hereinafter
defined) as agent under the Term Loan Agreement (as hereinafter defined), (iii)
for the Note Holders (as hereinafter defined), and (iv) for the Term Loan
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Lenders (as hereinafter defined) (the Beneficiary, the Note Trustee, the Term
Loan Agent, the Note Holders and the Term Loan Lenders being hereinafter
collectively referred to as the "Secured Parties"). The Note Holders, Term
Loan Lenders, the Note Trustee and the Term Loan Agent shall also be deemed to
be beneficiaries of this Deed of Trust. The Collateral Agent is authorized to
act on behalf of the Note Holders pursuant to the Collateral Agreement.
W I T N E S S E T H :
WHEREAS, pursuant to that certain Indenture dated as of the
date hereof among Pioneer Americas Acquisition Corp. ("PAAC"), the Subsidiary
Guarantors, as defined therein, and the Note Trustee, as trustee for the
holders of the Notes (as hereinafter defined) (the "Note Holders") (as the same
may be amended, amended and restated, supplemented or otherwise modified from
time to time, the "Indenture") PAAC will issue its 9 1/4% Senior Secured Notes
due 2007 (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time, including all notes issued in exchange or
substitution therefor, upon the registration of such notes pursuant to the
Securities Act of 1933 or otherwise, the "Notes") in the aggregate principal
amount of $200 million; and
WHEREAS, pursuant to that certain Term Loan Agreement dated as
of the date hereof among PAAC, Bank of America Illinois, as administrative
agent (the "Term Loan Agent"), DLJ Capital Funding, Inc., as syndication agent,
Salomon Brothers Holding Company Inc, as documentation agent, and the lenders
named therein (the "Term Loan Lenders") (as the same may be amended, amended
and restated, supplemented or otherwise modified from time to time, the "Term
Loan Agreement"), the Term Loan Lenders will make certain loans to PAAC to be
evidenced by notes (as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time, including all notes
issued in exchange or substitution therefor, the "Term Loan Notes") in an
aggregate amount of $100 million; and
WHEREAS, pursuant to Article Thirteen of the Indenture,
Trustor has guaranteed (such guarantee by Trustor being hereinafter referred to
as the "Note Guarantee") the payment and
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performance of the Indenture Obligation (as hereinafter defined); and
WHEREAS, pursuant to the Subsidiary Guaranty dated as of the
date hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time), Trustor has guaranteed (such guarantee
by Trustor being hereinafter referred to as the "Term Loan Guarantee") the
payment and performance of the Term Loan Obligation (as hereinafter defined);
and
WHEREAS, Beneficiary is the collateral agent under that
certain Intercreditor and Collateral Agency Agreement (as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Intercreditor Agreement"), dated as of the date hereof, among PAAC,
Trustor, Pioneer Americas, Inc. ("PAI" and together with PAAC and Trustor
sometimes referred to herein as the "Companies"), the Note Trustee, the Term
Loan Agent and Beneficiary, as collateral agent.
SECTION I - GRANTING CLAUSES
To secure the Secured Obligations (as hereinafter defined),
including, without limitation, Trustor's guarantees of payment and performance
of the Indenture Obligation and the Term Loan Obligation under the Note
Guarantee and the Term Loan Guarantee, respectively, and the payment and
performance of the covenants and obligations herein contained and in
consideration of the sum of $10.00 and other valuable consideration in hand
paid by Beneficiary to Trustor and in consideration of the debts and trusts
hereinafter mentioned, the receipt and sufficiency of all of which is hereby
acknowledged, Trustor does by these presents GRANT, BARGAIN, SELL, ASSIGN,
MORTGAGE, WARRANT, TRANSFER and CONVEY unto the Deed of Trust Trustee and its
successors and substitutes in trust with power of sale hereunder for the use
and benefit of Beneficiary all of Trustor's rights, titles, interests and
estates in and to the real and personal property described in Subparagraphs (a)
through (h) of this Section I (collectively herein called the "Mortgaged
Property"); provided, however, that the term Mortgaged Property shall not
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include any Obligor Collateral, as such term is defined in the Revolving Credit
Agreement (as hereinafter defined)), to- wit:
(a) Trustor's undivided 100% interest in and to the lands
described on Exhibit A hereto (the "Land"), together with any and all
other rights, titles and interests of Trustor of whatever kind or
character (whether now owned or hereafter acquired by operation of law
or otherwise) in and to such Land.
(b) All of Trustor's rights, titles and interests in all
plants, buildings, structures, towers and other improvements now owned
or hereafter acquired and located on the Land, including, without
limitation, that certain chlor alkali plant and all equipment,
fixtures, heating, lighting and power plants, pipelines, transmission
lines, buildings, housing and improvements, together with all other
machinery, equipment, appliances and apparatus of whatsoever character
or description (except for any motor vehicles, licensed or registered
with the Department of Motor Vehicles of the State), and all
replacements, substitutions and additions to said property, owned by
Trustor and located on the Land or located elsewhere and used in the
operation, conduct and maintenance of that certain chlor alkali plant
located thereon (collectively, the "Improvements") (the Land, together
with the Improvements, being hereinafter collectively referred to as
the "Chlor Alkali Plant").
(c) To the extent permitted by law, all of Trustor's rights,
titles and interests in, to and under all franchises, licenses,
permits and certificates, consents, approvals, authorizations, however
characterized, used or held for use in connection with Trustor's
ownership and operation of the Chlor Alkali Plant and issued or in any
way furnished, whether now existing or hereafter entered into and
whether necessary or not for the operation and use of the Chlor Alkali
Plant, including, without limitation, building permits, certificates
of occupancy, environmental certificates, industrial permits or
licenses or certificates of operation.
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(d) All of Trustor's rights, title and interest in all
absorbers, equipment, machinery, drums, engines, motors, regulators,
meters, exchangers, tanks, docks, racks, heaters, above ground storage
facilities, under ground storage facilities, loading facilities,
fractionation facilities, absorption equipment, distillation
equipment, deethanizers, depropanizers, debutanizers, olefin
splitters, stills, power plants, disposal pits, warehouses, dwelling
houses, cooling equipment, compressors, pipelines, piping flow lines,
wiring, boilers, vessels, dehydration equipment or any of them (except
for any motor vehicles, licensed or registered with the Department of
Motor Vehicles of the State), whether now owned or hereafter acquired
and located or to be located upon the Land or leaseholds now or
hereafter owned by Trustor and used or held for use in connection with
Trustor's ownership and operation of the Chlor Alkali Plant
(collectively, "Equipment").
(e) All Trustor's right, title and interest, as landlord,
franchisor, licensor or grantor, in all leases and subleases of space,
oil, gas and mineral leases, franchise agreements, licenses, occupancy
or concession agreements now existing or hereafter entered into
relating in any manner to the Chlor Alkali Plant or the Equipment and
any and all amendments, modifications, supplements and renewals of any
thereof (each such lease, license or agreement, together with any such
amendment, modification, supplement or renewal, a "Lease"), whether
now in effect or hereafter coming into effect including, without
limitation, all rents, additional rents, management fees payable by
tenants, cash, guarantees, letters of credit, bonds, sureties or
securities deposited thereunder to secure performance of the lessee's,
franchisee's, licensee's or obligee's obligations thereunder,
revenues, earnings, profits and income, advance rental payments,
payments incident to assignment, sublease or surrender of a Lease,
claims for forfeited deposits and claims for damages, now due or
hereafter to become due, with respect to any Lease (collectively,
"Rents").
(f) All surveys, title insurance policies, drawings,
plans, specifications, construction contracts, file materials,
operating and maintenance records, catalogues,
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tenant lists, correspondence, advertising materials, operating
manuals, warranties, guaranties, appraisals, studies and data relating
to the Chlor Alkali Plant or the Equipment or the construction of any
Alteration (as hereinafter defined) or the maintenance of any Permit
(as hereinafter defined).
(g) All general intangibles now owned or hereafter
acquired by Trustor (but not including the Obligor Collateral),
including without limitation (i) all of Trustor's rights, titles and
interests, whether now owned or hereafter acquired, of Trustor in, to
and under the contracts, agreements or other instruments and documents
relevant to Trustor's ownership and operation of the Chlor Alkali
Plant (collectively, "Plant Agreements"), (ii) all contract rights
relating to the Chlor Alkali Plant or the Equipment and all reserves,
deferred payments, deposits, refunds and claims of every kind or
character relating thereto, but not including Accounts Receivable, as
defined in the Revolving Credit Agreement (collectively, "Contract
Rights") and (iii) all processes, designs, methodologies and related
documentation, technical information, manufacturing, engineering and
technical drawings related to the ownership and operation of the Chlor
Alkali Plant.
(h) All proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, including,
without limitation, proceeds of insurance and condemnation or other
awards or payments with respect thereto and interest thereon
(collectively, "Proceeds").
TO HAVE AND TO HOLD the Mortgaged Property unto the Deed of
Trust Trustee and Beneficiary and to their successors and assigns forever to
secure the payment and performance of the Secured Obligations.
None of the Mortgaged Property is used principally or at all
for agricultural or farming purposes.
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<PAGE> 8
SECTION II - SECURITY INTEREST
(a) With respect to all personal property (both tangible and
intangible) and any fixtures constituting a part of the Mortgaged Property,
this Deed of Trust shall likewise be a security agreement and a financing
statement and for valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and for the purpose of further securing payment of the
Secured Obligations, Trustor hereby grants to Beneficiary a security interest
in all of Trustor's rights, titles and interests in and to the Mortgaged
Property insofar as the Mortgaged Property consists of equipment, contract
rights, general intangibles, documents, instruments, chattel paper, fixtures
and any and all other personal property of any kind or character defined in and
subject to the provisions of the Uniform Commercial Code as in effect in the
State (the "Uniform Commercial Code"), including the proceeds, profits, rents,
revenues and products from any and all of such personal property. Upon the
occurrence and during the continuance of any Event of Default (as hereinafter
defined), Beneficiary is and shall be entitled to all of the rights, powers and
remedies afforded a secured party by the Uniform Commercial Code with reference
to the personal property and fixtures in which Beneficiary has been granted a
security interest herein, or the Deed of Trust Trustee or Beneficiary may
proceed as to both the real and personal property covered hereby in accordance
with the rights and remedies granted under this Deed of Trust in respect of the
real property covered hereby. Such rights, powers and remedies shall be
cumulative and in addition to those granted to the Deed of Trust Trustee or
Beneficiary under any other provision of this instrument or under any other
instrument executed in connection with or as security for the Secured
Obligations. A carbon or photographic or other reproduction of this Deed of
Trust shall be sufficient as a financing statement covering the Mortgaged
Property.
(b) Trustor shall, forthwith after the execution and
delivery of this Deed of Trust and thereafter, from time to time, cause this
Deed of Trust and any financing statement, continuation statement or similar
instrument relating to any thereof or to any property intended to be subject to
the Lien of this Deed of Trust to be filed, registered and recorded in such
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<PAGE> 9
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the validity and priority
thereof or the Lien hereof upon the Mortgaged Property and the interest and
rights of the Deed of Trust Trustee and Beneficiary herein and therein.
Trustor shall pay or cause to be paid all taxes and fees incident to such
filing, registration and recording, all expenses incident to the preparation,
execution and acknowledgment thereof, and of any instrument of further
assurance, and all federal or State stamp taxes or other taxes, duties and
charges arising out of or in connection with the execution and delivery of such
instruments.
(c) Trustor shall, at the sole cost and expense of
Trustor, do, execute, acknowledge and deliver all and every such further acts,
deeds, conveyances, deeds of trust, mortgages, assignments, notices of
assignment, transfers, financing statements, continuation statements and
assurances as the Deed of Trust Trustee or Beneficiary shall from time to time
reasonably request which may be necessary in the requesting party's judgment to
assure, perfect, convey, assign, mortgage, transfer and confirm unto the Deed
of Trust Trustee or Beneficiary the property and rights hereby conveyed or
assigned, or which Trustor may be or may hereafter become bound to convey or
assign to Beneficiary or which may facilitate the performance of the terms of
this Deed of Trust or the filing, registering or recording of this Deed of
Trust. In the event Trustor shall fail to execute any instrument required to
be executed by Trustor pursuant to this subsection II(c), Beneficiary may
execute the same as the attorney-in-fact for Trustor, such power of attorney
being coupled with an interest and irrevocable.
SECTION III - SECURED OBLIGATIONS
This Deed of Trust is executed and delivered by Trustor to
secure the payment and performance of the obligations (collectively, the
"Secured Obligations") described below:
(a) Any and all indebtedness, obligations and liabilities of
Trustor now or hereafter existing under or in respect of the Note Guarantee,
including, without limitation, payment of principal, premium, if any, interest
and Liquidated
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Damages (as defined in the Indenture), if any, when due and payable, and all
other amounts due or to become due under or in connection with the Indenture
(including, without limitation, all sums due to the Note Trustee pursuant to
Section 606 thereof), the Notes and the performance of all other obligations to
the Note Trustee and the Note Holders under the Indenture and the Notes,
according to the terms thereof (collectively, the "Indenture Obligation);
(b) Any and all indebtedness, obligations and liabilities of
Trustor now or hereafter existing under or in respect of the Term Loan
Guarantee, including, without limitation, payment of principal, premium, if
any, and interest when due and payable, and all other amounts due or to become
due under or in connection with the Term Loan Agreement (including, without
limitation, all sums due to the Term Loan Agent pursuant to Sections 10.3 and
10.4 thereof) and the Term Loan Notes and the performance of all other
obligations to the Term Loan Agent and the Term Loan Lenders under the Term
Loan Agreement and the Term Loan Notes according to the terms thereof
(collectively, the "Term Loan Obligation");
(c) Any sums which may be advanced or paid by Beneficiary
under the terms hereof on account of the failure of Trustor to comply with the
covenants of Trustor contained herein;
(d) All covenants, agreements, and obligations of Trustor
herein contained; and
(e) All renewals, rearrangements, increases,
substitutions and extensions, and all amendments, supplements and
modifications, to any of the obligations described in the preceding clauses (a)
through (d).
This Deed of Trust secures all future advances and obligations
constituting Secured Obligations and all future advances to preserve and
protect the Mortgaged Property and advances for attorneys' fees and expenses in
all cases pursuant to the terms of the Deed of Trust. The maximum amount of
advances of principal to be secured by this Deed of Trust may increase or
decrease from time to time by amendment to this Deed of Trust.
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SECTION IV - REPRESENTATIONS, WARRANTIES AND COVENANTS
Trustor hereby represents, warrants and covenants as follows:
(a) Good Title; Authority and Validity. Trustor has good and
marketable title to the Mortgaged Property and the landlord's interest and
estate under or in respect of the Leases, subject to the Excepted Liens, and
has, in all material respects, full corporate power and lawful authority to
bargain, grant, sell, mortgage, assign, transfer, convey and grant a security
interest in all of the Mortgaged Property all in the manner and form herein
provided and without obtaining the waiver, consent or approval of any lessor,
sublessor, Governmental Authority or entity or other party whomsoever or
whatsoever which has not been obtained, except in the case of certain
environmental permits and approvals which, by their terms, are not transferable
or cannot be transferred without the prior approval of the issuing agency. The
Improvements upon the Land are all within the boundary lines of the Land except
as set forth on Schedule 1 attached hereto or have the benefit of valid
easements, and there are no encroachments thereon that would materially impair
the use thereof. The Mortgaged Property is free and clear of any and all Liens
or encumbrances of any nature or kind except for the Excepted Liens and the
Leases. Trustor has all necessary permits, franchises, licenses,
rights-of-way, servitudes or other rights or authority needed in connection
with the operation and maintenance of the Chlor Alkali Plant, except where the
failure to have the same would not have a Material Adverse Effect; all of the
Plant Agreements are presently in full force and effect and no default has
occurred or exists thereunder, except where such default would not individually
or in the aggregate have a Material Adverse Effect; except as provided in the
Excepted Liens, Trustor's grant of a Lien and security interest in the
Mortgaged Property in the manner herein provided does not result in the
creation or imposition of any other Lien or security interest, adverse claim or
option upon any of the Mortgaged Property. Trustor's chief executive
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office and chief place of business is located at the address set forth in the
initial paragraph of this Deed of Trust. Trustor will not change its name,
identity or corporate structure or its chief executive office or chief place of
business without notifying the Deed of Trust Trustee and Beneficiary at least
thirty (30) days prior to the effective date of such change.
(b) Defense of Title. Trustor will warrant and defend title
to the Mortgaged Property, subject to Excepted Liens, against the claims and
demands of all other Persons whomsoever and will maintain and preserve the Lien
created hereby so long as any of the Secured Obligations secured hereby remains
unpaid. Should an adverse claim be made against the title to any material part
of the Mortgaged Property, Trustor agrees it will immediately notify
Beneficiary in writing thereof and defend against such adverse claim to the
extent necessary to preserve the Deed of Trust Trustee's and Beneficiary's
rights and benefits hereunder, subject to Excepted Liens, and Trustor further
agrees that the Deed of Trust Trustee and/or Beneficiary may take such other
reasonable action as they deem advisable to protect and preserve their
interests in the Mortgaged Property, and in such event Trustor will indemnify
the Deed of Trust Trustee and Beneficiary against any and all costs, reasonable
attorney's fees and other expenses which they may incur in defending against
any such adverse claim. Such obligations shall be payable on demand and shall
bear interest from the date of demand therefor until paid at the Note Rate.
Any proceeds of any policy of title insurance maintained by Trustor with
respect to the Mortgaged Property shall, for the purposes of this Deed of
Trust, be paid and applied in the same manner as Insurance Proceeds (as
hereinafter defined).
(c) First Lien. This Deed of Trust is, and always will be
kept, a direct first Lien and security interest upon the Mortgaged Property,
subject to the Excepted Liens, and Trustor will not create or suffer to be
created or permit to exist any Lien, security interest or charge prior or
junior to or on parity with the Lien and security interest of this Deed of
Trust upon the Mortgaged Property or any part thereof or upon the rents,
issues, revenues, profits or other income therefrom, except for the Excepted
Liens.
(d) Maintenance of Mortgaged Property. Trustor will at its
own expense do or cause to be done all things necessary to preserve and keep in
full repair, working order and efficiency,
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reasonable wear and tear excepted, all of the Mortgaged Property, including,
without limitation, all equipment, machinery and facilities, and from time to
time will make all the needful and proper repairs, renewals and replacements so
that at all times the state and condition of the Mortgaged Property will be
fully preserved and maintained, unless the failure to repair, renew or replace
would not materially interfere with the present use or operation of the
Mortgaged Property.
(e) Performance of Contracts; Operation of Plant. Trustor
will promptly pay and discharge all rentals, or other payments and will perform
or cause to be performed each and every act, matter or thing required by, each
and all of the contracts, instruments or agreements executed in connection with
or incident to the ownership and operation of the Chlor Alkali Plant (including
without limitation the Plant Agreements) and being a portion of the Mortgaged
Property and will do all other things necessary to keep unimpaired Trustor's
rights with respect thereto and to prevent any forfeiture thereof or default
thereunder, unless such forfeiture or default would not individually or in the
aggregate have a Material Adverse Effect. Trustor will operate the facilities
comprising the Chlor Alkali Plant in a good and workmanlike manner and in
accordance with the practices of the industry and in compliance in all material
respects with all Governmental Requirements affecting ownership and operation
of such facilities, including without limitation, Environmental Laws.
(f) Payment by the Trustee and/or Beneficiary. Trustor
agrees that if Trustor fails to perform any act or to take any action which
Trustor is required to perform or take hereunder or pay any money which Trustor
is required to pay hereunder (taking into account applicable grace or cure
periods), the Deed of Trust Trustee and/or Beneficiary in Trustor's name or its
own name may, but shall not be obligated to, during the continuance of an Event
of Default, perform or cause to perform such act or take such action or pay
such money, and any expenses so incurred by the Deed of Trust Trustee or
Beneficiary and any money so paid by the Deed of Trust Trustee or Beneficiary
shall be a demand obligation owing by Trustor to the Deed of Trust Trustee or
Beneficiary, and the Deed of Trust Trustee or Beneficiary, upon making such
payment, shall be subrogated to all
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of the rights of the Person receiving such payment. Each amount due and owing
by Trustor to holders of the Secured Obligations and/or the Deed of Trust
Trustee pursuant to this Deed of Trust shall bear interest from the date of
such expenditure or payment or other occurrence which gives rise to such amount
being owed to the Deed of Trust Trustee or Beneficiary until paid at the Note
Rate, and all such amounts together with such interest thereon shall be a part
of the Secured Obligations and shall be secured by this Deed of Trust.
(g) Name of Trustor. Trustor does not do business with
respect to the Mortgaged Property under any name other than Pioneer Chlor
Alkali Company, Inc.
(h) Operation by Third Parties. To the extent any of the
Mortgaged Property is operated by a party or parties other than Trustor,
Trustor's covenants as expressed in this Section IV are modified to require
that Trustor use its best efforts (including without limitation the reasonable
exercise of all rights and remedies as are available to Trustor) to obtain
compliance with such covenants by the operator or operators of the Mortgaged
Property.
(i) Compliance with Laws. The Chlor Alkali Plant
complies in all material respects with all local zoning, land use, setback and
other development, use and occupancy requirements of governmental authorities
except for possible nonconforming uses or violations which do not and will not
materially interfere with the present use, operation or maintenance thereof as
now used, operated or maintained.
(j) Payment of Taxes, Insurance Premiums, Assessments;
Compliance with Law and Insurance Requirements. (i) Unless contested in
accordance with the provisions of subsection IV(j)(v) hereof, Trustor shall pay
and discharge or cause to be paid and discharged, from time to time when the
same shall become due, all real estate and other taxes, special assessments,
levies, permits, inspection and license fees, all premiums for insurance, all
water and sewer rents and charges, and all other public charges imposed upon or
assessed against the Mortgaged Property or any part thereof or upon the
revenues, rents, issues, income and profits of the Mortgaged Property,
including, without
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limitation, those arising in respect of the occupancy, use or possession
thereof.
(ii) During the continuance of an Event of Default,
Trustor shall deposit with Beneficiary, on the first day of each month, an
amount reasonably estimated by Trustor to be equal to one-twelfth (1/12th) of
the annual taxes, assessments and other items required to be discharged by
Trustor under subsection IV(j)(i) and amounts reasonably estimated by Trustor
to be necessary to maintain the insurance coverages contemplated in subsection
IV(l) below, which estimates shall not be less than one-twelfth (1/12th) of the
annual taxes, assessments, insurance premiums and other items required to be
discharged by Trustor during the year immediately preceding the year during
which such Event of Default occurred. Such amounts shall be held by
Beneficiary without interest to Trustor and applied to the payment of each
obligation in respect of which such amounts were deposited, in such order or
priority as Beneficiary shall determine, on or before the date on which such
obligation would become delinquent. If at any time the amounts so deposited by
Trustor shall, in Beneficiary's judgment, be insufficient (when added to the
installments anticipated to be paid thereafter) to discharge any of such
obligations when due, Trustor shall, immediately upon demand, deposit with
Beneficiary such additional amounts as may be requested by Beneficiary.
Nothing contained in this subsection IV(j) shall affect any right or remedy of
the Deed of Trust Trustee or Beneficiary under any provision of this Deed of
Trust or of any statute or rule of law to pay any such amount from its own
funds (provided, however, that neither the Deed of Trust Trustee nor
Beneficiary shall in any event be obligated to pay any of such amounts from its
own funds) and to add the amount so paid, together with interest at the Note
Rate, to the Secured Obligations, or relieve Trustor of its obligations to make
or provide for the payment of the annual taxes, assessments and other charges
required to be discharged by Trustor under subsection IV(j)(i). Trustor hereby
grants to Beneficiary a security interest in all sums held pursuant to this
subsection IV(j)(ii) to secure payment and performance of the Secured
Obligations. During the continuance of any Event of Default, Beneficiary may
apply all or any part of the sums held pursuant to this subsection IV(j)(ii) to
payment and performance of the Secured Obligations in accordance with the
provisions of
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the Intercreditor Agreement. Trustor shall redeposit with Beneficiary an
amount equal to all amounts so applied as a condition to the cure, if any, of
such Event of Default, in addition to fulfillment of any other required
conditions.
(iii) Unless contested in accordance with the provisions of
subsection IV(j)(v), Trustor shall timely pay (or obtain a bond in the amount
of) all lawful claims and demands of mechanics, materialmen, laborers,
warehousemen, employees, suppliers, government agencies administering worker's
compensation insurance, old age pensions and social security benefits and all
other claims, judgments, demands or amounts of any nature which, if unpaid or
not bonded, could result in or permit the creation of a Lien (other than an
Excepted Lien) on the Mortgaged Property or any part thereof or the Rents
arising therefrom, or which might result in forfeiture of all or any part of
the Mortgaged Property.
(iv) Trustor shall maintain, or cause to be maintained, in full
force and effect, all permits, certificates, authorizations, consents,
approvals, registrations, filings, licenses, franchises or other instruments
now or hereafter required by any Governmental Authority to operate or use and
occupy the Chlor Alkali Plant and the Equipment for its intended uses
(collectively, the "Permits"; each, a "Permit"), unless the failure to maintain
such Permits would not individually or in the aggregate have a Material Adverse
Effect. Trustor represents that, to its knowledge and subject to those
requirements for notice, approval or reissuance set forth by applicable law,
none of the Permits will be subject to cancellation, forfeiture or any
limitation on the scope thereof solely by virtue of the execution of this Deed
of Trust or the foreclosure of the Lien hereof. Unless contested in accordance
with the provisions of subsection IV(j)(v), Trustor shall comply promptly with,
or cause prompt compliance with, all requirements set forth in the Permits and
all Governmental Requirements applicable to all or any part of the Mortgaged
Property or the condition, use or occupancy of all or any part thereof or any
recorded deed of restriction, declaration, covenant running with the land or
otherwise, now or hereafter in force unless the compliance therewith would not
individually or in the aggregate have a Material Adverse Effect. Trustor shall
not initiate or consent to any change in the
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zoning, subdivision or any other use classification of the Land, if such action
could have a material adverse effect on the Lien of this Deed of Trust or
materially impair the present use and operation of the Mortgaged Property or
materially impair Beneficiary's rights or benefits hereunder, without the prior
written consent of Beneficiary.
(v) Trustor may at its own expense contest the amount or
applicability of any of the obligations described in subsections IV(j)(i),
IV(j)(iii) and IV(j)(iv) by appropriate legal proceedings, prosecution of which
operates to prevent the collection or enforcement thereof or the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy such
obligations; provided, however, that (A) any such contest shall be conducted in
good faith by appropriate legal proceedings promptly instituted and diligently
conducted and (B) in connection with such contest, Trustor shall have made
provision for the payment or performance of such contested obligation on
Trustor's books if and to the extent required by generally accepted accounting
principles then utilized by Trustor in the preparation of its financial
statements, or shall have deposited with Beneficiary a sum sufficient to pay
and discharge such obligation and Beneficiary's estimate of all interest and
penalties related thereto. Notwithstanding the foregoing provisions of this
subsection IV(j)(v), (A) no contest of any such obligations may be pursued by
Trustor if such contest would expose the Deed of Trust Trustee, Beneficiary, or
any other Secured Party to any possible criminal liability or, unless Trustor
shall have furnished an Additional Undertaking (as hereinafter defined)
therefor satisfactory to the Deed of Trust Trustee, Beneficiary, or such other
Secured Party, as the case may be, any civil liability for failure to comply
with such obligations and (B) if at any time payment or performance of any
obligation contested by Trustor pursuant to this subsection IV(j)(v) shall
become necessary to prevent the delivery of a tax or similar deed conveying the
Mortgaged Property or any portion thereof because of nonpayment or
nonperformance, Trustor shall pay or perform the same in sufficient time to
prevent the delivery of such tax or similar deed.
(vi) Trustor shall not in its use and occupancy of the Chlor
Alkali Plant or the Equipment (including, without
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limitation, in the making of any Alteration) take any action that would cause
the termination, revocation or denial of any insurance coverage required to be
maintained under this Deed of Trust or that pursuant to written notice from any
applicable insurer, would be the basis for a defense to any claim under any
insurance policy maintained in respect of the Chlor Alkali Plant or the
Equipment and Trustor shall otherwise comply in all material respects with the
requirements of any insurer that issues a policy of insurance in respect of the
Chlor Alkali Plant or the Equipment.
(vii) Trustor shall, promptly upon receipt of any written notice
regarding any failure by Trustor to pay or discharge any of the obligations
described in subsection IV(j)(i) or (vi), furnish a copy of such notice to
Beneficiary. Trustor shall, promptly upon receipt of any written notice
regarding any failure by Trustor to pay or discharge any of the obligations
described in subsection IV(j)(iii) or (iv), furnish a copy of such notice to
Beneficiary, if such failure would have a Material Adverse Effect.
(k) Certain Tax Law Changes. In the event of the passage
after the date of this Deed of Trust of any law deducting from the value of
real property, for the purpose of taxation, amounts in respect of any Lien
thereon or changing in any way the laws for the taxation of deeds of trust or
debts secured by deeds of trust for state or local purposes or the manner of
the collection of any such taxes, and imposing a new tax, either directly or
indirectly, on this Deed of Trust or the interest of any Secured Party in any
Mortgaged Property (other than income, franchise or similar taxes imposed on
such Secured Party), or in the event that any regulation or regulatory
amendment becoming effective after the date hereof imposes any State tax on
interest income received with respect to any Secured Obligation, Trustor shall
promptly pay the applicable Secured Party such amount or amounts as may be
necessary from time to time to pay such tax.
(l) Required Insurance Policies. (i) Trustor shall
maintain, or cause to be maintained, in full force and effect the following
insurance coverages in respect of the Chlor Alkali Plant and the Equipment:
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(A) Physical hazard insurance on an "all risk" basis covering
hazards commonly covered by fire and extended coverage, lightning,
civil commotion, hail, riot, strike, water damage, sprinkler leakage,
collapse and malicious mischief, in an amount equal to the full
replacement cost of the Improvements and all Equipment, with such
deductibles as would be maintained by a prudent operator of property
similar in use and configuration to the Chlor Alkali Plant and located
in the locality where the Chlor Alkali Plant is located. "Full
replacement cost" means the cost of construction to replace the
Improvements and the Equipment, exclusive of depreciation, excavation,
foundation and footings, as determined from time to time by a proper
officer of Trustor in consultation with its insurance company or
insurance agent, as appropriate;
(B) Comprehensive general liability insurance against claims
for bodily injury, death or property damage occurring on, in or about
the Chlor Alkali Plant and any adjoining streets, sidewalks and
passageways and covering any and all claims, including, without
limitation, all legal liability, subject to customary exclusions, to
the extent insurable, imposed upon Beneficiary or any Secured Party
and all court costs and attorneys' fees, arising out of or connected
with the possession, use, leasing, operation or condition of the Chlor
Alkali Plant, with policy limits and deductibles in such amounts as
would be maintained by a prudent operator of property similar in use
and configuration to the Chlor Alkali Plant and located in the
locality where the Chlor Alkali Plant is located;
(C) Workers' compensation insurance as required by the laws
of the State to protect Trustor against claims for injuries sustained
in the course of employment at the Chlor Alkali Plant;
(D) Comprehensive boiler and machinery insurance to cover
sudden and accidental breakdown, including but not limited to,
explosion of any boilers and machinery located on the Chlor Alkali
Plant or comprising any Equipment, with policy limits and deductibles
in such amounts as would be maintained by a prudent operator of
property similar in use
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and configuration to the Chlor Alkali Plant and the Equipment and
located in the locality where the Chlor Alkali Plant is located;
(E) Comprehensive automobile liability insurance policy
against claims for bodily injury, death and property damage covering
all owned, leased, non-owned and hired motor vehicles, including
loading and unloading in such amounts as would be maintained by a
prudent operator of property similar in use and configuration to the
Chlor Alkali Plant and the Equipment and located in the locality where
the Chlor Alkali Plant is located;
(F) Business interruption insurance on an annual basis in
amounts not less than the projected gross profit of the Chlor Alkali
Plant during the applicable twelve-month period but in no event less
than the amount necessary to pay the fixed charges and other expenses
of owning, operating and maintaining the Mortgaged Property for the
same period;
(G) To the extent not otherwise covered by the insurance
required under clauses (A) and (B) of this subsection IV(l)(i), during
the performance of any alterations, renovations, repairs, restorations
or construction, broad form Builders Risk Insurance on an all-risk
completed value basis; and
(H) Such other insurance, against such risks and with policy
limits and deductibles in such amounts as would be maintained by a
prudent operator of property similar in use and configuration to the
Chlor Alkali Plant and located in the locality in which the Chlor
Alkali Plant is located.
(ii) Trustor may maintain the coverages required by this
subsection IV(l) under blanket policies covering the Chlor Alkali Plant and
other locations owned or operated by Trustor if the terms of such blanket
policies otherwise comply with the provisions of this subsection IV(l) and
contain specific coverage allocations in respect of the Chlor Alkali Plant
determined in accordance with the provisions of this subsection IV(l). All
insurance policies in respect of the coverages required by subsections
IV(l)(i)(A), IV(l)(i)(D), IV(l)(i)(G) and, if
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applicable, IV(l)(i)(H) shall be in amounts at least sufficient to prevent
coinsurance liability and all losses thereunder shall be payable to
Beneficiary, as loss payee, subject to the terms of the Intercreditor
Agreement, pursuant to a standard noncontributory New York mortgage endorsement
or local equivalent, and each such policy shall, to the extent obtainable at
commercially reasonable costs, (A) include effective waivers (whether under the
terms of such policy or otherwise) by the insurer of all claims for insurance
premiums against all loss payees and named insureds other than Trustor and all
rights of subrogation against any named insured, and (B) provide that any
losses thereunder shall be payable notwithstanding (1) any act, failure to act,
negligence of, or violation or breach of warranties, declarations or conditions
contained in such policy by Trustor or Beneficiary or any other named insured
or loss payee, (2) the occupation or use of the Chlor Alkali Plant or the
Equipment for purposes more hazardous than permitted by the terms of the
policy, (3) any foreclosure or other proceeding or notice of sale relating to
the Chlor Alkali Plant or the Equipment or (4) any change in the title to or
ownership or possession of the Chlor Alkali Plant or the Equipment; provided,
however, that (with respect to items contemplated in clauses (3) and (4) above)
any notice requirements of the applicable policies are satisfied. All
insurance policies in respect of the coverages required by subsections
IV(l)(i)(B), IV(l)(i)(E) and, if applicable, IV(l)(i)(H) shall name Beneficiary
as an additional insured. Each policy of insurance required under this
subsection IV(l) shall provide that (A) notices of any failure by Trustor to
pay any insurance premium in respect thereof, be furnished to Beneficiary
contemporaneously with any such notice given to Trustor and (B) it may not be
cancelled or otherwise terminated without at least twenty (20) days' prior
written notice to Beneficiary and shall permit Beneficiary to pay any premium
therefor within twenty (20) days after receipt of any notice stating that such
premium has not been paid when due. The policy or policies of such insurance
or certificates of insurance evidencing the required coverages and all renewals
or extensions thereof shall be delivered to Beneficiary upon receipt by
Trustor. Settlement of any claim under any of the insurance policies referred
to in this subsection IV(l) (other than the insurance contemplated in clause(C)
of this subsection IV(l)(i)) which in Trustor's reasonable judgment involves
loss of
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$1,000,000 or more, shall require the prior approval of Beneficiary (acting
pursuant to the provisions of the Intercreditor Agreement) and Trustor shall
use its best efforts to cause each such insurance policy to contain a provision
to such effect.
(iii) At least fifteen (15) days prior to the expiration of
any insurance policy required by this subsection IV(l), Trustor shall deliver
to Beneficiary evidence that such policy or policies shall be renewed or
extended and Trustor shall deliver promptly to Beneficiary after receipt
thereof the policy or policies renewing or extending such expiring policy or
renewal or extension certificates or other evidence of renewal or extension,
together with a receipt showing payment of the premium thereof.
(iv) Trustor shall not purchase additional policies in
respect of the insurance coverages required to be maintained under this
subsection IV(l), unless Beneficiary is included thereon as an additional named
insured and, if applicable, with loss payable to Beneficiary under an
endorsement containing the provisions described in subsection IV(l)(ii) and the
policy evidencing such insurance otherwise complies with the requirements of
subsection IV(l)(ii). Trustor immediately shall notify Beneficiary whenever
any such separate insurance policy is obtained and promptly shall deliver to
Beneficiary the policy or certificate evidencing such insurance.
(m) Inspection. Trustor shall permit Beneficiary, by its
agents, accountants and attorneys, to visit and inspect the Mortgaged Property
upon reasonable prior notice at such times as may be reasonably requested by
Beneficiary.
(n) Trustor To Maintain Improvements. Trustor shall not
commit any waste on the Chlor Alkali Plant or with respect to any Equipment or
make any change in the use of the Chlor Alkali Plant or any Equipment. Trustor
represents and warrants that (i) to Trustor's knowledge, the Chlor Alkali Plant
is served by all electric, gas, sewer, water facilities and any other utilities
required or necessary for the current use thereof and any easements or
servitudes necessary to the furnishing of such utility service by Trustor have
been obtained and duly recorded,
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and (ii) Trustor has access to the Chlor Alkali Plant from public roads
sufficient to allow Trustor and its tenants and invitees to conduct its and
their businesses at the Chlor Alkali Plant as it is currently conducted.
Trustor shall not materially alter the occupancy or use of the Chlor Alkali
Plant without the prior written consent of Beneficiary. Except as otherwise
permitted by the Intercreditor Agreement no Improvements comprising a portion
of the Chlor Alkali Plant may be demolished nor shall any Equipment be removed
without the prior written consent of Beneficiary.
(o) Leases. (i) All of the Leases are valid and effective
in accordance with their respective terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar law affecting or relating to enforcement of creditors' rights
generally, and (ii) general equitable principles. To Trustor's knowledge,
Trustor is not in material breach of or in default (and to Trustor's knowledge,
no event has occurred which with due notice or lapse of time or both, may
constitute such a material breach or default) under any Lease, and no party to
any Lease has given Trustor written notice of or made a claim with respect to
any breach or default, the consequences of which, individually or in the
aggregate, would have a Material Adverse Effect on Trustor.
(ii) Trustor shall manage and operate the Mortgaged Property
or cause the Mortgaged Property to be managed and operated in a reasonably
prudent manner and, except as otherwise permitted under subsection IV(p), will
not enter into any Lease (or any amendment or modification thereof) or other
agreement subsequent to the date hereof with any Person which, in the
reasonable judgment of Trustor, individually or in the aggregate, would have a
Material Adverse Effect on the value of the property subject thereto.
(iii) Trustor shall not:
(A) receive or collect, or permit the receipt or collection
of, any rental or other payments under any Lease more than one (1)
month in advance of the respective period in respect of which they are
to accrue, except that (a) in
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connection with the execution and delivery of any Lease or of any
amendment to any Lease, rental payments thereunder may be collected
and received in advance in an amount not in excess of one (1) month's
rent and (b) Trustor may receive and collect escalation and other
charges in accordance with the terms of each Lease;
(B) assign, transfer or hypothecate (other than to
Beneficiary hereunder or as otherwise permitted under subsection IV(p)
of this Deed of Trust) any rental or other payment under any Lease
whether then due or to accrue in the future, the interest of Trustor
as lessor under any Lease or the rents, issues, revenues, profits or
other income of the Mortgaged Property;
(C) enter into any Lease after the date hereof that does not
contain terms to the effect as follows:
(1) such Lease and the rights of the tenant
thereunder shall be subject and subordinate to the rights of
Beneficiary under and the Lien of this Deed of Trust;
(2) such Lease has been assigned as collateral
security by Trustor as landlord thereunder to Beneficiary
under this Deed of Trust;
(3) in the case of any foreclosure hereunder, the
rights and remedies of the tenant in respect of any
obligations of any successor landlord thereunder shall be
limited to the equity interest of such successor landlord in
the Chlor Alkali Plant and any successor landlord shall not
(a) be liable for any act, omission or default of any prior
landlord under the Lease or (b) be required to make or
complete any tenant improvements or capital improvements or
repair, restore, rebuild or replace the demised premises or
any part thereof in the event of damage, casualty or
condemnation or (c) be required to pay any amounts to tenant
arising under the Lease prior to such successor landlord
taking possession;
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(4) the tenant's obligation to pay rent and any
additional rent shall not be subject to any abatement,
deduction, counterclaim or setoff as against Beneficiary or
any purchaser upon the foreclosure of any portion of the Chlor
Alkali Plant or the giving or granting of a deed in lieu
thereof by reason of a landlord default occurring prior to
such foreclosure, and Beneficiary or such purchaser will not
be bound by any advance payments of rent in excess of one
month or any security deposits unless such security was
actually received; and
(5) the tenant agrees to attorn, at the option of
Beneficiary or any purchaser of the Chlor Alkali Plant, to the
successor owner upon a foreclosure of the Chlor Alkali Plant
or the giving or granting of a deed in lieu thereof; and
(D) terminate or permit the termination of any Lease of
space, accept surrender of all or any portion of the space demised
under any Lease prior to the end of the term thereof or accept
assignment of any Lease to Trustor which, in the reasonable judgment
of Trustor, individually or in the aggregate, would have a Material
Adverse Effect or materially impair the Lien of this Deed of Trust
therein unless:
(1) the tenant under such Lease has not paid the
equivalent of two months' rent and Trustor has made reasonable
efforts to collect such rent; or
(2) Trustor shall deliver to Beneficiary an
Officers' Certificate to the effect that Trustor has entered
into a new Lease (or Leases) for the space covered by the
terminated or assigned Lease with a term (or terms) which
expire(s) no earlier than the date on which the terminated or
assigned Lease was to expire (excluding renewal options), and
with a tenant (or tenants) having a creditworthiness (as
reasonably determined by Trustor) sufficient to pay the rent
and other charges due under the new Lease (or Leases), and the
tenant(s) shall have commenced paying rent,
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including, without limitation, all operating expenses and
other amounts payable under the new Lease (or Leases), without
any abatement or concession, in an amount at least equal to
the amount which would have then been payable under the
terminated or assigned Lease.
(iv) Trustor timely shall perform and observe all the terms,
covenants and conditions required to be performed and observed by Trustor under
each Lease and will not engage in any conduct in respect of any Lease which
would have individually or in the aggregate a Material Adverse Effect or
materially impair the Lien of this Deed of Trust or the security interest
created hereby. Trustor promptly shall notify Beneficiary of the receipt of
any notice from any lessee under any Lease claiming that Trustor is in material
default in the performance or observance of any of the terms, covenants or
conditions thereof to be performed or observed by Trustor and will cause a copy
of each such notice to be delivered promptly to Beneficiary.
(p) Transfer Restrictions. Except as otherwise permitted by
the Intercreditor Agreement, Trustor shall not, without the prior written
consent of Beneficiary, further mortgage, encumber, hypothecate, sell, convey
or assign all or any part of the Mortgaged Property or suffer any of the
foregoing to occur by operation of law or otherwise (each a "Transfer");
provided, however, Trustor may so encumber the Mortgaged Property to the extent
such encumbrances are of the kind listed in clause (e) of the definition of
"Excepted Liens". Any proceeds of such permitted Transfer shall be deemed
Collateral Proceeds (as such term is defined in the Indenture) and are hereby
assigned and shall be paid to Beneficiary to be held in the Collateral Account
and disbursed pursuant to the Intercreditor Agreement.
(q) Destruction; Condemnation.
(i) Destruction; Insurance Proceeds. If there shall occur
any damage to, or loss or destruction of, the Improvements and Equipment, or
any part of any thereof (each, a "Destruction"), Trustor shall promptly send to
Beneficiary a notice setting forth the nature and extent of such Destruction.
The proceeds of any insurance payable in respect of any such
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Destruction are hereby assigned and shall be paid to Beneficiary to be held in
the Collateral Account; provided, however, that so long as no Event of Default
shall have occurred and be continuing, if such proceeds are in an amount less
than $1,000,000, such proceeds shall be paid directly to Trustor. All
insurance proceeds paid to Beneficiary pursuant to this subsection, less the
amount of any expenses incurred in litigating, arbitrating, compromising or
settling any claim arising out of such Destruction (the "Insurance Proceeds"),
shall constitute Trust Moneys and be applied in accordance with the provisions
of subsections IV(q)(iii), IV(q)(iv) and IV(q)(v).
(ii) Condemnation; Assignment of Award. If there shall occur
any taking of the Mortgaged Property or any part thereof, in or by condemnation
or other eminent domain proceedings pursuant to any law, general or special, or
by reason of the temporary requisition of the use or occupancy of the Mortgaged
Property or any part thereof, by any governmental authority, civil or military
(each, a "Taking"), Trustor immediately shall notify Beneficiary upon receiving
notice of such Taking or commencement of proceedings therefor. Beneficiary may
(but shall not be obligated to) participate in any proceedings or negotiations
which might result in any Taking. Beneficiary may be represented by counsel
satisfactory to it at the expense of Trustor. Trustor shall deliver or cause
to be delivered to Beneficiary all instruments requested by it to permit such
participation. Trustor shall in good faith and with due diligence file and
prosecute what would otherwise be Trustor's claim for any such award or payment
and cause the same to be collected and paid over to Beneficiary, and hereby
irrevocably authorizes and empowers Beneficiary, in the name of Trustor as its
true and lawful attorney-in-fact or otherwise, during the continuance of an
Event of Default to collect and to receipt for any such award or payment, and,
in the event Trustor fails so to act, to file and prosecute such claim.
Trustor shall pay all costs, fees and expenses incurred by Beneficiary in
connection with any Taking and seeking and obtaining any award or payment on
account thereof. Any proceeds, award or payment in respect of any Taking are
hereby assigned and shall be paid to Beneficiary to be held in the Collateral
Account; provided, however, that so long as no Event of Default shall have
occurred and be continuing, if such proceeds are in an amount less than
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$1,000,000, such proceeds shall be paid directly to Trustor. Trustor shall
take all steps necessary to notify the condemning authority of such assignment.
Such proceeds, award or payment paid to Beneficiary, less the amount of any
expenses incurred in litigating, arbitrating, compromising or settling any
claim arising out of such Taking ("Net Award"), shall constitute Trust Moneys
and be applied in accordance with the provisions of subsections IV(q)(iii),
IV(q)(iv) and IV(q)(v).
(iii) Payment or Restoration. So long as no Event of Default
shall have occurred and be continuing, Trustor shall have the right, at
Trustor's option, to require Beneficiary to apply such Net Award or Insurance
Proceeds to the payment of the Secured Obligations, in accordance with the
Intercreditor Agreement or to perform a restoration (each, a "Restoration") of
the affected portions of the Chlor Alkali Plant and the Equipment. In the
event that Trustor elects to make such payment, such Net Award or Insurance
Proceeds shall be delivered to the Beneficiary to be held as Trust Moneys
subject to withdrawal and application by Beneficiary in accordance with the
provisions of the Intercreditor Agreement. In the event Trustor elects to
perform a Restoration, Trustor shall give written notice ("Restoration Election
Notice") of such election to Beneficiary within twenty (20) business days after
the date that Beneficiary receives the applicable Insurance Proceeds or Net
Award, as the case may be. Trustor shall, within twenty (20) business days
following the date of delivery of a Restoration Election Notice, commence and
diligently continue to perform the Restoration of that portion or portions of
the Chlor Alkali Plant and Equipment subject to such Destruction or affected by
such Taking so that, upon the completion of the Restoration, the Mortgaged
Property shall be in the same condition and shall be of at least equal utility
for its intended purposes as the Mortgaged Property was immediately prior to
such Destruction or Taking. Trustor shall so complete such Restoration with
its own funds to the extent that the amount of any Net Award or Insurance
Proceeds is insufficient for such purpose. In the event Beneficiary does not
receive a Restoration Election Notice within such twenty (20) business day
period, Beneficiary shall apply such Insurance Proceeds or Net Award to the
payment of the Secured Obligations, in accordance with the provisions of the
Intercreditor Agreement.
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(iv) Restoration. In the event a Restoration is to be
performed under this subsection IV(q)(iv), Beneficiary shall not release any
part of the Net Award or the Insurance Proceeds except in accordance with the
provisions of subsection IV(q)(v) and Trustor shall, prior to commencing any
work to effect a Restoration of the Chlor Alkali Plant and the Equipment,
promptly (but in no event later than one-hundred twenty (120) days following
any Destruction or Taking) furnish to Beneficiary:
(A) complete plans and specifications (the "Plans and
Specifications") for the Restoration;
(B) an officers' certificate stating that all permits and
approvals required by law to commence work in connection with the
Restoration have been obtained;
(C) a certificate (an "Architect's Certificate") of an
independent, reputable architect or engineer acceptable to Beneficiary
and licensed in the State (1) stating that the Plans and
Specifications have been reviewed and approved by the signatory
thereto, (2) containing such signatory's estimate (an "Estimate") of
the costs of completing the Restoration, and (3) upon completion of
such Restoration in accordance with the Plans and Specifications, the
utility of the Chlor Alkali Plant and the Equipment will be equal to
or greater than the utility thereof immediately prior to the
Destruction or Taking relating to such Restoration; and
(D) if the Estimate exceeds the Insurance Proceeds or the Net
Award, as the case may be, by $5,000,000 or more, an Additional
Undertaking in an amount equal to not less than the Estimate less the
amount of the Insurance Proceeds or the Net Award, as the case may be,
then held by Beneficiary for application toward the cost of such
Restoration.
Upon receipt by Beneficiary of each of the items required
pursuant to clauses (A) through (D) above, Beneficiary shall acknowledge
receipt of the Plans and Specifications. Promptly upon such acknowledgment of
receipt by Beneficiary, Trustor shall commence and diligently continue to
perform the Restoration substantially in accordance with such Plans and
Specifications and in material compliance with all Governmental
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Requirements, free and clear of all Liens except Excepted Liens. Trustor shall
so complete such Restoration with its own funds to the extent that the amount
of any Net Award or Insurance Proceeds is insufficient for such purpose.
(v) Restoration Advances Following Destruction or Taking of
Mortgaged Property. In the event Trustor performs a Restoration of the Chlor
Alkali Plant and Equipment as provided in subsection IV(q)(iv), Beneficiary
shall apply any Insurance Proceeds or Net Award held by Beneficiary on account
of the Destruction or Taking to the payment of the cost of performing such
Restoration pursuant to the relevant provisions of the Intercreditor Agreement.
In the event there shall be any surplus after application of the Net Award or
the Insurance Proceeds to Restoration of the Chlor Alkali Plant and the
Equipment, such surplus shall become Net Proceeds, as defined in the Indenture
and shall be paid by Beneficiary to the Note Trustee for application in
accordance thereunder; provided, however, that if an Event of Default shall
have occurred and be continuing, such surplus shall be applied by Beneficiary
to the payment of the Secured Obligations, in accordance with Article 6 of the
Intercreditor Agreement. Notwithstanding anything to the contrary herein, if a
Destruction or Taking of all or substantially all of the Mortgaged Property
occurs on a date which is less than 12 months prior to Maturity, as such term
is defined in the Indenture, all Insurance Proceeds and Net Awards shall be
applied to the permanent repayment or prepayment of any Secured Obligations
then outstanding in accordance with the Intercreditor Agreement.
(r) Alterations. Trustor shall not make any material
structural addition, modification or change (each, an "Alteration") to the
Chlor Alkali Plant or the Equipment which would materially diminish the utility
of the Mortgaged Property or impair the Lien of this Deed of Trust thereon.
Whether or not Beneficiary has consented to the making of any Alteration,
Trustor shall (i) complete each Alteration promptly, in a good and workmanlike
manner and in material compliance with all applicable local laws, ordinances
and requirements and (ii) pay when due all claims for labor performed and
materials furnished in connection with such Alteration, unless contested in
accordance with the provisions of subsection IV(j)(v).
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(s) Hazardous Material.
(i) Except with respect to those matters which would not
reasonably be expected to have a Material Adverse Effect, to the best knowledge
of Trustor, Trustor holds all Permits required to permit Trustor to conduct its
business in the manner now conducted and none of the Trustor's operations are
being conducted in a manner that violates in any material respect the terms and
conditions under which any such Permit was granted, including without
limitation, under any Environmental Laws, except those permits that are
expected to be transferred in the ordinary course after the date hereof; to the
best knowledge of Trustor all such Permits are valid and in full force and
effect; and to the knowledge of Trustor, no suspension, cancellation,
revocation or termination of any such Permit is threatened.
(ii) Except as set forth in the Term Loan Agreement, there
are no material claims, actions, suits, proceedings or investigations pending
or to the knowledge of Trustor, threatened, before any Governmental Authority
or before any arbitrator brought by or against Trustor or with respect to any
of the Mortgaged Property the basis of which is any Environmental Law.
(iii) Trustor shall (or shall cause other parties obligated
to do so under contract or indemnity to) (A) take all commercially reasonable
actions to comply with any and all applicable present and future Environmental
Laws relating to the Chlor Alkali Plant; (B) pay in a timely fashion the cost
of any removal, response measure or corrective action relating to any Hazardous
Materials required by any Environmental Law or any order, regulation, consent
decree or similar agreement or instrument and keep the Mortgaged Property free
of any Lien imposed pursuant to any Environmental Law; (C) take all
commercially reasonable actions to not release, discharge or dispose of any
Hazardous Materials on, under or from the Mortgaged Property in violation of
any Environmental Law; (D) apply any insurance proceeds or other sums received
by it in respect of the removal of any Hazardous Material or any other
corrective action relating to any Hazardous Material to such removal or
corrective action; and (E) not take, or fail to take any action with respect to
any Environmental Laws or in connection with any Hazardous Materials that could
reasonably be expected to result in the incurrence of any obligation or
liability of any Secured Party. During the continuance of an Event of Default,
in the event Trustor fails to comply with the covenants in the preceding
sentence, Beneficiary may (upon receipt of an indemnity satisfactory to
Beneficiary), in addition to any other remedies set forth herein, but shall not
be obligated to, as trustee for and at Trustor's sole cost and expense cause to
be taken, any remediation, removal, response or corrective action relating to
Hazardous Materials that is required by Environmental Law and is not being done
or contested by Trustor. Any costs or expenses incurred by Beneficiary for
such purpose shall be immediately due and payable by Trustor and shall bear
interest at the Note Rate. Trustor shall provide to Beneficiary and its agents
and employees access to the Mortgaged Property to take any action required by
Environmental Laws, or in
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connection with any Hazardous Materials, that could be expected to result in
the incurrence of any obligation or liability of any Secured Party, if Trustor
fails to do so and such action or removal is required under any Environmental
Laws as provided above. Upon written request by Beneficiary, which shall
include a reasonably specific statement of the basis thereof (which shall be
specific to the condition of the Mortgaged Property and the alleged violation
of Environmental Law) and which shall be made not more frequently than once in
any twelve-month period or at any time that Beneficiary is exercising its
remedies under this Deed of Trust, Beneficiary shall have the right (upon
receipt of an indemnity satisfactory to Beneficiary), but shall not be
obligated, at the sole cost and expense of Trustor, to conduct an environmental
audit or review of the Mortgaged Property relating to the specific items as
required in writing or relating to the remedy that Beneficiary is exercising
under this Deed of Trust by persons or firms appointed by Beneficiary, and
Trustor shall cooperate in all reasonable respects in the conduct of such
environmental audit or review, including, without limitation, by providing
reasonable access to the Mortgaged Property and to all records relating
thereto. Such audit or review shall be conducted in a manner that would not
reasonably be expected to impose any additional material obligation upon, or
materially increase any obligation of, OCC Tacoma, Inc. or its successors
("OCC") under that certain Asset Purchase Agreement dated as of June 17, 1997
between OCC and Pioneer Companies, Inc., which
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agreement was assigned by Pioneer Companies, Inc. to Trustor pursuant to the
Assignment and Assumption Agreement dated as of June 17, 1997, or any Related
Agreements (as defined in said Asset Purchase Agreement), with respect to
Hazardous Materials at the Mortgaged Property. Trustor shall indemnify and
hold the Secured Parties harmless from and against all loss, cost, damage or
expense (including, without limitation, attorneys' fees) that any Secured Party
may sustain by reason of the assertion against such party of any claim relating
to such Hazardous Materials or actions taken with respect thereto as authorized
hereunder. Nothing contained herein shall result in any Secured Party being
deemed an "owner" or "operator" under applicable Environmental Law.
(iv) Trustor may at its own expense contest the amount or
applicability of any of the obligations described in the first sentence of
subsection IV(s)(iii) by appropriate legal proceedings, prosecution of which
operates to prevent the enforcement thereof; provided, however, that (A) any
such contest shall be conducted in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and (B) in connection with such
contest, Trustor shall have made provision for the payment or performance of
such contested obligation on Trustor's books if and to the extent required by
generally accepted accounting principles then utilized by Trustor in the
preparation of its financial statements, or shall have deposited with
Beneficiary a sum sufficient to pay and discharge such obligation and
Beneficiary's estimate of all interest and penalties related thereto.
Notwithstanding the foregoing provisions of this subsection IV(s)(iv), no
contest of any such obligations may be pursued by Trustor if such contest would
expose the Deed of Trust Trustee, Beneficiary, or any other Secured Party to
any possible criminal liability or, unless Trustor shall have furnished an
Additional Undertaking (as hereinafter defined) therefor satisfactory to the
Deed of Trust Trustee, Beneficiary or such other Secured Party, as the case may
be, any civil liability for failure to comply with such obligations.
(t) Asbestos. Trustor shall not install nor permit to be
installed in the Mortgaged Property friable asbestos or any asbestos-containing
material (collectively, "ACM") except in
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compliance with all applicable Environmental Laws respecting such material.
With respect to any ACM currently present in the Mortgaged Property, except
with respect to matters which would not have a Material Adverse Effect, Trustor
shall comply with all federal, state or local laws, regulations or orders
applicable to ACM located on the Chlor Alkali Plant, all at Trustor's sole cost
and expense. If Trustor shall fail so to comply with such laws or regulations,
Beneficiary may (upon receipt of an indemnity satisfactory to Beneficiary)
during the continuance of an Event of Default, but shall not be obligated to,
in addition to any other remedies set forth herein, take those steps reasonably
necessary to comply with applicable law, regulations or orders. Any costs or
expenses incurred by Beneficiary for such purpose shall be immediately due and
payable by Trustor and bear interest at the Note Rate. Trustor shall provide
to Beneficiary and its agents and employees reasonable access to the Mortgaged
Property upon reasonable prior notice to remove such ACM if Trustor fails to do
so and removal is required under any Environmental Law as provided for above;
provided, however, that nothing contained herein shall obligate Beneficiary to
exercise any rights under such license. Trustor shall indemnify and hold the
Secured Party harmless from and against all loss, cost, damage and expense that
any Secured Party may sustain as a result of the presence of any ACM and any
removal thereof in compliance with any applicable Environmental Law.
(u) Books and Records; Reports. Trustor shall keep proper
books of record and account, which shall accurately represent the financial
condition of Trustor and the business affairs of Trustor relating to the
Mortgaged Property. Beneficiary and its authorized representatives shall have
the right, from time to time, upon reasonable prior notice to examine the books
and records of Trustor relating to the operation of the Mortgaged Property at
the office of Trustor.
(v) No Claims Against Beneficiary. Nothing contained in this
Deed of Trust shall constitute any consent or request by Beneficiary, express
or implied, for the performance of any labor or services or the furnishing
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of any materials or other property in respect of the Chlor Alkali Plant or any
part thereof, nor as giving Trustor any right, power or authority to contract
for or permit the performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the making of any
claim against Beneficiary in respect thereof or any claim that any Lien based
on the performance of such labor or services or the furnishing of any such
materials or other property is prior to the Lien of this Deed of Trust.
(w) Utility Services. Trustor shall pay, or cause to be
paid, when due all charges for all public or private utility services, all
public or private rail and highway services, all public or private
communication services, all sprinkler systems, and all protective services, any
other services of whatever kind or nature at any time rendered to or in
connection with the Chlor Alkali Plant or any part thereof, shall comply in all
material respects with all contracts relating to any such services, and shall
do all other things reasonably required for the maintenance and continuance of
all such services to the extent required to fulfill the obligations set forth
in subsection IV(n).
(x) Notwithstanding any provisions herein to the contrary,
Trustor shall retain the right, at all times prior to foreclosure (or
deed-in-lieu thereof), to exercise custody and control with respect to actions
to be taken at the Mortgaged Property relating to the environmental condition
thereof, but only to the extent Trustor's exercise of such custody and control
of the Mortgaged Property is necessary for Trustor and/or its affiliates to
retain any and all benefits inuring to Trustor and/or its affiliates under the
indemnification provided by OCC in Article III of the Environmental Operating
Agreement dated as of June 17, 1997 between Trustor and OCC.
SECTION V - ASSIGNMENT OF LEASES, RENTS, ISSUES AND PROFITS
(a) Trustor absolutely, presently and irrevocably assigns,
transfers and sets over to Beneficiary and grants to Beneficiary, subject to
the terms and conditions hereof, all Trustor's estate, right, title and
interest (the "Trustor's Interest") in the Leases including, without
limitation, the following:
(i) the immediate and continuing right to receive and collect
Rents payable by all tenants or other parties pursuant to Leases;
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(ii) all claims, rights, powers, privileges and remedies of
Trustor, whether provided for in any Lease or arising by statute or at
law or in equity or otherwise, consequent on any failure on the part
of any tenant to perform or comply with any term of any Lease;
(iii) all rights to take all actions upon the happening of a
default under any Lease as shall be permitted by such Lease or by law,
including, without limitation, the commencement, conduct and
consummation of proceedings at law or in equity; and
(iv) the full power and authority, in the name of Trustor or
otherwise, to enforce, collect, receive and receipt for any and all of
the foregoing and to do any and all other acts and things whatsoever
which Trustor or any landlord is or may be entitled to do under the
Leases.
(b) Any Rents receivable by Beneficiary hereunder, after
payment of all proper costs and charges, shall be applied, in accordance with
the Intercreditor Agreement, to all amounts due and owing with respect to the
Secured Obligations. Beneficiary shall be accountable to Trustor only for
Rents actually received by Beneficiary pursuant to this assignment. The
collection of such Rents and the application thereof shall not cure or waive
any Event of Default or waive, modify or affect notice of an Event of Default
or invalidate any act done pursuant to such notice.
(c) So long as no Event of Default shall have occurred and be
continuing, Trustor shall have a license to collect and apply the Rents and to
enforce the obligations of tenants under the Leases. Immediately upon the
occurrence and during the continuance of any Event of Default, the license
granted in the immediately preceding sentence shall cease and terminate, with
or without any notice, action or proceeding. Upon such Event of Default and
during the continuance thereof, Beneficiary may (but shall not be obligated to)
to the fullest extent permitted by the Leases (i) exercise any of Trustor's
rights under the Leases, (ii) enforce the Leases, (iii) demand, collect, sue
for, attach, levy, recover, receive, compromise and adjust, and make, execute
and deliver receipts and releases for all Rents or other payments
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that may then be or may thereafter become due, owing or payable with respect to
the Leases and (iv) generally do, execute and perform any other act, deed,
matter or thing whatsoever that ought to be done, executed and performed in and
about or with respect to the Leases, as fully as allowed or authorized by the
Trustor's Interest.
(d) During the continuance of an Event of Default, Trustor
hereby irrevocably authorizes and directs the tenant under each Lease to pay
directly to, or as directed by, Beneficiary all Rents accruing or due under its
Lease. Trustor hereby authorizes the tenant under each Lease to rely upon and
comply with any notice or demand from Beneficiary for payment of Rents to
Beneficiary and Trustor shall have no claim against any tenant for Rents paid
by such tenant to Beneficiary pursuant to such notice or demand.
(e) Trustor at its sole cost and expense shall enforce all
material provisions of the Leases in accordance with their terms. Neither this
Deed of Trust nor any action or inaction on the part of Beneficiary shall
release any tenant under any Lease, any guarantor of any Lease or Trustor from
any of their respective obligations under the Leases or constitute an
assumption of any such obligation on the part of Beneficiary. No action or
failure to act on the part of Trustor shall adversely affect or limit the
rights of Beneficiary under this Deed of Trust or, through this Deed of Trust,
under the Leases.
(f) All rights, powers and privileges of Beneficiary herein
set forth are coupled with an interest and are irrevocable, subject to the
terms and conditions hereof, and Trustor shall not take any action under the
Leases or otherwise which is inconsistent with this Deed of Trust or any of the
terms hereof and any such action inconsistent herewith or therewith shall be
void. Trustor shall, from time to time, upon request of Beneficiary, execute
all instruments and further assurances and all supplemental instruments and
take all such action as Beneficiary from time to time may reasonably request in
order to perfect, preserve and protect the interests intended to be assigned to
Beneficiary hereby.
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(g) Trustor shall not, unilaterally or by agreement,
subordinate, amend, modify, extend, discharge, terminate, surrender, waive or
otherwise change any term of any of the Leases in any manner which would
violate this Deed of Trust. If the Leases shall be amended as permitted
hereby, they shall continue to be subject to the provisions hereof without the
necessity of any further act by any of the parties hereto.
(h) Nothing contained herein shall operate or be construed to
(i) obligate the Deed of Trust Trustee or Beneficiary to perform any of the
terms, covenants or conditions contained in the Leases or otherwise to impose
any obligation upon the Deed of Trust Trustee or Beneficiary with respect to
the Leases (including, without limitation, any obligation arising out of any
covenant of quiet enjoyment contained in the Leases in the event that any
tenant under a Lease shall have been joined as a party defendant in any action
by which the estate of such tenant shall be terminated) or (ii) place upon the
Deed of Trust Trustee or Beneficiary any responsibility for the operation,
control, care, management or repair of any portion of the Mortgaged Property.
(i) Beneficiary may also, at any time after an Event of
Default, apply to any court of competent jurisdiction for the appointment of a
receiver and Trustor agrees that such appointment shall be made upon a prima
facie showing of a claimed Event of Default without reference to any offsets or
defenses against such Event of Default. Such receiver shall have all the
rights and powers provided to Beneficiary pursuant to this section or otherwise
provided hereunder or by law. Said receiver may borrow monies and issue
certificates therefor. Said certificates shall be a lien on the Mortgaged
Property subordinate only to this Deed of Trust and the Leases; provided,
however, that should any of said certificates be acquired by Beneficiary the
amount thereof shall constitute additional indebtedness secured hereby. Such
receiver may lease all or any portion of the Mortgaged Property on such terms
and for such a term (which may extend beyond the terms of such receiver's
appointment and/or, if Beneficiary so consents, sale of the Mortgaged Property
hereunder) as such receiver may deem appropriate in its sole and absolute
discretion. The entering upon and taking possession of the Mortgaged Property
pursuant to
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this section and the collection of the Rents, issues and profits therefrom
shall not cure or waive any Event of Default or notice of an Event of Default
hereunder or invalidate any act of Beneficiary pursuant thereto.
SECTION VI - EVENTS OF DEFAULT
(a) Events of Default. As used in this Deed of Trust,
"Event of Default" shall mean the occurrence of an Event of Default under the
Indenture or the Term Loan Agreement or a breach or violation of the terms of
this Deed of Trust.
(b) Remedies. Upon the occurrence and during the continuance
of any Event of Default, in addition to any other rights and remedies
Beneficiary may have pursuant to this Deed of Trust or as provided by law, and
without limitation, Beneficiary may, subject to the terms of the Intercreditor
Agreement, declare all sums secured hereby immediately due and payable in full
and/or take such action, without notice or demand, as it deems advisable and is
permitted by law to protect and enforce its rights against Trustor and in and
to the Mortgaged Property, including, but not limited to, the following
actions, each of which may be pursued concurrently or otherwise, at such time
and in such manner as Beneficiary may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Beneficiary, except to the extent otherwise provided by law:
(i) (A) Beneficiary shall have the right and option to
foreclose this Deed of Trust judicially, in the same manner as a
mortgage, or direct the Deed of Trust Trustee to sell the Mortgaged
Property pursuant to the Deed of Trust Trustee's power of sale in
accordance with the Washington Deed of Trust Act (RCW Ch. 61.24) and
the procedures set forth below. The procedure for exercise of the
Deed of Trust Trustee's power of sale shall be as follows:
Upon written request therefor by Beneficiary specifying the
nature of the default, or the nature of the several defaults, and the
amount or amounts due and owing, the Deed of Trust Trustee shall
execute a written notice of breach
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and of its election to cause the Mortgaged Property to be sold to
satisfy the obligation secured hereby, and shall cause such notice to
be recorded and otherwise given according to law.
Notice of sale having been given as then required by law and
not less than the time then required by law having elapsed after
recordation of such notice of breach, the Deed of Trust Trustee,
without demand on Trustor, shall sell the Mortgaged Property at the
time and place of sale specified in the notice, as provided by
statute, either as a whole or in separate parcels and in such order as
it may determine, at public auction to the highest and best bidder for
cash in lawful money of the United States, payable at time of sale.
Trustor agrees that such a sale (or a sheriff's sale pursuant to
judicial foreclosure) of all the Mortgaged Property as real estate
constitutes a commercially reasonable disposition thereof, but that
with respect to all or any part of the Mortgaged Property which may be
personal property the Deed of Trust Trustee shall have and exercise,
at Beneficiary's sole election, all the rights and remedies of a
secured party under the Uniform Commercial Code. Whenever notice is
permitted or required hereunder or under the Uniform Commercial Code,
ten (10) days shall be deemed reasonable. The Deed of Trust Trustee
may postpone sale of all or any portion of the Mortgaged Property, and
from time to time thereafter may postpone such sale, as provided by
statute. The Deed of Trust Trustee shall deliver to the purchaser its
deed and bill of sale conveying the Mortgaged Property so sold, but
without any covenant or warranty, express or implied. The recital in
such deed and bill of sale of any matters or facts shall be conclusive
proof of the truthfulness thereof. Any person other than the Deed of
Trust Trustee, including Trustor or Beneficiary, may purchase at such
sale.
After deducting all costs, fees and expenses of the Deed of
Trust Trustee and of this trust, including the cost of evidence of
title search and reasonable counsel fees in connection with sale, the
Deed of Trust Trustee shall apply the proceeds of sale to payment of:
all sums expended under the terms hereof not then repaid, with accrued
interest at
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the Default Rate of interest specified in the Note; all other sums
then secured hereby; and the remainder, if any, to the clerk of the
superior court of the county in which the sale took place, as provided
in RCW 61.24.080.
(B) Trustor agrees to surrender possession of the hereinabove
described Mortgaged Property to the purchaser at the aforesaid sale,
immediately after such sale, in the event such possession has not
previously been surrendered by Trustor. Upon receipt of the sale
price in the case of a third party purchase or upon the crediting of
the applicable portion of the Secured Obligations to the sales price
if the purchaser is Beneficiary, the Deed of Trust Trustee is hereby
authorized, empowered and directed to make due conveyance to the
purchaser or purchasers, with general warranty binding upon Trustor
and the heirs, successors and assigns of Trustor. The right of sale
hereunder shall not be exhausted by one or more such sales, and the
Deed of Trust Trustee may make other and successive sales until all of
the Mortgaged Property be legally sold or all of the Secured
Obligations shall have been paid. Trustor hereby irrevocably appoints
the Deed of Trust Trustee to be the attorney of Trustor and in the
name and on behalf of Trustor to execute and deliver any deeds,
transfers, conveyances, assignments, assurances and notices which
Trustor ought to execute and deliver and do and perform any and all
such acts and things which Trustor ought to do and perform under the
covenants herein contained and generally, to use the name of Trustor
in the exercise of all or any of the powers hereby conferred on the
Deed
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of Trust Trustee. Recitals contained in any conveyance made by the
Deed of Trust Trustee to any purchaser at any sale made pursuant hereto
shall conclusively establish the truth and accuracy of the matters
therein treated, including, without limiting the generality of the
foregoing, nonpayment of the unpaid principal sum of, or the interest
accrued on, any of the Secured Obligations after the same has become
due and payable, advertisement and conduct of such sale in the manner
provided herein and appointment of any successor trustee hereunder.
The Deed of Trust Trustee or its successor or substitute may appoint
or delegate any one or more persons as agent to perform any act or
acts necessary or incident to any sale held by the Deed of Trust
Trustee, including the posting of notices and the conduct of sale, but
in the name and on behalf of the Deed of Trust Trustee, his successor
or substitute. If the Deed of Trust Trustee or his successor or
substitute shall have given notice of sale hereunder, any successor or
substitute Deed of Trust Trustee thereafter appointed may complete the
sale and the conveyance of the property pursuant thereto as if such
notice had been given by the successor or substitute Deed of Trust
Trustee conducting the sale.
(ii) (A) Upon the occurrence and during the continuance
of any Event of Default, the Deed of Trust Trustee or Beneficiary
shall have the right and power to proceed by a suit or suits in equity
or at law, whether for the specific performance of any covenant or
agreement herein contained or in aid of the execution of any power
herein granted, or for any foreclosure hereunder or for the sale of
the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction, or for the appointment of a receiver
pending any foreclosure hereunder or the sale of the Mortgaged
Property under the order of a court or courts of competent
jurisdiction or under executory or other legal process, or for the
enforcement of any other appropriate legal or equitable remedy. Any
money advanced by the Deed of Trust Trustee and/or Beneficiary in
connection with any such receivership shall be a demand obligation
(which obligation Trustor hereby expressly promises to pay) owing by
Trustor to the Deed of Trust Trustee and/or Beneficiary and shall bear
interest from the date of making such advance by the Deed of Trust
Trustee and/or Beneficiary until paid at the Note Rate.
(B) Trustor agrees to the full extent that it lawfully may,
that, in case one or more of the Events of Default shall have occurred
and shall not have been remedied, then, and in every such case, the
Deed of Trust Trustee or Beneficiary shall have the right and power to
enter into and upon and take possession of all or any part of the
Mortgaged Property in the possession of Trustor, its successors or
assigns, or its or their agents or servants, and may exclude Trustor,
its successors or assigns, and all persons claiming under Trustor, and
its or their agents or servants wholly or
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partly therefrom; and, holding the same, the Deed of Trust Trustee may
use, administer, manage, operate and control the Mortgaged Property
and conduct the business thereof to the same extent as Trustor, its
successors or assigns, might at the time do and may exercise all
rights and powers of Trustor, in the name, place and stead of Trustor,
or otherwise as the Deed of Trust Trustee shall deem best. All costs,
expenses and liabilities of every character incurred by the Deed of
Trust Trustee and/or Beneficiary in administering, managing,
operating, and controlling the Mortgaged Property shall constitute a
demand obligation (which obligation Trustor hereby expressly promises
to pay) owing by Trustor to the Deed of Trust Trustee and/or
Beneficiary and shall bear interest from date of expenditure until
paid at the Note Rate, all of which shall constitute a portion of the
Secured Obligations and shall be secured by this Deed of Trust and by
any other instrument securing the Secured Obligations. In connection
with any action taken by the Deed of Trust Trustee and/or Beneficiary
pursuant to this subsection (ii), the Deed of Trust Trustee and/or
Beneficiary shall not be liable for any loss sustained by Trustor
resulting from any act or omission of the Deed of Trust Trustee and/or
Beneficiary in administering, managing, operating or controlling the
Mortgaged Property, including a loss arising from the ordinary
negligence of the Deed of Trust Trustee and/or Beneficiary, unless
such loss is caused by its own gross negligence or willful misconduct
and bad faith, nor shall the Deed of Trust Trustee and/or Beneficiary
be obligated to perform or discharge any obligation, duty or liability
of Trustor.
(C) Trustor shall and does hereby agree to indemnify the Deed
of Trust Trustee and/or Beneficiary for, and to hold the Deed of Trust
Trustee and/or Beneficiary harmless from, any and all liability, loss
or damage which may or might be incurred by the Deed of Trust Trustee
and/or
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Beneficiary by reason of this Deed of Trust or the exercise of rights
or remedies hereunder, including a loss arising from the ordinary
negligence of the Deed of Trust Trustee and/or Beneficiary, except as
such liability, loss or damage is occasioned by the gross negligence
or willful misconduct of such party; should the Deed of Trust Trustee
and/or Beneficiary make any expenditure on account of any such
liability, loss or damage, the amount thereof, including costs,
expenses and reasonable attorneys' fees, shall be a demand obligation
(which obligation Trustor hereby expressly promises to pay) owing by
Trustor to the Deed of Trust Trustee and/or Beneficiary and shall bear
interest from the date expended until paid at the Note Rate, shall be
a part of the Secured Obligations and shall be secured by this Deed of
Trust and any other instrument securing the Secured Obligations.
(D) Trustor hereby assents to, ratifies and confirms any and
all actions of the Deed of Trust Trustee and/or Beneficiary with
respect to the Mortgaged Property taken under this paragraph (ii).
(iii) Every right, power and remedy herein given to the Deed
of Trust Trustee and Beneficiary shall be cumulative and in addition
to every other right, power and remedy herein specifically given or
now or hereafter existing in equity, at law or by statute; and each
and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time and so often and
in such order as may be deemed expedient by the Deed of Trust Trustee
and Beneficiary, and the exercise, or the beginning of the exercise,
of any such right, power or remedy shall not be deemed a waiver of the
right to exercise, at the same time or thereafter any other right,
power or remedy. No delay or omission by the Deed of Trust Trustee or
Beneficiary in the exercise of any right, power or remedy shall impair
any such right, power or remedy or operate as a waiver thereof or of
any other right, power or remedy then or thereafter existing.
(iv) To the extent permitted under applicable law,
Beneficiary shall have the right (but shall not be obligated to) to
become the purchaser at any sale held by the Deed of Trust Trustee or
by any receiver or public officer, whether by power of sale, judicial
procedure or otherwise, and shall have the right (but shall not be
obligated to) to have all or any part of the Secured Obligations then
owing credited
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against the amount of the bid made by Beneficiary at such sale.
(v) Upon any sale, whether under the power of sale hereby
given or by virtue of judicial proceedings, it shall not be necessary
for the Deed of Trust Trustee or any public officer acting under
execution or order of court to have physically present or
constructively in his or her possession any of the Mortgaged Property,
and Trustor hereby agrees to deliver all of such personal property to
the purchasers at such sale on the date of sale, and if it should be
impossible or impracticable to make actual delivery of such property,
then the title and right of possession to such property shall pass to
the purchaser at such sale as completely as if such property had been
actually present and delivered.
(vi) Upon any sale, whether made under the power of sale
hereby given or by virtue of judicial proceedings, the receipt of the
Deed of Trust Trustee, or of the officer making a sale under judicial
proceedings, shall be a sufficient discharge to the purchaser or
purchasers at any sale for his or her or their purchase money, and
such purchaser or purchasers, his or her or their assigns or personal
representatives, shall not, after paying such purchase money and
receiving such receipt of the Deed of Trust Trustee or of such officer
therefor, be obliged to see to the application of such purchase money,
or be in anywise answerable for any loss, misapplication or
nonapplication thereof.
(vii) (A) Any sale or sales of the Mortgaged Property or any
part thereof, whether under the power of sale herein granted and
conferred or under and by virtue of judicial proceedings, shall
operate to divest all right, title, interest, claim and demand
whatsoever, either at law or in equity, of Trustor of, in and to the
premises and the property sold, and shall be a perpetual bar, both at
law and in equity, against Trustor, its successors and assigns, and
against any and all persons claiming or who shall thereafter claim all
or any of the property sold from, through or under Trustor, its
successors and assigns; and Trustor, if
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requested by the Deed of Trust Trustee or Beneficiary to do so, shall
join in the execution and delivery of all proper conveyances,
assignments and transfers of the properties so sold.
(B) The proceeds of any sale of the Mortgaged Property or any
part thereof and all other moneys received by the Deed of Trust
Trustee in any proceedings for the enforcement hereof, whose
application has not elsewhere herein been specifically provided for,
shall be applied first, to the payment of all expenses incurred by the
Deed of Trust Trustee or Beneficiary incident to the enforcement of
this Deed of Trust or any of the Secured Obligations (including,
without limiting the generality of the foregoing, expenses of any
entry or taking of possession, of any sale, of advertisement thereof,
and of conveyances, and court costs, compensation of agents and
employees and reasonable legal fees), and to the payment of all other
charges, expenses, liabilities and advances incurred or made by the
Deed of Trust Trustee or Beneficiary under this Deed of Trust or in
executing any trust or power hereunder; and then to the payment of the
Secured Obligations in such order and manner as is determined by
Beneficiary in its sole discretion, subject to the terms of the
Intercreditor Agreement.
(C) Beneficiary may resort to any security given by this Deed
of Trust or to any other security now existing or hereafter given to
secure the payment of any of the Secured Obligations secured hereby,
in whole or in part, and in such portions and in such order as may
seem best to Beneficiary in its sole discretion, subject to the terms
of the Intercreditor Agreement, and any such action shall not in
anywise be considered as a waiver of any of the rights, benefits or
liens created by this Deed of Trust.
(D) Trustor agrees, to the full extent that it may lawfully
so agree, that it will not at any time insist upon or plead or in any
manner whatever claim or take the benefit or advantage of any
appraisement, valuation, stay, extension or redemption law now or
hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Deed of Trust or the absolute sale of the
Mortgaged Property
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or the possession thereof by any purchaser at any sale made pursuant
to any provision hereof, or pursuant to the decree of any court of
competent jurisdiction; but Trustor, for itself and all who may claim
through or under it, so far as it or they now or hereafter lawfully
may, hereby waives the benefit of all such laws. Trustor, for itself
and all who may claim through or under it, waives to the extent that
it may lawfully do so, any and all right to have the property included
in the Mortgaged Property marshaled upon any foreclosure of the lien
hereof, and agrees that any court having jurisdiction to foreclose
such lien may sell the Mortgaged Property as an entirety. If any law
referred to herein and now in force, of which Trustor or its successor
or successors might take advantage despite the provisions hereof,
shall hereafter be repealed or cease to be in force, such law shall
not thereafter be deemed to constitute any part of the contract herein
contained or to preclude the operation or application of the
provisions hereof.
(E) If the proceeds of any sale or other lawful disposition
of the Mortgaged Property by the Deed of Trust Trustee and/or
Beneficiary are insufficient to pay the Secured Obligations, then
Trustor shall pay or cause to be paid any deficiency.
(viii) Without in any manner limiting the generality of any
of the other provisions of this Deed of Trust; (A) some portions of
the goods described or to which reference is made herein are or are to
become fixtures on the land described or to which reference is made
herein; (B) the security interests created hereby under the Uniform
Commercial Code will attach to minerals including oil and gas; (C)
this instrument is to be filed of record in the real estate records as
a financing statement; and (D) Trustor is the record owner of the real
estate or interests in the real estate comprised of the Mortgaged
Property.
(ix) The Mortgaged Property may be sold in one or more
parcels and in such manner and order as Beneficiary, in its sole
discretion, may determine.
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Beneficiary's exercise of the foregoing remedies will not be
construed to constitute Beneficiary as a mortgagee in possession of the
Mortgaged Property nor to obligate Beneficiary to take any action or to incur
expenses or perform or discharge any obligation, duty or liability of Trustor
under any lease, or for the control, care, management, or repair of the
Mortgaged Property; nor will it operate to make Beneficiary responsible or
liable for any waste committed on the Mortgaged Property by any Person or for
any dangerous or defective condition of the Mortgaged Property, or for any act
or omission relating to the management, upkeep, repair, or control of the
Mortgaged Property that results in loss or injury or death to any Person.
SECTION VII - THE DEED OF TRUST TRUSTEE
(a) It shall be no part of the duty of the Deed of Trust
Trustee to see to any recording, filing or registration of this Deed of Trust
or any other instrument in addition or supplemental thereto, or to give any
notice thereof, or to see to the payment of or be under any duty in respect of
any tax or assessment or other governmental charge which may be levied or
assessed on the Mortgaged Property, or any part thereof, or against Trustor, or
to see to the performance or observance by Trustor of any of the covenants and
agreements contained herein. The Deed of Trust Trustee shall not be
responsible for the execution, acknowledgment or validity of this Deed of Trust
or of any instrument in addition or supplemental hereto or for the sufficiency
of the security purported to be created hereby, and makes no representation in
respect thereof or in respect of the rights of Beneficiary. The Deed of Trust
Trustee shall have the right to consult with counsel upon any matters arising
hereunder and shall be fully protected in relying as to legal matters on the
advice of counsel. The Deed of Trust Trustee shall not incur any personal
liability hereunder except for the Deed of Trust Trustee's own gross negligence
or willful misconduct; and the Deed of Trust Trustee shall have the right to
rely on any instrument, document or signature authorizing or supporting any
action taken or proposed to be taken by the Deed of Trust Trustee hereunder,
believed by the Deed of Trust Trustee in good faith to be genuine.
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(b) The Deed of Trust Trustee may resign by written notice
addressed to Beneficiary (but such resignation shall not be effective until and
unless a successor trustee is appointed by Beneficiary and such successor
trustee accepts the appointment) or be removed at any time with or without
cause by an instrument in writing duly executed on behalf of Beneficiary.
Beneficiary may, at any time, by instrument in writing, appoint a successor or
successors to the Deed of Trust Trustee named herein or acting hereunder, which
instrument, executed and acknowledged by Beneficiary, and recorded in the
appropriate office in the State, shall be conclusive proof of the proper
substitution of such successor trustee, who shall have all the estate, powers,
duties and trusts in the premises vested in or conferred on the original
trustee.
SECTION VIII - CERTAIN DEFINITIONS
As used herein, the following terms shall have the following
meanings:
"Additional Undertaking" shall mean (a) cash or cash
equivalents or (b) a Surety Bond, an Additional Undertaking Guarantee or an
Additional Undertaking Letter of Credit which is (i) provided by a Person, (ii)
whose long- term unsecured debt is rated at least "AA" (or equivalent) by a
nationally recognized statistical rating agency and (iii) is otherwise
satisfactory to Beneficiary. Additional Undertakings shall be addressed
directly to Beneficiary and shall name Beneficiary as the beneficiary thereof
and the party entitled to make claims thereunder.
"Additional Undertaking Guarantee" shall mean the
unconditional guarantee of payment of any corporation or partnership organized
and existing under the laws of the United States of America or any State or the
District of Columbia or Canada or province thereof that has a long-term
unsecured debt rating satisfactory to Beneficiary at the time such guarantee is
delivered, given to Beneficiary, accompanied by an opinion of counsel to such
guarantor to the effect that such guarantee has been duly authorized, executed
and delivered by such guarantor and constitutes the legal, valid and binding
obligation of such guarantor enforceable against such guarantor by Beneficiary
in
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accordance with its terms, subject to customary exceptions at the time for
opinions for such instruments, together with an opinion of counsel to the
effect that, taking into account the purpose under this Deed of Trust for which
such guarantee will be given, such guarantee and accompanying opinion are
responsive to the requirements of this Deed of Trust.
"Additional Undertaking Letter of Credit" shall mean a clean,
irrevocable, unconditional letter of credit in favor of Beneficiary and
entitling Beneficiary to draw thereon in The City of New York issued by a bank
satisfactory to Beneficiary, accompanied by an opinion of counsel to such bank
to the effect that such letter of credit has been duly authorized, executed and
delivered by such bank and constitutes the legal, valid and binding obligation
of such bank enforceable against such bank by Beneficiary in accordance with
its terms subject to customary exceptions at the time for opinions for such
instruments, together with an opinion of counsel to the effect that, taking
into account the purpose under this Deed of Trust for which such letter of
credit will be given, such letter of credit and accompanying opinion are
responsive to the requirements of this Deed of Trust.
"Collateral Account" shall have the meaning set forth in the
Intercreditor Agreement.
"Environmental Laws" shall mean any and all Governmental
Requirements pertaining to occupational health or the environment in effect in
the State, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation
Act, as amended, and other environmental conservation or protection laws. The
term "oil" shall have the meaning specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings specified
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in CERCLA, and the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA; provided, however, that (i) in the event either
OPA, CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (ii) to the extent the laws of the State establish a meaning
for "oil", "hazardous substance", "release", solid waste" or "disposal" which
is broader than that specified in either OPA, CERCLA or RCRA, such broader
meaning shall apply with respect to the Mortgaged Property.
"Excepted Liens" shall mean (a) Liens for taxes, assessments
or other governmental charges or levies not yet due or which are being
contested in good faith by appropriate action and for which appropriate
reserves have been maintained; (b) operators', vendors', carriers',
warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction
or other like Liens arising by operation of law in the ordinary course of
business or statutory landlord's liens; (c) any Liens reserved in leases for
rent and for compliance with the terms of the leases in the case of leasehold
estates, to the extent that any such Lien referred to in this clause does not
materially impair the use of the Mortgaged Property covered by such Lien for
the purposes for which such Mortgaged Property is held by Trustor or materially
impair the value of such Mortgaged Property subject thereto; (d) the Liens
listed on Schedule 1 attached hereto and made a part hereof; and (e) Liens and
encumbrances (other than to secure the payment of borrowed money or the
deferred purchase price of Mortgaged Property or services), easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations in any rights of way for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment,
and defects, irregularities, zoning restrictions and deficiencies in title to
the Mortgaged Property of which in the aggregate do not prevent the use of the
Mortgaged Property for the purposes of which it is currently held by Trustor or
have a Material Adverse Effect on the Companies taken as a whole.
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"Governmental Authority" shall include the country, the state,
county, city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such Person
or such Person's Property, and any court, agency, department, commission,
board, bureau or instrumentality of any of them including monetary authorities
which exercises valid jurisdiction over any such Person or such Person's
Property. Unless otherwise specified, all references to Governmental Authority
herein shall mean a Governmental Authority having jurisdiction over, where
applicable, Trustor or any Secured Party.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement, including, without limitation, Environmental Laws,
energy regulations and occupational safety and health standards or controls, of
any Governmental Authority.
"Hazardous Materials" shall mean any pollutants, contaminants,
or industrial, toxic or hazardous substances or wastes.
"Lien" shall mean any interest in Mortgaged Property owed to,
or a claim by a Person, whether such interest is based on the common law,
statute or contract, and whether such obligation or claim is fixed or
contingent, and including but not limited to the lien or security interest
arising from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting the Mortgaged
Property.
"Material Adverse Effect" shall mean, as to any Person, asset
or Property, a material adverse effect on the business, assets, properties,
condition (financial or other), operations or results of operations of such
Person, asset or Property, which effect is not adequately and effectively
insured or indemnified against by a financially sound insurance company, and
excepting
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effects arising solely out of general national economic conditions and/or
effects arising solely out of matters affecting the industry in which such
Person, asset or Property conducts business a whole.
"Note Rate" shall mean the rate borne by the Notes.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or government or any agency, instrumentality or political
subdivision thereof, or any other form of entity.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Revolving Credit Agreement" shall mean that certain Loan and
Security Agreement dated as of June 17, 1997 among PAAC, as borrower, Bank of
America Illinois, as agent and a lender, and the lenders named therein, as in
effect on the date hereof.
"State" shall mean the state where the Land is located.
"Surety Bond" shall mean a clean irrevocable surety bond or
credit insurance policy in favor of Beneficiary issued by an insurance company
the claims paying ability rating of which at the time such surety bond or
credit insurance policy is delivered is satisfactory to Beneficiary,
accompanied by an opinion of counsel to such insurance company to the effect
that such surety bond or credit insurance policy has been duly authorized,
executed and delivered by such insurance company and constitutes the legal,
valid and binding obligation of such insurance company enforceable against such
insurance company by Beneficiary in accordance with its terms subject to
customary exceptions at the time for opinions for such instruments, together
with an opinion of counsel to the effect that, taking into account the purpose
under this Deed of Trust for which such surety bond will be given, such surety
bond and accompanying opinions are responsive to the requirements of this Deed
of Trust.
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"Trust Money" shall mean those certain proceeds set forth in
subsections IV(q)(i) and IV(q)(ii).
SECTION IX - MISCELLANEOUS
(a) Choice of Law. The terms and provisions of this Deed of
Trust and the enforcement hereof shall be governed by and construed in
accordance with the laws of the state where the Land is located.
(b) Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of the Deed of Trust Trustee and
Beneficiary in order to effectuate the provisions hereof, and the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of any such provision in any other jurisdiction.
If any part of the Secured Obligations cannot be lawfully secured by this Deed
of Trust or if any part of the Mortgaged Property cannot be lawfully subject to
the Lien and security interest hereof to the full extent of such Secured
Obligations, then all payments made shall be applied on said Secured
Obligations first in discharge of that portion thereof which is not secured by
this Deed of Trust.
(c) Construction of this Instrument. This instrument may be
construed as a mortgage, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, fixture filing, pledge, financing statement,
hypothecation or contract, or any one or more of them, in order fully to
effectuate the Lien hereof and the purposes and agreements herein set forth.
(d) Captions; Gender and Number. The captions and section
headings of this Deed of Trust are for convenience only and are not to be used
to define the provisions hereof. The term "Beneficiary" as used herein shall
mean and include any successor(s) to United States Trust Company of New York in
its capacity as Collateral Agent under the Intercreditor Agreement. The terms
used to designate the Deed of Trust Trustee, Beneficiary and Trustor shall be
deemed to include the respective
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heirs, legal representatives, successors and assigns of such parties. All
terms contained herein shall be construed, whenever the context of this Deed of
Trust so requires, so that the singular includes the plural and so that the
masculine includes the feminine.
(e) Rights of Beneficiary. The Lien, security interest
and other security rights of Beneficiary hereunder shall not be impaired by any
indulgence, moratorium or release granted by Beneficiary, the Note Trustee or
the Term Loan Agent, including, but not limited to, any renewal, extension or
modification with respect to any Secured Obligation, or any surrender,
compromise, release, renewal, extension, exchange or substitution which
Beneficiary may grant in respect of the Mortgaged Property, or any part thereof
or any interest therein, or any release or indulgence granted to any endorser,
guarantor or surety of any Secured Obligation.
(f) Waiver of an Event of Default. Beneficiary may waive
any Event of Default without waiving any other prior or subsequent Event of
Default. Beneficiary may remedy any Event of Default without waiving the Event
of Default remedied. No single or partial exercise by Beneficiary of any
right, power or remedy hereunder shall exhaust the same or shall preclude any
other or further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time. No modification
or waiver of any provision hereof nor consent to any departure by Trustor
therefrom shall in any event be effective unless the same shall be in writing
and signed by Beneficiary and then such waiver or consent shall be effective
only in the specific instances, for the purpose for which given and to the
extent therein specified. No notice to nor demand on Trustor in any case shall
of itself entitle Trustor to any other or further notice of demand in similar
or other circumstances. Acceptance by Beneficiary of any payment in an amount
less than the amount then due on any Secured Obligations shall be deemed an
acceptance on account only and shall not in any way excuse the existence of an
Event of Default hereunder.
(g) Successor Trustor. In the event the ownership of the
Mortgaged Property or any part thereof becomes vested in a person other than
Trustor, Beneficiary may, without notice to
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Trustor, deal with such successor or successors in interest with reference to
this Deed of Trust and the Secured Obligations in the same manner as with
Trustor, without in any way vitiating or discharging Trustor's liability
hereunder or for the payment of the Secured Obligations or performance of the
obligations secured hereby. No transfer of the Mortgaged Property, no
forbearance on the part of Beneficiary and/or any Secured Party, and no
extension of the time for the payment of the Secured Obligations, in whole or
in part, shall affect the liability of Trustor or any other person hereunder or
for obligations secured hereby.
(h) Outstanding Lien, Security Interest, Charge or Prior
Encumbrance. To the extent that proceeds of the Notes or proceeds of advances
under the Term Loan Agreement are used to pay indebtedness secured by any
outstanding Lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced at Trustor's request, and
Beneficiary shall be subrogated to any and all rights, security interests and
Liens owned by any owner or holder of such outstanding Liens, security
interests, charges or encumbrances, irrespective of whether said Liens,
security interests, charges or encumbrances are released, and it is expressly
understood that, in consideration of the payment of such indebtedness, Trustor
hereby waives and releases all demands and causes of action for offsets and
payments to, upon and in connection with the said indebtedness.
(i) Covenants Running with the Land. The covenants and
agreements herein contained shall constitute covenants running with the land
and interests covered or affected hereby and shall be binding upon the heirs,
legal representatives, successors and assigns of the parties hereto.
(j) Notices. All notices requests, demands and other
communications provided for or permitted hereunder shall be in writing
(including telex and telecopy communications) and shall be sent by mail, telex,
telecopier or hand delivery:
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If to Trustor, to the following address:
4200 NationsBank Center
700 Louisiana Street
Suite 4200
Houston, Texas 77002
Attention: Vice President, General Counsel
and Secretary
If to Beneficiary, to the following address:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
If to the Deed of Trust Trustee, to the following address:
Transnation Title Insurance Company
6111 100th Street S.W.
Lakewood, Washington 98499
All such notices, requests, demands and communications shall be deemed to have
been duly given or made, when delivered by hand or five (5) business days after
being deposited in the mail, postage paid, when telexed answer back received
and when telecopied, receipt acknowledged. Any party hereto may change its
address set forth in this subsection (j) by notice to the other parties given
in accordance with the provisions of this subsection (j).
(k) Beneficiary's Consent. Except where otherwise
expressly provided herein, in any instance hereunder where the approval,
consent or the exercise of judgment of Beneficiary is required, the granting or
denial of such approval or consent and the exercise of such judgment shall be
within the sole discretion of Beneficiary, and Beneficiary shall not, for any
reason or to any extent, be required to grant such approval or consent or
exercise such judgment in any particular manner, regardless of the
reasonableness of either the request or Beneficiary's judgment.
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(l) Foreclosure. In the event there is a foreclosure
sale hereunder, and at the time of such sale Trustor or Trustor's successors or
assigns or any other person claiming any interest in the Mortgaged Property by,
through or under Trustor, are occupying or using the Mortgaged Property or any
part thereof, each and all shall immediately become the tenant of the purchaser
at such sale, which tenancy shall be a tenancy from day to day, terminable at
the will of either the landlord or tenant, or at a reasonable rental per day
based upon the value of the property occupied, such rental to be due daily to
the purchaser; to the extent permitted by applicable law, the purchaser at such
sale shall, notwithstanding any language herein apparently to the contrary,
have the sole option to demand immediate possession following the sale or to
permit the occupants to remain as tenants at will. In the event the tenant
fails to surrender possession of said property upon demand, the purchaser shall
be entitled to institute and maintain a summary action for possession of the
Mortgaged Property (such as an action for forcible entry and detainer) in any
court having jurisdiction. The purchaser or purchasers at foreclosure shall
have the right to affirm or disaffirm any lease of the Mortgaged Property or
any part thereof.
(m) Reimbursement. Trustor shall reimburse the Deed of
Trust Trustee and Beneficiary, upon demand, for all fees, costs and expenses
incurred by the Deed of Trust Trustee and Beneficiary in connection with the
administration and enforcement of this Deed of Trust. If any action or
proceedings, including, without limitation, bankruptcy or insolvency
proceedings, is commenced to which action or proceeding the Deed of Trust
Trustee or Beneficiary is made a party or in which it becomes necessary to
defend or uphold the Lien or validity of this Deed of Trust, Trustor shall,
upon demand, reimburse the Deed of Trust Trustee and Beneficiary for all
expenses (including, without limitation, attorneys' and agents' fees and
disbursement) incurred by the Deed of Trust Trustee or Beneficiary in such
action or proceedings. In any action or proceeding to foreclose this Deed of
Trust or to recover or collect the Secured Obligations, the provisions of law
relating to the recovery of costs, disbursements and allowances shall prevail
unaffected by this covenant. Trustor's obligations under this subsection IX(m)
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shall survive the satisfaction of this Deed of Trust and the discharge of
Trustor's other obligations hereunder.
(n) Waiver of Stay. (i) Trustor agrees that in the
event that Trustor or any property or assets of Trustor shall hereafter become
subject of a voluntary or involuntary proceeding under the Bankruptcy Code or
Trustor shall otherwise be a party to any federal or state bankruptcy,
insolvency, moratorium or similar proceeding to which the provisions relating
to the automatic stay under Section 362 of the Bankruptcy Code or any similar
provision in any such law is applicable, then, in any such case, whether or not
Beneficiary has commenced foreclosure proceedings under this Deed of Trust,
Beneficiary shall be entitled to relief from any such automatic stay as it
relates to the exercise of any of the rights and remedies (including, without
limitation, any foreclosure proceedings) available to Beneficiary as provided
in this Deed of Trust or in any other document evidencing or securing the
Secured Obligations.
(ii) Beneficiary shall have the right to petition or move
any court having jurisdiction over any proceeding described in subsection
IX(n)(i) for the purposes provided therein, and Trustor agrees (a) not to
oppose any such petition or motion and (b) at Trustor's sole cost and expense,
to assist and cooperate with Beneficiary, as may be requested by Beneficiary
from time to time, in obtaining any relief requested by Beneficiary, including,
without limitation, by filing any such petitions, supplemental petitions,
requests for relief, documents, instruments or other items from time to time
requested by Beneficiary or any such court.
(o) Waiver of Jury Trial. To the extent permitted by
law, Trustor hereby knowingly, voluntarily and intentionally waives any rights
it may have to a trial by jury in the respect of any litigation based hereon,
or directly or indirectly arising out of, under or in connection with, this
Deed of Trust or any course of conduct, course of dealing, statements (whether
verbal or written) or actions of Trustor, the Deed of Trust Trustee or
Beneficiary.
(p) Counterparts. This instrument may be executed in
several counterparts, all of which are identical. Each of such
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counterparts shall for all purposes be deemed to be an original and all such
counterparts shall together constitute but one and the same instrument.
(q) Provisions of the Intercreditor Agreement.
Notwithstanding anything to the contrary contained in this Deed of Trust, it is
the understanding of the parties hereto that any actions by the Deed of Trust
Trustee and/or Beneficiary are subject to the provisions of the Intercreditor
Agreement.
[Signature page follows]
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IN WITNESS WHEREOF, this Deed of Trust has been duly executed
by Trustor as of the date first written above.
PLEASE BE ADVISED THAT ORAL AGREEMENTS OR ORAL COMMITMENTS TO
LOAN MONEY, EXTEND CREDIT OR FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE
UNENFORCEABLE UNDER WASHINGTON LAW.
Trustor:
PIONEER CHLOR ALKALI COMPANY, INC.
By: /s/ Kent R. Stephenson
Name: Kent R. Stephenson
Title: Vice President
The name and address of Trustor is:
PIONEER CHLOR ALKALI COMPANY, INC.
700 Louisiana Street, Suite 4200
Houston, Texas 77002
The name and address of Beneficiary is:
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
I certify that I know or have satisfactory evidence that
Kent Stephenson is the person who appeared before me, and said person
acknowledged that said person signed this instrument, on oath stated that said
person was authorized to execute the instrument and acknowledged it as the
Vice President of Pioneer Chlor Alkali Company, Inc., a corporation, to be
the free and voluntary act of such corporation for the uses and purposes
mentioned in the instrument.
Dated this 17th day of June, 1997.
/s/ Christopher Tung
------------------------------
Notary Public in and for
the state of New York,
residing at
------------------------------
------------------------------
------------------------------
My appointment expires 9/29/98
-------
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<PAGE> 1
EXHIBIT 4.2(b)
LOUISIANA
MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
BY
PIONEER CHLOR ALKALI COMPANY, INC.
(Taxpayer I.D. No. 51-0302028),
as Mortgagor
TO
UNITED STATES TRUST COMPANY OF NEW YORK
as Collateral Agent
(Taxpayer I.D. No. 13-3813954),
as Mortgagee
Dated June 17, 1997
THIS INSTRUMENT COVERS, AMONG OTHER PROPERTY, GOODS WHICH ARE OR MAY
BECOME FIXTURES ON CERTAIN REAL PROPERTY DESCRIBED ON EXHIBIT A HERETO
A CARBON, PHOTOGRAPHIC, FACSIMILE OR OTHER REPRODUCTION OF THIS
INSTRUMENT IS SUFFICIENT AS A FINANCING STATEMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES
PAYMENT OF FUTURE ADVANCES AND COVERS PROCEEDS OF COLLATERAL.
WHEN RECORDED OR FILED RETURN TO:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
<PAGE> 2
MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
BE IT KNOWN, that on this 16th day of June, 1997, but
effective as of the 17th day of June, 1997, before me, the undersigned Notary
Public, duly commissioned and qualified in and for the State of New York, and
in the presence of the undersigned competent witnesses:
PERSONALLY CAME AND APPEARED:
PIONEER CHLOR ALKALI COMPANY, INC., a Delaware corporation
("Mortgagor"), represented herein by Philip Ablove, duly authorized
to appear herein by resolution of Mortgagor's Board of Directors, a certified
copy of which is attached hereto and made a part hereof, who being duly sworn,
did declare and say as follows:
W I T N E S S E T H :
WHEREAS, pursuant to that certain Indenture dated as of the
date hereof among Pioneer Americas Acquisition Corp. ("PAAC"), the Subsidiary
Guarantors, as defined therein, and United States Trust Company of New York, as
trustee (in such capacity, the "Note Trustee") for the holders of the Notes (as
hereinafter defined) (the "Note Holders") (as the same may be amended, amended
and restated, supplemented or otherwise modified from time to time, the
"Indenture") PAAC will issue its 9 1/4% Senior Secured Notes due 2007 (as the
same may be amended, amended and restated, supplemented or otherwise modified
from time to time, including all notes issued in exchange or substitution
therefor, upon the registration of such notes pursuant to the Securities Act of
1933 or otherwise, the "Notes") in the aggregate principal amount of $200
million; and
WHEREAS, pursuant to that certain Term Loan Agreement dated as
of the date hereof among PAAC, Bank of America Illinois, as administrative
agent (the "Term Loan Agent"), DLJ Capital Funding, Inc., as syndication agent,
Salomon Brothers Holding Company Inc, as documentation agent, and the lenders
named therein (the "Term Loan Lenders") (as the same may be amended, amended
and restated, supplemented or otherwise modified from
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time to time, the "Term Loan Agreement"), the Term Loan Lenders will make
certain loans to PAAC to be evidenced by notes (as the same may be amended,
amended and restated, supplemented or otherwise modified from time to time,
including all notes issued in exchange or substitution therefor, the "Term Loan
Notes") in an aggregate amount of $100 million; and
WHEREAS, pursuant to Article Thirteen of the Indenture,
Mortgagor has guaranteed (such guarantee by Mortgagor being hereinafter
referred to as the "Note Guarantee") the payment and performance of the
Indenture Obligation (as hereinafter defined); and
WHEREAS, pursuant to the Subsidiary Guaranty dated as of the
date hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time), Mortgagor has guaranteed (such guarantee
by Mortgagor being hereinafter referred to as the "Term Loan Guarantee") the
payment and performance of the Term Loan Obligation (as hereinafter defined);
and
WHEREAS, United States Trust Company of New York is the
collateral agent (in such capacity and together with any successors and assigns
in such capacity, "Mortgagee") under that certain Intercreditor and Collateral
Agency Agreement (as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time, the "Intercreditor
Agreement"), dated as of the date hereof, among Pioneer, Mortgagor, Pioneer
Americas, Inc. ("PAI" and together with PAAC and Mortgagor sometimes referred
to herein as the "Companies"), the Note Trustee, the Term Loan Agent and
Mortgagee, as collateral agent; and
WHEREAS, Mortgagor is entering into this Mortgage, Assignment
of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement
(the "Mortgage") in favor of Mortgagee for the benefit of (i) itself as the
Note Trustee, (ii) the Term Loan Agent as agent under the Term Loan Agreement,
(iii) the Note Holders and (iv) the Term Loan Lenders, to secure the Secured
Obligations (as hereinafter defined) (the Note Trustee, Mortgagee, the Note
Holders, the Term Loan Agent and the Term Loan Lenders, collectively the
"Secured Parties").
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SECTION I - GRANTING CLAUSES
To secure the Secured Obligations (as hereinafter defined),
including, without limitation, Mortgagor's guarantees of payment and
performance of the Indenture Obligation and the Term Loan Obligation under the
Note Guarantee and the Term Loan Guarantee, respectively, and the payment and
performance of the covenants and obligations herein contained, Mortgagor does
by these presents MORTGAGE, PLEDGE AND HYPOTHECATE unto Mortgagee all of
Mortgagor's rights, titles, interests and estates in and to the real and
personal property described in Subparagraphs (a) through (h) of this Section I
(collectively herein called the "Mortgaged Property"); provided, however, that
the term Mortgaged Property shall not include any Obligor Collateral (as
hereinafter defined), to-wit:
(a) Mortgagor's undivided 100% interest in and to the lands
described on Exhibit A hereto (the "Land"), together with any and all
other rights, titles and interests of Mortgagor of whatever kind or
character (whether now owned or hereafter acquired by operation of law
or otherwise) in and to such Land.
(b) All of Mortgagor's rights, titles and interests in all
plants, buildings, structures, towers and other improvements and
component parts thereof, now owned or hereafter acquired and located
on the Land, including, without limitation, that certain chlor alkali
plant and all equipment, fixtures, heating, lighting and power plants,
pipelines, transmission lines, buildings, housing and improvements,
together with all other machinery, equipment, appliances and apparatus
of whatsoever character or description (except for any motor vehicles,
licensed or registered with the Department of Motor Vehicles of the
State), and all replacements, substitutions and additions to said
property, owned by Mortgagor and located on the Land or located
elsewhere and used in the operation, conduct and maintenance of that
certain chlor alkali plant located thereon (collectively, the
"Improvements") (the Land, together with the Improvements, being
hereinafter collectively referred to as the "Chlor Alkali Plant").
(c) To the extent permitted by law, all of Mortgagor's
rights, titles and interests in, to and under all
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franchises, licenses, permits and certificates, consents, approvals,
authorizations, however characterized, used or held for use in
connection with Mortgagor's ownership and operation of the Chlor
Alkali Plant and issued or in any way furnished, whether now existing
or hereafter entered into and whether necessary or not for the
operation and use of the Chlor Alkali Plant, including, without
limitation, building permits, certificates of occupancy, environmental
certificates, industrial permits or licenses or certificates of
operation.
(d) All of Mortgagor's rights, title and interest in all
absorbers, equipment, machinery, drums, engines, motors, regulators,
meters, exchangers, tanks, docks, racks, heaters, above ground storage
facilities, under ground storage facilities, loading facilities,
fractionation facilities, absorption equipment, distillation
equipment, deethanizers, depropanizers, debutanizers, olefin
splitters, stills, power plants, disposal pits, warehouses, dwelling
houses, cooling equipment, compressors, pipelines, piping flow lines,
wiring, boilers, vessels, dehydration equipment or any of them (except
for any motor vehicles, licensed or registered with the Department of
Motor Vehicles of the State), whether now owned or hereafter acquired
and located or to be located upon the Land or leaseholds now or
hereafter owned by Mortgagor and used or held for use in connection
with Mortgagor's ownership and operation of the Chlor Alkali Plant
(collectively, "Equipment").
(e) All Mortgagor's right, title and interest, as landlord,
franchisor, licensor or grantor, in all leases and subleases of space,
oil, gas and mineral leases, franchise agreements, licenses, occupancy
or concession agreements now existing or hereafter entered into
relating in any manner to the Chlor Alkali Plant or the Equipment and
any and all amendments, modifications, supplements and renewals of any
thereof (each such lease, license or agreement, together with any such
amendment, modification, supplement or renewal, a "Lease"), whether
now in effect or hereafter coming into effect including, without
limitation, all rents, additional rents, management fees payable by
tenants, cash, guarantees, letters of credit, bonds, sureties or
securities deposited thereunder to secure performance of the lessee's,
franchisee's, licensee's or obligee's obligations
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thereunder, revenues, earnings, profits and income, advance rental
payments, payments incident to assignment, sublease or surrender of a
Lease, claims for forfeited deposits and claims for damages, now due
or hereafter to become due, with respect to any Lease (collectively,
"Rents").
(f) All surveys, title insurance policies, drawings,
plans, specifications, construction contracts, file materials,
operating and maintenance records, catalogues, tenant lists,
correspondence, advertising materials, operating manuals, warranties,
guaranties, appraisals, studies and data relating to the Chlor Alkali
Plant or the Equipment or the construction of any Alteration (as
hereinafter defined) or the maintenance of any Permit (as hereinafter
defined).
(g) All general intangibles now owned or hereafter
acquired by Mortgagor (but not including the Obligor Collateral),
including without limitation (i) all of Mortgagor's rights, titles and
interests, whether now owned or hereafter acquired, of Mortgagor in,
to and under the contracts, agreements or other instruments and
documents relevant to Mortgagor's ownership and operation of the Chlor
Alkali Plant (collectively, "Plant Agreements"), (ii) all contract
rights relating to the Chlor Alkali Plant or the Equipment and all
reserves, deferred payments, deposits, refunds and claims of every
kind or character relating thereto, but not including Accounts
Receivable (as hereinafter defined) (collectively, "Contract Rights")
and (iii) all processes, designs, methodologies and related
documentation, technical information, manufacturing, engineering and
technical drawings related to the operation of the Chlor Alkali Plant.
(h) All proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, including,
without limitation, proceeds of insurance and condemnation or other
awards or payments with respect thereto and interest thereon
(collectively, "Proceeds").
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee
and to its successors and assigns forever to secure the payment and performance
of the Secured Obligations.
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SECTION II - SECURITY INTEREST
(a) With respect to all personal property (both tangible and
intangible) and any fixtures constituting a part of the Mortgaged Property,
this Mortgage shall likewise be a security agreement and a financing statement
and for valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and for the purpose of further securing payment of the Secured
Obligations, Mortgagor hereby grants to Mortgagee a security interest in all of
Mortgagor's rights, titles and interests in and to the Mortgaged Property
insofar as the Mortgaged Property consists of equipment, contract rights,
general intangibles, documents, instruments, chattel paper, fixtures and any
and all other personal property of any kind or character defined in and subject
to the provisions of the Louisiana Commercial Laws (La.R.S. 10:1-101 et seq.)
as in effect in the State (the "Uniform Commercial Code"), including the
proceeds, profits, rents, revenues and products from any and all of such
personal property. Upon the occurrence and during the continuance of any Event
of Default (as hereinafter defined), Mortgagee is and shall be entitled to all
of the rights, powers and remedies afforded a secured party by the Uniform
Commercial Code with reference to the personal property and fixtures in which
Mortgagee has been granted a security interest herein, or Mortgagee may proceed
as to both the real and personal property covered hereby in accordance with the
rights and remedies granted under this Mortgage in respect of the real property
covered hereby. Such rights, powers and remedies shall be cumulative and in
addition to those granted to Mortgagee under any other provision of this
Mortgage or under any other instrument executed in connection with or as
security for the Secured Obligations. A carbon or photographic or other
reproduction of this Mortgage shall be sufficient as a financing statement
covering the Mortgaged Property.
(b) Mortgagor shall, forthwith after the execution and
delivery of this Mortgage and thereafter, from time to time, cause this
Mortgage and any financing statement, continuation statement or similar
instrument relating to any thereof or to any property intended to be subject to
the Lien of this Mortgage to be filed, registered and recorded in such manner
and in such places as may be required by any present or future law in order to
publish notice of and fully to protect the validity and priority thereof or the
Lien hereof upon the Mortgaged Property
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and the interest and rights of Mortgagee herein and therein. Mortgagor shall
pay or cause to be paid all taxes and fees incident to such filing,
registration and recording, all expenses incident to the preparation, execution
and acknowledgment thereof, and of any instrument of further assurance, and all
federal or State stamp taxes or other taxes, duties and charges arising out of
or in connection with the execution and delivery of such instruments.
(c) Mortgagor shall, at the sole cost and expense of
Mortgagor, do, execute, acknowledge and deliver all and every such further
acts, deeds, conveyances, deeds of trust, mortgages, assignments, notices of
assignment, transfers, financing statements, continuation statements and
assurances as Mortgagee shall from time to time reasonably request which may be
necessary in the requesting party's judgment to assure, perfect, mortgage,
transfer and confirm unto the Mortgagee the property and rights hereby
mortgaged or granted or which Mortgagor may be or may hereafter become bound to
mortgage or grant to Mortgagee or which may facilitate the performance of the
terms of this Mortgage or the filing, registering or recording of this
Mortgage. In the event Mortgagor shall fail to execute any instrument required
to be executed by Mortgagor pursuant to this subsection II(c), Mortgagee may
execute the same as the attorney-in-fact for Mortgagor, such power of attorney
being coupled with an interest and irrevocable.
SECTION III - SECURED OBLIGATIONS
This Mortgage is executed and delivered by Mortgagor to secure
the payment and performance of the obligations (collectively, the "Secured
Obligations") described below:
(a) Any and all indebtedness, obligations and liabilities of
Mortgagor now or hereafter existing under or in respect of the Note Guarantee,
including, without limitation, payment of principal, premium, if any, interest
and Liquidated Damages (as defined in the Indenture), if any when due and
payable, and all other amounts due or to become due under or in connection with
the Indenture (including, without limitation, all sums due to the Note Trustee
pursuant to Section 606 thereof), the Notes and the performance of all other
obligations to the Note Trustee and the
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<PAGE> 9
Note Holders under the Indenture and the Notes, according to the terms thereof
(collectively, the "Indenture Obligation);
(b) Any and all indebtedness, obligations and liabilities of
Mortgagor now or hereafter existing under or in respect of the Term Loan
Guarantee, including, without limitation, payment of principal, premium, if
any, and interest when due and payable, and all other amounts due or to become
due under or in connection with the Term Loan Agreement (including, without
limitation, all sums due to the Term Loan Agent pursuant to Sections 10.3 and
10.4 thereof) and the Term Loan Notes and the performance of all other
obligations to the Term Loan Agent and the Term Loan Lenders under the Term
Loan Agreement and the Term Loan Notes according to the terms thereof
(collectively, the "Term Loan Obligation");
(c) Any sums which may be advanced or paid by Mortgagee under
the terms hereof on account of the failure of Mortgagor to comply with the
covenants of Mortgagor contained herein;
(d) All covenants, agreements, and obligations of
Mortgagor herein contained; and
(e) All renewals, rearrangements, increases,
substitutions and extensions, and all amendments, supplements and
modifications, to any of the obligations described in the preceding clauses (a)
through (d).
This Mortgage secures all future advances and obligations
constituting Secured Obligations. The maximum amount of the Secured
Obligations that may be outstanding at any time and from time to time that this
Mortgage (including the Assignment of Leases, Rents, Issues and Profits under
Section V) secures is fixed at $375,000,000, and the maximum amount which
Mortgagee or the Secured Parties may claim for damages that Mortgagee or the
Secured Parties may suffer from a breach of any obligation, covenant,
agreement, term or condition secured by this Mortgage (other than for the
payment of money) is fixed at $375,000,000.
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SECTION IV - REPRESENTATIONS, WARRANTIES AND COVENANTS
Mortgagor hereby represents, warrants and covenants as
follows:
(a) Good Title; Authority and Validity. Mortgagor has good
and marketable title to the Mortgaged Property and the landlord's interest and
estate under or in respect of the Leases, subject to the Excepted Liens, and
has, in all material respects, full corporate power and lawful authority to
mortgage, pledge and hypothecate and to grant a security interest in all of the
Mortgaged Property all in the manner and form herein provided and without
obtaining the waiver, consent or approval of any lessor, sublessor,
Governmental Authority or entity or other party whomsoever or whatsoever which
has not been obtained, except in the case of certain environmental permits and
approvals which, by their terms, are not transferable or cannot be transferred
without the prior approval of the issuing agency. The Improvements upon the
Land are all within the boundary lines of the Land or have the benefit of valid
easements, and there are no encroachments thereon that would materially impair
the use thereof. The Mortgaged Property is free and clear of any and all Liens
or encumbrances of any nature or kind except for the Excepted Liens and the
Leases. Mortgagor has all necessary permits, franchises, licenses,
rights-of-way, servitudes or other rights or authority needed in connection
with the operation and maintenance of the Chlor Alkali Plant, except where the
failure to have the same would not have a Material Adverse Effect; all of the
Plant Agreements are presently in full force and effect and no default has
occurred or exists thereunder, except where such default would not individually
or in the aggregate have a Material Adverse Effect; except as provided in the
Excepted Liens, Mortgagor's grant of a Lien and security interest in the
Mortgaged Property in the manner herein provided does not result in the
creation or imposition of any other Lien or security interest, adverse claim or
option upon any of the Mortgaged Property. Mortgagor's chief executive office
and chief place of business is located at the address set forth in Section
VIII(j) of this Mortgage. Mortgagor will not change its name, identity or
corporate structure or its chief executive office or chief place of business
without notifying Mortgagee at least thirty (30) days prior to the effective
date of such change.
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(b) Defense of Title. Mortgagor will warrant and defend
title to the Mortgaged Property, subject to Excepted Liens, against the claims
and demands of all other Persons whomsoever and will maintain and preserve the
Lien created hereby so long as any of the Secured Obligations secured hereby
remains unpaid. Should an adverse claim be made against the title to any
material part of the Mortgaged Property, Mortgagor agrees it will immediately
notify Mortgagee in writing thereof and defend against such adverse claim to
the extent necessary to preserve Mortgagee's rights and benefits hereunder,
subject to Excepted Liens, and Mortgagor further agrees that Mortgagee may take
such other reasonable action as it deems advisable to protect and preserve its
interest in the Mortgaged Property, and in such event Mortgagor will indemnify
Mortgagee against any and all costs, reasonable attorney's fees and other
expenses which they may incur in defending against any such adverse claim.
Such obligations shall be payable on demand and shall bear interest from the
date of demand therefor until paid at the Note Rate. Any proceeds of any
policy of title insurance maintained by Mortgagor with respect to the Mortgaged
Property shall, for the purposes of this Mortgage, be paid and applied in the
same manner as Insurance Proceeds (as hereinafter defined).
(c) First Lien. This Mortgage is, and always will be kept, a
direct first Lien and security interest upon the Mortgaged Property, subject to
the Excepted Liens, and Mortgagor will not create or suffer to be created or
permit to exist any Lien, security interest or charge prior or junior to or on
parity with the Lien and security interest of this Mortgage upon the Mortgaged
Property or any part thereof or upon the Rents therefrom, except for the
Excepted Liens.
(d) Maintenance of Mortgaged Property. Mortgagor will at its
own expense do or cause to be done all things necessary to preserve and keep in
full repair, working order and efficiency, reasonable wear and tear excepted,
all of the Mortgaged Property, including, without limitation, all equipment,
machinery and facilities, and from time to time will make all the needful and
proper repairs, renewals and replacements so that at all times the state and
condition of the Mortgaged Property will be fully preserved and maintained,
unless the failure to repair, renew or replace would not materially interfere
with the present use or operation of the Mortgaged Property.
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(e) Performance of Contracts; Operation of Plant. Mortgagor
will promptly pay and discharge all rentals, or other payments and will perform
or cause to be performed each and every act, matter or thing required by, each
and all of the contracts, instruments or agreements executed in connection with
or incident to the ownership and operation of the Chlor Alkali Plant (including
without limitation the Plant Agreements) and being a portion of the Mortgaged
Property and will do all other things necessary to keep unimpaired Mortgagor's
rights with respect thereto and to prevent any forfeiture thereof or default
thereunder, unless such forfeiture or default would not individually or in the
aggregate have a Material Adverse Effect. Mortgagor will operate the
facilities comprising the Chlor Alkali Plant in a good and workmanlike manner
and in accordance with the practices of the industry and in compliance in all
material respects with all Governmental Requirements affecting ownership and
operation of such facilities, including without limitation, Environmental Laws.
(f) Payment by Mortgagee. Mortgagor agrees that if Mortgagor
fails to perform any act or to take any action which Mortgagor is required to
perform or take hereunder or pay any money which Mortgagor is required to pay
hereunder (taking into account applicable grace or cure periods), Mortgagee in
Mortgagor's name or its own name may, but shall not be obligated to, during the
continuance of an Event of Default, perform or cause to perform such act or
take such action or pay such money, and any expenses so incurred by Mortgagee
and any money so paid by Mortgagee shall be a demand obligation owing by
Mortgagor to Mortgagee, and Mortgagee, upon making such payment, shall be
subrogated to all of the rights of the Person receiving such payment. Each
amount due and owing by Mortgagor to holders of the Secured Obligations
pursuant to this Mortgage shall bear interest from the date of such expenditure
or payment or other occurrence which gives rise to such amount being owed to
Mortgagee until paid at the Note Rate, and all such amounts together with such
interest thereon shall be a part of the Secured Obligations and shall be
secured by this Mortgage.
(g) Name of Mortgagor. Mortgagor does not do business with
respect to the Mortgaged Property under any name other than Pioneer Chlor
Alkali Company, Inc.
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(h) Operation by Third Parties. To the extent any of the
Mortgaged Property is operated by a party or parties other than Mortgagor,
Mortgagor's covenants as expressed in this Section IV are modified to require
that Mortgagor use its best efforts (including without limitation the
reasonable exercise of all rights and remedies as are available to Mortgagor)
to obtain compliance with such covenants by the operator or operators of the
Mortgaged Property.
(i) Compliance with Laws. The Chlor Alkali Plant
complies in all material respects with all local zoning, land use, setback and
other development, use and occupancy requirements of governmental authorities
except for possible nonconforming uses or violations which do not and will not
materially interfere with the present use, operation or maintenance thereof as
now used, operated or maintained.
(j) Payment of Taxes, Insurance Premiums, Assessments;
Compliance with Law and Insurance Requirements. (i) Unless contested in
accordance with the provisions of subsection IV(j)(v) hereof, Mortgagor shall
pay and discharge or cause to be paid and discharged, from time to time when
the same shall become due, all real estate and other taxes, special
assessments, levies, permits, inspection and license fees, all premiums for
insurance, all water and sewer rents and charges, and all other public charges
imposed upon or assessed against the Mortgaged Property or any part thereof or
upon the revenues, rents, issues, income and profits of the Mortgaged Property,
including, without limitation, those arising in respect of the occupancy, use
or possession thereof.
(ii) During the continuance of an Event of Default,
Mortgagor shall deposit with Mortgagee, on the first day of each month, an
amount reasonably estimated by Mortgagor to be equal to one-twelfth (1/12th) of
the annual taxes, assessments and other items required to be discharged by
Mortgagor under subsection IV(j)(i) and amounts reasonably estimated by
Mortgagor to be necessary to maintain the insurance coverages contemplated in
subsection IV(l) below, which estimates shall not be less than one-twelfth
(1/12th) of the annual taxes, assessments, insurance premiums and other items
required to be discharged by Mortgagor during the year immediately preceding
the year during which such Event of Default occurred. Such amounts shall be
held by Mortgagee without interest to Mortgagor and applied to the
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payment of each obligation in respect of which such amounts were deposited, in
such order or priority as Mortgagee shall determine, on or before the date on
which such obligation would become delinquent. If at any time the amounts so
deposited by Mortgagor shall, in Mortgagee's judgment, be insufficient (when
added to the installments anticipated to be paid thereafter) to discharge any
of such obligations when due, Mortgagor shall, immediately upon demand, deposit
with Mortgagee such additional amounts as may be requested by Mortgagee.
Nothing contained in this subsection IV(j) shall affect any right or remedy of
Mortgagee under any provision of this Mortgage or of any statute or rule of law
to pay any such amount from its own funds (provided, however, that Mortgagee
shall not in any event be obligated to pay any of such amounts from its own
funds) and to add the amount so paid, together with interest at the Note Rate,
to the Secured Obligations, or relieve Mortgagor of its obligations to make or
provide for the payment of the annual taxes, assessments and other charges
required to be discharged by Mortgagor under subsection IV(j)(i). Mortgagor
hereby grants to Mortgagee a security interest in all sums held pursuant to
this subsection IV(j)(ii) to secure payment and performance of the Secured
Obligations. During the continuance of any Event of Default, Mortgagee may
apply all or any part of the sums held pursuant to this subsection IV(j)(ii) to
payment and performance of the Secured Obligations in accordance with the
provisions of the Intercreditor Agreement. Mortgagor shall redeposit with
Mortgagee an amount equal to all amounts so applied as a condition to the cure,
if any, of such Event of Default, in addition to fulfillment of any other
required conditions.
(iii) Unless contested in accordance with the provisions of
subsection IV(j)(v), Mortgagor shall timely pay (or obtain a bond in the amount
of) all lawful claims and demands of mechanics, materialmen, laborers,
warehousemen, employees, suppliers, government agencies administering worker's
compensation insurance, old age pensions and social security benefits and all
other claims, judgments, demands or amounts of any nature which, if unpaid or
not bonded, could result in or permit the creation of a Lien (other than an
Excepted Lien) on the Mortgaged Property or any part thereof or the Rents
arising therefrom, or which might result in forfeiture of all or any part of
the Mortgaged Property.
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(iv) Mortgagor shall maintain, or cause to be maintained, in full
force and effect, all permits, certificates, authorizations, consents,
approvals, registrations, filings, licenses, franchises or other instruments
now or hereafter required by any Governmental Authority to operate or use and
occupy the Chlor Alkali Plant and the Equipment for its intended uses
(collectively, the "Permits"; each, a "Permit"), unless the failure to maintain
such Permits would not individually or in the aggregate have a Material Adverse
Effect. Mortgagor represents that, to its knowledge and subject to those
requirements for notice, approval or reissuance set forth by applicable law,
none of the Permits will be subject to cancellation, forfeiture or any
limitation on the scope thereof solely by virtue of the execution of this
Mortgage or the foreclosure of the Lien hereof. Unless contested in accordance
with the provisions of subsection IV(j)(v), Mortgagor shall comply promptly
with, or cause prompt compliance with, all requirements set forth in the
Permits and all Governmental Requirements applicable to all or any part of the
Mortgaged Property or the condition, use or occupancy of all or any part
thereof or any recorded deed of restriction, declaration, covenant running with
the land or otherwise, now or hereafter in force unless the compliance
therewith would not individually or in the aggregate have a Material Adverse
Effect. Mortgagor shall not initiate or consent to any change in the zoning,
subdivision or any other use classification of the Land, if such action could
have a material adverse effect on the Lien of this Mortgage or materially
impair the present use and operation of the Mortgaged Property or materially
impair Mortgagee's rights or benefits hereunder, without the prior written
consent of Mortgagee.
(v) Mortgagor may at its own expense contest the amount or
applicability of any of the obligations described in subsections IV(j)(i),
IV(j)(iii) and IV(j)(iv) by appropriate legal proceedings, prosecution of which
operates to prevent the collection or enforcement thereof or the sale or
forfeiture of the Mortgaged Property or any part thereof to satisfy such
obligations; provided, however, that (A) any such contest shall be conducted in
good faith by appropriate legal proceedings promptly instituted and diligently
conducted and (B) in connection with such contest, Mortgagor shall have made
provision for the payment or performance of such contested obligation on
Mortgagor's books if and to the extent required by generally accepted
accounting principles then utilized by Mortgagor in the
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preparation of its financial statements, or shall have deposited with Mortgagee
a sum sufficient to pay and discharge such obligation and Mortgagee's estimate
of all interest and penalties related thereto. Notwithstanding the foregoing
provisions of this subsection IV(j)(v), (A) no contest of any such obligations
may be pursued by Mortgagor if such contest would expose Mortgagee or any other
Secured Party to any possible criminal liability or, unless Mortgagor shall
have furnished an Additional Undertaking (as hereinafter defined) therefor
satisfactory to Mortgagee or such other Secured Party, as the case may be, any
civil liability for failure to comply with such obligations and (B) if at any
time payment or performance of any obligation contested by Mortgagor pursuant
to this subsection IV(j)(v) shall become necessary to prevent the delivery of a
tax or similar deed conveying the Mortgaged Property or any portion thereof
because of nonpayment or nonperformance, Mortgagor shall pay or perform the
same in sufficient time to prevent the delivery of such tax or similar deed.
(vi) Mortgagor shall not in its use and occupancy of the Chlor
Alkali Plant or the Equipment (including, without limitation, in the making of
any Alteration) take any action that would cause the termination, revocation or
denial of any insurance coverage required to be maintained under this Mortgage
or that pursuant to written notice from any applicable insurer, would be the
basis for a defense to any claim under any insurance policy maintained in
respect of the Chlor Alkali Plant or the Equipment and Mortgagor shall
otherwise comply in all material respects with the requirements of any insurer
that issues a policy of insurance in respect of the Chlor Alkali Plant or the
Equipment.
(vii) Mortgagor shall, promptly upon receipt of any written notice
regarding any failure by Mortgagor to pay or discharge any of the obligations
described in subsection IV(j)(i) or (vi), furnish a copy of such notice to
Mortgagee. Mortgagor shall, promptly upon receipt of any written notice
regarding any failure by mortgagor to pay or discharge any of the obligations
described in subsection IV(j)(iii) or (iv), furnish a copy of such notice to
Mortgagee, if such failure would have a Material Adverse Effect.
(k) Certain Tax Law Changes. In the event of the passage
after the date of this Mortgage of any law deducting from
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the value of real property, for the purpose of taxation, amounts in respect of
any Lien thereon or changing in any way the laws for the taxation of deeds of
trust or debts secured by deeds of trust for state or local purposes or the
manner of the collection of any such taxes, and imposing a new tax, either
directly or indirectly, on this Mortgage or the interest of any Secured Party
in any Mortgaged Property (other than income, franchise or similar taxes
imposed on such Secured Party), Mortgagor shall promptly pay such Secured Party
such amount or amounts as may be necessary from time to time to pay such tax.
(l) Required Insurance Policies. (i) Mortgagor shall
maintain, or cause to be maintained, in full force and effect the following
insurance coverages in respect of the Chlor Alkali Plant and the Equipment:
(A) Physical hazard insurance on an "all risk" basis covering
hazards commonly covered by fire and extended coverage, lightning,
civil commotion, hail, riot, strike, water damage, sprinkler leakage,
collapse and malicious mischief, in an amount equal to the full
replacement cost of the Improvements and all Equipment, with such
deductibles as would be maintained by a prudent operator of property
similar in use and configuration to the Chlor Alkali Plant and located
in the locality where the Chlor Alkali Plant is located. "Full
replacement cost" means the cost of construction to replace the
Improvements and the Equipment, exclusive of depreciation, excavation,
foundation and footings, as determined from time to time by a proper
officer of Mortgagor in consultation with its insurance company or
insurance agent, as appropriate;
(B) Comprehensive general liability insurance against claims
for bodily injury, death or property damage occurring on, in or about
the Chlor Alkali Plant and any adjoining streets, sidewalks and
passageways and covering any and all claims, including, without
limitation, all legal liability, subject to customary exclusions, to
the extent insurable, imposed upon Mortgagee or any Secured Party and
all court costs and attorneys' fees, arising out of or connected with
the possession, use, leasing, operation or condition of the Chlor
Alkali Plant, with policy limits and deductibles in such amounts as
would be maintained by a prudent operator of property similar in use
and configuration to the Chlor
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<PAGE> 18
Alkali Plant and located in the locality where the Chlor Alkali Plant
is located;
(C) Workers' compensation insurance as required by the laws
of the State to protect Mortgagor against claims for injuries
sustained in the course of employment at the Chlor Alkali Plant;
(D) Comprehensive boiler and machinery insurance to cover
sudden and accidental breakdown, including but not limited to,
explosion of any boilers and machinery located on the Chlor Alkali
Plant or comprising any Equipment, with policy limits and deductibles
in such amounts as would be maintained by a prudent operator of
property similar in use and configuration to the Chlor Alkali Plant
and the Equipment and located in the locality where the Chlor Alkali
Plant is located;
(E) Comprehensive automobile liability insurance policy
against claims for bodily injury, death and property damage covering
all owned, leased, non-owned and hired motor vehicles, including
loading and unloading in such amounts as would be maintained by a
prudent operator of property similar in use and configuration to the
Chlor Alkali Plant and the Equipment and located in the locality where
the Chlor Alkali Plant is located;
(F) Business interruption insurance on an annual basis in
amounts not less than the projected gross profit of the Chlor Alkali
Plant during the applicable twelve-month period but in no event less
than the amount necessary to pay the fixed charges and other expenses
of owning, operating and maintaining the Mortgaged Property for the
same period;
(G) To the extent not otherwise covered by the insurance
required under clauses (A) and (B) of this subsection IV(l)(i), during
the performance of any alterations, renovations, repairs, restorations
or construction, broad form Builders Risk Insurance on an all-risk
completed value basis; and
(H) Such other insurance, against such risks and with policy
limits and deductibles in such amounts as would be maintained by a
prudent operator of property similar in use
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<PAGE> 19
and configuration to the Chlor Alkali Plant and located in the
locality in which the Chlor Alkali Plant is located.
(ii) Mortgagor may maintain the coverages required by this
subsection IV(l) under blanket policies covering the Chlor Alkali Plant and
other locations owned or operated by Mortgagor if the terms of such blanket
policies otherwise comply with the provisions of this subsection IV(l) and
contain specific coverage allocations in respect of the Chlor Alkali Plant
determined in accordance with the provisions of this subsection IV(l). All
insurance policies in respect of the coverages required by subsections
IV(l)(i)(A), IV(l)(i)(D), IV(l)(i)(G) and, if applicable, IV(l)(i)(H) shall be
in amounts at least sufficient to prevent coinsurance liability and all losses
thereunder shall be payable to Mortgagee, as loss payee, subject to the terms
of the Intercreditor Agreement, pursuant to a standard noncontributory New York
mortgage endorsement or local equivalent, and each such policy shall, to the
extent obtainable at commercially reasonable costs, (A) include effective
waivers (whether under the terms of such policy or otherwise) by the insurer of
all claims for insurance premiums against all loss payees and named insureds
other than Mortgagor and all rights of subrogation against any named insured,
and (B) provide that any losses thereunder shall be payable notwithstanding (1)
any act, failure to act, negligence of, or violation or breach of warranties,
declarations or conditions contained in such policy by Mortgagor or Mortgagee
or any other named insured or loss payee, (2) the occupation or use of the
Chlor Alkali Plant or the Equipment for purposes more hazardous than permitted
by the terms of the policy, (3) any foreclosure or other proceeding or notice
of sale relating to the Chlor Alkali Plant or the Equipment or (4) any change
in the title to or ownership or possession of the Chlor Alkali Plant or the
Equipment; provided, however, that (with respect to items contemplated in
clauses (3) and (4) above) any notice requirements of the applicable policies
are satisfied. All insurance policies in respect of the coverages required by
subsections IV(l)(i)(B), IV(l)(i)(E) and, if applicable, IV(l)(i)(H) shall name
Mortgagee as an additional insured. Each policy of insurance required under
this subsection IV(l) shall provide that (A) notices of any failure by
Mortgagor to pay any insurance premium in respect thereof, be furnished to
Mortgagee contemporaneously with any such notice given to Mortgagor and (B) it
may not be cancelled or otherwise terminated without at least twenty (20) days'
prior written notice to Mortgagee and
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<PAGE> 20
shall permit Mortgagee to pay any premium therefor within twenty (20) days
after receipt of any notice stating that such premium has not been paid when
due. The policy or policies of such insurance or certificates of insurance
evidencing the required coverages and all renewals or extensions thereof shall
be delivered to Mortgagee upon receipt by Mortgagor. Settlement of any claim
under any of the insurance policies referred to in this subsection IV(l) (other
than the insurance contemplated in clause(C) of this subsection IV(l)(i)) which
in Mortgagor's reasonable judgment involves loss of $1,000,000 or more, shall
require the prior approval of Mortgagee (acting pursuant to the provisions of
the Intercreditor Agreement) and Mortgagor shall use its best efforts to cause
each such insurance policy to contain a provision to such effect.
(iii) At least fifteen (15) days prior to the expiration of
any insurance policy required by this subsection IV(l), Mortgagor shall deliver
to Mortgagee evidence that such policy or policies shall be renewed or extended
and Mortgagor shall deliver promptly to Mortgagee after receipt thereof the
policy or policies renewing or extending such expiring policy or renewal or
extension certificates or other evidence of renewal or extension, together with
a receipt showing payment of the premium thereof.
(iv) Mortgagor shall not purchase additional policies in
respect of the insurance coverages required to be maintained under this
subsection IV(l), unless Mortgagee is included thereon as an additional named
insured and, if applicable, with loss payable to Mortgagee under an endorsement
containing the provisions described in subsection IV(l)(ii) and the policy
evidencing such insurance otherwise complies with the requirements of
subsection IV(l)(ii). Mortgagor immediately shall notify Mortgagee whenever
any such separate insurance policy is obtained and promptly shall deliver to
Mortgagee the policy or certificate evidencing such insurance.
(m) Inspection. Mortgagor shall permit Mortgagee, by its
agents, accountants and attorneys, to visit and inspect the Mortgaged Property
upon reasonable prior notice at such times as may be reasonably requested by
Mortgagee.
(n) Mortgagor To Maintain Improvements. Mortgagor shall not
commit any waste on the Chlor Alkali Plant or with
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respect to any Equipment or make any change in the use of the Chlor Alkali
Plant or any Equipment. Mortgagor represents and warrants that (i) to
Mortgagor's knowledge, the Chlor Alkali Plant is served by all electric, gas,
sewer, water facilities and any other utilities required or necessary for the
current use thereof and any easements or servitudes necessary to the furnishing
of such utility service by Mortgagor have been obtained and duly recorded, and
(ii) Mortgagor has access to the Chlor Alkali Plant from public roads
sufficient to allow Mortgagor and its tenants and invitees to conduct its and
their businesses at the Chlor Alkali Plant as it is currently conducted.
Mortgagor shall not materially alter the occupancy or use of the Chlor Alkali
Plant without the prior written consent of Mortgagee. Except as otherwise
permitted by the Intercreditor Agreement no Improvements comprising a portion
of the Chlor Alkali Plant may be demolished nor shall any Equipment be removed
without the prior written consent of Mortgagee.
(o) Leases. (i) All of the Leases are valid and effective
in accordance with their respective terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or
other similar law affecting or relating to enforcement of creditors' rights
generally, and (ii) general equitable principles. To Mortgagor's knowledge,
Mortgagor is not in material breach of or in default (and to Mortgagor's
knowledge, no event has occurred which with due notice or lapse of time or
both, may constitute such a material breach or default) under any Lease, and no
party to any Lease has given Mortgagor written notice of or made a claim with
respect to any breach or default, the consequences of which, individually or in
the aggregate, would have a Material Adverse Effect on Mortgagor.
(ii) Mortgagor shall manage and operate the Mortgaged
Property or cause the Mortgaged Property to be managed and operated in a
reasonably prudent manner and, except as otherwise permitted under subsection
IV(p), will not enter into any Lease (or any amendment or modification thereof)
or other agreement subsequent to the date hereof with any Person which, in the
reasonable judgment of Mortgagor, individually or in the aggregate, would have
a Material Adverse Effect on the value of the property subject thereto.
(iii) Mortgagor shall not:
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(A) receive or collect, or permit the receipt or collection
of, any rental or other payments under any Lease more than one (1)
month in advance of the respective period in respect of which they are
to accrue, except that (a) in connection with the execution and
delivery of any Lease or of any amendment to any Lease, rental
payments thereunder may be collected and received in advance in an
amount not in excess of one (1) month's rent and (b) Mortgagor may
receive and collect escalation and other charges in accordance with
the terms of each Lease;
(B) assign, transfer or hypothecate (other than to Mortgagee
hereunder or as otherwise permitted under subsection IV(p) of this
Mortgage) any rental or other payment under any Lease whether then due
or to accrue in the future, the interest of Mortgagor as lessor under
any Lease or the rents, issues, revenues, profits or other income of
the Mortgaged Property;
(C) enter into any Lease after the date hereof that does not
contain terms to the effect as follows:
(1) such Lease and the rights of the tenant
thereunder shall be subject and subordinate to the rights of
Mortgagee under and the Lien of this Mortgage;
(2) such Lease has been assigned as collateral
security by Mortgagor as landlord thereunder to Mortgagee
under this Mortgage;
(3) in the case of any foreclosure hereunder, the
rights and remedies of the tenant in respect of any
obligations of any successor landlord thereunder shall be
limited to the equity interest of such successor landlord in
the Chlor Alkali Plant and any successor landlord shall not
(a) be liable for any act, omission or default of any prior
landlord under the Lease or (b) be required to make or
complete any tenant improvements or capital improvements or
repair, restore, rebuild or replace the demised premises or
any part thereof in the event of damage, casualty or
condemnation or (c) be required to pay any amounts to
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tenant arising under the Lease prior to such successor
landlord taking possession;
(4) the tenant's obligation to pay rent and any
additional rent shall not be subject to any abatement,
deduction, counterclaim or setoff as against Mortgagee or any
purchaser upon the foreclosure of any portion of the Chlor
Alkali Plant or the giving or granting of a deed in lieu
thereof by reason of a landlord default occurring prior to
such foreclosure, and Mortgagee or such purchaser will not be
bound by any advance payments of rent in excess of one month
or any security deposits unless such security was actually
received; and
(5) the tenant agrees to attorn, at the option of
Mortgagee or any purchaser of the Chlor Alkali Plant, to the
successor owner upon a foreclosure of the Chlor Alkali Plant
or the giving or granting of a deed in lieu thereof; and
(D) terminate or permit the termination of any Lease of
space, accept surrender of all or any portion of the space demised
under any Lease prior to the end of the term thereof or accept
assignment of any Lease to Mortgagor which, in the reasonable judgment
of Mortgagor, individually or in the aggregate, would have a Material
Adverse Effect or materially impair the Lien of this Mortgage therein
unless:
(1) the tenant under such Lease has not paid the
equivalent of two months' rent and Mortgagor has made
reasonable efforts to collect such rent; or
(2) Mortgagor shall deliver to Mortgagee an
Officers' Certificate to the effect that Mortgagor has entered
into a new Lease (or Leases) for the space covered by the
terminated or assigned Lease with a term (or terms) which
expire(s) no earlier than the date on which the terminated or
assigned Lease was to expire (excluding renewal options), and
with a tenant (or tenants) having a creditworthiness (as
reasonably determined by Mortgagor) sufficient to pay the rent
and other charges due under the new Lease (or Leases), and the
tenant(s) shall have commenced paying rent,
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including, without limitation, all operating expenses and
other amounts payable under the new Lease (or Leases), without
any abatement or concession, in an amount at least equal to
the amount which would have then been payable under the
terminated or assigned Lease.
(iv) Mortgagor timely shall perform and observe all the
terms, covenants and conditions required to be performed and observed by
Mortgagor under each Lease and will not engage in any conduct in respect of any
Lease which would have individually or in the aggregate a Material Adverse
Effect or materially impair the Lien of this Mortgage or the security interest
created hereby. Mortgagor promptly shall notify Mortgagee of the receipt of
any notice from any lessee under any Lease claiming that Mortgagor is in
material default in the performance or observance of any of the terms,
covenants or conditions thereof to be performed or observed by Mortgagor and
will cause a copy of each such notice to be delivered promptly to Mortgagee.
(p) Transfer Restrictions. Except as otherwise permitted by
the Intercreditor Agreement, Mortgagor shall not, without the prior written
consent of Mortgagee, further mortgage, encumber, hypothecate, sell, convey or
assign all or any part of the Mortgaged Property or suffer any of the foregoing
to occur by operation of law or otherwise (each a "Transfer"); provided,
however, Mortgagor may so encumber the Mortgaged Property to the extent such
encumbrances are of the kind listed in clause (e) of the definition of
"Excepted Liens". Any proceeds of such permitted Transfer shall be deemed
Collateral Proceeds (as such term is defined in the Indenture) and are hereby
assigned and shall be paid to Mortgagee to be held in the Collateral Account
and disbursed pursuant to the Intercreditor Agreement.
(q) Destruction; Condemnation.
(i) Destruction; Insurance Proceeds. If there shall occur
any damage to, or loss or destruction of, the Improvements and Equipment, or
any part of any thereof (each, a "Destruction"), Mortgagor shall promptly send
to Mortgagee a notice setting forth the nature and extent of such Destruction.
The proceeds of any insurance payable in respect of any such Destruction are
hereby assigned and shall be paid to Mortgagee to be held in the Collateral
Account; provided, however, that so
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long as no Event of Default shall have occurred and be continuing, if such
proceeds are in an amount less than $1,000,000, such proceeds shall be paid
directly to Mortgagor. All insurance proceeds paid to Mortgagee pursuant to
this subsection, less the amount of any expenses incurred in litigating,
arbitrating, compromising or settling any claim arising out of such Destruction
(the "Insurance Proceeds"), shall constitute Trust Moneys and be applied in
accordance with the provisions of subsections IV(q)(iii), IV(q)(iv) and
IV(q)(v).
(ii) Condemnation; Assignment of Award. If there shall occur
any taking of the Mortgaged Property or any part thereof, in or by condemnation
or other eminent domain proceedings pursuant to any law, general or special, or
by reason of the temporary requisition of the use or occupancy of the Mortgaged
Property or any part thereof, by any governmental authority, civil or military
(each, a "Taking"), Mortgagor immediately shall notify Mortgagee upon receiving
notice of such Taking or commencement of proceedings therefor. Mortgagee may
(but shall not be obligated to) participate in any proceedings or negotiations
which might result in any Taking. Mortgagee may be represented by counsel
satisfactory to it at the expense of Mortgagor. Mortgagor shall deliver or
cause to be delivered to Mortgagee all instruments requested by it to permit
such participation. Mortgagor shall in good faith and with due diligence file
and prosecute what would otherwise be Mortgagor's claim for any such award or
payment and cause the same to be collected and paid over to Mortgagee, and
hereby irrevocably authorizes and empowers Mortgagee, in the name of Mortgagor
as its true and lawful attorney-in-fact or otherwise, during the continuance of
an Event of Default to collect and to receipt for any such award or payment,
and, in the event Mortgagor fails so to act, to file and prosecute such claim.
Mortgagor shall pay all costs, fees and expenses incurred by Mortgagee in
connection with any Taking and seeking and obtaining any award or payment on
account thereof. Any proceeds, award or payment in respect of any Taking are
hereby assigned and shall be paid to Mortgagee to be held in the Collateral
Account; provided, however, that so long as no Event of Default shall have
occurred and be continuing, if such proceeds are in an amount less than
$1,000,000, such proceeds shall be paid directly to Mortgagor. Mortgagor shall
take all steps necessary to notify the condemning authority of such assignment.
Such proceeds, award or payment paid to Mortgagee, less the amount of any
expenses incurred in
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litigating, arbitrating, compromising or settling any claim arising out of such
Taking ("Net Award"), shall constitute Trust Moneys and be applied in
accordance with the provisions of subsections IV(q)(iii), IV(q)(iv) and
IV(q)(v).
(iii) Payment or Restoration. So long as no Event of Default
shall have occurred and be continuing, Mortgagor shall have the right, at
Mortgagor's option, to require Mortgagee to apply such Net Award or Insurance
Proceeds to the payment of the Secured Obligations, in accordance with the
Intercreditor Agreement or to perform a restoration (each, a "Restoration") of
the affected portions of the Chlor Alkali Plant and the Equipment. In the
event that Mortgagor elects to make such payment, such Net Award or Insurance
Proceeds shall be delivered to Mortgagee to be held as Trust Moneys subject to
withdrawal and application by Mortgagee in accordance with the provisions of
the Intercreditor Agreement. In the event Mortgagor elects to perform a
Restoration, Mortgagor shall give written notice ("Restoration Election
Notice") of such election to Mortgagee within twenty (20) business days after
the date that Mortgagee receives the applicable Insurance Proceeds or Net
Award, as the case may be. Mortgagor shall, within twenty (20) business days
following the date of delivery of a Restoration Election Notice, commence and
diligently continue to perform the Restoration of that portion or portions of
the Chlor Alkali Plant and Equipment subject to such Destruction or affected by
such Taking so that, upon the completion of the Restoration, the Mortgaged
Property shall be in the same condition and shall be of at least equal utility
for its intended purposes as the Mortgaged Property was immediately prior to
such Destruction or Taking. Mortgagor shall so complete such Restoration with
its own funds to the extent that the amount of any Net Award or Insurance
Proceeds is insufficient for such purpose. In the event Mortgagee does not
receive a Restoration Election Notice within such twenty (20) business day
period, Mortgagee shall apply such Insurance Proceeds or Net Award to the
payment of the Secured Obligations, in accordance with the provisions of the
Intercreditor Agreement.
(iv) Restoration. In the event a Restoration is to be
performed under this subsection IV(q)(iv), Mortgagee shall not release any part
of the Net Award or the Insurance Proceeds except in accordance with the
provisions of subsection IV(q)(v) and Mortgagor shall, prior to commencing any
work to effect a Restoration of the Chlor Alkali Plant and the Equipment,
promptly
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(but in no event later than one-hundred twenty (120) days following any
Destruction or Taking) furnish to Mortgagee:
(A) complete plans and specifications (the "Plans and
Specifications") for the Restoration;
(B) an officers' certificate stating that all permits and
approvals required by law to commence work in connection with the
Restoration have been obtained;
(C) a certificate (an "Architect's Certificate") of an
independent, reputable architect or engineer acceptable to Mortgagee
and licensed in the State (1) stating that the Plans and
Specifications have been reviewed and approved by the signatory
thereto, (2) containing such signatory's estimate (an "Estimate") of
the costs of completing the Restoration, and (3) upon completion of
such Restoration in accordance with the Plans and Specifications, the
utility of the Chlor Alkali Plant and the Equipment will be equal to
or greater than the utility thereof immediately prior to the
Destruction or Taking relating to such Restoration; and
(D) if the Estimate exceeds the Insurance Proceeds or the Net
Award, as the case may be, by $5,000,000 or more, an Additional
Undertaking in an amount equal to not less than the Estimate less the
amount of the Insurance Proceeds or the Net Award, as the case may be,
then held by Mortgagee for application toward the cost of such
Restoration.
Upon receipt by Mortgagee of each of the items required
pursuant to clauses (A) through (D) above, Mortgagee shall acknowledge receipt
of the Plans and Specifications. Promptly upon such acknowledgment of receipt
by Mortgagee, Mortgagor shall commence and diligently continue to perform the
Restoration substantially in accordance with such Plans and Specifications and
in material compliance with all Governmental Requirements, free and clear of
all Liens except Excepted Liens. Mortgagor shall so complete such Restoration
with its own funds to the extent that the amount of any Net Award or Insurance
Proceeds is insufficient for such purpose.
(v) Restoration Advances Following Destruction or Taking of
Mortgaged Property. In the event Mortgagor performs a Restoration of the Chlor
Alkali Plant and Equipment as provided
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<PAGE> 28
in subsection IV(q)(iv), Mortgagee shall apply any Insurance Proceeds or Net
Award held by Mortgagee on account of the Destruction or Taking to the payment
of the cost of performing such Restoration pursuant to the relevant provisions
of the Intercreditor Agreement. In the event there shall be any surplus after
application of the Net Award or the Insurance Proceeds to Restoration of the
Chlor Alkali Plant and the Equipment, such surplus shall become Net Proceeds,
as defined in the Indenture and shall be paid by Mortgagee to the Note Trustee
for application in accordance thereunder; provided, however, that if an Event
of Default shall have occurred and be continuing, such surplus shall be applied
by Mortgagee to the payment of the Secured Obligations, in accordance with
Article 6 of the Intercreditor Agreement. Notwithstanding anything to the
contrary herein, if a Destruction or Taking of all or substantially all of the
Mortgaged Property occurs on a date which is less than 12 months prior to
Maturity, as such term is defined in the Indenture, all Insurance Proceeds and
Net Awards shall be applied to the permanent repayment or prepayment of any
Secured Obligations then outstanding in accordance with the Intercreditor
Agreement.
(r) Alterations. Mortgagor shall not make any material
structural addition, modification or change (each, an "Alteration") to the
Chlor Alkali Plant or the Equipment which would materially diminish the utility
of the Mortgaged Property or impair the Lien of this Mortgage thereon. Whether
or not Mortgagee has consented to the making of any Alteration, Mortgagor shall
(i) complete each Alteration promptly, in a good and workmanlike manner and in
material compliance with all applicable local laws, ordinances and requirements
and (ii) pay when due all claims for labor performed and materials furnished in
connection with such Alteration, unless contested in accordance with the
provisions of subsection IV(j)(v).
(s) Hazardous Material.
(i) Except with respect to those matters which would not
reasonably be expected to have a Material Adverse Effect, Mortgagor holds all
Permits required to permit Mortgagor to conduct its business in the manner now
conducted and none of the Mortgagor's operations are being conducted in a
manner that violates in any material respect the terms and conditions under
which any such Permit was granted, including without limitation,
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under any Environmental Laws; all such Permits are valid and in full force and
effect; and to the knowledge of Mortgagor, no suspension, cancellation,
revocation or termination of any such Permit is threatened.
(ii) Except as set forth in the Term Loan Agreement, there
are no material claims, actions, suits, proceedings or investigations pending
or to the knowledge of Mortgagor, threatened, before any Governmental Authority
or before any arbitrator brought by or against Mortgagor or with respect to any
of the Mortgaged Property the basis of which is any Environmental Law.
(iii) Mortgagor shall (or shall cause other parties obligated
to do so under contract or indemnity to) (A) take all commercially reasonable
actions to comply with any and all applicable present and future Environmental
Laws relating to the Chlor Alkali Plant; (B) pay in a timely fashion the cost
of any removal, response measure or corrective action relating to any Hazardous
Materials required by any Environmental Law or any order, regulation, consent
decree or similar agreement or instrument and keep the Mortgaged Property free
of any Lien imposed pursuant to any Environmental Law; (C) take all
commercially reasonable actions to not release, discharge or dispose of any
Hazardous Materials on, under or from the Mortgaged Property in violation of
any Environmental Law; (D) apply any insurance proceeds or other sums received
by it in respect of the removal of any Hazardous Material or any other
corrective action relating to any Hazardous Material to such removal or
corrective action; and (E) not take, or fail to take any action with respect to
any Environmental Laws or in connection with any Hazardous Materials that could
reasonably be expected to result in the incurrence of any obligation or
liability of any Secured Party. During the continuance of an Event of Default,
in the event Mortgagor fails to comply with the covenants in the preceding
sentence, Mortgagee may (upon receipt of an indemnity satisfactory to
Mortgagee), in addition to any other remedies set forth herein, but shall not
be obligated to, as trustee for and at Mortgagor's sole cost and expense cause
to be taken, any remediation, removal, response or corrective action relating
to Hazardous Materials that is required by Environmental Law and is not being
done or contested by Mortgagor. Any costs or expenses incurred by Mortgagee
for such purpose shall be immediately due and payable by Mortgagor and shall
bear interest
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at the Note Rate. Mortgagor shall provide to Mortgagee and its agents and
employees access to the Mortgaged Property to take any action required by
Environmental Laws, or in connection with any Hazardous Materials, that could
be expected to result in the incurrence of any obligation or liability of any
Secured Party, if Mortgagor fails to do so and such action or removal is
required under any Environmental Laws as provided above. Upon written request
by Mortgagee, which shall include a reasonably specific statement of the basis
thereof (which shall be specific to the condition of the Mortgaged Property and
the alleged violation of Environmental Law) and which shall be made not more
frequently than once in any twelve-month period or at any time that Mortgagee
is exercising its remedies under this Mortgage, Mortgagee shall have the right
(upon receipt of an indemnity satisfactory to Mortgagee), but shall not be
obligated, at the sole cost and expense of Mortgagor, to conduct an
environmental audit or review of the Mortgaged Property relating to the
specific items as required in writing or relating to the remedy that Mortgagee
is exercising under this Mortgage by persons or firms appointed by Mortgagee,
and Mortgagor shall cooperate in all reasonable respects in the conduct of such
environmental audit or review, including, without limitation, by providing
reasonable access to the Mortgaged Property and to all records relating
thereto. Such audit or review shall be conducted in a manner that would not
reasonably be expected to impose any additional material obligation upon, or
materially increase any obligation of, ICI Delaware Holdings, Inc. or its
successors ("ICI") under that certain Purchase Agreement, dated August 29,
1988, between ICI and Pioneer Chlor Alkali Holdings, Inc., as amended October
25, 1988 (as amended, the "ICI Agreement"), with respect to Hazardous Materials
at the Mortgaged Property. Mortgagor shall indemnify and hold the Secured
Parties harmless from and against all loss, cost, damage or expense (including,
without limitation, attorneys' fees) that any Secured Party may sustain by
reason of the assertion against such party of any claim relating to such
Hazardous Materials or actions taken with respect thereto as authorized
hereunder. Nothing contained herein shall result in any Secured Party being
deemed an "owner" or "operator" under applicable Environmental Law.
(iv) Mortgagor may at its own expense contest the amount or
applicability of any of the obligations described in the first sentence of
subsection IV(s)(iii) by appropriate legal proceedings, prosecution of which
operates to prevent the
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enforcement thereof; provided, however, that (A) any such contest shall be
conducted in good faith by appropriate legal proceedings promptly instituted
and diligently conducted and (B) in connection with such contest, Mortgagor
shall have made provision for the payment or performance of such contested
obligation on Mortgagor's books if and to the extent required by generally
accepted accounting principles then utilized by Mortgagor in the preparation of
its financial statements, or shall have deposited with Mortgagee a sum
sufficient to pay and discharge such obligation and Mortgagee's estimate of all
interest and penalties related thereto. Notwithstanding the foregoing
provisions of this subsection IV(s)(iv), no contest of any such obligations may
be pursued by Mortgagor if such contest would expose Mortgagee or any other
Secured Party to any possible criminal liability or, unless Mortgagor shall
have furnished an Additional Undertaking (as hereinafter defined) therefor
satisfactory to Mortgagee or such other Secured Party, as the case may be, any
civil liability for failure to comply with such obligations.
(t) Asbestos. Mortgagor shall not install nor permit to be
installed in the Mortgaged Property friable asbestos or any asbestos-containing
material (collectively, "ACM") except in compliance with all applicable
Environmental Laws respecting such material. With respect to any ACM currently
present in the Mortgaged Property, except with respect to matters which would
not have a Material Adverse Effect, Mortgagor shall comply with all federal,
state or local laws, regulations or orders applicable to ACM located on the
Chlor Alkali Plant, all at Mortgagor's sole cost and expense. If Mortgagor
shall fail so to comply with such laws or regulations, Mortgagee may (upon
receipt of an indemnity satisfactory to Mortgagee) during the continuance of an
Event of Default, but shall not be obligated to, in addition to any other
remedies set forth herein, take those steps reasonably necessary to comply with
applicable law, regulations or orders. Any costs or expenses incurred by
Mortgagee for such purpose shall be immediately due and payable by Mortgagor
and bear interest at the Note Rate. Mortgagor shall provide to Mortgagee and
its agents and employees reasonable access to the Mortgaged Property upon
reasonable prior notice to remove such ACM if Mortgagor fails to do so and
removal is required under any Environmental Law as provided for above;
provided, however, that nothing contained herein shall obligate Mortgagee to
exercise any rights under such license. Mortgagor shall indemnify and hold the
Secured Party harmless from and against all loss, cost,
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damage and expense that any Secured Party may sustain as a result of the
presence of any ACM and any removal thereof in compliance with any applicable
Environmental Law.
(u) Books and Records; Reports. Mortgagor shall keep proper
books of record and account, which shall accurately represent the financial
condition of Mortgagor and the business affairs of Mortgagor relating to the
Mortgaged Property. Mortgagee and its authorized representatives shall have
the right, from time to time, upon reasonable prior notice to examine the books
and records of Mortgagor relating to the operation of the Mortgaged Property at
the office of Mortgagor.
(v) No Claims Against Mortgagee. Nothing contained in this
Mortgage shall constitute any consent or request by Mortgagee, express or
implied, for the performance of any labor or services or the furnishing of any
materials or other property in respect of the Chlor Alkali Plant or any part
thereof, nor as giving Mortgagor any right, power or authority to contract for
or permit the performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the making of any
claim against Mortgagee in respect thereof or any claim that any Lien based on
the performance of such labor or services or the furnishing of any such
materials or other property is prior to the Lien of this Mortgage.
(w) Utility Services. Mortgagor shall pay, or cause to be
paid, when due all charges for all public or private utility services, all
public or private rail and highway services, all public or private
communication services, all sprinkler systems, and all protective services, any
other services of whatever kind or nature at any time rendered to or in
connection with the Chlor Alkali Plant or any part thereof, shall comply in all
material respects with all contracts relating to any such services, and shall
do all other things reasonably required for the maintenance and continuance of
all such services to the extent required to fulfill the obligations set forth
in subsection IV(n).
(x) Notwithstanding any provisions herein to the contrary,
Mortgagor shall retain the right, at all times prior to foreclosure (or
deed-in-lieu thereof), to exercise custody and control with respect to actions
to be taken at the Mortgaged Property relating to the environmental condition
thereof, but
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only to the extent Mortgagor's exercise of such custody and control of the
Mortgaged Property is necessary for Mortgagor and/or its affiliates to retain
any and all benefits inuring to Mortgagor and/or its affiliates under the
indemnification provided by ICI in Section 8.02 of the ICI Agreement.
SECTION V - ASSIGNMENT OF LEASES, RENTS, ISSUES AND PROFITS
(a) As security for the payment and performance of the
Secured Obligations, Mortgagor pledges, assigns, transfers and sets over to
Mortgagee and grants to Mortgagee a security interest in, subject to the terms
and conditions hereof, all Mortgagor's estate, right, title and interest (the
"Mortgagor's Interest") in the Leases and Rents including, without limitation,
the following:
(i) the immediate and continuing right to receive and
collect Rents payable by all tenants or other parties pursuant to
Leases;
(ii) all claims, rights, powers, privileges and remedies
of Mortgagor, whether provided for in any Lease or arising by statute
or at law or in equity or otherwise, consequent on any failure on the
part of any tenant to perform or comply with any term of any Lease;
(iii) all rights to take all actions upon the happening of
a default under any Lease as shall be permitted by such Lease or by
law, including, without limitation, the commencement, conduct and
consummation of proceedings at law or in equity; and
(iv) the full power and authority, in the name of
Mortgagor or otherwise, to enforce, collect, receive and receipt for
any and all of the foregoing and to do any and all other acts and
things whatsoever which Mortgagor or any landlord is or may be
entitled to do under the Leases.
(b) Any Rents receivable by Mortgagee hereunder, after
payment of all proper costs and charges, shall be applied, in accordance with
the Intercreditor Agreement, to all amounts due and owing with respect to the
Secured Obligations. Mortgagee shall be accountable to Mortgagor only for
Rents actually received by Mortgagee pursuant to this assignment. The
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collection of such Rents and the application thereof shall not cure or waive
any Event of Default or waive, modify or affect notice of an Event of Default
or invalidate any act done pursuant to such notice.
(c) So long as no Event of Default shall have occurred and be
continuing, Mortgagor shall have a license to collect and apply the Rents and
to enforce the obligations of tenants under the Leases. Immediately upon the
occurrence and during the continuance of any Event of Default, the license
granted in the immediately preceding sentence shall cease and terminate, with
or without any notice, action or proceeding. Upon such Event of Default and
during the continuance thereof, Mortgagee may (but shall not be obligated to)
to the fullest extent permitted by the Leases (i) exercise any of Mortgagor's
rights under the Leases, (ii) enforce the Leases, (iii) demand, collect, sue
for, attach, levy, recover, receive, compromise and adjust, and make, execute
and deliver receipts and releases for all Rents or other payments that may then
be or may thereafter become due, owing or payable with respect to the Leases
and (iv) generally do, execute and perform any other act, deed, matter or thing
whatsoever that ought to be done, executed and performed in and about or with
respect to the Leases, as fully as allowed or authorized by the Mortgagor's
Interest.
(d) During the continuance of an Event of Default, Mortgagor
hereby irrevocably authorizes and directs the tenant under each Lease to pay
directly to, or as directed by, Mortgagee all Rents accruing or due under its
Lease. Mortgagor hereby authorizes the tenant under each Lease to rely upon
and comply with any notice or demand from Mortgagee for payment of Rents to
Mortgagee and Mortgagor shall have no claim against any tenant for Rents paid
by such tenant to Mortgagee pursuant to such notice or demand.
(e) Mortgagor at its sole cost and expense shall enforce all
material provisions of the Leases in accordance with their terms. Neither this
Mortgage nor any action or inaction on the part of Mortgagee shall release any
tenant under any Lease, any guarantor of any Lease or Mortgagor from any of
their respective obligations under the Leases or constitute an assumption of
any such obligation on the part of Mortgagee. No action or failure to act on
the part of Mortgagor shall adversely
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affect or limit the rights of Mortgagee under this Mortgage or, through this
Mortgage, under the Leases.
(f) All rights, powers and privileges of Mortgagee herein set
forth are coupled with an interest and are irrevocable, subject to the terms
and conditions hereof, and Mortgagor shall not take any action under the Leases
or otherwise which is inconsistent with this Mortgage or any of the terms
hereof and any such action inconsistent herewith or therewith shall be void.
Mortgagor shall, from time to time, upon request of Mortgagee, execute all
instruments and further assurances and all supplemental instruments and take
all such action as Mortgagee from time to time may reasonably request in order
to perfect, preserve and protect the interests intended to be assigned to
Mortgagee hereby.
(g) Mortgagor shall not, unilaterally or by agreement,
subordinate, amend, modify, extend, discharge, terminate, surrender, waive or
otherwise change any term of any of the Leases in any manner which would
violate this Mortgage. If the Leases shall be amended as permitted hereby,
they shall continue to be subject to the provisions hereof without the
necessity of any further act by any of the parties hereto.
(h) Nothing contained herein shall operate or be construed to
(i) obligate Mortgagee to perform any of the terms, covenants or conditions
contained in the Leases or otherwise to impose any obligation upon Mortgagee
with respect to the Leases (including, without limitation, any obligation
arising out of any covenant of quiet enjoyment contained in the Leases in the
event that any tenant under a Lease shall have been joined as a party defendant
in any action by which the estate of such tenant shall be terminated) or (ii)
place upon Mortgagee any responsibility for the operation, control, care,
management or repair of any portion of the Mortgaged Property.
(i) The assignment of Leases and Rents contained in this
Section V is made pursuant to provisions of La.R.S. 9:4401 et seq.
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SECTION VI - EVENTS OF DEFAULT
(a) Events of Default. As used in this Mortgage, "Event
of Default" shall mean the occurrence of an Event of Default under the
Indenture or the Term Loan Agreement or a breach or violation of the terms of
this Mortgage.
(b) Remedies. Upon the occurrence and during the continuance
of any Event of Default, in addition to any other rights and remedies Mortgagee
may have pursuant to this Mortgage or as provided by law, and without
limitation, Mortgagee may, subject to the terms of the Intercreditor Agreement,
take such action, without notice or demand, as it deems advisable and is
permitted by law to protect and enforce its rights against Mortgagor and in and
to the Mortgaged Property, including, but not limited to, the following
actions, each of which may be pursued concurrently or otherwise, at such time
and in such manner as Mortgagee may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of Mortgagee,
except to the extent otherwise provided by law:
(i) (A) Mortgagee shall have the right and option to proceed
with foreclosure of the Mortgaged Property in such manner as permitted
or required by applicable law relating to the sale of real estate or
by the Uniform Commercial Code relating to the sale of collateral
after default by a debtor (as such applicable laws and Uniform
Commercial Code now exist or as may be hereafter amended), or by any
other present or subsequent articles or enactments relating to the
sale of real estate or collateral.
(B) Mortgagor agrees to surrender possession of the
hereinabove described Mortgaged Property to the purchaser at the
aforesaid sale, immediately after such sale, in the event such
possession has not previously been surrendered by Mortgagor. The
right of sale hereunder shall not be exhausted by one or more such
sales, and Mortgagee may cause to occur other and successive sales
until all of the Mortgaged Property be legally sold or all of the
Secured Obligations shall have been paid.
(ii) (A) Upon the occurrence and during the continuance
of any Event of Default, Mortgagee shall have
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the right and power to proceed by a suit or suits in equity or at law,
whether for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein
granted, or for any foreclosure hereunder or for the sale of the
Mortgaged Property under the judgment or decree of any court or courts
of competent jurisdiction, or for the appointment of a receiver or
keeper pending any foreclosure hereunder or the sale of the Mortgaged
Property under the order of a court or courts of competent
jurisdiction or under executory or other legal process, or for the
enforcement of any other appropriate legal or equitable remedy. Any
money advanced by Mortgagee in connection with any such receivership
shall be a demand obligation (which obligation Mortgagor hereby
expressly promises to pay) owing by Mortgagor to Mortgagee and shall
bear interest from the date of making such advance by Mortgagee until
paid at the Note Rate.
(B) Mortgagor agrees to the full extent that it lawfully may,
that, in case one or more of the Events of Default shall have occurred
and shall not have been remedied, then, and in every such case,
Mortgagee shall have the right and power to enter into and upon and
take possession of all or any part of the Mortgaged Property in the
possession of Mortgagor, its successors or assigns, or its or their
agents or servants, and may exclude Mortgagor, its successors or
assigns, and all persons claiming under Mortgagor, and its or their
agents or servants wholly or partly therefrom; and, holding the same,
Mortgagee may use, administer, manage, operate and control the
Mortgaged Property and conduct the business thereof to the same extent
as Mortgagor, its successors or assigns, might at the time do and may
exercise all rights and powers of Mortgagor, in the name, place and
stead of Mortgagor, or otherwise as Mortgagee shall deem best. All
costs, expenses and liabilities of every character incurred by
Mortgagee in administering, managing, operating, and controlling the
Mortgaged Property shall constitute a demand obligation (which
obligation Mortgagor hereby expressly promises to pay) owing by
Mortgagor to Mortgagee and shall bear interest from date of
expenditure until paid at the Note Rate, all of which shall constitute
a portion of the Secured Obligations and shall be secured by this
Mortgage and by any other instrument securing the Secured Obligations.
In connection
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with any action taken by Mortgagee pursuant to this subsection (ii),
Mortgagee shall not be liable for any loss sustained by Mortgagor
resulting from any act or omission of Mortgagee in administering,
managing, operating or controlling the Mortgaged Property, including a
loss arising from the ordinary negligence of Mortgagee, unless such
loss is caused by its own gross negligence or willful misconduct and
bad faith, nor shall Mortgagee be obligated to perform or discharge
any obligation, duty or liability of Mortgagor.
(C) Mortgagor shall and does hereby agree to indemnify
Mortgagee for, and to hold Mortgagee harmless from, any and all
liability, loss or damage which may or might be incurred by Mortgagee
by reason of this Mortgage or the exercise of rights or remedies
hereunder, including a loss arising from the ordinary negligence of
the Mortgagee, except as such liability, loss or damage is occasioned
by the gross negligence or willful misconduct of such party; should
Mortgagee make any expenditure on account of any such liability, loss
or damage, the amount thereof, including costs, expenses and
reasonable attorneys' fees, shall be a demand obligation (which
obligation Mortgagor hereby expressly promises to pay) owing by
Mortgagor to Mortgagee and shall bear interest from the date expended
until paid at the Note Rate, shall be a part of the Secured
Obligations and shall be secured by this Mortgage and any other
instrument securing the Secured Obligations.
(D) Mortgagor hereby assents to, ratifies and confirms any
and all actions of Mortgagee with respect to the Mortgaged Property
taken under this paragraph (ii).
(iii) Every right, power and remedy herein given to Mortgagee
shall be cumulative and in addition to every other right, power and
remedy herein specifically given or now or hereafter existing in
equity, at law or by statute; and each and every right, power and
remedy whether specifically herein given or otherwise existing may be
exercised from time to time and so often and in such order as may be
deemed expedient by Mortgagee, and the exercise, or the beginning of
the exercise, of any such right, power or remedy shall not be deemed a
waiver of the right to exercise, at the same time or thereafter any
other right, power or remedy. No delay or omission by Mortgagee in
the exercise of any right,
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power or remedy shall impair any such right, power or remedy or
operate as a waiver thereof or of any other right, power or remedy
then or thereafter existing.
(iv) To the extent permitted under applicable law, Mortgagee
shall have the right (but shall not be obligated to) to become the
purchaser at any sale held by any receiver or public officer, whether
by judicial procedure or otherwise, and shall have the right (but
shall not be obligated to) to have all or any part of the Secured
Obligations then owing credited against the amount of the bid made by
Mortgagee at such sale.
(v) Upon any sale, whether or by virtue of judicial
proceedings or otherwise, it shall not be necessary for any public
officer acting under execution or order of court to have physically
present or constructively in his or her possession any of the
Mortgaged Property, and Mortgagor hereby agrees to deliver all of such
personal property to the purchasers at such sale on the date of sale,
and if it should be impossible or impracticable to make actual
delivery of such property, then the title and right of possession to
such property shall pass to the purchaser at such sale as completely
as if such property had been actually present and delivered.
(vi) Upon any sale, whether made or by virtue of judicial
proceedings or otherwise, the receipt of the officer making a sale
under judicial proceedings, shall be a sufficient discharge to the
purchaser or purchasers at any sale for his or her or their purchase
money, and such purchaser or purchasers, his or her or their assigns
or personal representatives, shall not, after paying such purchase
money and receiving such receipt of such officer therefor, be obliged
to see to the application of such purchase money, or be in anywise
answerable for any loss, misapplication or nonapplication thereof.
(vii) (A) Any sale or sales of the Mortgaged Property or any
part thereof, whether under and by virtue of judicial proceedings or
otherwise, shall operate to divest all right, title, interest, claim
and demand whatsoever, either at law or in equity, of Mortgagor of, in
and to the premises and the property sold, and shall be a perpetual
bar, both at law
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and in equity, against Mortgagor, its successors and assigns, and
against any and all persons claiming or who shall thereafter claim all
or any of the property sold from, through or under Mortgagor, its
successors and assigns; and Mortgagor, if requested by Mortgagee to do
so, shall join in the execution and delivery of all proper
conveyances, assignments and transfers of the properties so sold.
(B) The proceeds of any sale of the Mortgaged Property or any
part thereof and all other moneys received by Mortgagee in any
proceedings for the enforcement hereof, whose application has not
elsewhere herein been specifically provided for, shall be applied
first, to the payment of all expenses incurred by Mortgagee incident
to the enforcement of this Mortgage or any of the Secured Obligations
(including, without limiting the generality of the foregoing, expenses
of any entry or taking of possession, of any sale, of advertisement
thereof, and of conveyances, and court costs, compensation of agents
and employees and reasonable legal fees), and to the payment of all
other charges, expenses, liabilities and advances incurred or made by
Mortgagee under this Mortgage; and then to the payment of the Secured
Obligations in such order and manner as is determined by Mortgagee in
its sole discretion, subject to the terms of the Intercreditor
Agreement.
(C) Mortgagee may resort to any security given by this
Mortgage or to any other security now existing or hereafter given to
secure the payment of any of the Secured Obligations secured hereby,
in whole or in part, and in such portions and in such order as may
seem best to Mortgagee in its sole discretion, subject to the terms of
the Intercreditor Agreement, and any such action shall not in anywise
be considered as a waiver of any of the rights, benefits or Liens
created by this Mortgage.
(D) Mortgagor agrees, to the full extent that it may lawfully
so agree, that it will not at any time insist upon or plead or in any
manner whatever claim or take the benefit or advantage of any
appraisement, valuation, stay, extension or redemption law now or
hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Mortgage or the absolute sale of the Mortgaged
Property or the possession thereof by any purchaser at any sale made
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pursuant to any provision hereof, or pursuant to the decree of any
court of competent jurisdiction; but Mortgagor, for itself and all who
may claim through or under it, so far as it or they now or hereafter
lawfully may, hereby waives the benefit of all such laws. Mortgagor,
for itself and all who may claim through or under it, waives to the
extent that it may lawfully do so, any and all right to have the
property included in the Mortgaged Property marshaled upon any
foreclosure of the Lien hereof, and agrees that any court having
jurisdiction to foreclose such Lien may sell the Mortgaged Property as
an entirety. If any law referred to herein and now in force, of which
Mortgagor or its successor or successors might take advantage despite
the provisions hereof, shall hereafter be repealed or cease to be in
force, such law shall not thereafter be deemed to constitute any part
of the contract herein contained or to preclude the operation or
application of the provisions hereof.
(E) If the proceeds of any sale or other lawful disposition
of the Mortgaged Property by Mortgagee are insufficient to pay the
Secured Obligations, then Mortgagor shall pay or cause to be paid any
deficiency.
(viii) Without in any manner limiting the generality of any
of the other provisions of this Mortgage; (A) some portions of the
goods described or to which reference is made herein are or are to
become fixtures on the Land described or to which reference is made
herein; (B) the security interests created hereby under the Uniform
Commercial Code will attach to minerals including oil and gas; (C)
this Mortgage may be filed as a financing statement; and (D) Mortgagor
is the record owner of the real estate or interests in the real estate
comprised of the Mortgaged Property.
(ix) The Mortgaged Property may be sold in one or more
parcels and in such manner and order as Mortgagee, in its sole
discretion, may determine.
(x) For purposes of Louisiana executory process,
Mortgagor acknowledges the Secured Obligations secured hereby, whether
now existing or to arise hereafter, and confess judgment thereon if
not paid when due. Upon the occurrence of an Event of Default
hereunder and at any time
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thereafter so long as the same shall be continuing, and in addition to
all other rights and remedies granted Mortgagee hereunder, it shall be
lawful for and Mortgagor hereby authorizes Mortgagee without making a
demand or putting Mortgagor in default, a putting in default being
expressly waived, to cause all and singular the Mortgaged Property to
be seized and sold after due process of law, Mortgagor waiving the
benefit of any and all laws or parts of laws relative to appraisement
of property seized and sold under executory process or other legal
process, and consenting that the Mortgaged Property be sold without
appraisement, either in its entirety or in lots or parcels, as
Mortgagee may determine, to the highest bidder for cash or on such
other terms as the plaintiff in such proceedings may direct. In
addition, Mortgagee shall have all of the rights and remedies
available to it under this Mortgage, as a mortgagee under Louisiana
law or as a secured party under the Uniform Commercial Code, then in
effect.
(xi) Mortgagor hereby waives:
(A) the benefit of appraisement provided for in
Articles 2332, 2336, 2723 and 2724 of the
Louisiana Code of Civil Procedure and all
other laws conferring the same;
(B) the demand and three (3) days notice of
demand as provided in Articles 2639 and 2721
of the Louisiana Code of Civil Procedure;
(C) the notice of seizure provided by Articles
2293 and 2721 of the Louisiana Code of Civil
Procedure; and
(C) the three (3) days delay provided for in
Articles 2331 and 2722 of the Louisiana Code
of Civil Procedure.
(x) Mortgagor expressly authorizes and agrees that
Mortgagee shall have the right to appoint a keeper of the Mortgaged
Property, or any part thereof, pursuant to the terms and provisions of
La.R.S. 9:5136.
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Mortgagee's exercise of the foregoing remedies will not be
construed to constitute Mortgagee as a mortgagee in possession of the Mortgaged
Property nor to obligate Mortgagee to take any action or to incur expenses or
perform or discharge any obligation, duty or liability of Trustor under any
lease, or for the control, care, management, or repair of the Mortgaged
Property; nor will it operate to make Mortgagee responsible or liable for any
waste committed on the Mortgaged Property by any Person or for any dangerous or
defective condition of the Mortgaged Property, or for any act or omission
relating to the management, upkeep, repair, or control of the Mortgaged
Property that results in loss or injury or death to any Person.
SECTION VII - CERTAIN DEFINITIONS
As used herein, the following terms shall have the following
meanings:
"Accounts Receivable" means any account of Mortgagor and any
other right of Mortgagor 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.
"Additional Undertaking" shall mean (a) cash or cash
equivalents or (b) a Surety Bond, an Additional Undertaking Guarantee or an
Additional Undertaking Letter of Credit which is (i) provided by a Person, (ii)
whose long- term unsecured debt is rated at least "AA" (or equivalent) by a
nationally recognized statistical rating agency and (iii) is otherwise
satisfactory to Mortgagee. Additional Undertakings shall be addressed directly
to Mortgagee and shall name Mortgagee as the beneficiary thereof and the party
entitled to make claims thereunder.
"Additional Undertaking Guarantee" shall mean the
unconditional guarantee of payment of any corporation or partnership organized
and existing under the laws of the United States of America or any State or the
District of Columbia or Canada or province thereof that has a long-term
unsecured debt rating satisfactory to Mortgagee at the time such guarantee is
delivered, given to Mortgagee, accompanied by an opinion of counsel to such
guarantor to the effect that such guarantee has been duly authorized, executed
and delivered by such guarantor and constitutes the legal, valid and binding
obligation of such
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guarantor enforceable against such guarantor by Mortgagee in accordance with
its terms, subject to customary exceptions at the time for opinions for such
instruments, together with an opinion of counsel to the effect that, taking
into account the purpose under this Mortgage for which such guarantee will be
given, such guarantee and accompanying opinion are responsive to the
requirements of this Mortgage.
"Additional Undertaking Letter of Credit" shall mean a clean,
irrevocable, unconditional letter of credit in favor of Mortgagee and entitling
Mortgagee to draw thereon in The City of New York issued by a bank satisfactory
to Mortgagee, accompanied by an opinion of counsel to such bank to the effect
that such letter of credit has been duly authorized, executed and delivered by
such bank and constitutes the legal, valid and binding obligation of such bank
enforceable against such bank by Mortgagee in accordance with its terms subject
to customary exceptions at the time for opinions for such instruments, together
with an opinion of counsel to the effect that, taking into account the purpose
under this Mortgage for which such letter of credit will be given, such letter
of credit and accompanying opinion are responsive to the requirements of this
Mortgage.
"Collateral Account" shall have the meaning set forth in the
Intercreditor Agreement.
"Contract Right" means any right of Mortgagor 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.
"Environmental Laws" shall mean any and all Governmental
Requirements pertaining to occupational health or the environment in effect in
the State, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials
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<PAGE> 45
Transportation Act, as amended, and other environmental conservation or
protection laws. The term "oil" shall have the meaning specified in OPA, the
terms "hazardous substance" and "release" (or "threatened release") have the
meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or
"disposed") have the meanings specified in RCRA; provided, however, that (i) in
the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of
any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and (ii) to the extent the laws of the State
establish a meaning for "oil", "hazardous substance", "release", solid waste"
or "disposal" which is broader than that specified in either OPA, CERCLA or
RCRA, such broader meaning shall apply with respect to the Mortgaged Property.
"Excepted Liens" shall mean (a) Liens for taxes, assessments
or other governmental charges or levies not yet due or which are being
contested in good faith by appropriate action and for which appropriate
reserves have been maintained; (b) operators', vendors', carriers',
warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction
or other like Liens arising by operation of law in the ordinary course of
business or statutory landlord's liens; (c) any Liens reserved in leases for
rent and for compliance with the terms of the leases in the case of leasehold
estates, to the extent that any such Lien referred to in this clause does not
materially impair the use of the Mortgaged Property covered by such Lien for
the purposes for which such Mortgaged Property is held by Mortgagor or
materially impair the value of such Mortgaged Property subject thereto; (d) the
Liens listed on Schedule 1 attached hereto and made a part hereof; and (e)
Liens and encumbrances (other than to secure the payment of borrowed money or
the deferred purchase price of Mortgaged Property or services), easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations in any rights of way for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment,
and defects, irregularities, zoning restrictions and deficiencies in title to
the Mortgaged Property of which in the aggregate do not prevent the use of the
Mortgaged Property for the purposes of which it is currently held by Mortgagor
or have a Material Adverse Effect on the Companies taken as a whole.
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<PAGE> 46
"General Intangibles" means (i) all general intangibles now
owned or hereafter acquired by Mortgagor, including without limitation all
right, title and interest of Mortgagor 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 Mortgagor, in each
case to the extent that any of the foregoing arises out of or relates to
Accounts or Inventory.
"Governmental Authority" shall include the country, the state,
county, city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such Person
or such Person's Property, and any court, agency, department, commission,
board, bureau or instrumentality of any of them including monetary authorities
which exercises valid jurisdiction over any such Person or such Person's
Property. Unless otherwise specified, all references to Governmental Authority
herein shall mean a Governmental Authority having jurisdiction over, where
applicable, Mortgagor or any Secured Party.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement, including, without limitation, Environmental Laws,
energy regulations and occupational safety and health standards or controls, of
any Governmental Authority.
"Hazardous Materials" shall mean any pollutants, contaminants,
or industrial, toxic or hazardous substances or wastes.
"Inventory" means any and all of Mortgagor'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 Mortgagor'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 clause (a) of the
definition of Obligor
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<PAGE> 47
Collateral 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,
Mortgagor or any lender under the Revolving Credit Agreement or any agent or
bailee of any of them, and all documents of title or other documents
representing the same.
"Lien" shall mean any interest in Mortgaged Property owed to,
or a claim by a Person, whether such interest is based on the common law,
statute or contract, and whether such obligation or claim is fixed or
contingent, and including but not limited to the lien or security interest
arising from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting the Mortgaged
Property.
"Material Adverse Effect" shall mean, as to any Person, asset
or Property, a material adverse effect on the business, assets, properties,
condition (financial or other), operations or results of operations of such
Person, asset or Property, which effect is not adequately and effectively
insured or indemnified against by a financially sound insurance company, and
excepting effects arising solely out of general national economic conditions
and/or effects arising solely out of matters affecting the industry in which
such Person, asset or Property conducts business a whole.
"Note Rate" shall mean the rate borne by the Notes.
"Obligor Collateral" means all of the following property of
Mortgagor, whether now owned or existing, or hereafter acquired or coming into
existence, wherever now or hereafter located:
(a) Accounts Receivable; Contract Rights; any and all
security deposits and other security held by or granted to Mortgagor
to secure payments from any and all persons who are or may become
obligated to Mortgagor 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 Mortgagor
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for goods sold or leased or services rendered, or otherwise arising
out of or relating to any Obligor Collateral;
(b) 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 Mortgagor now or hereafter with the Agent, any
Lender or any Participant (as defined in the Revolving Credit
Agreement) and any and all property of every kind or description of or
in the name of Mortgagor now or hereafter, for any reason or purpose
whatsoever, in the possession or control of, or in transit to, or
standing to Mortgagor's credit on the books of, such Agent, any agent
or bailee for such Agent, any such Lender or 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 Mortgagor or any computer bureau from time to
time acting for Mortgagor, 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 Mortgagor, and the proceeds of any insurance
covering any of the property described above) of any of the foregoing.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or government or any agency, instrumentality or political
subdivision thereof, or any other form of entity.
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<PAGE> 49
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Revolving Credit Agreement" shall mean that certain Loan and
Security Agreement dated as June 17, 1997 among PAAC, as borrower, Bank of
America Illinois, as agent and a lender, and the lenders named therein, as in
effect on the date hereof.
"State" shall mean the state where the Land is located.
"Surety Bond" shall mean a clean irrevocable surety bond or
credit insurance policy in favor of Mortgagee issued by an insurance company
the claims paying ability rating of which at the time such surety bond or
credit insurance policy is delivered is satisfactory to Mortgagee, accompanied
by an opinion of counsel to such insurance company to the effect that such
surety bond or credit insurance policy has been duly authorized, executed and
delivered by such insurance company and constitutes the legal, valid and
binding obligation of such insurance company enforceable against such insurance
company by Mortgagee in accordance with its terms subject to customary
exceptions at the time for opinions for such instruments, together with an
opinion of counsel to the effect that, taking into account the purpose under
this Mortgage for which such surety bond will be given, such surety bond and
accompanying opinions are responsive to the requirements of this Mortgage.
"Trust Money" shall mean those certain proceeds set forth in
subsections IV(q)(i) and IV(q)(ii).
SECTION VIII - MISCELLANEOUS
(a) Choice of Law. The terms and provisions of this Mortgage
and the enforcement hereof shall be governed by and construed in accordance
with the laws of the state where the Land is located.
(b) Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of Mortgagee in order to effectuate the
provisions hereof, and the invalidity or unenforceability of any provision
hereof in
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<PAGE> 50
any jurisdiction shall not affect the validity or enforceability of any such
provision in any other jurisdiction. If any part of the Secured Obligations
cannot be lawfully secured by this Mortgage or if any part of the Mortgaged
Property cannot be lawfully subject to the Lien and security interest hereof to
the full extent of such Secured Obligations, then all payments made shall be
applied on said Secured Obligations first in discharge of that portion thereof
which is not secured by this Mortgage.
(c) Construction of this Instrument. This instrument may be
construed as a mortgage, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, fixture filing, pledge, financing statement,
hypothecation or contract, or any one or more of them, in order fully to
effectuate the Lien hereof and the purposes and agreements herein set forth.
(d) Captions; Gender and Number. The captions and section
headings of this Mortgage are for convenience only and are not to be used to
define the provisions hereof. The term "Mortgagee" as used herein shall mean
and include any successor(s) to United States Trust Company of New York in its
capacity as Collateral Agent under the Intercreditor Agreement. The terms used
to designate Mortgagee and Mortgagor shall be deemed to include the respective
heirs, legal representatives, successors and assigns of such parties. All
terms contained herein shall be construed, whenever the context of this
Mortgage so requires, so that the singular includes the plural and so that the
masculine includes the feminine.
(e) Rights of Mortgagee. The Lien, security interest and
other security rights of Mortgagee hereunder shall not be impaired by any
indulgence, moratorium or release granted by Mortgagee, the Note Trustee or the
Term Loan Agent, including, but not limited to, any renewal, extension or
modification with respect to any Secured Obligation, or any surrender,
compromise, release, renewal, extension, exchange or substitution which
Mortgagee may grant in respect of the Mortgaged Property, or any part thereof
or any interest therein, or any release or indulgence granted to any endorser,
guarantor or surety of any Secured Obligation.
(f) Waiver of an Event of Default. Mortgagee may waive
any Event of Default without waiving any other prior or subsequent Event of
Default. Mortgagee may remedy any Event of
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<PAGE> 51
Default without waiving the Event of Default remedied. No single or partial
exercise by Mortgagee of any right, power or remedy hereunder shall exhaust the
same or shall preclude any other or further exercise thereof, and every such
right, power or remedy hereunder may be exercised at any time and from time to
time. No modification or waiver of any provision hereof nor consent to any
departure by Mortgagor therefrom shall in any event be effective unless the
same shall be in writing and signed by Mortgagee and then such waiver or
consent shall be effective only in the specific instances, for the purpose for
which given and to the extent therein specified. No notice to nor demand on
Mortgagor in any case shall of itself entitle Mortgagor to any other or further
notice of demand in similar or other circumstances. Acceptance by Mortgagee of
any payment in an amount less than the amount then due on any Secured
Obligations shall be deemed an acceptance on account only and shall not in any
way excuse the existence of an Event of Default hereunder.
(g) Successor Mortgagor. In the event the ownership of
the Mortgaged Property or any part thereof becomes vested in a person other
than Mortgagor, Mortgagee may, without notice to Mortgagor, deal with such
successor or successors in interest with reference to this Mortgage and the
Secured Obligations in the same manner as with Mortgagor, without in any way
vitiating or discharging Mortgagor's liability hereunder or for the payment of
the Secured Obligations or performance of the obligations secured hereby. No
transfer of the Mortgaged Property, no forbearance on the part of Mortgagee
and/or any Secured Party, and no extension of the time for the payment of the
Secured Obligations, in whole or in part, shall affect the liability of
Mortgagor or any other person hereunder or for obligations secured hereby.
(h) Outstanding Lien, Security Interest, Charge or Prior
Encumbrance. To the extent that proceeds of the Notes or proceeds of advances
under the Term Loan Agreement are used to pay indebtedness secured by any
outstanding Lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced at Mortgagor's request,
and Mortgagee shall be subrogated to any and all rights, security interests and
Liens owned by any owner or holder of such outstanding Liens, security
interests, charges or encumbrances, irrespective of whether said Liens,
security interests, charges or encumbrances are released, and it is expressly
understood
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that, in consideration of the payment of such indebtedness, Mortgagor hereby
waives and releases all demands and causes of action for offsets and payments
to, upon and in connection with the said indebtedness.
(i) Covenants Running with the Land. The covenants and
agreements herein contained shall constitute covenants running with the land
and interests covered or affected hereby and shall be binding upon the heirs,
legal representatives, successors and assigns of the parties hereto.
(j) Notices. All notices requests, demands and other
communications provided for or permitted hereunder shall be in writing
(including telex and telecopy communications) and shall be sent by mail, telex,
telecopier or hand delivery:
If to Mortgagor, to the following address:
4200 NationsBank Center
700 Louisiana Street
Suite 4200
Houston, Texas 77002
Attention: Vice President, General Counsel
and Secretary
If to Mortgagee, to the following address:
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
All such notices, requests, demands and communications shall be deemed to have
been duly given or made, when delivered by hand or five (5) business days after
being deposited in the mail, postage paid, when telexed answer back received
and when telecopied, receipt acknowledged. Any party hereto may change its
address set forth in this subsection (j) by notice to the other parties given
in accordance with the provisions of this subsection (j).
(k) Mortgagee's Consent. Except where otherwise
expressly provided herein, in any instance hereunder where the approval,
consent or the exercise of judgment of Mortgagee is required, the granting or
denial of such approval or consent and the exercise of such judgment shall be
within the sole discretion
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<PAGE> 53
of Mortgagee, and Mortgagee shall not, for any reason or to any extent, be
required to grant such approval or consent or exercise such judgment in any
particular manner, regardless of the reasonableness of either the request or
Mortgagee's judgment.
(l) Foreclosure. In the event there is a foreclosure
sale hereunder, and at the time of such sale Mortgagor or Mortgagor's
successors or assigns or any other person claiming any interest in the
Mortgaged Property by, through or under Mortgagor, are occupying or using the
Mortgaged Property or any part thereof, each and all shall immediately become
the tenant of the purchaser at such sale, which tenancy shall be a tenancy from
day to day, terminable at the will of either the landlord or tenant, or at a
reasonable rental per day based upon the value of the property occupied, such
rental to be due daily to the purchaser; to the extent permitted by applicable
law, the purchaser at such sale shall, notwithstanding any language herein
apparently to the contrary, have the sole option to demand immediate possession
following the sale or to permit the occupants to remain as tenants at will. In
the event the tenant fails to surrender possession of said property upon
demand, the purchaser shall be entitled to institute and maintain a summary
action for possession of the Mortgaged Property (such as an action for forcible
entry and detainer) in any court having jurisdiction. The purchaser or
purchasers at foreclosure shall have the right to affirm or disaffirm any lease
of the Mortgaged Property or any part thereof.
(m) Reimbursement. Mortgagor shall reimburse Mortgagee,
upon demand, for all fees, costs and expenses incurred by Mortgagee in
connection with the administration and enforcement of this Mortgage. If any
action or proceedings, including, without limitation, bankruptcy or insolvency
proceedings, is commenced to which action or proceeding Mortgagee is made a
party or in which it becomes necessary to defend or uphold the Lien or validity
of this Mortgage, Mortgagor shall, upon demand, reimburse Mortgagee for all
expenses (including, without limitation, attorneys' and agents' fees and
disbursement) incurred by Mortgagee in such action or proceedings. In any
action or proceeding to foreclose this Mortgage or to recover or collect the
Secured Obligations, the provisions of law relating to the recovery of costs,
disbursements and allowances shall prevail unaffected by this covenant.
Mortgagor's obligations under this subsection VIII(m) shall survive the
satisfaction of
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<PAGE> 54
this Mortgage and the discharge of Mortgagor's other obligations hereunder.
(n) Waiver of Stay. (i) Mortgagor agrees that in the
event that Mortgagor or any property or assets of Mortgagor shall hereafter
become subject of a voluntary or involuntary proceeding under the Bankruptcy
Code or Mortgagor shall otherwise be a party to any federal or state
bankruptcy, insolvency, moratorium or similar proceeding to which the
provisions relating to the automatic stay under Section 362 of the Bankruptcy
Code or any similar provision in any such law is applicable, then, in any such
case, whether or not Mortgagee has commenced foreclosure proceedings under this
Mortgage, Mortgagee shall be entitled to relief from any such automatic stay as
it relates to the exercise of any of the rights and remedies (including,
without limitation, any foreclosure proceedings) available to Mortgagee as
provided in this Mortgage or in any other document evidencing or securing the
Secured Obligations.
(ii) Mortgagee shall have the right to petition or move any court
having jurisdiction over any proceeding described in subsection VIII(n)(i) for
the purposes provided therein, and Mortgagor agrees (a) not to oppose any such
petition or motion and (b) at Mortgagor's sole cost and expense, to assist and
cooperate with Mortgagee, as may be requested by Mortgagee from time to time,
in obtaining any relief requested by Mortgagee, including, without limitation,
by filing any such petitions, supplemental petitions, requests for relief,
documents, instruments or other items from time to time requested by Mortgagee
or any such court.
(o) Waiver of Jury Trial. To the extent permitted by
law, Mortgagor hereby knowingly, voluntarily and intentionally waives any
rights it may have to a trial by jury in the respect of any litigation based
hereon, or directly or indirectly arising out of, under or in connection with,
this Mortgage or any course of conduct, course of dealing, statements (whether
verbal or written) or actions of Mortgagor or Mortgagee.
(p) No Paraph. The evidences of the Secured Obligations
have not been paraphed for identification with this Mortgage.
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<PAGE> 55
(q) Acceptance. The acceptance of this Mortgage by
Mortgagee is presumed, and therefore this Mortgage has not been executed and
need not be executed by Mortgagee.
(r) Provisions of the Intercreditor Agreement.
Notwithstanding anything to the contrary contained in this Mortgage, it is the
understanding of the parties hereto that any actions by Mortgagee are subject
to the provisions of the Intercreditor Agreement; provided that (i) the
provisions of this Mortgage shall govern and control to the extent any
provision of the Intercreditor Agreement would negate or adversely affect the
enforceability, validity, perfection or priority of the Lien or security
interest created by this Mortgage, and (ii) the provisions of Sections I, II,
III and V hereof shall govern and control in the event of a conflict with the
Intercreditor Agreement.
[Signature page follows]
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<PAGE> 56
THUS DONE AND PASSED, on the date first above written, in the
presence of the undersigned competent witnesses, who hereunto sign their names
with Mortgagor and me, Notary, after due reading of the whole.
WITNESSES: MORTGAGOR:
PIONEER CHLOR ALKALI COMPANY, INC.
a Delaware corporation
/s/ Kent R. Stephenson By: /s/ Philip J. Ablove
- ------------------------- --------------------------------
/s/ Scott A. Arenare Name: Philip J. Ablove
- ------------------------- ------------------------------
Title: Vice President and Chief
Financial Officer
-----------------------------
/s/ Christopher Tung
------------------------------
NOTARY PUBLIC, in and for
the State of New York
My Commission expires: 9/29/98
------------------
The name and address of Mortgagor is:
PIONEER CHLOR ALKALI COMPANY, INC.
700 Louisiana Street, Suite 4200
Houston, Texas 77002
The name and address of Mortgagee is:
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
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<PAGE> 1
EXHIBIT 4.2(c)
NEVADA
DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
BY
PIONEER CHLOR ALKALI COMPANY, INC.
(Taxpayer I.D. No. 51-0302028),
as Trustor
TO
First American Title Insurance Company of Nevada,
as Deed of Trust Trustee
FOR THE BENEFIT OF
UNITED STATES TRUST COMPANY OF NEW YORK,
as Collateral Agent
(Taxpayer I.D. No. 13-3818954),
as Beneficiary
Dated as of June 17, 1997
THIS INSTRUMENT COVERS, AMONG OTHER PROPERTY, GOODS WHICH ARE OR MAY
BECOME FIXTURES ON CERTAIN REAL PROPERTY DESCRIBED ON EXHIBIT A HERETO,
AND IS TO BE FILED FOR RECORD IN THE REAL ESTATE RECORDS AS BOTH A DEED OF
TRUST OF REAL PROPERTY AND A FIXTURES FINANCING STATEMENT UNDER THE
UNIFORM COMMERCIAL CODE.
A CARBON, PHOTOGRAPHIC, FACSIMILE OR OTHER REPRODUCTION OF THIS INSTRUMENT
IS SUFFICIENT AS A FINANCING STATEMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES
PAYMENT OF FUTURE ADVANCES AND COVERS PROCEEDS OF COLLATERAL.
THE MAXIMUM PRINCIPAL AMOUNT SECURED BY THIS DEED OF TRUST IS $300,000,000
(SEE SECTION III).
WHEN RECORDED OR FILED RETURN TO:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
<PAGE> 2
DEED OF TRUST, ASSIGNMENT OF LEASES AND
RENTS, SECURITY AGREEMENT, FIXTURE FILING
AND FINANCING STATEMENT
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT (this "Deed of Trust"), dated
as of June 17, 1997, by and between PIONEER CHLOR ALKALI COMPANY, INC., a
Delaware corporation, whose address for notice hereunder is 700 Louisiana
Street, Suite 4200, Houston, Texas 77002 ("Trustor") to First American Title
Insurance Company of Nevada, a Nevada corporation having an address at 3760
Pecos- McLeod, Suite #7, Las Vegas, Nevada 89121, as trustee (the "Deed of
Trust Trustee"), in favor of UNITED STATES TRUST COMPANY OF NEW YORK, with
offices at 114 West 47th Street, New York, New York 10036, as Collateral Agent
under the Intercreditor Agreement (as hereinafter defined) (in such capacity
and together with any successors and assigns in such capacity, "Beneficiary"),
for (i) itself, as Trustee under the Indenture (as hereinafter defined) (in
such capacity, the "Note Trustee"), (ii) for the Term Loan Agent (as
hereinafter defined) as agent under the Term Loan Agreement (as hereinafter
defined), (iii) for the Note Holders (as hereinafter defined), and (iv) for the
Term Loan Lenders (as hereinafter defined) (the Beneficiary, the Note Trustee,
the Term Loan Agent, the Note Holders and the Term Loan Lenders being
hereinafter collectively referred to as the "Secured Parties").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Indenture dated as of the
date hereof among Pioneer Americas Acquisition Corp. ("PAAC"), the Subsidiary
Guarantors, as defined therein, and the Note Trustee, as trustee for the
holders of the Notes (as hereinafter defined) (the "Note Holders") (as the same
may be amended, amended and restated, supplemented or otherwise modified from
time to time, the "Indenture") PAAC will issue its 9 1/4% Senior Secured Notes
due 2007 (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time, including all notes issued in exchange or
substitution therefor, upon the registration of such notes pursuant to the
Securities Act of 1933 or otherwise, the "Notes") in the aggregate principal
amount of $200 million; and
<PAGE> 3
WHEREAS, pursuant to that certain Term Loan Agreement dated as
of the date hereof among PAAC, Bank of America Illinois, as administrative
agent (the "Term Loan Agent"), DLJ Capital Funding, Inc., as syndication agent,
Salomon Brothers Holding Company Inc, as documentation agent, and the lenders
named therein (the "Term Loan Lenders") (as the same may be amended, amended
and restated, supplemented or otherwise modified from time to time, the "Term
Loan Agreement"), the Term Loan Lenders will make certain loans to PAAC to be
evidenced by notes (as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time, including all notes
issued in exchange or substitution therefor, the "Term Loan Notes") in an
aggregate amount of $100 million; and
WHEREAS, pursuant to Article Thirteen of the Indenture,
Trustor has guaranteed (such guarantee by Trustor being hereinafter referred to
as the "Note Guarantee") the payment and performance of the Indenture
Obligation (as hereinafter defined); and
WHEREAS, pursuant to the Subsidiary Guaranty dated as of the
date hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time), Trustor has guaranteed (such guarantee
by Trustor being hereinafter referred to as the "Term Loan Guarantee") the
payment and performance of the Term Loan Obligation (as hereinafter defined);
and
WHEREAS, Beneficiary is the collateral agent under that
certain Intercreditor and Collateral Agency Agreement (as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Intercreditor Agreement"), dated as of the date hereof, among PAAC,
Trustor, Pioneer Americas, Inc. ("PAI" and together with PAAC and Trustor
sometimes referred to herein as the "Companies"), the Note Trustee, the Term
Loan Agent and Beneficiary, as collateral agent.
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<PAGE> 4
SECTION I - GRANTING CLAUSES
To secure the Secured Obligations (as hereinafter defined),
including, without limitation, Trustor's guarantees of payment and performance
of the Indenture Obligation and the Term Loan Obligation under the Note
Guarantee and the Term Loan Guarantee, respectively, and the payment and
performance of the covenants and obligations herein contained and in
consideration of the sum of $10.00 and other valuable consideration in hand
paid by Beneficiary to Trustor and in consideration of the debts and trusts
hereinafter mentioned, the receipt and sufficiency of all of which is hereby
acknowledged, Trustor does by these presents GRANT, BARGAIN, SELL, ASSIGN,
MORTGAGE, WARRANT, TRANSFER and CONVEY unto the Deed of Trust Trustee and its
successors and substitutes in trust with power of sale hereunder for the use
and benefit of Beneficiary all of Trustor's rights, titles, interests and
estates in and to the real and personal property described in Subparagraphs (a)
through (h) of this Section I (collectively herein called the "Mortgaged
Property"); provided, however, that the term Mortgaged Property shall not
include any Obligor Collateral, as such term is defined in the Revolving Credit
Agreement (as hereinafter defined)), to-wit:
(a) Trustor's undivided 100% interest in and to the lands
described on Exhibit A hereto (the "Land"), together with any and all
other rights, titles and interests of Trustor of whatever kind or
character (whether now owned or hereafter acquired by operation of law
or otherwise) in and to such Land.
(b) All of Trustor's rights, titles and interests in all
plants, buildings, structures, towers and other improvements now owned
or hereafter acquired and located on the Land, including, without
limitation, that certain chlor alkali plant and all equipment,
fixtures, heating, lighting and power plants, pipelines, transmission
lines, buildings, housing and improvements, together with all other
machinery, equipment, appliances and apparatus of whatsoever character
or description (except for any motor vehicles, licensed or registered
with the Department of Motor Vehicles of the State), and all
replacements, substitutions and additions to said property, owned by
Trustor and located on the Land or located elsewhere and used in the
operation, conduct and maintenance of that certain chlor alkali plant
located thereon (collectively, the "Improvements") (the Land, together
with the Improvements, being hereinafter collectively referred to as
the "Chlor Alkali Plant").
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(c) To the extent permitted by law, all of Trustor's rights,
titles and interests in, to and under all franchises, licenses,
permits and certificates, consents, approvals, authorizations, however
characterized, used or held for use in connection with Trustor's
ownership and operation of the Chlor Alkali Plant and issued or in any
way furnished, whether now existing or hereafter entered into and
whether necessary or not for the operation and use of the Chlor Alkali
Plant, including, without limitation, building permits, certificates
of occupancy, environmental certificates, industrial permits or
licenses or certificates of operation.
(d) All of Trustor's rights, title and interest in all
absorbers, equipment, machinery, drums, engines, motors, regulators,
meters, exchangers, tanks, docks, racks, heaters, above ground storage
facilities, under ground storage facilities, loading facilities,
fractionation facilities, absorption equipment, distillation
equipment, deethanizers, depropanizers, debutanizers, olefin
splitters, stills, power plants, disposal pits, warehouses, dwelling
houses, cooling equipment, compressors, pipelines, piping flow lines,
wiring, boilers, vessels, dehydration equipment or any of them (except
for any motor vehicles, licensed or registered with the Department of
Motor Vehicles of the State), whether now owned or hereafter acquired
and located or to be located upon the Land or leaseholds now or
hereafter owned by Trustor and used or held for use in connection with
Trustor's ownership and operation of the Chlor Alkali Plant
(collectively, "Equipment").
(e) All Trustor's right, title and interest, as landlord,
franchisor, licensor or grantor, in all leases and subleases of space,
oil, gas and mineral leases, franchise agreements, licenses, occupancy
or concession agreements now existing or hereafter entered into
relating in any manner to the Chlor Alkali Plant or the Equipment and
any and all amendments, modifications, supplements and renewals of any
thereof (each such lease, license or agreement, together with any such
amendment, modification, supplement or renewal, a "Lease"), whether
now in effect or hereafter
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coming into effect including, without limitation, all rents,
additional rents, management fees payable by tenants, cash,
guarantees, letters of credit, bonds, sureties or securities deposited
thereunder to secure performance of the lessee's, franchisee's,
licensee's or obligee's obligations thereunder, revenues, earnings,
profits and income, advance rental payments, payments incident to
assignment, sublease or surrender of a Lease, claims for forfeited
deposits and claims for damages, now due or hereafter to become due,
with respect to any Lease (collectively, "Rents").
(f) All surveys, title insurance policies, drawings,
plans, specifications, construction contracts, file materials,
operating and maintenance records, catalogues, tenant lists,
correspondence, advertising materials, operating manuals, warranties,
guaranties, appraisals, studies and data relating to the Chlor Alkali
Plant or the Equipment or the construction of any Alteration (as
hereinafter defined) or the maintenance of any Permit (as hereinafter
defined).
(g) All general intangibles now owned or hereafter
acquired by Trustor (but not including the Obligor Collateral),
including without limitation (i) all of Trustor's rights, titles and
interests, whether now owned or hereafter acquired, of Trustor in, to
and under the contracts, agreements or other instruments and documents
relevant to Trustor's ownership and operation of the Chlor Alkali
Plant (collectively, "Plant Agreements"), (ii) all contract rights
relating to the Chlor Alkali Plant or the Equipment and all reserves,
deferred payments, deposits, refunds and claims of every kind or
character relating thereto, but not including Accounts Receivable, as
defined in the Revolving Credit Agreement (collectively, "Contract
Rights") and (iii) all processes, designs, methodologies and related
documentation, technical information, manufacturing, engineering and
technical drawings related to the ownership and operation of the Chlor
Alkali Plant.
(h) All proceeds of the conversion, voluntary or involuntary,
of any of the foregoing into cash or liquidated claims, including,
without limitation, proceeds of insurance and condemnation or other
awards or payments with respect thereto and interest thereon
(collectively, "Proceeds").
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TO HAVE AND TO HOLD the Mortgaged Property unto the Deed of
Trust Trustee and Beneficiary and to their successors and assigns forever to
secure the payment and performance of the Secured Obligations.
SECTION II - SECURITY INTEREST
(a) With respect to all personal property (both tangible and
intangible) and any fixtures constituting a part of the Mortgaged Property,
this Deed of Trust shall likewise be a security agreement and a financing
statement and for valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and for the purpose of further securing payment of the
Secured Obligations, Trustor hereby grants to Beneficiary a security interest
in all of Trustor's rights, titles and interests in and to the Mortgaged
Property insofar as the Mortgaged Property consists of equipment, contract
rights, general intangibles, documents, instruments, chattel paper, fixtures
and any and all other personal property of any kind or character defined in and
subject to the provisions of the Uniform Commercial Code as in effect in the
State (the "Uniform Commercial Code"), including the proceeds, profits, rents,
revenues and products from any and all of such personal property. Upon the
occurrence and during the continuance of any Event of Default (as hereinafter
defined), Beneficiary is and shall be entitled to all of the rights, powers and
remedies afforded a secured party by the Uniform Commercial Code with reference
to the personal property and fixtures in which Beneficiary has been granted a
security interest herein, or the Deed of Trust Trustee or Beneficiary may
proceed as to both the real and personal property covered hereby in accordance
with the rights and remedies granted under this Deed of Trust in respect of the
real property covered hereby. Such rights, powers and remedies shall be
cumulative and in addition to those granted to the Deed of Trust Trustee or
Beneficiary under any other provision of this instrument or under any other
instrument executed in connection with or as security for the Secured
Obligations. A carbon or photographic or other reproduction of this Deed of
Trust shall be sufficient as a financing statement covering the Mortgaged
Property.
(b) Trustor shall, forthwith after the execution and
delivery of this Deed of Trust and thereafter, from time to time,
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cause this Deed of Trust and any financing statement, continuation statement or
similar instrument relating to any thereof or to any property intended to be
subject to the Lien of this Deed of Trust to be filed, registered and recorded
in such manner and in such places as may be required by any present or future
law in order to publish notice of and fully to protect the validity and
priority thereof or the Lien hereof upon the Mortgaged Property and the
interest and rights of the Deed of Trust Trustee and Beneficiary herein and
therein. Trustor shall pay or cause to be paid all taxes and fees incident to
such filing, registration and recording, all expenses incident to the
preparation, execution and acknowledgment thereof, and of any instrument of
further assurance, and all federal or State stamp taxes or other taxes, duties
and charges arising out of or in connection with the execution and delivery of
such instruments.
(c) Trustor shall, at the sole cost and expense of
Trustor, do, execute, acknowledge and deliver all and every such further acts,
deeds, conveyances, deeds of trust, mortgages, assignments, notices of
assignment, transfers, financing statements, continuation statements and
assurances as the Deed of Trust Trustee or Beneficiary shall from time to time
reasonably request which may be necessary in the requesting party's judgment to
assure, perfect, convey, assign, mortgage, transfer and confirm unto the Deed
of Trust Trustee or Beneficiary the property and rights hereby conveyed or
assigned, or which Trustor may be or may hereafter become bound to convey or
assign to Beneficiary or which may facilitate the performance of the terms of
this Deed of Trust or the filing, registering or recording of this Deed of
Trust. In the event Trustor shall fail to execute any instrument required to be
executed by Trustor pursuant to this subsection II(c), Beneficiary may execute
the same as the attorney-in-fact for Trustor, such power of attorney being
coupled with an interest and irrevocable.
SECTION III - SECURED OBLIGATIONS
This Deed of Trust is executed and delivered by Trustor to
secure the payment and performance of the obligations (collectively, the
"Secured Obligations") described below:
(a) Any and all indebtedness, obligations and liabilities of
Trustor now or hereafter existing under or in
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respect of the Note Guarantee, including, without limitation, payment of
principal, premium, if any, interest and Liquidated Damages (as defined in the
Indenture), if any, when due and payable, and all other amounts due or to
become due under or in connection with the Indenture (including, without
limitation, all sums due to the Note Trustee pursuant to Section 606 thereof),
the Notes and the performance of all other obligations to the Note Trustee and
the Note Holders under the Indenture and the Notes, according to the terms
thereof (collectively, the "Indenture Obligation);
(b) Any and all indebtedness, obligations and liabilities of
Trustor now or hereafter existing under or in respect of the Term Loan
Guarantee, including, without limitation, payment of principal, premium, if
any, and interest when due and payable, and all other amounts due or to become
due under or in connection with the Term Loan Agreement (including without
limitation, all sums due to the Term Loan Agent pursuant to Sections 10.3 and
10.4 thereof) and the Term Loan Notes and the performance of all other
obligations to the Term Loan Agent and the Term Loan Lenders under the Term
Loan Agreement and the Term Loan Notes according to the terms thereof
(collectively, the "Term Loan Obligation");
(c) Any sums which may be advanced or paid by Beneficiary
under the terms hereof on account of the failure of Trustor to comply with the
covenants of Trustor contained herein;
(d) All covenants, agreements, and obligations of Trustor
herein contained; and
(e) All renewals, rearrangements, increases,
substitutions and extensions, and all amendments, supplements and
modifications, to any of the obligations described in the preceding clauses (a)
through (d).
This Deed of Trust secures all future advances and obligations
constituting Secured Obligations. This Deed of Trust also secures future
advances, as defined in NRS 106.320 and is to be governed by NRS 106.300 to
106.400, inclusive. Notwithstanding anything to the contrary contained herein,
the maximum principal amount to be secured hereby is $300 million. The maximum
amount of advances of principal to be secured by this Deed of Trust may
increase or decrease from time to time by amendment to this Deed of Trust.
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<PAGE> 10
SECTION IV - REPRESENTATIONS, WARRANTIES AND COVENANTS
Trustor hereby represents, warrants and covenants as follows:
(a) Good Title; Authority and Validity. Trustor has good and
marketable title to the Mortgaged Property and the landlord's interest and
estate under or in respect of the Leases, subject to the Excepted Liens, and
has, in all material respects, full corporate power and lawful authority to
bargain, grant, sell, mortgage, assign, transfer, convey and grant a security
interest in all of the Mortgaged Property all in the manner and form herein
provided and without obtaining the waiver, consent or approval of any lessor,
sublessor, Governmental Authority or entity or other party whomsoever or
whatsoever which has not been obtained, except in the case of certain
environmental permits and approvals which, by their terms, are not transferable
or cannot be transferred without the prior approval of the issuing agency. The
Improvements upon the Land are all within the boundary lines of the Land or
have the benefit of valid easements, and there are no encroachments thereon
that would materially impair the use thereof. The Mortgaged Property is free
and clear of any and all Liens or encumbrances of any nature or kind except for
the Excepted Liens and the Leases. Trustor has all necessary permits,
franchises, licenses, rights-of-way, servitudes or other rights or authority
needed in connection with the operation and maintenance of the Chlor Alkali
Plant, except where the failure to have the same would not have a Material
Adverse Effect; all of the Plant Agreements are presently in full force and
effect and no default has occurred or exists thereunder, except where such
default would not individually or in the aggregate have a Material Adverse
Effect; except as provided in the Excepted Liens, Trustor's grant of a Lien and
security interest in the Mortgaged Property in the manner herein provided does
not result in the creation or imposition of any other Lien or security
interest, adverse claim or option upon any of the Mortgaged Property. Trustor's
chief executive office and chief place of business is located at the address
set forth in the initial paragraph of this Deed of Trust. Trustor will not
change its name, identity or corporate structure or its chief executive
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office or chief place of business without notifying the Deed of Trust Trustee
and Beneficiary at least thirty (30) days prior to the effective date of such
change.
(b) Defense of Title. Trustor will warrant and defend title to
the Mortgaged Property, subject to Excepted Liens, against the claims and
demands of all other Persons whomsoever and will maintain and preserve the Lien
created hereby so long as any of the Secured Obligations secured hereby remains
unpaid. Should an adverse claim be made against the title to any material part
of the Mortgaged Property, Trustor agrees it will immediately notify
Beneficiary in writing thereof and defend against such adverse claim to the
extent necessary to preserve the Deed of Trust Trustee's and Beneficiary's
rights and benefits hereunder, subject to Excepted Liens, and Trustor further
agrees that the Deed of Trust Trustee and/or Beneficiary may take such other
reasonable action as they deem advisable to protect and preserve their
interests in the Mortgaged Property, and in such event Trustor will indemnify
the Deed of Trust Trustee and Beneficiary against any and all costs, reasonable
attorney's fees and other expenses which they may incur in defending against
any such adverse claim. Such obligations shall be payable on demand and shall
bear interest from the date of demand therefor until paid at the Note Rate. Any
proceeds of any policy of title insurance maintained by Trustor with respect to
the Mortgaged Property shall, for the purposes of this Deed of Trust, be paid
and applied in the same manner as Insurance Proceeds (as hereinafter defined).
(c) First Lien. This Deed of Trust is, and always will be
kept, a direct first Lien and security interest upon the Mortgaged Property,
subject to the Excepted Liens, and Trustor will not create or suffer to be
created or permit to exist any Lien, security interest or charge prior or
junior to or on parity with the Lien and security interest of this Deed of
Trust upon the Mortgaged Property or any part thereof or upon the rents,
issues, revenues, profits or other income therefrom, except for the Excepted
Liens.
(d) Maintenance of Mortgaged Property. Trustor will at its own
expense do or cause to be done all things necessary to preserve and keep in
full repair, working order and efficiency, reasonable wear and tear excepted,
all of the Mortgaged Property, including, without limitation, all equipment,
machinery and
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facilities, and from time to time will make all the needful and proper repairs,
renewals and replacements so that at all times the state and condition of the
Mortgaged Property will be fully preserved and maintained, unless the failure
to repair, renew or replace would not materially interfere with the present use
or operation of the Mortgaged Property.
(e) Performance of Contracts; Operation of Plant. Trustor will
promptly pay and discharge all rentals, or other payments and will perform or
cause to be performed each and every act, matter or thing required by, each and
all of the contracts, instruments or agreements executed in connection with or
incident to the ownership and operation of the Chlor Alkali Plant (including
without limitation the Plant Agreements) and being a portion of the Mortgaged
Property and will do all other things necessary to keep unimpaired Trustor's
rights with respect thereto and to prevent any forfeiture thereof or default
thereunder, unless such forfeiture or default would not individually or in the
aggregate have a Material Adverse Effect. Trustor will operate the facilities
comprising the Chlor Alkali Plant in a good and workmanlike manner and in
accordance with the practices of the industry and in compliance in all material
respects with all Governmental Requirements affecting ownership and operation
of such facilities, including without limitation, Environmental Laws.
(f) Payment by the Trustee and/or Beneficiary. Trustor agrees
that if Trustor fails to perform any act or to take any action which Trustor is
required to perform or take hereunder or pay any money which Trustor is
required to pay hereunder (taking into account applicable grace or cure
periods), the Deed of Trust Trustee and/or Beneficiary in Trustor's name or its
own name may, but shall not be obligated to, during the continuance of an Event
of Default, perform or cause to perform such act or take such action or pay
such money, and any expenses so incurred by the Deed of Trust Trustee or
Beneficiary and any money so paid by the Deed of Trust Trustee or Beneficiary
shall be a demand obligation owing by Trustor to the Deed of Trust Trustee or
Beneficiary, and the Deed of Trust Trustee or Beneficiary, upon making such
payment, shall be subrogated to all of the rights of the Person receiving such
payment. Each amount due and owing by Trustor to holders of the Secured
Obligations and/or the Deed of Trust Trustee pursuant to this Deed of Trust
shall bear interest from the date of such expenditure or payment
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or other occurrence which gives rise to such amount being owed to the Deed of
Trust Trustee or Beneficiary until paid at the Note Rate, and all such amounts
together with such interest thereon shall be a part of the Secured Obligations
and shall be secured by this Deed of Trust.
(g) Name of Trustor. Trustor does not do business with respect
to the Mortgaged Property under any name other than Pioneer Chlor Alkali
Company, Inc.
(h) Operation by Third Parties. To the extent any of the
Mortgaged Property is operated by a party or parties other than Trustor,
Trustor's covenants as expressed in this Section IV are modified to require
that Trustor use its best efforts (including without limitation the reasonable
exercise of all rights and remedies as are available to Trustor) to obtain
compliance with such covenants by the operator or operators of the Mortgaged
Property.
(i) Compliance with Laws. The Chlor Alkali Plant complies
in all material respects with all local zoning, land use, setback and other
development, use and occupancy requirements of governmental authorities except
for possible nonconforming uses or violations which do not and will not
materially interfere with the present use, operation or maintenance thereof as
now used, operated or maintained.
(j) Payment of Taxes, Insurance Premiums, Assessments;
Compliance with Law and Insurance Requirements. (i) Unless contested in
accordance with the provisions of subsection IV(j)(v) hereof, Trustor shall pay
and discharge or cause to be paid and discharged, from time to time when the
same shall become due, all real estate and other taxes, special assessments,
levies, permits, inspection and license fees, all premiums for insurance, all
water and sewer rents and charges, and all other public charges imposed upon or
assessed against the Mortgaged Property or any part thereof or upon the
revenues, rents, issues, income and profits of the Mortgaged Property,
including, without limitation, those arising in respect of the occupancy, use
or possession thereof.
(ii) During the continuance of an Event of Default, Trustor shall
deposit with Beneficiary, on the first day of each month, an amount reasonably
estimated by Trustor to be equal to
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one-twelfth (1/12th) of the annual taxes, assessments and other items required
to be discharged by Trustor under subsection IV(j)(i) and amounts reasonably
estimated by Trustor to be necessary to maintain the insurance coverages
contemplated in subsection IV(l) below, which estimates shall not be less than
one-twelfth (1/12th) of the annual taxes, assessments, insurance premiums and
other items required to be discharged by Trustor during the year immediately
preceding the year during which such Event of Default occurred. Such amounts
shall be held by Beneficiary without interest to Trustor and applied to the
payment of each obligation in respect of which such amounts were deposited, in
such order or priority as Beneficiary shall determine, on or before the date on
which such obligation would become delinquent. If at any time the amounts so
deposited by Trustor shall, in Beneficiary's judgment, be insufficient (when
added to the installments anticipated to be paid thereafter) to discharge any
of such obligations when due, Trustor shall, immediately upon demand, deposit
with Beneficiary such additional amounts as may be requested by Beneficiary.
Nothing contained in this subsection IV(j) shall affect any right or remedy of
the Deed of Trust Trustee or Beneficiary under any provision of this Deed of
Trust or of any statute or rule of law to pay any such amount from its own
funds (provided, however, that neither the Deed of Trust Trustee nor
Beneficiary shall in any event be obligated to pay any of such amounts from its
own funds) and to add the amount so paid, together with interest at the Note
Rate, to the Secured Obligations, or relieve Trustor of its obligations to make
or provide for the payment of the annual taxes, assessments and other charges
required to be discharged by Trustor under subsection IV(j)(i). Trustor hereby
grants to Beneficiary a security interest in all sums held pursuant to this
subsection IV(j)(ii) to secure payment and performance of the Secured
Obligations. During the continuance of any Event of Default, Beneficiary may
apply all or any part of the sums held pursuant to this subsection IV(j)(ii) to
payment and performance of the Secured Obligations in accordance with the
provisions of the Intercreditor Agreement. Trustor shall redeposit with
Beneficiary an amount equal to all amounts so applied as a condition to the
cure, if any, of such Event of Default, in addition to fulfillment of any other
required conditions.
(iii) Unless contested in accordance with the provisions of
subsection IV(j)(v), Trustor shall timely pay (or obtain a bond in the amount
of) all lawful claims and demands of
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mechanics, materialmen, laborers, warehousemen, employees, suppliers,
government agencies administering worker's compensation insurance, old age
pensions and social security benefits and all other claims, judgments, demands
or amounts of any nature which, if unpaid or not bonded, could result in or
permit the creation of a Lien (other than an Excepted Lien) on the Mortgaged
Property or any part thereof or the Rents arising therefrom, or which might
result in forfeiture of all or any part of the Mortgaged Property.
(iv) Trustor shall maintain, or cause to be maintained, in full force
and effect, all permits, certificates, authorizations, consents, approvals,
registrations, filings, licenses, franchises or other instruments now or
hereafter required by any Governmental Authority to operate or use and occupy
the Chlor Alkali Plant and the Equipment for its intended uses (collectively,
the "Permits"; each, a "Permit"), unless the failure to maintain such Permits
would not individually or in the aggregate have a Material Adverse Effect.
Trustor represents that, to its knowledge and subject to those requirements for
notice, approval or reissuance set forth by applicable law, none of the Permits
will be subject to cancellation, forfeiture or any limitation on the scope
thereof solely by virtue of the execution of this Deed of Trust or the
foreclosure of the Lien hereof. Unless contested in accordance with the
provisions of subsection IV(j)(v), Trustor shall comply promptly with, or cause
prompt compliance with, all requirements set forth in the Permits and all
Governmental Requirements applicable to all or any part of the Mortgaged
Property or the condition, use or occupancy of all or any part thereof or any
recorded deed of restriction, declaration, covenant running with the land or
otherwise, now or hereafter in force unless the compliance therewith would not
individually or in the aggregate have a Material Adverse Effect. Trustor shall
not initiate or consent to any change in the zoning, subdivision or any other
use classification of the Land, if such action could have a material adverse
effect on the Lien of this Deed of Trust or materially impair the present use
and operation of the Mortgaged Property or materially impair Beneficiary's
rights or benefits hereunder, without the prior written consent of Beneficiary.
(v) Trustor may at its own expense contest the amount or
applicability of any of the obligations described in subsections IV(j)(i),
IV(j)(iii) and IV(j)(iv) by appropriate
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legal proceedings, prosecution of which operates to prevent the collection or
enforcement thereof or the sale or forfeiture of the Mortgaged Property or any
part thereof to satisfy such obligations; provided, however, that (A) any such
contest shall be conducted in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and (B) in connection with such
contest, Trustor shall have made provision for the payment or performance of
such contested obligation on Trustor's books if and to the extent required by
generally accepted accounting principles then utilized by Trustor in the
preparation of its financial statements, or shall have deposited with
Beneficiary a sum sufficient to pay and discharge such obligation and
Beneficiary's estimate of all interest and penalties related thereto.
Notwithstanding the foregoing provisions of this subsection IV(j)(v), (A) no
contest of any such obligations may be pursued by Trustor if such contest would
expose the Deed of Trust Trustee, Beneficiary, or any other Secured Party to
any possible criminal liability or, unless Trustor shall have furnished an
Additional Undertaking (as hereinafter defined) therefor satisfactory to the
Deed of Trust Trustee, Beneficiary, or such other Secured Party, as the case
may be, any civil liability for failure to comply with such obligations and (B)
if at any time payment or performance of any obligation contested by Trustor
pursuant to this subsection IV(j)(v) shall become necessary to prevent the
delivery of a tax or similar deed conveying the Mortgaged Property or any
portion thereof because of nonpayment or nonperformance, Trustor shall pay or
perform the same in sufficient time to prevent the delivery of such tax or
similar deed.
(vi) Trustor shall not in its use and occupancy of the Chlor Alkali
Plant or the Equipment (including, without limitation, in the making of any
Alteration) take any action that would cause the termination, revocation or
denial of any insurance coverage required to be maintained under this Deed of
Trust or that pursuant to written notice from any applicable insurer, would be
the basis for a defense to any claim under any insurance policy maintained in
respect of the Chlor Alkali Plant or the Equipment and Trustor shall otherwise
comply in all material respects with the requirements of any insurer that
issues a policy of insurance in respect of the Chlor Alkali Plant or the
Equipment.
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(vii) Trustor shall, promptly upon receipt of any written notice
regarding any failure by Trustor to pay or discharge any of the obligations
described in subsection IV(j)(i) or (vi), furnish a copy of such notice to
Beneficiary. Trustor shall, promptly upon receipt of any written notice
regarding any failure by Trustor to pay or discharge any of the obligations
described in subsection IV(j)(iii) or (iv), furnish a copy of such notice to
Beneficiary, if such failure would have a Material Adverse Effect.
(k) Certain Tax Law Changes. In the event of the passage after
the date of this Deed of Trust of any law deducting from the value of real
property, for the purpose of taxation, amounts in respect of any Lien thereon
or changing in any way the laws for the taxation of deeds of trust or debts
secured by deeds of trust for state or local purposes or the manner of the
collection of any such taxes, and imposing a new tax, either directly or
indirectly, on this Deed of Trust or the interest of any Secured Party in any
Mortgaged Property (other than income, franchise or similar taxes imposed on
such Secured Party), Trustor shall promptly pay such Secured Party such amount
or amounts as may be necessary from time to time to pay such tax.
(l) Required Insurance Policies. (i) Trustor shall maintain,
or cause to be maintained, in full force and effect the following insurance
coverages in respect of the Chlor Alkali Plant and the Equipment:
(A) Physical hazard insurance on an "all risk" basis covering
hazards commonly covered by fire and extended coverage, lightning,
civil commotion, hail, riot, strike, water damage, sprinkler leakage,
collapse and malicious mischief, in an amount equal to the full
replacement cost of the Improvements and all Equipment, with such
deductibles as would be maintained by a prudent operator of property
similar in use and configuration to the Chlor Alkali Plant and located
in the locality where the Chlor Alkali Plant is located. "Full
replacement cost" means the cost of construction to replace the
Improvements and the Equipment, exclusive of depreciation, excavation,
foundation and footings, as determined from time to time by a proper
officer of Trustor in consultation with its insurance company or
insurance agent, as appropriate;
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(B) Comprehensive general liability insurance against claims
for bodily injury, death or property damage occurring on, in or about
the Chlor Alkali Plant and any adjoining streets, sidewalks and
passageways and covering any and all claims, including, without
limitation, all legal liability, subject to customary exclusions, to
the extent insurable, imposed upon Beneficiary or any Secured Party
and all court costs and attorneys' fees, arising out of or connected
with the possession, use, leasing, operation or condition of the Chlor
Alkali Plant, with policy limits and deductibles in such amounts as
would be maintained by a prudent operator of property similar in use
and configuration to the Chlor Alkali Plant and located in the
locality where the Chlor Alkali Plant is located;
(C) Workers' compensation insurance as required by the laws of
the State to protect Trustor against claims for injuries sustained in
the course of employment at the Chlor Alkali Plant;
(D) Comprehensive boiler and machinery insurance to cover
sudden and accidental breakdown, including but not limited to,
explosion of any boilers and machinery located on the Chlor Alkali
Plant or comprising any Equipment, with policy limits and deductibles
in such amounts as would be maintained by a prudent operator of
property similar in use and configuration to the Chlor Alkali Plant
and the Equipment and located in the locality where the Chlor Alkali
Plant is located;
(E) Comprehensive automobile liability insurance policy
against claims for bodily injury, death and property damage covering
all owned, leased, non-owned and hired motor vehicles, including
loading and unloading in such amounts as would be maintained by a
prudent operator of property similar in use and configuration to the
Chlor Alkali Plant and the Equipment and located in the locality where
the Chlor Alkali Plant is located;
(F) Business interruption insurance on an annual basis in
amounts not less than the projected gross profit of the Chlor Alkali
Plant during the applicable twelve-month period but in no event less
than the amount necessary to pay the fixed charges and other expenses
of owning, operating and maintaining the Mortgaged Property for the
same period;
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(G) To the extent not otherwise covered by the insurance
required under clauses (A) and (B) of this subsection IV(l)(i), during
the performance of any alterations, renovations, repairs, restorations
or construction, broad form Builders Risk Insurance on an all-risk
completed value basis; and
(H) Such other insurance, against such risks and with policy
limits and deductibles in such amounts as would be maintained by a
prudent operator of property similar in use and configuration to the
Chlor Alkali Plant and located in the locality in which the Chlor
Alkali Plant is located.
(ii) Trustor may maintain the coverages required by this
subsection IV(l) under blanket policies covering the Chlor Alkali Plant and
other locations owned or operated by Trustor if the terms of such blanket
policies otherwise comply with the provisions of this subsection IV(l) and
contain specific coverage allocations in respect of the Chlor Alkali Plant
determined in accordance with the provisions of this subsection IV(l). All
insurance policies in respect of the coverages required by subsections
IV(l)(i)(A), IV(l)(i)(D), IV(l)(i)(G) and, if applicable, IV(l)(i)(H) shall be
in amounts at least sufficient to prevent coinsurance liability and all losses
thereunder shall be payable to Beneficiary, as loss payee, subject to the terms
of the Intercreditor Agreement, pursuant to a standard noncontributory New York
mortgage endorsement or local equivalent, and each such policy shall, to the
extent obtainable at commercially reasonable costs, (A) include effective
waivers (whether under the terms of such policy or otherwise) by the insurer of
all claims for insurance premiums against all loss payees and named insureds
other than Trustor and all rights of subrogation against any named insured, and
(B) provide that any losses thereunder shall be payable notwithstanding (1) any
act, failure to act, negligence of, or violation or breach of warranties,
declarations or conditions contained in such policy by Trustor or Beneficiary
or any other named insured or loss payee, (2) the occupation or use of the
Chlor Alkali Plant or the Equipment for purposes more hazardous than permitted
by the terms of the policy, (3) any foreclosure or other proceeding or notice
of sale relating to the Chlor Alkali Plant or the Equipment or
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(4) any change in the title to or ownership or possession of the Chlor Alkali
Plant or the Equipment; provided, however, that (with respect to items
contemplated in clauses (3) and (4) above) any notice requirements of the
applicable policies are satisfied. All insurance policies in respect of the
coverages required by subsections IV(l)(i)(B), IV(l)(i)(E) and, if applicable,
IV(l)(i)(H) shall name Beneficiary as an additional insured. Each policy of
insurance required under this subsection IV(l) shall provide that (A) notices
of any failure by Trustor to pay any insurance premium in respect thereof, be
furnished to Beneficiary contemporaneously with any such notice given to
Trustor and (B) it may not be cancelled or otherwise terminated without at
least twenty (20) days' prior written notice to Beneficiary and shall permit
Beneficiary to pay any premium therefor within twenty (20) days after receipt
of any notice stating that such premium has not been paid when due. The policy
or policies of such insurance or certificates of insurance evidencing the
required coverages and all renewals or extensions thereof shall be delivered to
Beneficiary upon receipt by Trustor. Settlement of any claim under any of the
insurance policies referred to in this subsection IV(l) (other than the
insurance contemplated in clause(C) of this subsection IV(l)(i)) which in
Trustor's reasonable judgment involves loss of $1,000,000 or more, shall
require the prior approval of Beneficiary (acting pursuant to the provisions of
the Intercreditor Agreement) and Trustor shall use its best efforts to cause
each such insurance policy to contain a provision to such effect.
(iii) At least fifteen (15) days prior to the expiration of
any insurance policy required by this subsection IV(l), Trustor shall deliver
to Beneficiary evidence that such policy or policies shall be renewed or
extended and Trustor shall deliver promptly to Beneficiary after receipt
thereof the policy or policies renewing or extending such expiring policy or
renewal or extension certificates or other evidence of renewal or extension,
together with a receipt showing payment of the premium thereof.
(iv) Trustor shall not purchase additional policies in respect
of the insurance coverages required to be maintained under this subsection
IV(l), unless Beneficiary is included thereon as an additional named insured
and, if applicable, with loss payable to Beneficiary under an endorsement
containing the
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provisions described in subsection IV(l)(ii) and the policy evidencing such
insurance otherwise complies with the requirements of subsection IV(l)(ii).
Trustor immediately shall notify Beneficiary whenever any such separate
insurance policy is obtained and promptly shall deliver to Beneficiary the
policy or certificate evidencing such insurance.
(m) Inspection. Trustor shall permit Beneficiary, by its
agents, accountants and attorneys, to visit and inspect the Mortgaged Property
upon reasonable prior notice at such times as may be reasonably requested by
Beneficiary.
(n) Trustor To Maintain Improvements. Trustor shall not commit
any waste on the Chlor Alkali Plant or with respect to any Equipment or make
any change in the use of the Chlor Alkali Plant or any Equipment. Trustor
represents and warrants that (i) to Trustor's knowledge, the Chlor Alkali Plant
is served by all electric, gas, sewer, water facilities and any other utilities
required or necessary for the current use thereof and any easements or
servitudes necessary to the furnishing of such utility service by Trustor have
been obtained and duly recorded, and (ii) Trustor has access to the Chlor
Alkali Plant from public roads sufficient to allow Trustor and its tenants and
invitees to conduct its and their businesses at the Chlor Alkali Plant as it is
currently conducted. Trustor shall not materially alter the occupancy or use of
the Chlor Alkali Plant without the prior written consent of Beneficiary. Except
as otherwise permitted by the Intercreditor Agreement no Improvements
comprising a portion of the Chlor Alkali Plant may be demolished nor shall any
Equipment be removed without the prior written consent of Beneficiary.
(o) Leases. (i) All of the Leases are valid and effective in
accordance with their respective terms, except that the enforcement thereof may
be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar law affecting or relating to enforcement of creditors' rights
generally, and (ii) general equitable principles. To Trustor's knowledge,
Trustor is not in material breach of or in default (and to Trustor's knowledge,
no event has occurred which with due notice or lapse of time or both, may
constitute such a material breach or default) under any Lease, and no party to
any Lease has given Trustor written notice of or made a claim with respect to
any breach or default, the consequences of which, individually or in the
aggregate, would have a Material Adverse Effect on Trustor.
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(ii) Trustor shall manage and operate the Mortgaged Property
or cause the Mortgaged Property to be managed and operated in a reasonably
prudent manner and, except as otherwise permitted under subsection IV(p), will
not enter into any Lease (or any amendment or modification thereof) or other
agreement subsequent to the date hereof with any Person which, in the
reasonable judgment of Trustor, individually or in the aggregate, would have a
Material Adverse Effect on the value of the property subject thereto.
(iii) Trustor shall not:
(A) receive or collect, or permit the receipt or collection
of, any rental or other payments under any Lease more than one (1)
month in advance of the respective period in respect of which they are
to accrue, except that (a) in connection with the execution and
delivery of any Lease or of any amendment to any Lease, rental
payments thereunder may be collected and received in advance in an
amount not in excess of one (1) month's rent and (b) Trustor may
receive and collect escalation and other charges in accordance with
the terms of each Lease;
(B) assign, transfer or hypothecate (other than to Beneficiary
hereunder or as otherwise permitted under subsection IV(p) of this
Deed of Trust) any rental or other payment under any Lease whether
then due or to accrue in the future, the interest of Trustor as lessor
under any Lease or the rents, issues, revenues, profits or other
income of the Mortgaged Property;
(C) enter into any Lease after the date hereof that does not
contain terms to the effect as follows:
(1) such Lease and the rights of the tenant
thereunder shall be subject and subordinate to the rights of
Beneficiary under and the Lien of this Deed of Trust;
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(2) such Lease has been assigned as collateral
security by Trustor as landlord thereunder to Beneficiary
under this Deed of Trust;
(3) in the case of any foreclosure hereunder, the
rights and remedies of the tenant in respect of any
obligations of any successor landlord thereunder shall be
limited to the equity interest of such successor landlord in
the Chlor Alkali Plant and any successor landlord shall not
(a) be liable for any act, omission or default of any prior
landlord under the Lease or (b) be required to make or
complete any tenant improvements or capital improvements or
repair, restore, rebuild or replace the demised premises or
any part thereof in the event of damage, casualty or
condemnation or (c) be required to pay any amounts to tenant
arising under the Lease prior to such successor landlord
taking possession;
(4) the tenant's obligation to pay rent and any
additional rent shall not be subject to any abatement,
deduction, counterclaim or setoff as against Beneficiary or
any purchaser upon the foreclosure of any portion of the Chlor
Alkali Plant or the giving or granting of a deed in lieu
thereof by reason of a landlord default occurring prior to
such foreclosure, and Beneficiary or such purchaser will not
be bound by any advance payments of rent in excess of one
month or any security deposits unless such security was
actually received; and
(5) the tenant agrees to attorn, at the option of
Beneficiary or any purchaser of the Chlor Alkali Plant, to the
successor owner upon a foreclosure of the Chlor Alkali Plant
or the giving or granting of a deed in lieu thereof; and
(D) terminate or permit the termination of any Lease of space,
accept surrender of all or any portion of the space demised under any
Lease prior to the end of the term thereof or accept assignment of any
Lease to Trustor which, in the reasonable judgment of Trustor,
individually or in the aggregate, would have a Material Adverse Effect
or materially impair the Lien of this Deed of Trust therein unless:
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<PAGE> 24
(1) the tenant under such Lease has not paid the
equivalent of two months' rent and Trustor has made reasonable
efforts to collect such rent; or
(2) Trustor shall deliver to Beneficiary an Officers'
Certificate to the effect that Trustor has entered into a new
Lease (or Leases) for the space covered by the terminated or
assigned Lease with a term (or terms) which expire(s) no
earlier than the date on which the terminated or assigned
Lease was to expire (excluding renewal options), and with a
tenant (or tenants) having a creditworthiness (as reasonably
determined by Trustor) sufficient to pay the rent and other
charges due under the new Lease (or Leases), and the tenant(s)
shall have commenced paying rent, including, without
limitation, all operating expenses and other amounts payable
under the new Lease (or Leases), without any abatement or
concession, in an amount at least equal to the amount which
would have then been payable under the terminated or assigned
Lease.
(iv) Trustor timely shall perform and observe all the terms,
covenants and conditions required to be performed and observed by Trustor under
each Lease and will not engage in any conduct in respect of any Lease which
would have individually or in the aggregate a Material Adverse Effect or
materially impair the Lien of this Deed of Trust or the security interest
created hereby. Trustor promptly shall notify Beneficiary of the receipt of any
notice from any lessee under any Lease claiming that Trustor is in material
default in the performance or observance of any of the terms, covenants or
conditions thereof to be performed or observed by Trustor and will cause a copy
of each such notice to be delivered promptly to Beneficiary.
(p) Transfer Restrictions. Except as otherwise permitted by
the Intercreditor Agreement, Trustor shall not, without the prior written
consent of Beneficiary, further mortgage, encumber, hypothecate, sell, convey
or assign all or any part of the Mortgaged Property or suffer any of the
foregoing to occur by operation of law or otherwise (each a "Transfer");
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provided, however, Trustor may so encumber the Mortgaged Property to the extent
such encumbrances are of the kind listed in clause (e) of the definition of
"Excepted Liens". Any proceeds of such permitted Transfer shall be deemed
Collateral Proceeds (as such term is defined in the Indenture) and are hereby
assigned and shall be paid to Beneficiary to be held in the Collateral Account
and disbursed pursuant to the Intercreditor Agreement.
(q) Destruction; Condemnation.
(i) Destruction; Insurance Proceeds. If there shall occur any
damage to, or loss or destruction of, the Improvements and Equipment, or any
part of any thereof (each, a "Destruction"), Trustor shall promptly send to
Beneficiary a notice setting forth the nature and extent of such Destruction.
The proceeds of any insurance payable in respect of any such Destruction are
hereby assigned and shall be paid to Beneficiary to be held in the Collateral
Account; provided, however, that so long as no Event of Default shall have
occurred and be continuing, if such proceeds are in an amount less than
$1,000,000, such proceeds shall be paid directly to Trustor. All insurance
proceeds paid to Beneficiary pursuant to this subsection, less the amount of
any expenses incurred in litigating, arbitrating, compromising or settling any
claim arising out of such Destruction (the "Insurance Proceeds"), shall
constitute Trust Moneys and be applied in accordance with the provisions of
subsections IV(q)(iii), IV(q)(iv) and IV(q)(v).
(ii) Condemnation; Assignment of Award. If there shall occur
any taking of the Mortgaged Property or any part thereof, in or by condemnation
or other eminent domain proceedings pursuant to any law, general or special, or
by reason of the temporary requisition of the use or occupancy of the Mortgaged
Property or any part thereof, by any governmental authority, civil or military
(each, a "Taking"), Trustor immediately shall notify Beneficiary upon receiving
notice of such Taking or commencement of proceedings therefor. Beneficiary may
(but shall not be obligated to) participate in any proceedings or negotiations
which might result in any Taking. Beneficiary may be represented by counsel
satisfactory to it at the expense of Trustor. Trustor shall deliver or cause to
be delivered to Beneficiary all instruments requested by it to permit such
participation. Trustor shall in good faith and with due diligence file and
prosecute what would otherwise be
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Trustor's claim for any such award or payment and cause the same to be
collected and paid over to Beneficiary, and hereby irrevocably authorizes and
empowers Beneficiary, in the name of Trustor as its true and lawful
attorney-in-fact or otherwise, during the continuance of an Event of Default to
collect and to receipt for any such award or payment, and, in the event Trustor
fails so to act, to file and prosecute such claim. Trustor shall pay all costs,
fees and expenses incurred by Beneficiary in connection with any Taking and
seeking and obtaining any award or payment on account thereof. Any proceeds,
award or payment in respect of any Taking are hereby assigned and shall be paid
to Beneficiary to be held in the Collateral Account; provided, however, that so
long as no Event of Default shall have occurred and be continuing, if such
proceeds are in an amount less than $1,000,000, such proceeds shall be paid
directly to Trustor. Trustor shall take all steps necessary to notify the
condemning authority of such assignment. Such proceeds, award or payment paid
to Beneficiary, less the amount of any expenses incurred in litigating,
arbitrating, compromising or settling any claim arising out of such Taking
("Net Award"), shall constitute Trust Moneys and be applied in accordance with
the provisions of subsections IV(q)(iii), IV(q)(iv) and IV(q)(v).
(iii) Payment or Restoration. So long as no Event of Default
shall have occurred and be continuing, Trustor shall have the right, at
Trustor's option, to require Beneficiary to apply such Net Award or Insurance
Proceeds to the payment of the Secured Obligations, in accordance with the
Intercreditor Agreement or to perform a restoration (each, a "Restoration") of
the affected portions of the Chlor Alkali Plant and the Equipment. In the event
that Trustor elects to make such payment, such Net Award or Insurance Proceeds
shall be delivered to the Beneficiary to be held as Trust Moneys subject to
withdrawal and application by Beneficiary in accordance with the provisions of
the Intercreditor Agreement. In the event Trustor elects to perform a
Restoration, Trustor shall give written notice ("Restoration Election Notice")
of such election to Beneficiary within twenty (20) business days after the date
that Beneficiary receives the applicable Insurance Proceeds or Net Award, as
the case may be. Trustor shall, within twenty (20) business days following the
date of delivery of a Restoration Election Notice, commence and diligently
continue to perform the Restoration of that portion or portions of the Chlor
Alkali Plant and Equipment subject to such Destruction or affected by such
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Taking so that, upon the completion of the Restoration, the Mortgaged Property
shall be in the same condition and shall be of at least equal utility for its
intended purposes as the Mortgaged Property was immediately prior to such
Destruction or Taking. Trustor shall so complete such Restoration with its own
funds to the extent that the amount of any Net Award or Insurance Proceeds is
insufficient for such purpose. In the event Beneficiary does not receive a
Restoration Election Notice within such twenty (20) business day period,
Beneficiary shall apply such Insurance Proceeds or Net Award to the payment of
the Secured Obligations, in accordance with the provisions of the Intercreditor
Agreement.
(iv) Restoration. In the event a Restoration is to be
performed under this subsection IV(q)(iv), Beneficiary shall not release any
part of the Net Award or the Insurance Proceeds except in accordance with the
provisions of subsection IV(q)(v) and Trustor shall, prior to commencing any
work to effect a Restoration of the Chlor Alkali Plant and the Equipment,
promptly (but in no event later than one-hundred twenty (120) days following
any Destruction or Taking) furnish to Beneficiary:
(A) complete plans and specifications (the "Plans and
Specifications") for the Restoration;
(B) an officers' certificate stating that all permits and
approvals required by law to commence work in connection with the
Restoration have been obtained;
(C) a certificate (an "Architect's Certificate") of an
independent, reputable architect or engineer acceptable to Beneficiary
and licensed in the State (1) stating that the Plans and
Specifications have been reviewed and approved by the signatory
thereto, (2) containing such signatory's estimate (an "Estimate") of
the costs of completing the Restoration, and (3) upon completion of
such Restoration in accordance with the Plans and Specifications, the
utility of the Chlor Alkali Plant and the Equipment will be equal to
or greater than the utility thereof immediately prior to the
Destruction or Taking relating to such Restoration; and
(D) if the Estimate exceeds the Insurance Proceeds or the Net
Award, as the case may be, by $5,000,000 or more, an Additional
Undertaking in an amount equal to not less than the Estimate less the
amount of the Insurance Proceeds or
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the Net Award, as the case may be, then held by Beneficiary for
application toward the cost of such Restoration.
Upon receipt by Beneficiary of each of the items required
pursuant to clauses (A) through (D) above, Beneficiary shall acknowledge
receipt of the Plans and Specifications. Promptly upon such acknowledgment of
receipt by Beneficiary, Trustor shall commence and diligently continue to
perform the Restoration substantially in accordance with such Plans and
Specifications and in material compliance with all Governmental Requirements,
free and clear of all Liens except Excepted Liens. Trustor shall so complete
such Restoration with its own funds to the extent that the amount of any Net
Award or Insurance Proceeds is insufficient for such purpose.
(v) Restoration Advances Following Destruction or Taking of
Mortgaged Property. In the event Trustor performs a Restoration of the Chlor
Alkali Plant and Equipment as provided in subsection IV(q)(iv), Beneficiary
shall apply any Insurance Proceeds or Net Award held by Beneficiary on account
of the Destruction or Taking to the payment of the cost of performing such
Restoration pursuant to the relevant provisions of the Intercreditor Agreement.
In the event there shall be any surplus after application of the Net Award or
the Insurance Proceeds to Restoration of the Chlor Alkali Plant and the
Equipment, such surplus shall become Net Proceeds, as defined in the Indenture
and shall be paid by Beneficiary to the Note Trustee for application in
accordance thereunder; provided, however, that if an Event of Default shall
have occurred and be continuing, such surplus shall be applied by Beneficiary
to the payment of the Secured Obligations, in accordance with Article 6 of the
Intercreditor Agreement. Notwithstanding anything to the contrary herein, if a
Destruction or Taking of all or substantially all of the Mortgaged Property
occurs on a date which is less than 12 months prior to Maturity, as such term
is defined in the Indenture, all Insurance Proceeds and Net Awards shall be
applied to the permanent repayment or prepayment of any Secured Obligations
then outstanding in accordance with the Intercreditor Agreement.
(r) Alterations. Trustor shall not make any material
structural addition, modification or change (each, an "Alteration") to the
Chlor Alkali Plant or the Equipment which would materially diminish the utility
of the Mortgaged Property
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or impair the Lien of this Deed of Trust thereon. Whether or not Beneficiary
has consented to the making of any Alteration, Trustor shall (i) complete each
Alteration promptly, in a good and workmanlike manner and in material
compliance with all applicable local laws, ordinances and requirements and (ii)
pay when due all claims for labor performed and materials furnished in
connection with such Alteration, unless contested in accordance with the
provisions of subsection IV(j)(v).
(s) Hazardous Material.
(i) Except with respect to those matters which would not
reasonably be expected to have a Material Adverse Effect, Trustor holds all
Permits required to permit Trustor to conduct its business in the manner now
conducted and none of the Trustor's operations are being conducted in a manner
that violates in any material respect the terms and conditions under which any
such Permit was granted, including without limitation, under any Environmental
Laws; all such Permits are valid and in full force and effect; and to the
knowledge of Trustor, no suspension, cancellation, revocation or termination of
any such Permit is threatened.
(ii) Except as set forth in the Term Loan Agreement, there are
no material claims, actions, suits, proceedings or investigations pending or to
the knowledge of Trustor, threatened, before any Governmental Authority or
before any arbitrator brought by or against Trustor or with respect to any of
the Mortgaged Property the basis of which is any Environmental Law.
(iii) Trustor shall (or shall cause other parties obligated to
do so under contract or indemnity to) (A) take all commercially reasonable
actions to comply with any and all applicable present and future Environmental
Laws relating to the Chlor Alkali Plant; (B) pay in a timely fashion the cost
of any removal, response measure or corrective action relating to any Hazardous
Materials required by any Environmental Law or any order, regulation, consent
decree or similar agreement or instrument and keep the Mortgaged Property free
of any Lien imposed pursuant to any Environmental Law; (C) take all
commercially reasonable actions to not release, discharge or dispose of any
Hazardous Materials on, under or from the Mortgaged Property in violation of
any Environmental Law;
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(D) apply any insurance proceeds or other sums received by it in respect of the
removal of any Hazardous Material or any other corrective action relating to
any Hazardous Material to such removal or corrective action; and (E) not take,
or fail to take any action with respect to any Environmental Laws or in
connection with any Hazardous Materials that could reasonably be expected to
result in the incurrence of any obligation or liability of any Secured Party.
During the continuance of an Event of Default, in the event Trustor fails to
comply with the covenants in the preceding sentence, Beneficiary may (upon
receipt of an indemnity satisfactory to Beneficiary), in addition to any other
remedies set forth herein, but shall not be obligated to, as trustee for and at
Trustor's sole cost and expense cause to be taken, any remediation, removal,
response or corrective action relating to Hazardous Materials that is required
by Environmental Law and is not being done or contested by Trustor. Any costs
or expenses incurred by Beneficiary for such purpose shall be immediately due
and payable by Trustor and shall bear interest at the Note Rate. Trustor shall
provide to Beneficiary and its agents and employees access to the Mortgaged
Property to take any action required by Environmental Laws, or in connection
with any Hazardous Materials, that could be expected to result in the
incurrence of any obligation or liability of any Secured Party, if Trustor
fails to do so and such action or removal is required under any Environmental
Laws as provided above. Upon written request by Beneficiary, which shall
include a reasonably specific statement of the basis thereof (which shall be
specific to the condition of the Mortgaged Property and the alleged violation
of Environmental Law) and which shall be made not more frequently than once in
any twelve-month period or at any time that Beneficiary is exercising its
remedies under this Deed of Trust, Beneficiary shall have the right (upon
receipt of an indemnity satisfactory to Beneficiary), but shall not be
obligated, at the sole cost and expense of Trustor, to conduct an environmental
audit or review of the Mortgaged Property relating to the specific items as
required in writing or relating to the remedy that Beneficiary is exercising
under this Deed of Trust by persons or firms appointed by Beneficiary, and
Trustor shall cooperate in all reasonable respects in the conduct of such
environmental audit or review, including, without limitation, by providing
reasonable access to the Mortgaged Property and to all records relating
thereto. Such audit or review shall be conducted in a manner that would not
reasonably be expected to impose any additional material obligation upon, or
materially
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increase any obligation of, ICI Delaware Holdings, Inc. or its successors
("ICI") under that certain Purchase Agreement, dated August 29, 1988, between
ICI and Pioneer Chlor Alkali Holdings, Inc., as amended October 25, 1988 (as
amended, the "ICI Agreement"), with respect to Hazardous Materials at the
Mortgaged Property. Trustor shall indemnify and hold the Secured Parties
harmless from and against all loss, cost, damage or expense (including, without
limitation, attorneys' fees) that any Secured Party may sustain by reason of
the assertion against such party of any claim relating to such Hazardous
Materials or actions taken with respect thereto as authorized hereunder.
Nothing contained herein shall result in any Secured Party being deemed an
"owner" or "operator" under applicable Environmental Law.
(iv) Trustor may at its own expense contest the amount or
applicability of any of the obligations described in the first sentence of
subsection IV(s)(iii) by appropriate legal proceedings, prosecution of which
operates to prevent the enforcement thereof; provided, however, that (A) any
such contest shall be conducted in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and (B) in connection with such
contest, Trustor shall have made provision for the payment or performance of
such contested obligation on Trustor's books if and to the extent required by
generally accepted accounting principles then utilized by Trustor in the
preparation of its financial statements, or shall have deposited with
Beneficiary a sum sufficient to pay and discharge such obligation and
Beneficiary's estimate of all interest and penalties related thereto.
Notwithstanding the foregoing provisions of this subsection IV(s)(iv), no
contest of any such obligations may be pursued by Trustor if such contest would
expose the Deed of Trust Trustee, Beneficiary, or any other Secured Party to
any possible criminal liability or, unless Trustor shall have furnished an
Additional Undertaking (as hereinafter defined) therefor satisfactory to the
Deed of Trust Trustee, Beneficiary or such other Secured Party, as the case may
be, any civil liability for failure to comply with such obligations.
(t) Asbestos. Trustor shall not install nor permit to be
installed in the Mortgaged Property friable asbestos or any asbestos-containing
material (collectively, "ACM") except in compliance with all applicable
Environmental Laws respecting such material. With respect to any ACM currently
present in the
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Mortgaged Property, except with respect to matters which would not have a
Material Adverse Effect, Trustor shall comply with all federal, state or local
laws, regulations or orders applicable to ACM located on the Chlor Alkali
Plant, all at Trustor's sole cost and expense. If Trustor shall fail so to
comply with such laws or regulations, Beneficiary may (upon receipt of an
indemnity satisfactory to Beneficiary) during the continuance of an Event of
Default, but shall not be obligated to, in addition to any other remedies set
forth herein, take those steps reasonably necessary to comply with applicable
law, regulations or orders. Any costs or expenses incurred by Beneficiary for
such purpose shall be immediately due and payable by Trustor and bear interest
at the Note Rate. Trustor shall provide to Beneficiary and its agents and
employees reasonable access to the Mortgaged Property upon reasonable prior
notice to remove such ACM if Trustor fails to do so and removal is required
under any Environmental Law as provided for above; provided, however, that
nothing contained herein shall obligate Beneficiary to exercise any rights
under such license. Trustor shall indemnify and hold the Secured Party harmless
from and against all loss, cost, damage and expense that any Secured Party may
sustain as a result of the presence of any ACM and any removal thereof in
compliance with any applicable Environmental Law.
(u) Books and Records; Reports. Trustor shall keep proper
books of record and account, which shall accurately represent the financial
condition of Trustor and the business affairs of Trustor relating to the
Mortgaged Property. Beneficiary and its authorized representatives shall have
the right, from time to time, upon reasonable prior notice to examine the books
and records of Trustor relating to the operation of the Mortgaged Property at
the office of Trustor.
(v) No Claims Against Beneficiary. Nothing contained in this
Deed of Trust shall constitute any consent or request by Beneficiary, express
or implied, for the performance of any labor or services or the furnishing of
any materials or other property in respect of the Chlor Alkali Plant or any
part thereof, nor as giving Trustor any right, power or authority to contract
for or permit the performance of any labor or services or the furnishing of any
materials or other property in such fashion as would permit the making of any
claim against Beneficiary in respect thereof or any claim that any Lien based
on the performance of
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such labor or services or the furnishing of any such materials or other
property is prior to the Lien of this Deed of Trust.
(w) Utility Services. Trustor shall pay, or cause to be paid,
when due all charges for all public or private utility services, all public or
private rail and highway services, all public or private communication
services, all sprinkler systems, and all protective services, any other
services of whatever kind or nature at any time rendered to or in connection
with the Chlor Alkali Plant or any part thereof, shall comply in all material
respects with all contracts relating to any such services, and shall do all
other things reasonably required for the maintenance and continuance of all
such services to the extent required to fulfill the obligations set forth in
subsection IV(n).
(x) Notwithstanding any provisions herein to the contrary,
Trustor shall retain the right, at all times prior to foreclosure (or
deed-in-lieu thereof), to exercise custody and control with respect to actions
to be taken at the Mortgaged Property relating to the environmental condition
thereof, but only to the extent Trustor's exercise of such custody and control
of the Mortgaged Property is necessary for Trustor and/or its affiliates to
retain any and all benefits inuring to Trustor and/or its affiliates under the
indemnification provided by ICI in Section 8.02 of the ICI Agreement.
SECTION V - ASSIGNMENT OF LEASES, RENTS, ISSUES AND PROFITS
(a) Trustor absolutely, presently and irrevocably assigns,
transfers and sets over to Beneficiary and grants to Beneficiary, subject to
the terms and conditions hereof, all Trustor's estate, right, title and
interest (the "Trustor's Interest") in the Leases including, without
limitation, the following:
(i) the immediate and continuing right to receive and collect
Rents payable by all tenants or other parties pursuant to Leases;
(ii) all claims, rights, powers, privileges and remedies of
Trustor, whether provided for in any Lease or arising by statute or at
law or in equity or otherwise, consequent on any failure on the part
of any tenant to perform or comply with any term of any Lease;
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(iii) all rights to take all actions upon the happening of a
default under any Lease as shall be permitted by such Lease or by law,
including, without limitation, the commencement, conduct and
consummation of proceedings at law or in equity; and
(iv) the full power and authority, in the name of Trustor or
otherwise, to enforce, collect, receive and receipt for any and all of
the foregoing and to do any and all other acts and things whatsoever
which Trustor or any landlord is or may be entitled to do under the
Leases.
(b) Any Rents receivable by Beneficiary hereunder, after
payment of all proper costs and charges, shall be applied, in accordance with
the Intercreditor Agreement, to all amounts due and owing with respect to the
Secured Obligations. Beneficiary shall be accountable to Trustor only for Rents
actually received by Beneficiary pursuant to this assignment. The collection of
such Rents and the application thereof shall not cure or waive any Event of
Default or waive, modify or affect notice of an Event of Default or invalidate
any act done pursuant to such notice.
(c) So long as no Event of Default shall have occurred and be
continuing, Trustor shall have a license to collect and apply the Rents and to
enforce the obligations of tenants under the Leases. Immediately upon the
occurrence and during the continuance of any Event of Default, the license
granted in the immediately preceding sentence shall cease and terminate, with
or without any notice, action or proceeding. Upon such Event of Default and
during the continuance thereof, Beneficiary may (but shall not be obligated to)
to the fullest extent permitted by the Leases (i) exercise any of Trustor's
rights under the Leases, (ii) enforce the Leases, (iii) demand, collect, sue
for, attach, levy, recover, receive, compromise and adjust, and make, execute
and deliver receipts and releases for all Rents or other payments that may then
be or may thereafter become due, owing or payable with respect to the Leases
and (iv) generally do, execute and perform any other act, deed, matter or thing
whatsoever that ought to be done, executed and performed in and about or with
respect to the Leases, as fully as allowed or authorized by the Trustor's
Interest.
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(d) During the continuance of an Event of Default, Trustor
hereby irrevocably authorizes and directs the tenant under each Lease to pay
directly to, or as directed by, Beneficiary all Rents accruing or due under its
Lease. Trustor hereby authorizes the tenant under each Lease to rely upon and
comply with any notice or demand from Beneficiary for payment of Rents to
Beneficiary and Trustor shall have no claim against any tenant for Rents paid
by such tenant to Beneficiary pursuant to such notice or demand.
(e) Trustor at its sole cost and expense shall enforce all
material provisions of the Leases in accordance with their terms. Neither this
Deed of Trust nor any action or inaction on the part of Beneficiary shall
release any tenant under any Lease, any guarantor of any Lease or Trustor from
any of their respective obligations under the Leases or constitute an
assumption of any such obligation on the part of Beneficiary. No action or
failure to act on the part of Trustor shall adversely affect or limit the
rights of Beneficiary under this Deed of Trust or, through this Deed of Trust,
under the Leases.
(f) All rights, powers and privileges of Beneficiary herein
set forth are coupled with an interest and are irrevocable, subject to the
terms and conditions hereof, and Trustor shall not take any action under the
Leases or otherwise which is inconsistent with this Deed of Trust or any of the
terms hereof and any such action inconsistent herewith or therewith shall be
void. Trustor shall, from time to time, upon request of Beneficiary, execute
all instruments and further assurances and all supplemental instruments and
take all such action as Beneficiary from time to time may reasonably request in
order to perfect, preserve and protect the interests intended to be assigned to
Beneficiary hereby.
(g) Trustor shall not, unilaterally or by agreement,
subordinate, amend, modify, extend, discharge, terminate, surrender, waive or
otherwise change any term of any of the Leases in any manner which would
violate this Deed of Trust. If the Leases shall be amended as permitted hereby,
they shall continue to be subject to the provisions hereof without the
necessity of any further act by any of the parties hereto.
(h) Nothing contained herein shall operate or be construed to
(i) obligate the Deed of Trust Trustee or
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Beneficiary to perform any of the terms, covenants or conditions contained in
the Leases or otherwise to impose any obligation upon the Deed of Trust Trustee
or Beneficiary with respect to the Leases (including, without limitation, any
obligation arising out of any covenant of quiet enjoyment contained in the
Leases in the event that any tenant under a Lease shall have been joined as a
party defendant in any action by which the estate of such tenant shall be
terminated) or (ii) place upon the Deed of Trust Trustee or Beneficiary any
responsibility for the operation, control, care, management or repair of any
portion of the Mortgaged Property.
(i) Beneficiary may also, at any time after an Event of
Default, or pursuant to NRS Section 32.015, under the circumstances described
in NRS Section 40.507, apply to any court of competent jurisdiction for the
appointment of a receiver and Trustor agrees that such appointment shall be
made upon a prima facie showing of a claimed Event of Default without reference
to any offsets or defenses against such Event of Default. Such receiver shall
have all the rights and powers provided to Beneficiary pursuant to this section
or otherwise provided hereunder or by law. Said receiver may borrow monies and
issue certificates therefor. Said certificates shall be a lien on the Mortgaged
Property subordinate only to this Deed of Trust and the Leases; provided,
however, that should any of said certificates be acquired by Beneficiary the
amount thereof shall constitute additional indebtedness secured hereby. Such
receiver may lease all or any portion of the Mortgaged Property on such terms
and for such a term (which may extend beyond the terms of such receiver's
appointment and/or, if Beneficiary so consents, sale of the Mortgaged Property
hereunder) as such receiver may deem appropriate in its sole and absolute
discretion. The entering upon and taking possession of the Mortgaged Property
pursuant to this section and the collection of the Rents, issues and profits
therefrom shall not cure or waive any Event of Default or notice of an Event of
Default hereunder or invalidate any act of Beneficiary pursuant thereto.
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SECTION VI - EVENTS OF DEFAULT
(a) Events of Default. As used in this Deed of Trust,
"Event of Default" shall mean the occurrence of an Event of Default under the
Indenture or the Term Loan Agreement or a breach or violation of the terms of
this Deed of Trust.
(b) Remedies. Upon the occurrence and during the continuance
of any Event of Default, in addition to any other rights and remedies
Beneficiary may have pursuant to this Deed of Trust or as provided by law, and
without limitation, Beneficiary may, subject to the terms of the Intercreditor
Agreement, take such action, without notice or demand, as it deems advisable
and is permitted by law to protect and enforce its rights against Trustor and
in and to the Mortgaged Property, including, but not limited to, the following
actions, each of which may be pursued concurrently or otherwise, at such time
and in such manner as Beneficiary may determine, in its sole discretion,
without impairing or otherwise affecting the other rights and remedies of
Beneficiary, except to the extent otherwise provided by law:
(i) (A) Beneficiary shall have the right and option to proceed
with foreclosure by directing the Deed of Trust Trustee, or its
successors or substitutes in trust, to proceed with foreclosure and to
sell or offer for sale the Mortgaged Property in such manner as
permitted or required by applicable law relating to the sale of real
estate or by the Uniform Commercial Code relating to the sale of
collateral after default by a debtor (as such applicable laws and
Uniform Commercial Code now exist or as may be hereafter amended), or
by any other present or subsequent articles or enactments relating to
the sale of real estate or collateral; provided, however, that nothing
contained in this subsection VI(b)(i) shall be construed so as to
limit in any way the Deed of Trust Trustee's rights to sell the
Mortgaged Property, or any portion thereof, by private sale if, and to
the extent that, such private sale is permitted under the laws of the
State or by public or private sale after entry of a judgment by any
court of competent jurisdiction so ordering.
(B) Trustor agrees to surrender possession of the hereinabove
described Mortgaged Property to the purchaser at the aforesaid sale,
immediately after such sale, in the
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event such possession has not previously been surrendered by Trustor.
Upon receipt of the sale price in the case of a third party purchase
or upon the crediting of the applicable portion of the Secured
Obligations to the sales price if the purchaser is Beneficiary, the
Deed of Trust Trustee is hereby authorized, empowered and directed to
make due conveyance to the purchaser or purchasers, with general
warranty binding upon Trustor and the heirs, successors and assigns of
Trustor. The right of sale hereunder shall not be exhausted by one or
more such sales, and the Deed of Trust Trustee may make other and
successive sales until all of the Mortgaged Property be legally sold
or all of the Secured Obligations shall have been paid. Trustor hereby
irrevocably appoints the Deed of Trust Trustee to be the attorney of
Trustor and in the name and on behalf of Trustor to execute and
deliver any deeds, transfers, conveyances, assignments, assurances and
notices which Trustor ought to execute and deliver and do and perform
any and all such acts and things which Trustor ought to do and perform
under the covenants herein contained and generally, to use the name of
Trustor in the exercise of all or any of the powers hereby conferred
on the Deed of Trust Trustee. Recitals contained in any conveyance
made by the Deed of Trust Trustee to any purchaser at any sale made
pursuant hereto shall conclusively establish the truth and accuracy of
the matters therein treated, including, without limiting the
generality of the foregoing, nonpayment of the unpaid principal sum
of, or the interest accrued on, any of the Secured Obligations after
the same has become due and payable, advertisement and conduct of such
sale in the manner provided herein and appointment of any successor
trustee hereunder. The Deed of Trust Trustee or its successor or
substitute may appoint or delegate any one or more persons as agent to
perform any act or acts necessary or incident to any sale held by the
Deed of Trust Trustee, including the posting of notices and the
conduct of sale, but in the name and on behalf of the Deed of Trust
Trustee, his successor or substitute. If the Deed of Trust Trustee or
his successor or substitute shall have given notice of sale hereunder,
any successor or substitute Deed of Trust Trustee thereafter appointed
may complete the sale and the conveyance of the property pursuant
thereto as if such notice had been given by the successor or
substitute Deed of Trust Trustee conducting the sale.
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(C) Subject to Section 2.2(b) of the Intercreditor Agreement,
without limitation on any other provision contained herein,
Beneficiary may, subject to NRS 107.080, declare all sums secured
hereby immediately due by delivery to the Deed of Trust Trustee of a
written notice of breach and election to sell (which notice the Deed
of Trust Trustee shall cause to be recorded and mailed as required by
law).
(D) After three (3) months shall have elapsed following
recordation of any such notice of breach, the Deed of Trust Trustee
shall sell the property subject hereto at such time and at such place
in the State as the Deed of Trust Trustee, in its sole discretion,
shall deem best to accomplish the objects of these trusts, having
first given notice of such sale as then required by law. In the
conduct of any such sale the Deed of Trust Trustee may act itself or
through any auctioneer, agent or attorney. The place of sale may be
either in the county in which the property to be sold, or any part
thereof, is situated, or at an office of the Deed of Trust Trustee
located in the State.
(1) Upon the request of Beneficiary or if required by
law the Deed of Trust Trustee shall postpone sale of all or
any portion of said property or interest therein by public
announcement at the time fixed by said notice of sale, and
shall thereafter postpone said sale from time to time by
public announcement at the time previously appointed.
(2) At the time of sale so fixed, the Deed of Trust
Trustee shall sell the property so advertised or any part
thereof or interest therein either as a whole or in separate
parcels, as Beneficiary may determine in its sole and absolute
discretion, to the highest bidder for cash in lawful money of
the United States, payable at time of sale, and shall deliver
to such purchaser a deed or deeds or other appropriate
instruments conveying the property so sold, but without
covenant or warranty, express or implied. Beneficiary and the
Deed of Trust Trustee may bid and purchase at such sale. To
the extent of the Secured Obligations, Beneficiary need not
bid for cash at any sale of all or any portion of the
Mortgaged Property pursuant hereto, but the amount of any
successful bid by Beneficiary shall be applied
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in reduction of the Secured Obligations. Trustor hereby
agrees, if it is then still in possession, to surrender,
immediately and without demand, possession of said property to
any purchaser.
(ii) (A) Upon the occurrence and during the continuance
of any Event of Default, the Deed of Trust Trustee or Beneficiary
shall have the right and power to proceed by a suit or suits in equity
or at law, whether for the specific performance of any covenant or
agreement herein contained or in aid of the execution of any power
herein granted, or for any foreclosure hereunder or for the sale of
the Mortgaged Property under the judgment or decree of any court or
courts of competent jurisdiction, or for the appointment of a receiver
pending any foreclosure hereunder or the sale of the Mortgaged
Property under the order of a court or courts of competent
jurisdiction or under executory or other legal process, or for the
enforcement of any other appropriate legal or equitable remedy. Any
money advanced by the Deed of Trust Trustee and/or Beneficiary in
connection with any such receivership shall be a demand obligation
(which obligation Trustor hereby expressly promises to pay) owing by
Trustor to the Deed of Trust Trustee and/or Beneficiary and shall bear
interest from the date of making such advance by the Deed of Trust
Trustee and/or Beneficiary until paid at the Note Rate.
(B) Trustor agrees to the full extent that it lawfully may,
that, in case one or more of the Events of Default shall have occurred
and shall not have been remedied, then, and in every such case, the
Deed of Trust Trustee or Beneficiary shall have the right and power to
enter into and upon and take possession of all or any part of the
Mortgaged Property in the possession of Trustor, its successors or
assigns, or its or their agents or servants, and may exclude Trustor,
its successors or assigns, and all persons claiming under Trustor, and
its or their agents or servants wholly or partly therefrom; and,
holding the same, the Deed of Trust Trustee may use, administer,
manage, operate and control the Mortgaged Property and conduct the
business thereof to the same extent as Trustor, its successors or
assigns, might at the time do and may exercise all rights and powers
of Trustor, in the name, place and stead of Trustor, or otherwise as
the Deed of Trust Trustee shall deem best. All
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costs, expenses and liabilities of every character incurred by the
Deed of Trust Trustee and/or Beneficiary in administering, managing,
operating, and controlling the Mortgaged Property shall constitute a
demand obligation (which obligation Trustor hereby expressly promises
to pay) owing by Trustor to the Deed of Trust Trustee and/or
Beneficiary and shall bear interest from date of expenditure until
paid at the Note Rate, all of which shall constitute a portion of the
Secured Obligations and shall be secured by this Deed of Trust and by
any other instrument securing the Secured Obligations. In connection
with any action taken by the Deed of Trust Trustee and/or Beneficiary
pursuant to this subsection (ii), the Deed of Trust Trustee and/or
Beneficiary shall not be liable for any loss sustained by Trustor
resulting from any act or omission of the Deed of Trust Trustee and/or
Beneficiary in administering, managing, operating or controlling the
Mortgaged Property, including a loss arising from the ordinary
negligence of the Deed of Trust Trustee and/or Beneficiary, unless
such loss is caused by its own gross negligence or willful misconduct
and bad faith, nor shall the Deed of Trust Trustee and/or Beneficiary
be obligated to perform or discharge any obligation, duty or liability
of Trustor.
(C) Trustor shall and does hereby agree to indemnify the Deed
of Trust Trustee and/or Beneficiary for, and to hold the Deed of Trust
Trustee and/or Beneficiary harmless from, any and all liability, loss
or damage which may or might be incurred by the Deed of Trust Trustee
and/or Beneficiary by reason of this Deed of Trust or the exercise of
rights or remedies hereunder, including a loss arising from the
ordinary negligence of the Deed of Trust Trustee and/or Beneficiary,
except as such liability, loss or damage is occasioned by the gross
negligence or willful misconduct of such party; should the Deed of
Trust Trustee and/or Beneficiary make any expenditure on account of
any such liability, loss or damage, the amount thereof, including
costs, expenses and reasonable attorneys' fees, shall be a demand
obligation (which obligation Trustor hereby expressly promises to pay)
owing by Trustor to the Deed of Trust Trustee and/or Beneficiary and
shall bear interest from the date expended until paid at the Note
Rate, shall be a part of the Secured Obligations and shall be secured
by this Deed of Trust and any other instrument securing the Secured
Obligations.
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(D) Trustor hereby assents to, ratifies and confirms any and
all actions of the Deed of Trust Trustee and/or Beneficiary with
respect to the Mortgaged Property taken under this paragraph (ii).
(iii) Every right, power and remedy herein given to the Deed
of Trust Trustee and Beneficiary shall be cumulative and in addition
to every other right, power and remedy herein specifically given or
now or hereafter existing in equity, at law or by statute; and each
and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time and so often and
in such order as may be deemed expedient by the Deed of Trust Trustee
and Beneficiary, and the exercise, or the beginning of the exercise,
of any such right, power or remedy shall not be deemed a waiver of the
right to exercise, at the same time or thereafter any other right,
power or remedy. No delay or omission by the Deed of Trust Trustee or
Beneficiary in the exercise of any right, power or remedy shall impair
any such right, power or remedy or operate as a waiver thereof or of
any other right, power or remedy then or thereafter existing.
(iv) To the extent permitted under applicable law, Beneficiary
shall have the right (but shall not be obligated to) to become the
purchaser at any sale held by the Deed of Trust Trustee or by any
receiver or public officer, whether by power of sale, judicial
procedure or otherwise, and shall have the right (but shall not be
obligated to) to have all or any part of the Secured Obligations then
owing credited against the amount of the bid made by Beneficiary at
such sale.
(v) Upon any sale, whether under the power of sale hereby
given or by virtue of judicial proceedings, it shall not be necessary
for the Deed of Trust Trustee or any public officer acting under
execution or order of court to have physically present or
constructively in his or her possession any of the Mortgaged Property,
and Trustor hereby agrees to deliver all of such personal property to
the purchasers at such sale on the date of sale, and if it
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should be impossible or impracticable to make actual delivery of such
property, then the title and right of possession to such property
shall pass to the purchaser at such sale as completely as if such
property had been actually present and delivered.
(vi) Upon any sale, whether made under the power of sale
hereby given or by virtue of judicial proceedings, the receipt of the
Deed of Trust Trustee, or of the officer making a sale under judicial
proceedings, shall be a sufficient discharge to the purchaser or
purchasers at any sale for his or her or their purchase money, and
such purchaser or purchasers, his or her or their assigns or personal
representatives, shall not, after paying such purchase money and
receiving such receipt of the Deed of Trust Trustee or of such officer
therefor, be obliged to see to the application of such purchase money,
or be in anywise answerable for any loss, misapplication or
nonapplication thereof.
(vii) (A) Any sale or sales of the Mortgaged Property or any
part thereof, whether under the power of sale herein granted and
conferred or under and by virtue of judicial proceedings, shall
operate to divest all right, title, interest, claim and demand
whatsoever, either at law or in equity, of Trustor of, in and to the
premises and the property sold, and shall be a perpetual bar, both at
law and in equity, against Trustor, its successors and assigns, and
against any and all persons claiming or who shall thereafter claim all
or any of the property sold from, through or under Trustor, its
successors and assigns; and Trustor, if requested by the Deed of Trust
Trustee or Beneficiary to do so, shall join in the execution and
delivery of all proper conveyances, assignments and transfers of the
properties so sold.
(B) The proceeds of any sale of the Mortgaged Property or any
part thereof and all other moneys received by the Deed of Trust
Trustee in any proceedings for the enforcement hereof, whose
application has not elsewhere herein been specifically provided for,
shall be applied first, to the payment of all expenses incurred by the
Deed of Trust Trustee or Beneficiary incident to the enforcement of
this Deed of Trust or any of the Secured Obligations (including,
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without limiting the generality of the foregoing, expenses of any
entry or taking of possession, of any sale, of advertisement thereof,
and of conveyances, and court costs, compensation of agents and
employees and reasonable legal fees), and to the payment of all other
charges, expenses, liabilities and advances incurred or made by the
Deed of Trust Trustee or Beneficiary under this Deed of Trust or in
executing any trust or power hereunder; and then to the payment of the
Secured Obligations in such order and manner as is determined by
Beneficiary in its sole discretion, subject to the terms of the
Intercreditor Agreement.
(C) Beneficiary may resort to any security given by this Deed
of Trust or to any other security now existing or hereafter given to
secure the payment of any of the Secured Obligations secured hereby,
in whole or in part, and in such portions and in such order as may
seem best to Beneficiary in its sole discretion, subject to the terms
of the Intercreditor Agreement, and any such action shall not in
anywise be considered as a waiver of any of the rights, benefits or
liens created by this Deed of Trust.
(D) Trustor agrees, to the full extent that it may lawfully so
agree, that it will not at any time insist upon or plead or in any
manner whatever claim or take the benefit or advantage of any
appraisement, valuation, stay, extension or redemption law now or
hereafter in force, in order to prevent or hinder the enforcement or
foreclosure of this Deed of Trust or the absolute sale of the
Mortgaged Property or the possession thereof by any purchaser at any
sale made pursuant to any provision hereof, or pursuant to the decree
of any court of competent jurisdiction; but Trustor, for itself and
all who may claim through or under it, so far as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Trustor, for itself and all who may claim through or under it, waives
to the extent that it may lawfully do so, any and all right to have
the property included in the Mortgaged Property marshaled upon any
foreclosure of the lien hereof, and agrees that any court having
jurisdiction to foreclose such lien may sell the Mortgaged Property as
an entirety. If any law referred to herein and now in force, of which
Trustor or its successor or successors might take advantage despite
the provisions hereof, shall hereafter be repealed or cease to be in
force,
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such law shall not thereafter be deemed to constitute any part of the
contract herein contained or to preclude the operation or application
of the provisions hereof.
(E) If the proceeds of any sale or other lawful disposition of
the Mortgaged Property by the Deed of Trust Trustee and/or Beneficiary
are insufficient to pay the Secured Obligations, then Trustor shall
pay or cause to be paid any deficiency.
(viii) Without in any manner limiting the generality of any of
the other provisions of this Deed of Trust; (A) some portions of the
goods described or to which reference is made herein are or are to
become fixtures on the land described or to which reference is made
herein; (B) the security interests created hereby under the Uniform
Commercial Code will attach to minerals including oil and gas; (C)
this instrument is to be filed of record in the real estate records as
a financing statement; and (D) Trustor is the record owner of the real
estate or interests in the real estate comprised of the Mortgaged
Property.
(ix) The Mortgaged Property may be sold in one or more parcels
and in such manner and order as Beneficiary, in its sole discretion,
may determine.
(c) Where not inconsistent with paragraph (b) the above,
the following covenants, No., 1; 2 (full replacement value); 3; 4 (20% per
annum); 5; 6; 7 (a reasonable percentage); 8 and 9 of NRS 107.030 are hereby
adopted and made a part of this Deed of Trust.
Beneficiary's exercise of the foregoing remedies will not be
construed to constitute Beneficiary as a mortgagee in possession of the
Mortgaged Property nor to obligate Beneficiary to take any action or to incur
expenses or perform or discharge any obligation, duty or liability of Trustor
under any lease, or for the control, care, management, or repair of the
Mortgaged Property; nor will it operate to make Beneficiary responsible or
liable for any waste committed on the Mortgaged Property by any Person or for
any dangerous or defective condition of the Mortgaged Property, or for any act
or omission relating to the management, upkeep, repair, or control of the
Mortgaged Property that results in loss or injury or death to any Person.
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SECTION VII - THE DEED OF TRUST TRUSTEE
(a) It shall be no part of the duty of the Deed of Trust
Trustee to see to any recording, filing or registration of this Deed of Trust
or any other instrument in addition or supplemental thereto, or to give any
notice thereof, or to see to the payment of or be under any duty in respect of
any tax or assessment or other governmental charge which may be levied or
assessed on the Mortgaged Property, or any part thereof, or against Trustor, or
to see to the performance or observance by Trustor of any of the covenants and
agreements contained herein. The Deed of Trust Trustee shall not be responsible
for the execution, acknowledgment or validity of this Deed of Trust or of any
instrument in addition or supplemental hereto or for the sufficiency of the
security purported to be created hereby, and makes no representation in respect
thereof or in respect of the rights of Beneficiary. The Deed of Trust Trustee
shall have the right to consult with counsel upon any matters arising hereunder
and shall be fully protected in relying as to legal matters on the advice of
counsel. The Deed of Trust Trustee shall not incur any personal liability
hereunder except for the Deed of Trust Trustee's own gross negligence or
willful misconduct; and the Deed of Trust Trustee shall have the right to rely
on any instrument, document or signature authorizing or supporting any action
taken or proposed to be taken by the Deed of Trust Trustee hereunder, believed
by the Deed of Trust Trustee in good faith to be genuine.
(b) The Deed of Trust Trustee may resign by written notice
addressed to Beneficiary (but such resignation shall not be effective until and
unless a successor trustee is appointed by Beneficiary and such successor
trustee accepts the appointment) or be removed at any time with or without
cause by an instrument in writing duly executed on behalf of Beneficiary.
Beneficiary may, at any time, by instrument in writing, appoint a successor or
successors to the Deed of Trust Trustee named herein or acting hereunder, which
instrument, executed and acknowledged by Beneficiary, and recorded in the
appropriate office in the State, shall be conclusive proof of the proper
substitution of such successor trustee, who shall have all the estate, powers,
duties and trusts in the premises vested in or conferred on the original
trustee.
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SECTION VIII - CERTAIN DEFINITIONS
As used herein, the following terms shall have the following
meanings:
"Additional Undertaking" shall mean (a) cash or cash
equivalents or (b) a Surety Bond, an Additional Undertaking Guarantee or an
Additional Undertaking Letter of Credit which is (i) provided by a Person, (ii)
whose long- term unsecured debt is rated at least "AA" (or equivalent) by a
nationally recognized statistical rating agency and (iii) is otherwise
satisfactory to Beneficiary. Additional Undertakings shall be addressed
directly to Beneficiary and shall name Beneficiary as the beneficiary thereof
and the party entitled to make claims thereunder.
"Additional Undertaking Guarantee" shall mean the
unconditional guarantee of payment of any corporation or partnership organized
and existing under the laws of the United States of America or any State or the
District of Columbia or Canada or province thereof that has a long-term
unsecured debt rating satisfactory to Beneficiary at the time such guarantee is
delivered, given to Beneficiary, accompanied by an opinion of counsel to such
guarantor to the effect that such guarantee has been duly authorized, executed
and delivered by such guarantor and constitutes the legal, valid and binding
obligation of such guarantor enforceable against such guarantor by Beneficiary
in accordance with its terms, subject to customary exceptions at the time for
opinions for such instruments, together with an opinion of counsel to the
effect that, taking into account the purpose under this Deed of Trust for which
such guarantee will be given, such guarantee and accompanying opinion are
responsive to the requirements of this Deed of Trust.
"Additional Undertaking Letter of Credit" shall mean a clean,
irrevocable, unconditional letter of credit in favor of Beneficiary and
entitling Beneficiary to draw thereon in The City of New York issued by a bank
satisfactory to Beneficiary, accompanied by an opinion of counsel to such bank
to the effect that such letter of credit has been duly authorized, executed and
delivered by such bank and constitutes the legal, valid and binding obligation
of such bank enforceable against such bank by Beneficiary in accordance with
its terms subject to customary exceptions at the time for opinions for such
instruments, together with an opinion of counsel to the effect that, taking
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into account the purpose under this Deed of Trust for which such letter of
credit will be given, such letter of credit and accompanying opinion are
responsive to the requirements of this Deed of Trust.
"Collateral Account" shall have the meaning set forth in the
Intercreditor Agreement.
"Environmental Laws" shall mean any and all Governmental
Requirements pertaining to occupational health or the environment in effect in
the State, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation
Act, as amended, and other environmental conservation or protection laws. The
term "oil" shall have the meaning specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings specified
in CERCLA, and the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA; provided, however, that (i) in the event either
OPA, CERCLA or RCRA is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and (ii) to the extent the laws of the State establish a meaning
for "oil", "hazardous substance", "release", solid waste" or "disposal" which
is broader than that specified in either OPA, CERCLA or RCRA, such broader
meaning shall apply with respect to the Mortgaged Property.
"Excepted Liens" shall mean (a) Liens for taxes, assessments
or other governmental charges or levies not yet due or which are being
contested in good faith by appropriate action and for which appropriate
reserves have been maintained; (b) operators', vendors', carriers',
warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction
or other like Liens arising by operation of law in the ordinary course of
business or statutory landlord's liens; (c) any Liens reserved in leases for
rent and for compliance with the terms of the leases
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in the case of leasehold estates, to the extent that any such Lien referred to
in this clause does not materially impair the use of the Mortgaged Property
covered by such Lien for the purposes for which such Mortgaged Property is held
by Trustor or materially impair the value of such Mortgaged Property subject
thereto; (d) the Liens listed on Schedule 1 attached hereto and made a part
hereof; and (e) Liens and encumbrances (other than to secure the payment of
borrowed money or the deferred purchase price of Mortgaged Property or
services), easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any rights of way for the purpose of roads,
pipelines, transmission lines, transportation lines, distribution lines for the
removal of gas, oil, coal or other minerals or timber, and other like purposes,
or for the joint or common use of real estate, rights of way, facilities and
equipment, and defects, irregularities, zoning restrictions and deficiencies in
title to the Mortgaged Property of which in the aggregate do not prevent the
use of the Mortgaged Property for the purposes of which it is currently held by
Trustor or have a Material Adverse Effect on the Companies taken as a whole.
"Governmental Authority" shall include the country, the state,
county, city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such Person
or such Person's Property, and any court, agency, department, commission,
board, bureau or instrumentality of any of them including monetary authorities
which exercises valid jurisdiction over any such Person or such Person's
Property. Unless otherwise specified, all references to Governmental Authority
herein shall mean a Governmental Authority having jurisdiction over, where
applicable, Trustor or any Secured Party.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement, including, without limitation, Environmental Laws,
energy regulations and occupational safety and health standards or controls, of
any Governmental Authority.
"Hazardous Materials" shall mean any pollutants, contaminants,
or industrial, toxic or hazardous substances or wastes.
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"Lien" shall mean any interest in Mortgaged Property owed to,
or a claim by a Person, whether such interest is based on the common law,
statute or contract, and whether such obligation or claim is fixed or
contingent, and including but not limited to the lien or security interest
arising from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting the Mortgaged
Property.
"Material Adverse Effect" shall mean, as to any Person, asset
or Property, a material adverse effect on the business, assets, properties,
condition (financial or other), operations or results of operations of such
Person, asset or Property, which effect is not adequately and effectively
insured or indemnified against by a financially sound insurance company, and
excepting effects arising solely out of general national economic conditions
and/or effects arising solely out of matters affecting the industry in which
such Person, asset or Property conducts business a whole.
"Note Rate" shall mean the rate borne by the Notes.
"NRS" shall mean the Nevada Revised Statutes.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or government or any agency, instrumentality or political
subdivision thereof, or any other form of entity.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Revolving Credit Agreement" shall mean that certain Loan and
Security Agreement dated as of June 17, 1997 among PAAC, as borrower, Bank of
America Illinois, as agent and a lender, and the lenders named therein, as in
effect on the date hereof.
"State" shall mean the state where the Land is located.
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<PAGE> 51
"Surety Bond" shall mean a clean irrevocable surety bond or
credit insurance policy in favor of Beneficiary issued by an insurance company
the claims paying ability rating of which at the time such surety bond or
credit insurance policy is delivered is satisfactory to Beneficiary,
accompanied by an opinion of counsel to such insurance company to the effect
that such surety bond or credit insurance policy has been duly authorized,
executed and delivered by such insurance company and constitutes the legal,
valid and binding obligation of such insurance company enforceable against such
insurance company by Beneficiary in accordance with its terms subject to
customary exceptions at the time for opinions for such instruments, together
with an opinion of counsel to the effect that, taking into account the purpose
under this Deed of Trust for which such surety bond will be given, such surety
bond and accompanying opinions are responsive to the requirements of this Deed
of Trust.
"Trust Money" shall mean those certain proceeds set forth in
subsections IV(q)(i) and IV(q)(ii).
SECTION IX - MISCELLANEOUS
(a) Choice of Law. The terms and provisions of this Deed of
Trust and the enforcement hereof shall be governed by and construed in
accordance with the laws of the state where the Land is located.
(b) Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of the Deed of Trust Trustee and
Beneficiary in order to effectuate the provisions hereof, and the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of any such provision in any other jurisdiction.
If any part of the Secured Obligations cannot be lawfully secured by this Deed
of Trust or if any part of the Mortgaged Property cannot be lawfully subject to
the Lien and security interest hereof to the full extent of such Secured
Obligations, then all payments made shall be applied on said Secured
Obligations first in discharge of that portion thereof which is not secured by
this Deed of Trust.
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<PAGE> 52
(c) Construction of this Instrument. This instrument may be
construed as a mortgage, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, fixture filing, pledge, financing statement,
hypothecation or contract, or any one or more of them, in order fully to
effectuate the Lien hereof and the purposes and agreements herein set forth.
(d) Captions; Gender and Number. The captions and section
headings of this Deed of Trust are for convenience only and are not to be used
to define the provisions hereof. The term "Beneficiary" as used herein shall
mean and include any successor(s) to United States Trust Company of New York in
its capacity as Collateral Agent under the Intercreditor Agreement. The terms
used to designate the Deed of Trust Trustee, Beneficiary and Trustor shall be
deemed to include the respective heirs, legal representatives, successors and
assigns of such parties. All terms contained herein shall be construed,
whenever the context of this Deed of Trust so requires, so that the singular
includes the plural and so that the masculine includes the feminine.
(e) Rights of Beneficiary. The Lien, security interest
and other security rights of Beneficiary hereunder shall not be impaired by any
indulgence, moratorium or release granted by Beneficiary, the Note Trustee or
the Term Loan Agent, including, but not limited to, any renewal, extension or
modification with respect to any Secured Obligation, or any surrender,
compromise, release, renewal, extension, exchange or substitution which
Beneficiary may grant in respect of the Mortgaged Property, or any part thereof
or any interest therein, or any release or indulgence granted to any endorser,
guarantor or surety of any Secured Obligation.
(f) Waiver of an Event of Default. Beneficiary may waive
any Event of Default without waiving any other prior or subsequent Event of
Default. Beneficiary may remedy any Event of Default without waiving the Event
of Default remedied. No single or partial exercise by Beneficiary of any right,
power or remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy hereunder may
be exercised at any time and from time to time. No modification or waiver of
any provision hereof nor consent to any departure by Trustor therefrom shall in
any event be effective unless the same shall be in writing and signed by
Beneficiary and
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<PAGE> 53
then such waiver or consent shall be effective only in the specific instances,
for the purpose for which given and to the extent therein specified. No notice
to nor demand on Trustor in any case shall of itself entitle Trustor to any
other or further notice of demand in similar or other circumstances. Acceptance
by Beneficiary of any payment in an amount less than the amount then due on any
Secured Obligations shall be deemed an acceptance on account only and shall not
in any way excuse the existence of an Event of Default hereunder.
(g) Successor Trustor. In the event the ownership of the
Mortgaged Property or any part thereof becomes vested in a person other than
Trustor, Beneficiary may, without notice to Trustor, deal with such successor
or successors in interest with reference to this Deed of Trust and the Secured
Obligations in the same manner as with Trustor, without in any way vitiating or
discharging Trustor's liability hereunder or for the payment of the Secured
Obligations or performance of the obligations secured hereby. No transfer of
the Mortgaged Property, no forbearance on the part of Beneficiary and/or any
Secured Party, and no extension of the time for the payment of the Secured
Obligations, in whole or in part, shall affect the liability of Trustor or any
other person hereunder or for obligations secured hereby.
(h) Outstanding Lien, Security Interest, Charge or Prior
Encumbrance. To the extent that proceeds of the Notes or proceeds of advances
under the Term Loan Agreement are used to pay indebtedness secured by any
outstanding Lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced at Trustor's request, and
Beneficiary shall be subrogated to any and all rights, security interests and
Liens owned by any owner or holder of such outstanding Liens, security
interests, charges or encumbrances, irrespective of whether said Liens,
security interests, charges or encumbrances are released, and it is expressly
understood that, in consideration of the payment of such indebtedness, Trustor
hereby waives and releases all demands and causes of action for offsets and
payments to, upon and in connection with the said indebtedness.
(i) Covenants Running with the Land. The covenants and
agreements herein contained shall constitute covenants running with the land
and interests covered or affected hereby
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<PAGE> 54
and shall be binding upon the heirs, legal representatives, successors and
assigns of the parties hereto.
(j) Notices. All notices requests, demands and other
communications provided for or permitted hereunder shall be in writing
(including telex and telecopy communications) and shall be sent by mail, telex,
telecopier or hand delivery:
If to Trustor, to the following address:
4200 NationsBank Center
700 Louisiana Street
Suite 4200
Houston, Texas 77002
Attention: Vice President, General Counsel
and Secretary
If to Beneficiary, to the following address:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
If to the Deed of Trust Trustee, to the following address:
First American Title Company of Nevada
3760 Pecos-McLeod, Suite # 7
Las Vegas, Nevada 89121
All such notices, requests, demands and communications shall be deemed to have
been duly given or made, when delivered by hand or five (5) business days after
being deposited in the mail, postage paid, when telexed answer back received
and when telecopied, receipt acknowledged. Any party hereto may change its
address set forth in this subsection (j) by notice to the other parties given
in accordance with the provisions of this subsection (j).
(k) Beneficiary's Consent. Except where otherwise
expressly provided herein, in any instance hereunder where the approval,
consent or the exercise of judgment of Beneficiary is required, the granting or
denial of such approval or consent and the exercise of such judgment shall be
within the sole discretion
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<PAGE> 55
of Beneficiary, and Beneficiary shall not, for any reason or to any extent, be
required to grant such approval or consent or exercise such judgment in any
particular manner, regardless of the reasonableness of either the request or
Beneficiary's judgment.
(l) Foreclosure. In the event there is a foreclosure sale
hereunder, and at the time of such sale Trustor or Trustor's successors or
assigns or any other person claiming any interest in the Mortgaged Property by,
through or under Trustor, are occupying or using the Mortgaged Property or any
part thereof, each and all shall immediately become the tenant of the purchaser
at such sale, which tenancy shall be a tenancy from day to day, terminable at
the will of either the landlord or tenant, or at a reasonable rental per day
based upon the value of the property occupied, such rental to be due daily to
the purchaser; to the extent permitted by applicable law, the purchaser at such
sale shall, notwithstanding any language herein apparently to the contrary,
have the sole option to demand immediate possession following the sale or to
permit the occupants to remain as tenants at will. In the event the tenant
fails to surrender possession of said property upon demand, the purchaser shall
be entitled to institute and maintain a summary action for possession of the
Mortgaged Property (such as an action for forcible entry and detainer) in any
court having jurisdiction. The purchaser or purchasers at foreclosure shall
have the right to affirm or disaffirm any lease of the Mortgaged Property or
any part thereof.
(m) Reimbursement. Trustor shall reimburse the Deed of
Trust Trustee and Beneficiary, upon demand, for all fees, costs and expenses
incurred by the Deed of Trust Trustee and Beneficiary in connection with the
administration and enforcement of this Deed of Trust. If any action or
proceedings, including, without limitation, bankruptcy or insolvency
proceedings, is commenced to which action or proceeding the Deed of Trust
Trustee or Beneficiary is made a party or in which it becomes necessary to
defend or uphold the Lien or validity of this Deed of Trust, Trustor shall,
upon demand, reimburse the Deed of Trust Trustee and Beneficiary for all
expenses (including, without limitation, attorneys' and agents' fees and
disbursement) incurred by the Deed of Trust Trustee or Beneficiary in such
action or proceedings. In any action or proceeding to foreclose this Deed of
Trust or to recover or collect the Secured Obligations, the
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provisions of law relating to the recovery of costs, disbursements and
allowances shall prevail unaffected by this covenant. Trustor's obligations
under this subsection IX(m) shall survive the satisfaction of this Deed of
Trust and the discharge of Trustor's other obligations hereunder.
(n) Waiver of Stay. (i) Trustor agrees that in the event
that Trustor or any property or assets of Trustor shall hereafter become
subject of a voluntary or involuntary proceeding under the Bankruptcy Code or
Trustor shall otherwise be a party to any federal or state bankruptcy,
insolvency, moratorium or similar proceeding to which the provisions relating
to the automatic stay under Section 362 of the Bankruptcy Code or any similar
provision in any such law is applicable, then, in any such case, whether or not
Beneficiary has commenced foreclosure proceedings under this Deed of Trust,
Beneficiary shall be entitled to relief from any such automatic stay as it
relates to the exercise of any of the rights and remedies (including, without
limitation, any foreclosure proceedings) available to Beneficiary as provided
in this Deed of Trust or in any other document evidencing or securing the
Secured Obligations.
(ii) Beneficiary shall have the right to petition or move
any court having jurisdiction over any proceeding described in subsection
IX(n)(i) for the purposes provided therein, and Trustor agrees (a) not to
oppose any such petition or motion and (b) at Trustor's sole cost and expense,
to assist and cooperate with Beneficiary, as may be requested by Beneficiary
from time to time, in obtaining any relief requested by Beneficiary, including,
without limitation, by filing any such petitions, supplemental petitions,
requests for relief, documents, instruments or other items from time to time
requested by Beneficiary or any such court.
(o) Waiver of Jury Trial. To the extent permitted by law,
Trustor hereby knowingly, voluntarily and intentionally waives any rights it
may have to a trial by jury in the respect of any litigation based hereon, or
directly or indirectly arising out of, under or in connection with, this Deed
of Trust or any course of conduct, course of dealing, statements (whether
verbal or written) or actions of Trustor, the Deed of Trust Trustee or
Beneficiary.
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(p) Counterparts. This instrument may be executed in
several counterparts, all of which are identical. Each of such counterparts
shall for all purposes be deemed to be an original and all such counterparts
shall together constitute but one and the same instrument.
(q) Provisions of the Intercreditor Agreement. Notwithstanding
anything to the contrary contained in this Deed of Trust, it is the
understanding of the parties hereto that any actions by the Deed of Trust
Trustee and/or Beneficiary are subject to the provisions of the Intercreditor
Agreement.
[Signature page follows]
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IN WITNESS WHEREOF, this Deed of Trust has been duly executed
by Trustor as of the date first written above.
Trustor:
PIONEER CHLOR ALKALI COMPANY, INC.
By: /s/ PHILIP J. ABLOVE
--------------------------
Name: Philip J. Ablove
Title: Vice President and
Chief Financial Officer
The name and address of Trustor is:
PIONEER CHLOR ALKALI COMPANY, INC.
700 Louisiana Street, Suite 4200
Houston, Texas 77002
The name and address of Beneficiary is:
UNITED STATES TRUST COMPANY OF NEW YORK
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
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<PAGE> 59
THE STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
This instrument was acknowledged before me on this 17th day of June
1997, by Philip J. Ablove, Vice President and Chief Financial Officer of
Pioneer Chlor Alkali Company, Inc., a Delaware corporation, on behalf of such
corporation.
/s/ CHRISTOPHER TUNG
--------------------------------
Notary Public in and for
The State of New York
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<PAGE> 1
EXHIBIT 4.3(a)
[REVISED EXECUTION COPY]
U.S. $100,000,000
TERM LOAN AGREEMENT,
dated as of June 17, 1997,
among
PIONEER AMERICAS ACQUISITION CORP.,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent for the Lenders,
SALOMON BROTHERS HOLDING COMPANY INC,
as the Documentation Agent for the Lenders,
and
BANK OF AMERICA ILLINOIS,
as the Administrative Agent for the Lenders,
ARRANGED BY
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
<S> <C> <C>
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . 26
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . . 26
1.4. Accounting and Financial Determinations . . . . . . . . . . . . 26
1.5. Use of UCC Terms . . . . . . . . . . . . . . . . . . . . . . . . 26
1.6. Officers' Certificates and Opinions . . . . . . . . . . . . . . 26
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.1.1. Term Loan Commitments . . . . . . . . . . . . . . . . . . . . . 27
2.1.2. Lenders Not Permitted or Required to Make the Term Loans . . . . 27
2.2. Borrowing Procedures and Funding Maintenance . . . . . . . . . . 27
2.3. Continuation and Conversion Elections . . . . . . . . . . . . . 28
2.4. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.5. Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application . . . . . . . . . . . . 29
3.1.1. Repayments and Prepayments . . . . . . . . . . . . . . . . . . . 29
3.1.2. Application . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2. Interest Provisions . . . . . . . . . . . . . . . . . . . . . . 32
3.2.1. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.2.2. Post-Maturity Rates . . . . . . . . . . . . . . . . . . . . . . 32
3.2.3. Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.3.1. Arrangement, Structuring and Commitment Fees . . . . . . . . . . 33
3.3.2. Administrative Agent Fee . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful . . . . . . . . . . . . . . . . . . . 33
4.2. Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . 33
4.3. Increased LIBO Rate Loan Costs, etc. . . . . . . . . . . . . . . 33
4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . . . 34
4.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.7. Payments, Computations, etc. . . . . . . . . . . . . . . . . . . 35
4.8. Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . 36
4.9. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE V
CONDITIONS TO TERM LOAN EXTENSION
5.1. Resolutions, etc. . . . . . . . . . . . . . . . . . . . . . . . 37
5.2. Delivery of Term Note. . . . . . . . . . . . . . . . . . . . . . 37
5.3. Subsidiary Guaranty. . . . . . . . . . . . . . . . . . . . . . . 37
5.4. Consummation of Acquisition . . . . . . . . . . . . . . . . . . 37
5.5. Completion of Consent Solicitation . . . . . . . . . . . . . . . 37
5.6. Completion of Tender Offer . . . . . . . . . . . . . . . . . . . 37
5.7. Issuance of the Senior Notes . . . . . . . . . . . . . . . . . . 38
5.8. Revolving Credit Agreement. . . . . . . . . . . . . . . . . . . 38
5.9. Transaction Documents . . . . . . . . . . . . . . . . . . . . . 38
5.10. Mortgages. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.11. Additional Security Documents. . . . . . . . . . . . . . . . . . 40
5.12. Existing Intercreditor Agreement. . . . . . . . . . . . . . . . 40
5.13. Intercreditor Agreement. . . . . . . . . . . . . . . . . . . . . 40
5.14. Closing Date Certificates . . . . . . . . . . . . . . . . . . . 40
5.15. Financial Information, etc. . . . . . . . . . . . . . . . . . . 41
5.16. Solvency, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.17. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.18. Material Adverse Change . . . . . . . . . . . . . . . . . . . . 41
5.19. Consents and Approvals, etc. . . . . . . . . . . . . . . . . . . 41
5.20. Reliance Letters . . . . . . . . . . . . . . . . . . . . . . . . 41
5.21. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . 42
5.22. Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . 42
5.23. Satisfactory Legal Form . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc. . . . . . . . . . . . . . . . . . . . . . . . 43
6.2. Due Authorization, Non-Contravention, etc. . . . . . . . . . . . 43
6.3. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
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6.4. Validity and Binding Effect . . . . . . . . . . . . . . . . . . 43
6.5. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.6. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 44
6.7. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.8. Litigation; Contingent Liabilities . . . . . . . . . . . . . . . 44
6.9. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.10. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.11. Partnerships; Joint Ventures . . . . . . . . . . . . . . . . . . 44
6.12. Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.13. Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 45
6.14. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.15. Contracts; Labor Matters . . . . . . . . . . . . . . . . . . . . 45
6.16. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . 46
6.17. Regulations G, U and X . . . . . . . . . . . . . . . . . . . . . 46
6.18. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.19. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.20. Investment Company Act Representation . . . . . . . . . . . . . 47
6.21. Public Utility Holding Company Act Representation . . . . . . . 47
6.22. Environmental and Safety and Health Matters . . . . . . . . . . 47
6.23. Related Agreements and Transaction Documents . . . . . . . . . . 48
6.24. Holding Companies . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 49
7.1.1. Financial Information, Reports, Notices, etc. . . . . . . . . . 49
7.1.2. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . 51
7.1.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . 51
7.1.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.1.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.1.6. Books and Records . . . . . . . . . . . . . . . . . . . . . . . 51
7.1.7. Use of Proceeds, etc. . . . . . . . . . . . . . . . . . . . . . 52
7.1.8. Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . 52
7.1.9. Stock Pledge Agreements . . . . . . . . . . . . . . . . . . . . 52
7.1.10. Concerning the Collateral and the Loan Documents . . . . . . . . 53
7.1.11. Maintenance of Corporate Separateness . . . . . . . . . . . . . 53
7.1.12. Working Capital Line . . . . . . . . . . . . . . . . . . . . . . 54
7.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . 54
7.2.1. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.2.2. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.2.3. Restricted Payments, etc. . . . . . . . . . . . . . . . . . . . 58
7.2.4. Payment Restrictions Affecting Restricted Subsidiaries . . . . . 60
7.2.5. Consolidation, Merger, etc. . . . . . . . . . . . . . . . . . . 61
7.2.6. Asset Dispositions, etc. . . . . . . . . . . . . . . . . . . . . 63
7.2.7. Modification of Certain Agreements . . . . . . . . . . . . . . . 65
7.2.8. Transactions with Affiliates . . . . . . . . . . . . . . . . . . 65
</TABLE>
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7.2.9. Impairment of Security Interest . . . . . . . . . . . . . . . . 66
7.2.10. Stock of Subsidiaries . . . . . . . . . . . . . . . . . . . . . 66
7.2.11. Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . 67
7.2.12. Limitation on Applicability of Certain Covenants . . . . . . . . 67
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default . . . . . . . . . . . . . . . . . . 67
8.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . 68
8.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . 68
8.1.3. Non-Performance of Certain Covenants and Obligations . . . . . . 68
8.1.4. Non-Performance of Other Covenants and Obligations . . . . . . . 68
8.1.5. Disaffirmation of Obligations . . . . . . . . . . . . . . . . . 68
8.1.6. Effectiveness and Enforceability of Guarantees . . . . . . . . . 68
8.1.7. Default on Other Indebtedness . . . . . . . . . . . . . . . . . 68
8.1.8. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.1.9. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . . 69
8.1.10. Impairment of Security, etc. . . . . . . . . . . . . . . . . . . 69
8.2. Action if Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . 69
8.3. Action if Other Event of Default . . . . . . . . . . . . . . . . 70
ARTICLE IX
THE AGENTS
9.1. Appointment of Agents . . . . . . . . . . . . . . . . . . . . . 70
9.2. Nature of Duties of the Agents. . . . . . . . . . . . . . . . . 70
9.3. General Immunity . . . . . . . . . . . . . . . . . . . . . . . . 71
9.4. Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.5. Agents in their Capacity as Lenders. . . . . . . . . . . . . . . 72
9.6. Actions by Each Agent . . . . . . . . . . . . . . . . . . . . . 72
9.7. Right to Indemnity . . . . . . . . . . . . . . . . . . . . . . . 73
9.8. Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . 73
9.9. Suits to Protect Collateral . . . . . . . . . . . . . . . . . . 73
9.10. Determinations Relating to Collateral . . . . . . . . . . . . . 73
9.11. Trust Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.12. Release of Collateral . . . . . . . . . . . . . . . . . . . . . 74
9.13. Application of Proceeds of Collateral . . . . . . . . . . . . . 74
9.14. Rights and Remedies to be Exercised by Administrative Agent Only 74
9.15. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . 75
9.16. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.17. The Syndication Agent, the Documentation Agent and the
Administrative Agent . . . . . . . . . . . . . . . . . . . . . . 75
9.18. Agreement to Cooperate . . . . . . . . . . . . . . . . . . . . . 75
9.19. Lenders to Act as Agents . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . 76
10.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.3. Payment of Costs and Expenses . . . . . . . . . . . . . . . . . 77
10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 77
10.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.8. Execution in Counterparts, Effectiveness, etc. . . . . . . . . . 79
10.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . 79
10.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 79
10.11. Sale and Transfer of Term Loans and Term Notes;
Participations in Term Loans and Term Notes . . . . . . . . . . 79
10.11.1. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . 81
10.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . 81
10.13. Forum Selection and Consent to Jurisdiction . . . . . . . . . . 81
10.14. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 82
</TABLE>
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SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentages and Administrative Information
EXHIBIT A - Form of Term Note
EXHIBIT B - Form of Borrowing Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Subsidiary Guaranty
EXHIBIT E - Form of Mortgage
EXHIBIT F - Form of Security Agreement
EXHIBIT G - Form of Stock Pledge Agreement
EXHIBIT H - Form of Intercreditor Agreement
EXHIBIT I - Form of Borrower Closing Date Certificate
EXHIBIT J - Form of Parent Closing Date Certificate
EXHIBIT K - Form of Lender Assignment Agreement
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TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT, dated as of June 17, 1997, is among PIONEER
AMERICAS ACQUISITION CORP., a Delaware corporation (the "Borrower"), the
various financial institutions as are or may become parties hereto
(collectively, the "Lenders"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as
syndication agent (the "Syndication Agent") for the Lenders, SALOMON BROTHERS
HOLDING COMPANY INC ("Salomon"), as documentation agent (the "Documentation
Agent") for the Lenders, and BANK OF AMERICA ILLINOIS ("BofA"), as
administrative agent (the "Administrative Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, Pioneer Companies, Inc. (the "Parent") has entered into an
Asset Purchase Agreement dated as of May 14, 1997 (the "Purchase Agreement")
with OCC Tacoma, Inc. (the "Seller"), pursuant to which it will acquire,
through the Borrower and its Wholly-Owned Restricted Subsidiary, Pioneer Chlor
Alkali Company, Inc., a Delaware corporation ("PCAC"), all of the assets and
properties used by the Seller in its chlor-alkali business (the "Tacoma
Business"), including the chlor-alkali production facility located in Tacoma,
Washington, in exchange for (a) $97,000,000, in cash, (b) 55,000 shares of
Convertible Preferred Stock, par value $.01 per share, of the Parent, having a
liquidation preference of $100 per share and (c) the assumption of certain
obligations relating to the acquired chlor-alkali business (the "Acquisition");
WHEREAS, the Borrower has commenced (a) an offer to purchase (the
"Tender Offer") all of its existing 13 3/8% First Mortgage Notes due 2005 (the
"First Mortgage Notes") for a cash purchase price per $1,000 principal amount
of outstanding First Mortgage Notes tendered and accepted not exceeding
(inclusive of any fee paid in connection with the solicitation of consents
referred to below) 120% of the par value thereof plus accrued and unpaid
interest thereon and (b) a solicitation of consents (the "Consent
Solicitation") from the holders of the First Mortgage Notes to delete or modify
certain covenants and other provisions governing the First Mortgage Notes;
WHEREAS, the Borrower intends to issue senior secured notes due 2007
for gross cash proceeds of $200,000,000, which proceeds would be used, in part,
to fund the Acquisition and the Tender Offer (the "Senior Note Offering", and,
together with the Acquisition, the Tender Offer, the Consent Solicitation and
the transactions relating thereto, the "Transaction");
WHEREAS, in connection with the Transaction, the Borrower desires to
obtain from the Lenders a commitment to provide $100,000,000 in term loans, the
proceeds of which will be used, in part, to fund the Acquisition and the Tender
Offer, and pay certain fees and expenses arising in connection with the
Transaction; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend the
commitments and make the loans described herein to the Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Acquisition" is defined in the first recital.
"Acquisition Agreements" means the Purchase Agreement, the Chlorine
Purchase Agreement dated as of June 17, 1997 between PCAC and OCC Tacoma, Inc.,
the Chlorine and Caustic Soda Sales Agreement date as of June 17, 1997 between
PCAC and Occidental Chemical Corporation and the Environmental Operating
Agreement dated as of June 17, 1997 between PCAC and OCC Tacoma, inc.
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.
"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.
"Agents" means, collectively, the Administrative Agent, the
Syndication Agent and the Documentation Agent.
"Agreement" means, on any date, this Term Loan Agreement as originally
in effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"All-Pure" means All-Pure Chemical Co., a California corporation and
direct Wholly-Owned restricted Subsidiary of PAI.
"Alternate Base Rate" means, for any day and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum equal to the higher of:
(a) 0.50% per annum above the Federal Funds Rate most recently determined by
the Administrative Agent; and (b) the rate of interest in effect for such day
as most recently publicly announced or established by the Administrative Agent
at its Domestic Office as its "reference rate." (The "reference rate" is a
rate set by the Administrative Agent based upon various factors including the
Administrative
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Agent's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above or below such announced rate.) Any change in the reference
rate announced by the Administrative Agent shall take effect at the opening of
business on the day of such establishment or announcement.
"Applicable Margin" means (i) with respect to the unpaid principal
amount of each Term Loan maintained as a Base Rate Loan, 125 basis points and
(ii) with respect to the unpaid principal amount of each Term Loan maintained
as a LIBO Rate Loan, 250 basis points.
"Arranger" means Donaldson, Lufkin & Jenrette Securities Corporation,
a Delaware corporation.
"Asset Sale" means, with respect to the Borrower 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 Borrower or a Wholly-Owned
Restricted Subsidiary of any of the Borrower'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 Borrower or such
Restricted Subsidiary from any prior transaction or series of related
transactions that constituted an Asset Sale hereunder), whether owned on the
date hereof or subsequently acquired, in one transaction or a series of related
transactions; provided, however, that the following will 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 $1,000,000; (ii) a transaction or
series of related transactions that results in a Change in Control; (iii) any
sale of assets of the Borrower and its Restricted Subsidiaries or merger
permitted pursuant to Section 7.2.5; (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 Borrower 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.
"Assignee Lender" is defined in Section 10.11.1.
"Assignor Lender" is defined in Section 10.11.1.
"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 Borrower'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
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penalty, but no rent will be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated.
"Authorized Officer" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the
Administrative Agent and the Lenders pursuant to Section 5.1.1.
"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.
"Base Rate Loan" means a Term Loan bearing interest at a fluctuating
rate determined by reference to the Alternate Base Rate.
"BMPC" means Black Mountain Power Company, a Texas corporation and
direct Wholly-Owned Subsidiary of PCAC.
"Board of Directors" means the Board of Directors of the Borrower or
any committee thereof duly authorized to act on behalf of such Board of
Directors.
"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
Administrative Agent.
"BofA" is defined in the preamble.
"Borrower" is defined in the preamble.
"Borrower Closing Date Certificate" means a certificate of an
Authorized Officer of the Borrower substantially in the form of Exhibit I
hereto, delivered pursuant to Section 5.1.4.
"Borrowing" means Term Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period made by all Lenders on the same
Business Day.
"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 Borrower and
its Restricted Subsidiaries as of such date, (b) 50% of the net book value of
all inventory owned by the Borrower and its Restricted Subsidiaries as of such
date, and (c) the lesser of (x) $10,000,000 and (y) 85% of the net book value
of all accounts receivable of Kemwater as of such date plus 50% of the net book
value of all inventory as of such date owned by Kemwater, 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 as of a
specific date, the Borrower may utilize the most recent available quarterly or
annual financial report for purposes of calculating the Borrowing Base.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit
B hereto.
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"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in
Chicago, Illinois or New York City and, with respect to Borrowings of, Interest
Periods with respect to, payments of principal and interest in respect of,
continuations or conversions of Base Rate Loans into, LIBO Rate Loans, on which
dealings in Dollars are carried on in the London interbank market.
"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.
"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 Flow" for any period means the Consolidated Net Income of the
Borrower 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.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"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 the Parent or the Borrower, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Parent or the Borrower, (iii)
the merger or consolidation of the Parent or the Borrower with or into another
corporation with the effect that the stockholders of the Parent or the Borrower
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 are at the beginning of such period (together
with any new directors whose election by the board of directors of the Parent
or the Borrower, or whose nomination for election by the shareholders of the
Parent or the Borrower, 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 the Parent or the
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Borrower 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 Borrower with or into the Parent
provided that such merger or consolidation is permitted under Section 7.2.5.
"Closing Date" means the date of the initial Borrowing, not to be
later than July 31, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified.
"Collateral" means (i) a first mortgage lien and security interest in
PCAC's interest in real property, buildings, fixtures, and certain equipment
relating to the Tacoma Facility, (ii) a first priority security interest in
PCAC's interest in the Acquisition Agreements, (iii) first mortgage lien on
PCAC's chlor-alkali production facilities located in Henderson, Nevada and St.
Gabriel, Louisiana (including real property, buildings, fixtures and certain
equipment), (iv) a pledge of PAI's interest in the Capital Stock of PCAC and
All-Pure, each as further described in the respective Security Documents with
respect thereto, and (v) any other property or assets which may from time to
time be subject to one or more of the Liens evidenced or created by any Loan
Document.
"Collateral Agent" means United States Trust Company of New York, as
collateral agent under the Intercreditor Agreement, and any successor thereto.
"Commitment Letter" means the commitment letter, dated May 29, 1997,
among the Borrower, the Arranger and the Syndication Agent including all
annexes and exhibits thereto.
"Commitment Termination Event" means (i) the occurrence of any Event
of Default described in clause (a) or (b) of Section 8.1.9, or (ii) the
occurrence and continuance of any other Event of Default and either (x) the
declaration of the Term Loans to be due and payable pursuant to Section 8.3, or
(y) in the absence of such declaration, the giving of notice to the Borrower
by the Administrative Agent, acting at the direction of the Required Lenders,
that the Term Loan Commitments have been terminated.
"Consent Solicitation" is defined in the second recital.
"Consolidated Cash Flow Coverage Ratio" means, as of any date of
determination, 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
Borrower and its Restricted Subsidiaries; provided, however, that (A) if the
Borrower or 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 will 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 Borrower or any Restricted
Subsidiary has
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<PAGE> 14
made any Asset Sale, the Cash Flow for such period will 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 will be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Borrower or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Borrower and its
continuing Restricted Subsidiaries in connection with any such sale or other
disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent
the Borrower and its continuing Restricted Subsidiaries are no longer liable
for such Indebtedness after such sale), (C) if since the beginning of such
period the Borrower 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 hereunder, which constitutes all or substantially all of an operating
unit of a business, Cash Flow and Consolidated Interest Expense for such period
will 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 Expense attributable to any Indebtedness incurred under
any revolving credit facility will 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 will be determined in good
faith by a responsible financial or accounting officer of the Borrower. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness will be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period.
"Consolidated Interest Expense" means, for any period, interest
expense of the Borrower 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 issuance 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 Borrower 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 Borrower held by Persons other than
the Borrower or a Wholly-Owned Restricted Subsidiary of the Borrower 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 Borrower) in connection with loans incurred
by such plan or trust to purchase newly issued or treasury shares of the
Capital Stock of the Borrower.
"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 Borrower, the Unrestricted Subsidiaries of the Borrower) 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
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<PAGE> 15
but which is consolidated with such Person or is accounted for by such Person
by the equity method of accounting will be included only to the extent of the
amount of cash dividends or cash distributions paid to such Person or a Wholly-
Owned Restricted Subsidiary of such Person (other than, in the case of the
Borrower, the Unrestricted Subsidiaries of the Borrower), (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 will 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 will 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 Borrower or its Wholly-Owned Restricted
Subsidiaries will be included only to the extent of the amount of cash
dividends or cash distributions actually paid by such Subsidiary to the
Borrower or a Wholly-Owned Restricted Subsidiary of the Borrower, (v) in the
case of the Borrower, the Net Income attributable to any business, properties
or assets acquired (by way of merger, consolidation, purchase or otherwise) by
the Borrower or any Restricted Subsidiary of the Borrower for any period prior
to the date of such acquisition will 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) will 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, will be
excluded from such Person's aggregate Net Income; provided that in the case of
the Borrower the foregoing exclusion will not apply to cash dividends or cash
distributions paid to the Borrower in respect of its 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 (other than, in the case of the Borrower, the Unrestricted
Subsidiaries of the Borrower), 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).
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount of the debt, obligation or other liability
guaranteed thereby.
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"Contingent Payment Agreement" means the Contingent Payment Agreement
dated as of April 20, 1995 among the Borrower, the Parent and the Sellers named
therein.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Credit Facility" means any revolving credit facility or similar
arrangement that makes credit available entered into by and among the Borrower
and/or any of its Subsidiaries that is a Subsidiary Guarantor and the lending
institutions party thereto, including any credit agreement, related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would, unless cured or
waived, constitute an Event of Default.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Agents and the Required
Lenders.
"DLJ" is defined in the preamble.
"Documentation Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Documentation Agent pursuant to Section 9.4.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such in Schedule II hereto or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto. A Lender may have separate Domestic Offices for purposes of
making, maintaining or continuing, as the case may be, Base Rate Loans.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 10.8.
"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 Lender or any bank or financial institution party to the
Revolving Credit Facility, (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
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<PAGE> 17
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 Revolving Credit Facility, 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).
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to protection and
conservation of the environment concerning any hazardous, toxic or dangerous
waste, substance or constituent, or any pollutant or contaminant.
"Equity Interests" means shares, interests, participations or other
equivalents (however designated) of 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).
"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 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 the Borrower, a
member of a controlled group of corporations or a controlled group of trades or
businesses, as described in Section 414(b) and 414(c), respectively, of the
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.
"Event of Default" is defined in Section 8.1.
"Excess Land" means certain real property adjoining the sites of
PCAC's Henderson, Nevada and St. Gabriel, Louisiana plants and the Mojave,
California property owned by Imperial West Chemical Co., a Wholly-Owned
Subsidiary of PAI 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.
"Existing Affiliate Agreements" means (i) agreements between the
Borrower or any of its Subsidiaries and Saguaro Power Company, a Limited
Partnership, relating to the delivery of steam and other services, existing on
the date hereof and listed on Item 7.2.8 ("Existing Affiliate Agreements") of
the Disclosure Schedule, (ii) the Tax Sharing Agreement and (iii) agreements
between the Borrower or any of its Subsidiaries and Basic Investments, Inc.
relating to the
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<PAGE> 18
delivery of water and power, power transmission services, and other services,
existing on the date hereof and listed on Item 7.2.8 ("Existing Affiliate
Agreements") of the Disclosure Schedule hereto and (iv) any other agreements
with affiliates of the Borrower, existing on the date hereof and listed on Item
7.2.8 ("Existing Affiliate Agreements") of the Disclosure Schedule hereto.
"Existing First Mortgage Indenture" means the Indenture dated as of
April 1, 1995 among the Borrower, Pioneer Americas, Inc., Pioneer Chlor Alkali
Company, Inc., Imperial West Chemical Co., All Pure Chemical Co., Black
Mountain Power Company, All Pure Chemical Northwest, Inc., Pioneer Chlor Alkali
International, Ltd., and G.O.W. Corporation, and IBJ Schroder Bank & Trust
Company (predecessor in interest to the Existing Trustee), as modified and
supplemented and in effect from time to time.
"Existing Indebtedness" means all Indebtedness (other than the Senior
Notes outstanding) of the Borrower or any Restricted Subsidiary existing on the
date hereof and listed on Item 7.2.1(c) ("Existing Indebtedness") of the
Disclosure Schedule.
"Existing Intercreditor Agreement" means the Intercreditor and
Collateral Agency Agreement among the Borrower, PCAC, PAI, the Trustee, the
Administrative Agent, the Existing Trustee, the Collateral Agent, the bank
agent under PAI's Loan and Security Agreement dated as April 12, 1995, dated as
of September 14, 1995.
"Existing Trustee" means United States Trust Company of New York as
successor trustee under the Existing First Mortgage Indenture, and any
successor thereto.
"Fair Market Value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length 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 will be
determined by a majority of the members of the Board of Directors and a
majority of the disinterested members of the Board of Directors, if any, acting
in good faith and will be evidenced by a duly and properly adopted resolution
of the Board of Directors.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to (i) 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 Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or (ii) if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three federal funds brokers of recognized standing selected by it.
"Fee Letter" means the confidential fee letter, dated as of May 29,
1997, among the Borrower, the Arranger and the Syndication Agent.
"First Mortgage Notes" is defined in the second recital.
"Fiscal Quarter" means any fiscal quarter of a Fiscal Year.
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<PAGE> 19
"Fiscal Year" means any period of twelve consecutive months ending on
December 31; references to a Fiscal Year with a numbering corresponding to any
calendar year refer to the fiscal year ending on the 31st of December during
such calender year.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"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.
"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 Borrower's
business, as the case may be.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"Imperial" means Imperial West Chemical Co., a Nevada corporation and
direct Wholly-Owned Subsidiary of PAI.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"incur" has the meaning ascribed in Section 7.2.1; provided that (a)
with respect to any Indebtedness of any Restricted Subsidiary of the Borrower
that is owing to the Borrower or another Restricted Subsidiary of the Borrower,
any disposition, pledge or transfer of such Indebtedness to any Person (other
than the Borrower 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 Borrower 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 Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary shall be deemed to be
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<PAGE> 20
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 Borrower 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 clauses (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 Existing
First Mortgage 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 Borrower 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.
"Indemnified Liabilities" is defined in Section 10.4.
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"Indemnified Parties" is defined in Section 10.4.
"Independent Director" means a director of the Borrower other than a
director (i) who (apart from being a director of the Borrower or any of its
Subsidiaries) is an employee, insider, associate or Affiliate of the Borrower
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.
"Insurance Proceeds" has the meaning specified in each Mortgage.
"Intercreditor Agreement" means the Intercreditor and Collateral
Agency Agreement dated as of June 17, 1997, among the Borrower, PAI, PCAC, the
Trustee, the Administrative Agent and the Collateral Agent, substantially in
the form of Exhibit H attached hereto.
"Intercreditor Collateral Account" means the Collateral Account as
defined in the Intercreditor Agreement.
"Interest Expense" means, for any applicable period, the aggregate
consolidated interest expense of the Borrower and its Subsidiaries for such
applicable period, as determined in accordance with GAAP, including the portion
of any payments made in respect of Capitalized Lease Liabilities allocable to
interest expense, but excluding (to the extent included in interest expense)
up-front fees and expenses and other deferred financing costs incurred in
connection with the Transaction.
"Interest Period" means, as to any LIBO Rate Loan, the period
commencing on the Borrowing date of such Term Loan or on the date on which any
Term Loan is converted into or continued as a LIBO Rate Loan, and ending on the
date one, two, three, six or, if available in the Administrative Agent's
reasonable determination, nine or twelve months thereafter as selected by the
Borrower in its Borrowing Request or its Conversion/Continuation Notice;
provided however that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period;
(iii) no Interest Period for any Term Loan shall extend
beyond the Stated Maturity Date for such Term Loan;
(iv) no Interest Period applicable to a Term Loan or portion
thereof shall extend beyond any date upon which is due any scheduled
principal payment in respect of the Term Loans unless the aggregate
principal amount of Term Loans represented by Base Rate Loans, or by
LIBO Rate Loans having Interest Periods that will expire on or before
such date, equals or exceeds the amount of such principal payment; and
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(v) there shall be no more than five Interest Periods in
effect at any one time.
"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. In the event
the Borrower or any Subsidiary of the Borrower sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Borrower such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Borrower, the Borrower shall be deemed to have made
an Investment on the date of any such sale or disposition equal to the Fair
Market Value of the Equity Interests of such Subsidiary not sold or disposed of
determined as provided in the final paragraph of Section 7.2.3.
"Kemwater" means Kemwater North America Company, a Delaware
corporation, and any successor thereto.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit K hereto.
"Lenders" is defined in the preamble.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate
Loans, the rate of interest per annum determined by the Administrative Agent to
be the arithmetic mean (rounded upward to the next 1/16th of 1%) of the rates
of interest per annum at which Dollar deposits in the approximate amount of the
Term Loan to be made or continued as, or converted into, a LIBO Rate Loan by
the Administrative Agent and having a maturity comparable to such Interest
Period would be offered to the Administrative Agent in the London interbank
market at its request at approximately 11:00 a.m. (London time) two Business
Days prior to the commencement of such Interest Period.
"LIBO Rate Loan" means a Term Loan bearing interest, at all times
during an Interest Period applicable to such Term Loan, at a fixed rate of
interest determined by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Term Loan to be
made, continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, the rate of interest per annum (rounded upwards to the next
1/100th of 1%) determined by the Administrative Agent as follows:
LIBO Rate = LIBO Rate
-----------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
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The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be adjusted automatically as to all LIBO Rate Loans then outstanding
as of the effective date of any change in the LIBOR Reserve Percentage.
"LIBOR Office" means, relative to any Lender, the office of such
Lender designated as such in Schedule II hereto or designated in the Lender
Assignment Agreement or such other office of a Lender as shall be so designated
from time to time by notice from such Lender to the Borrower and the
Administrative Agent, whether or not outside the United States, which shall be
making or maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S.
Board, having a term approximately equal or comparable to such Interest Period.
"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).
"Loan Document" means this Agreement, the Term Notes, the Subsidiary
Guaranty, the Intercreditor Agreement, each Borrowing Request, the Fee Letter,
each Stock Pledge Agreement, each Mortgage (upon execution and delivery
thereof), the Security Agreement and each other agreement, document or
instrument delivered in connection with this Agreement or any other Loan
Document, whether or not specifically mentioned herein or therein.
"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 Effect" means (a) a material adverse effect on the
business, assets, debt service capacity, liabilities (including environmental
liabilities), financial condition, operations or prospects of the Borrower and
its Restricted Subsidiaries, taken as a whole, (b) a material adverse effect
upon the ability of the Borrower or any other Obligor to perform its respective
material obligations under the Loan Documents to which it is or will be a
party, or (c) an impairment of the validity or enforceability of, or a material
impairment of the rights, remedies or benefits available to the Agents, the
Arranger, the Collateral Agent or the Lenders under this Agreement or any other
Loan Document.
"Monthly Payment Date" means the last day of each calendar month or,
if any such day is not a Business Day, the next succeeding Business Day.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means each mortgage, deed of trust, or similar security
instrument, substantially in the form of Exhibit E attached hereto, which from
time to time affects any property that secures PCAC's obligations in respect of
its Contingent Liabilities under the Senior
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<PAGE> 24
Note Indenture and this Agreement, as such instruments may be amended,
supplemented or otherwise modified from time to time.
"Mortgaged Property" has the meaning specified in each Mortgage.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, that is maintained for employees of the Borrower
or any ERISA Affiliate.
"Net Award" has the meaning specified in each Mortgage.
"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 in Section 7.2.3, 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" means, for any period, the net income of the Borrower and
its Subsidiaries (other than its Unrestricted Subsidiaries) for such period on
a consolidated basis, determined in accordance with GAAP.
"Net Proceeds" means the aggregate cash proceeds received by the
Borrower 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 Borrower 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 hereto,
(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.
"Net Worth" means the consolidated net worth of the Borrower and its
Subsidiaries.
"Non-U.S. Lender" means any Lender (including each Assignee Lender)
that is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any state thereof, or (iii) an estate or trust that is subject
to U.S. Federal income taxation regardless of the source of its income.
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<PAGE> 25
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, the Term Notes, and each other Loan Document.
"Obligor" means the Borrower or any other Person (other than any
Agent, the Arranger, or any Lender) obligated under any Loan Document.
"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.
"Offering Memorandum" means the offering memorandum of the Borrower,
dated June 11, 1997, in connection with the offer and sale of the Senior Notes.
"Officers' Certificate" means a certificate executed 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 Borrower or any Subsidiary
Guarantor, as the case may be, and delivered to the Administrative Agent.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Borrower or any of the Subsidiary Guarantors and who shall be
reasonably acceptable to the Required Lenders.
"Organic Document" means, relative to any Obligor, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements to which such Obligor is a party applicable to any of its
authorized shares of Capital Stock.
"Parent" is defined in the first recital.
"Parent Closing Date Certificate" means a certificate of an Authorized
Officer of the Parent substantially in the form of Exhibit J hereto, delivered
pursuant to Section 5.1.4.
"Participant" is defined in Section 10.11.2.
"PAI" means Pioneer Americas, Inc., a Delaware corporation and direct
Wholly-Owned Restricted Subsidiary of the Borrower, and any successor thereto.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor entity.
"PCAC" is defined in the first recital.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
Multiemployer Plan), and to which the Borrower or any corporation, trade or
business that is, along with the Borrower, an ERISA Affiliate, may have any
liability, including any liability by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Percentage" means, relative to any Lender, the applicable percentage
relating to Term Loans, as set forth in Schedule II hereto or set forth in the
Lender Assignment Agreement as
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such percentage may be adjusted from time to time pursuant to Lender Assignment
Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered
pursuant to Section 10.11.
"Permitted Investment" means (i) any Eligible Investment, (ii) any
Investment in the Borrower, (iii) Investments in existence on the date hereof
and listed in Item 7.2.3 ("Existing Investments") of the Disclosure Schedule
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 pursuant
to Section 7.2.1, (v) Investments in any Wholly-Owned Restricted Subsidiary of
the Borrower or any Person which, as a result of such Investment, becomes a
Wholly-Owned Restricted Subsidiary of the Borrower; provided that such Wholly-
Owned Restricted Subsidiary is engaged in a Related Business, and (vi) other
Investments after the date hereof in joint ventures, corporations, limited
liability companies, partnerships or Unrestricted Subsidiaries engaged in a
Related Business that do not at any one time outstanding exceed $5,000,000;
provided that the amount of Investments pursuant to clause (vi) will be
included in the calculation of Restricted Payments pursuant to Section 7.2.3.
"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 Borrower or any Restricted Subsidiary by appropriate
proceedings promptly instituted and diligently conducted and against
which the Borrower has established appropriate reserves in accordance
with GAAP;
(b) the Lien of any judgment rendered which is being
contested in good faith by the Borrower or any of its Restricted
Subsidiaries by appropriate proceedings promptly instituted and
diligently conducted and against which the Borrower has established
appropriate reserves in accordance with GAAP and which does not have a
material adverse effect on the ability of the Borrower 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, leases, progress payments, contracts (other than for the
payment of money) or to secure public or statutory obligations of the
Borrower, or any Restricted Subsidiary, or to secure surety or appeal
bonds to which the Borrower 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
Borrower or any Restricted Subsidiaries by appropriate proceedings
promptly instituted and diligently conducted and against which the
Borrower has established appropriate reserves in accordance with GAAP,
(iii) rights of financial institutions to setoff and chargeback
arising by operation of law and (iv) similar Liens;
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<PAGE> 27
(d) servitudes, licenses, easements, encumbrances,
restrictions, rights-of-way and rights in the nature of easements or
similar charges which will not in the aggregate materially adversely
impair the use of the subject property by the Borrower 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
Borrower or a Restricted Subsidiary as such property is used as of the
date hereof; 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 natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Pioneer East" means Pioneer (East), Inc., a Delaware corporation and
direct Wholly-Owned Subsidiary of PAI.
"Plan" means any Pension Plan or Welfare Plan.
"Preferred Stock" means, as applied to the Equity Interests of any
corporation, 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.
"Pro Forma Balance Sheet" is defined in clause (d) of Section 5.1.15.
"Purchase Agreement" is defined in the first recital.
"Quarterly Payment Date" means the last Business Day of each March,
June, September and December, commencing with September, 1997.
"Redeemable Stock" means any Equity Interest that by its terms or
otherwise (i) is required to be redeemed prior to June 30, 2007, (ii) matures
or is redeemable, in whole or in part, at the option of the Borrower, any
Subsidiary or the holder thereof or pursuant to a mandatory sinking fund at any
time prior to June 30, 2007, or (iii) is convertible into or exchangeable for
debt securities which provide for any scheduled payment of principal prior to
June 30, 2007, at the option of the issuer thereof at any time prior to June
30, 2007, until the right to so convert or exchange is irrevocably
relinquished.
"Refinancing" is defined in clause (j) of Section 7.2.1.
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"Refinancing Indebtedness" is defined in clause (j) of Section 7.2.1.
"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 and other chlorides and aluminum sulfate,
and in lines of business reasonably related thereto.
"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 a "release", as such term is defined in CERCLA.
"Reportable Event" has the meaning given to such term in ERISA.
"Required Lenders" means, at any time, (i) prior to the Closing Date
hereunder, Lenders having at least 51% of the sum of the Term Loan Commitments
and (ii) on and after the Closing Date, Lenders holding at least 51% of the
principal amount of the Term Loans.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Restoration" has the meaning specified in each Mortgage.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Payment" is defined in Section 7.2.3.
"Restricted Payment Computation Date" is defined in Section 7.2.3.
"Restricted Payment Computation Period" is defined in Section 7.2.3.
"Restricted Subsidiary" means (i) any Subsidiary Guarantor, (ii) any
Subsidiary of the Borrower 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 date hereof, (iii) any Subsidiary of the
Borrower organized or acquired after the date hereof, 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 Borrower could incur at least $1.00 of Indebtedness
pursuant to Section 7.2.1, on a pro forma basis taking into account such
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<PAGE> 29
designation. The Borrower will evidence any such designation to the
Administrative Agent by promptly filing with the Administrative Agent an
Officers' Certificate certifying that such designation has been made and
complies with the requirements of the immediately preceding sentence.
Notwithstanding any provision herein to the contrary, each Subsidiary Guarantor
will be a Restricted Subsidiary.
"Revolving Credit Agreement" means the Loan and Security Agreement
dated as of June 17, 1997, between the Borrower and Bank of America Illinois,
as agent and a lender, and the lenders named therein, as amended, supplemented
or otherwise modified from time to time in accordance with the provisions
hereof and thereof.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc.
"Sale and Leaseback Transaction" means, with respect to any Person,
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.
"Salomon" is defined in the preamble.
"Security Agreement" means the security agreement dated as of June 17,
1997 by PCAC, as debtor, to the Collateral Agent, as secured party in respect
of the Acquisition Agreements, substantially in the form of Exhibit F attached
hereto.
"Security Documents" means (i) each Mortgage, (ii) the Security
Agreement, (iii) the Stock Pledge Agreement, (iv) the Intercreditor Agreement,
(v) the documentation relating to the Intercreditor Collateral Account, and
(vi) all security agreements, mortgages, deeds of trust, pledges, collateral
assignments or any other instrument evidencing or creating any security
interest in favor of the Collateral Agent in all or any portion of the
Collateral, in each case as amended, supplemented or otherwise modified from
time to time.
"Senior Indebtedness" means the principal of, premium, if any, and
interest on any Indebtedness of the Borrower or its Restricted Subsidiaries,
whether outstanding on the date hereof 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 Borrower 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 the Borrower from time to time
owed under the Term Facility. Notwithstanding the foregoing, "Senior
Indebtedness" does not include (i) in the case of the obligation of the
Borrower in respect of each Term Note, the obligation of the Borrower in
respect of the other Term Notes, (ii) any liability for foreign, federal,
state, local or other taxes owed or owing by the Borrower or any Restricted
Subsidiary to the extent that such liability constitutes Indebtedness, (iii)
Indebtedness of the Borrower to any Restricted Subsidiary or of any Restricted
Subsidiary to the Borrower or another Restricted Subsidiary, (iv) that portion
of any Indebtedness which at the time of issuance is issued in violation hereof
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).
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"Senior Note Indenture" means the Indenture dated June 17, 1997, among
the Borrower, the Subsidiary Guarantors, and United States Trust Company of New
York, as Trustee, as the same may be amended, restated, amended and restated or
otherwise modified from time to time in accordance with the terms hereof and
thereof.
"Senior Note Offering" is defined in the third recital.
"Senior Notes" means the 91/4% Senior Secured Notes due 2007 of the
Borrower issued pursuant to the Senior Note Offering and the Senior Note
Indenture, including, without limitation, any senior secured notes of the
Borrower with substantially identical terms exchanged therefor pursuant to a
registration statement under the Securities Act of 1933, as amended.
"Stated Maturity Date" means, in the case of all Term Loans, December
5, 2006.
"Stock Pledge Agreement" means the pledge agreement from PAI, as
debtor, to the Collateral Agent, as secured party, in respect of all the issued
and outstanding Capital Stock owned by PAI of PCAC and All-Pure, substantially
in the form of Exhibit G attached hereto, and each other pledge agreement
executed and delivered in connection with Section 7.1.9.
"Subordinated Indebtedness" means Indebtedness of the Borrower or any
Subsidiary Guarantor subordinated in right of payment to the Obligations.
"Subsidiary" means, with respect to any Person, (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 such Person, by such Person
and one or more of its Subsidiaries or by one or more of such Person's
Subsidiaries or (ii) any other Person of which at least a majority of voting
interest, under ordinary circumstances, is at the time owned, directly or
indirectly, by such Person, by such Person and one or more of its Subsidiaries
or by one or more of such Person's Subsidiaries.
"Subsidiary Guarantors" means, collectively, PAI, PCAC, All-Pure,
Imperial, BMPC, All Pure Chemical Northwest, Inc., a Washington corporation,
Pioneer Chlor Alkali International, Inc., a Barbados corporation, G.O.W.
Corporation, a Nevada corporation, Pioneer East, TCH, T.C. Products, Inc., and
each other Subsidiary of the Borrower that becomes a guarantor under the
Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guaranty executed and delivered by an
Authorized Officer of each Subsidiary Guarantor pursuant to Section 5.3,
substantially in the form of Exhibit D attached hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Substantial Shareholder" means each of (i) William R. Berkley and his
Affiliates and/or (ii) Interlaken Capital, Inc. and its Affiliates.
"Syndication Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor Syndication
Agent pursuant to Section 9.4.
"Tacoma Business" is defined in the first recital.
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"Tacoma Facility" means PCAC's chlor-alkali production facility in
Tacoma, Washington.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
April 20, 1995 among the Parent and its subsidiaries.
"Taxes" is defined in Section 4.6.
"TCH" means T.C. Holdings, Inc., a New Mexico corporation and direct
Wholly-Owned Subsidiary of All-Pure.
"Tender Offer" is defined in the second recital.
"Term Facility" is defined in the fourth recital.
"Term Loan" is defined in Section 2.1.1.
"Term Loan Commitment" is defined in Section 2.1.1.
"Term Loan Commitment Amount" means $100,000,000.
"Term Loan Commitment Termination Date" means the earliest of (i) July
31, 1997, if the Term Loans have not been made on or prior to such date, (ii)
the Closing Date (immediately after the making of the Term Loans on such date),
and (iii) the date on which any Commitment Termination Event occurs.
"Term Note" means a promissory note of the Borrower payable to the
order of any Lender, in the form of Exhibit A hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term Loans, and also means all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"Transaction" is defined in the third recital.
"Transaction Documents" means each of the Acquisition Agreements, the
Senior Note Indenture, the form of Senior Note and all other agreements,
documents, instruments, certificates, filings, consents, approvals, board of
directors resolutions and opinions furnished pursuant to or in connection with
the Acquisition, the Tender Offer, the Consent Solicitation, the Senior Note
Offering and the transactions contemplated hereby or thereby, each as amended,
supplemented, amended and restated or otherwise modified from time to time as
permitted in accordance with the terms hereof or of any other Loan Document.
"Trust Moneys" means all cash or Eligible Investments received by the
Collateral Agent: (a) in exchange for the release of property from the Lien of
any of the Security Documents; (b) as compensation for or proceeds of the sale
of all or any part of the Collateral taken by eminent domain or purchased by,
or sold pursuant to any order of, a governmental authority or otherwise
disposed of; (c) as proceeds of insurance upon any, all or part of the
Collateral (other than any liability insurance proceeds payable to the
Collateral Agent for any loss, liability or expense incurred by it); (d) as
proceeds of any other sale or other disposition of all or any part of the
Collateral by or on behalf of either of the Collateral Agent or any collection,
recovery, receipt, appropriation or other realization of or from all or any
part of the
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Collateral pursuant to the Security Documents or otherwise; or (e) for
application under this Agreement as provided in this Agreement or any other
Security Document, or whose disposition is not otherwise specifically provided
for in this Agreement or in any other Security Document.
"Trustee" means United States Trust Company of New York, in its
capacity as "trustee" under the Senior Note Indenture, and each successor
trustee thereunder to become such pursuant to the applicable provisions
thereof.
"type" means, relative to any Term Loan, the portion thereof, if any,
being maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"United States" or "U.S." means the United States of America, its
fifty states and the District of Columbia.
"Unrestricted Subsidiary" means, until such time as it may be
designated as a Restricted Subsidiary by the Board of Directors of the Borrower
as provided in and in compliance with the definition of "Restricted
Subsidiary," (i) any Subsidiary of the Borrower organized or acquired after the
date hereof designated as an Unrestricted Subsidiary by the Board of Directors
of the Borrower in which all investments by the Borrower or any Restricted
Subsidiary are made only from funds available for the making of Restricted
Payments pursuant to Section 7.2.3 and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors of the Borrower may designate any Subsidiary
of the Borrower (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
Borrower which is not a Subsidiary of such Subsidiary to be so designated;
provided that (w) 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
with respect thereto has recourse to any of the assets of the Borrower or any
of its Restricted Subsidiaries, (x) immediately after giving effect to such
designation no Default or Event of Default shall have occurred and be
continuing, (y) all outstanding Investments by the Borrower and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation equal in amount to the Fair Market Value of such Investments at the
time of such designation and would be Restricted Payments permitted to be paid
pursuant to the provisions of Section 7.2.3 and (z) the amount of such
Restricted Payments will be included in the calculation of the amount of
Restricted Payments previously made pursuant to such covenant. The Borrower
will evidence any such designation by promptly filing with the Administrative
Agent an Officers' Certificate certifying that such designation has been made
and complies with the requirements of the immediately preceding sentence.
"U.S. Subsidiary" means any Subsidiary of the Borrower that is
incorporated or organized in or under the laws of the United States or any
state thereof.
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"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 of securities has such voting power by reason of any
contingency.
"Wholly-Owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the Capital Stock (and all rights and options
to purchase such Capital Stock) of which, other than directors' qualifying
shares, are owned, beneficially and of record, by such Person and/or one or
more Wholly-Owned Subsidiaries of such Person.
"Wholly-Owned Restricted Subsidiary" means, with respect to any
Person, a Restricted Subsidiary of such Person all of the outstanding Capital
Stock or other ownership interests of which (other than capital stock
constituting directors' qualifying shares or interests held by directors or
shares or interests required to be held by foreign nationals, to the extent
mandated by applicable law) are owned by such Person or by one or more
Wholly-Owned Restricted Subsidiaries of such Person.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each other Loan Document, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder shall be made, and all financial statements required to
be delivered hereunder or thereunder shall be prepared in accordance with,
those generally accepted accounting principles ("GAAP"), as in effect from time
to time and, unless otherwise expressly provided herein, shall be computed or
determined on a consolidated basis and without duplication.
SECTION 1.5. Use of UCC Terms. Unless the context otherwise
requires, the terms "accounts receivable", "inventory" and "general
intangibles" shall have the meanings ascribed thereto in the UCC.
SECTION 1.6. Officers' Certificates and Opinions. Every Officers'
Certificate or Opinion of Counsel with respect to compliance with a condition
or covenant provided for in this Agreement or any other Loan Document shall be
addressed to the Administrative Agent and each of the Lenders and 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;
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(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.
Absent any actual knowledge to the contrary, the Administrative Agent may rely
on any such certificate without further inquiry.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including Article V), each Lender severally agrees to make
Term Loans pursuant to the Term Loan Commitments described in this Section 2.1.
SECTION 2.1.1. Term Loan Commitments. On the Closing Date, which
shall be a Business Day occurring prior to the Term Loan Commitment Termination
Date, each Lender will make loans (relative to such Lender, its "Term Loans")
to the Borrower equal to such Lender's Percentage of the aggregate amount of
the Borrowing of Term Loans requested by the Borrower to be made on such day
with the commitment of each such Lender to make the Term Loans described in
this Section referred to as its "Term Loan Commitment". No amounts paid or
prepaid with respect to any Term Loans may be reborrowed.
SECTION 2.1.2. Lenders Not Permitted or Required to Make the Term
Loans. No Lender shall be permitted or required to, and the Borrower shall not
request any Lender to, make any Term Loan on the Closing Date if, after giving
effect thereto, the aggregate original principal amount of all the Term Loans
(a) of all Lenders would exceed the Term Loan Commitment
Amount, or
(b) of such Lender would exceed such Lender's Percentage of
the Term Loan Commitment Amount.
SECTION 2.2. Borrowing Procedures and Funding Maintenance. By
delivering a Borrowing Request to the Administrative Agent on or before 10:00
a.m. (Chicago time) on a Business Day, the Borrower may request, on not less
than one Business Day's notice (in the case of Base Rate Loans) or three
Business Days' notice (in the case of LIBO Rate Loans), that a Borrowing be
made on the Closing Date. On the terms and subject to the conditions of this
Agreement, each Borrowing shall be comprised of the type of Term Loans, and
shall be made on the Business Day, specified in such Borrowing Request. On or
before 11:00 a.m. (Chicago time) on such Business Day each Lender shall deposit
with the Administrative Agent same day funds
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in an amount equal to such Lender's Percentage of the requested Borrowing.
Such deposit will be made to an account which the Administrative Agent shall
specify from time to time by notice to the Lenders. To the extent funds are
received from the Lenders, the Administrative Agent shall make such funds
available to the Borrower by wire transfer to the accounts the Borrower shall
have specified in its Borrowing Request. No Lender's obligation to make any
Term Loan shall be affected by any other Lender's failure to make any Term
Loan.
SECTION 2.3. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 10:00
a.m. (Chicago time) on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than one Business Day's notice (in the case of a
conversion of LIBO Rate Loans to Base Rate Loans) or three Business Days'
notice (in the case of a continuation of LIBO Rate Loans or a conversion of
Base Rate Loans into LIBO Rate Loans) nor more than five Business Days' notice
that all, or any portion in a minimum amount of $5,000,000 or any larger
integral multiple of $250,000, be, in the case of Base Rate Loans, converted
into LIBO Rate Loans or a minimum amount of $250,000 or any larger integral
multiple of $250,000, in the case of LIBO Rate Loans, converted into Base Rate
Loans or continued as LIBO Rate Loans (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at least
three Business Days before the last day of the then current Interest Period
with respect thereto, such LIBO Rate Loan shall, on such last day,
automatically convert to a Base Rate Loan); provided, however, that (x) each
such conversion or continuation shall be pro rated among the applicable
outstanding Term Loans of all Lenders, and (y) no portion of the outstanding
principal amount of any Term Loans may be continued as, or be converted into,
LIBO Rate Loans when any Default has occurred and is continuing.
SECTION 2.4. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing
one of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any determination to
be made for purposes of Section 4.1, 4.2, 4.3 or 4.4, it shall be conclusively
assumed that each Lender elected to fund all LIBO Rate Loans by purchasing
Dollar deposits in its LIBOR Office's interbank eurodollar market.
SECTION 2.5. Term Notes. Each Lender's Term Loans under its Term
Loan Commitment shall be evidenced by a Term Note payable to the order of such
Lender in a maximum principal amount equal to such Lender's Percentage of the
original Term Loan Commitment Amount. The Borrower hereby irrevocably
authorizes each Lender to make (or cause to be made) appropriate notations on
the grid attached to such Lender's Term Note (or on any continuation of such
grid), which notations, if made, shall evidence, inter alia, the date of, the
outstanding principal amount of, and the interest rate and Interest Period
applicable to the Term Loans evidenced thereby. Such notations shall be
conclusive and binding on the Borrower absent manifest error; provided,
however, that the failure of any Lender to make any such notations shall not
limit or otherwise affect any Obligations of the Borrower or any other Obligor.
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ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay
in full the unpaid principal amount of each Term Loan upon the Stated Maturity
Date therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Term Loans; provided, however, that
(i) any such prepayment shall be made pro rata among
Term Loans of the same type and, if applicable, having the
same Interest Period of all Lenders;
(ii) the Borrower shall comply with Section 4.4 in
the event that any LIBO Rate Loan is prepaid on any day other
than the last day of the Interest Period for such Term Loan;
(iii) all such voluntary prepayments shall require
at least one Business Day's notice in the case of Base Rate
Loans and three Business Days' notice in the case of LIBO Rate
Loans, but no more than five Business Days' notice, in each
case in writing to the Administrative Agent; and
(iv) all such voluntary partial prepayments shall
be, in the case of LIBO Rate Loans, in an aggregate minimum
amount of $5,000,000 or any larger integral multiple of
$1,000,000 and, in the case of Base Rate Loans, in an
aggregate minimum amount of $1,000,000 or any larger integral
multiple of $500,000 or in the aggregate principal amount of
all Term Loans of the type then outstanding; and
(v) any voluntary prepayment of Term Loans made on
or prior to the third anniversary of the Closing Date shall be
subject to the payment of a premium, as set forth below:
(A) 3.0% of the principal amount of Term
Loans prepaid pursuant to this clause (a) of this
Section 3.1.1 on or prior to the first anniversary of
the Closing Date;
(B) 2.0% of the principal amount of Term
Loans prepaid pursuant to this clause (a) of this
Section 3.1.1 subsequent to the first anniversary and
prior to or on the second anniversary of the Closing
Date; and
(C) 1.0% of the principal amount of Term
Loans prepaid pursuant to this clause (a) of this
Section 3.1.1 subsequent to the second anniversary
and prior to or on the third anniversary of the
Closing Date.
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<PAGE> 37
(b) shall, make a mandatory prepayment of the Term Loans on
account of Net Proceeds in accordance with Section 7.2.6;
(c) shall, (i) on each Quarterly Payment Date occurring on or
during any period set forth below, make a scheduled repayment of the
aggregate outstanding principal amount, if any, of all Term Loans in
an amount equal to the amount set forth below opposite such period,
and (ii) on the Stated Maturity Date, make a scheduled repayment of
the outstanding principal amount of all Term Loans in the amount set
forth opposite such date below (in each case as such amounts may have
otherwise been reduced pursuant to this Agreement):
<TABLE>
<CAPTION>
SCHEDULED QUARTERLY
PRINCIPAL
PERIOD REPAYMENT
<S> <C>
Closing Date to (and including)
June 30, 1998 $250,000
July 1, 1998 to (and including)
June 30, 1999 $250,000
July 1, 1999 to (and including)
June 30, 2000 $250,000
July 1, 2000 to (and including)
June 30, 2001 $250,000
July 1, 2001 to (and including)
June 30, 2002 $250,000
July 1, 2002 to (and including)
June 30, 2003 $250,000
July 1, 2003 to (and including)
June 30, 2004 $250,000
July 1, 2004 to (and including)
June 30, 2005 $250,000
July 1, 2005 to (and including)
June 30, 2006 $250,000
</TABLE>
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<PAGE> 38
<TABLE>
<CAPTION>
SCHEDULED QUARTERLY
PRINCIPAL
PERIOD REPAYMENT
<S> <C>
July 1, 2006 to (and including)
September 30, 2006 $250,000
Stated Maturity Date $90,750,000
</TABLE>
(d) shall, subject to Section 3.1.2, make a mandatory
prepayment of the Term Loans upon the occurrence of a Change in
Control; and
(e) shall, immediately upon the acceleration of the Stated
Maturity Date of any Term Loans pursuant to Section 8.2 or Section
8.3, repay all outstanding Term Loans, unless, pursuant to Section
8.3, only a portion of all Term Loans are so accelerated (in which
case the portion so accelerated shall be so prepaid).
Each prepayment of any Term Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by clause (a)(v) of this
Section and/or Section 4.4.
SECTION 3.1.2. Application. Amounts prepaid and repaid shall be
applied as set forth in this Section.
(a) Subject to clauses (b) and (c) below, each prepayment or
repayment of principal of the Term Loans shall be applied, to the
extent of such prepayment or repayment, first, to the principal amount
thereof being maintained as Base Rate Loans, and second, to the
principal amount thereof being maintained as LIBO Rate Loans.
(b) Each prepayment of any Term Loans made pursuant to clause
(a) of Section 3.1.1 shall be applied, to the extent of such
prepayment, in the inverse order of the scheduled repayments of such
Term Loans, as set forth in clause (c) of Section 3.1.1 with respect
to such Term Loans.
(c) Each prepayment of Term Loans made pursuant to clause (b)
or clause (d) of Section 3.1.1 shall be applied to the outstanding
principal amount of all Term Loans, except that, (i) with respect to
the amount of any such prepayment, the Administrative Agent will as
soon as is practicable (but in any event no later than the date on
which the Borrower has provided such prepayment to the Administrative
Agent) provide notice of such prepayment to each Lender prior to the
distribution of the funds from such prepayment, and (ii) each Lender
will have the right to refuse any such prepayment by giving written
notice of such refusal to the Administrative Agent within three
Business Days after such Lender's receipt of notice from the
Administrative Agent of such prepayment. In addition, any prepayment
of Term Loans shall be applied to the remaining amortization payments
in the inverse order of the scheduled repayments of such Term Loans,
as set forth in clause (c) of Section 3.1.1 with respect to such Term
Loans.
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SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of the Term Loans shall accrue and be payable in accordance
with this Section 3.2.
SECTION 3.2.1. Rates. Each Base Rate Loan shall accrue interest on
the unpaid principal amount thereof for each day from and including the day
upon which such was made or converted to a Base Rate Loan to but excluding the
date such Term Loan is repaid or converted to a LIBO Rate Loan at a rate per
annum equal to the sum of the Alternate Base Rate for such day plus the
Applicable Margin for such Term Loan on such day. Each LIBO Rate Loan shall
accrue interest on the unpaid principal amount thereof for each day during each
Interest Period applicable thereto at a rate per annum equal to the sum of the
LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable
Margin for such Term Loan on such day. All LIBO Rate Loans shall bear interest
from and including the first day of the applicable Interest Period to (but not
including) the last day of such Interest Period at the interest rate determined
as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. Upon the occurrence and
continuance of (i) any Default described in Section 8.1.1 or (ii) any Event of
Default which shall remain uncured for thirty days (without giving effect to
any grace period therefor), all Term Loans shall bear, and the Borrower shall
pay, but only to the extent permitted by law, interest (after as well as before
judgment) thereon at a rate per annum equal to the rate that would otherwise be
applicable to such Term Loans pursuant to Section 3.2.1 plus 2.0% on each
Monthly Payment Date in arrears.
SECTION 3.2.3. Payment Dates. Interest accrued on each Term Loan
shall be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Term Loan;
(c) with respect to Base Rate Loans, on each Monthly Payment
Date occurring after the Closing Date;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, at intervals of three months after the first day of such
Interest Period);
(e) with respect to the principal amount of any Base Rate
Loans converted into LIBO Rate Loans on a day when interest would not
otherwise have been payable pursuant to clause (c), on the date of
such conversion; and
(f) on that portion of any Term Loans the Stated Maturity
Date of which is accelerated pursuant to Section 8.2 or Section 8.3,
immediately upon such acceleration.
Interest accrued on Term Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
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SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Arrangement, Structuring and Commitment Fees. In
accordance with the Fee Letter, the Borrower shall pay on the Effective Date to
each of the Arranger, the Syndication Agent and the Documentation Agent for its
account their applicable portion of the arrangement and structuring fee
referred to therein and, for the account of the Arranger, the commitment fee
referred to therein.
SECTION 3.3.2. Administrative Agent Fee. The Borrower agrees to pay
an annual administration fee to the Administrative Agent, for its own account,
in the amounts mutually agreed to between the Borrower and the Administrative
Agent, payable in advance on the Closing Date and annually thereafter.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall
determine (which determination shall, upon notice thereof to the Borrower and
the Lenders, be conclusive and binding on the Borrower) that the introduction
of or any change in or in the interpretation of any law makes it unlawful, or
any central bank or other governmental authority asserts that it is unlawful,
for such Lender to make, continue or maintain any Term Loan as, or to convert
any Term Loan into, a LIBO Rate Loan of a certain type, the obligations of all
Lenders to make, continue, maintain or convert any such Term Loans shall, upon
such determination, forthwith be suspended until such Lender shall notify the
Administrative Agent that the circumstances causing such suspension no longer
exist, and all LIBO Rate Loans of such type shall automatically convert into
Base Rate Loans at the end of the then current Interest Periods with respect
thereto or sooner, if required by such law or assertion.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall
have determined that (i) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to the Administrative Agent in its
relevant market, or (ii) by reason of circumstances affecting the
Administrative Agent's relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then,
upon notice from the Administrative Agent to the Borrower and the Lenders, the
obligations of all Lenders under Section 2.3 and Section 2.4 to make or
continue any Term Loans as, or to convert any Term Loans into, LIBO Rate Loans
shall forthwith be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower
agrees to reimburse each Lender for any increase in the cost to such Lender of,
or any reduction in the amount of any sum receivable by such Lender in respect
of, making, continuing or maintaining (or of its obligation to make, continue
or maintain) any Term Loans as, or of converting (or of its obligation to
convert) any Term Loans into, LIBO Rate Loans. Such Lender shall promptly
notify the Administrative Agent and the Borrower in writing of the occurrence
of any such event,
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such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five days of its receipt of such
notice, and such notice shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Term
Loan as, or to convert any portion of the principal amount of any Term Loan
into, a LIBO Rate Loan) as a result of (i) any conversion or repayment or
prepayment of the principal amount of any LIBO Rate Loans on a date other than
the scheduled last day of the Interest Period applicable thereto, whether
pursuant to Section 3.1 or otherwise, (ii) Borrower's failure to borrow any
Term Loans as LIBO Rate Loans in accordance with the Borrowing Request
therefor, or (iii) Borrower's failure to continue, or to convert Base Rate
Loans into LIBO Rate Loans in accordance with the Continuation/Conversion
Notice therefor, then, upon the written notice of such Lender to the Borrower
(with a copy to the Administrative Agent), the Borrower shall, within five days
of its receipt thereof, pay directly to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person controlling
such Lender, and such Lender determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's capital as a
consequence of its Term Loan Commitment or the Term Loans made by such Lender
is reduced to a level below that which such Lender or such controlling Person
could have achieved but for the occurrence of any such circumstance, then, in
any such case upon notice from time to time by such Lender to the Borrower, the
Borrower shall immediately pay directly to such Lender additional amounts
sufficient to compensate such Lender or such controlling Person for such
reduction in rate of return. A statement of such Lender as to any such
additional amount or amounts (including calculations thereof in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower. In determining such amount, such Lender may use any method of
averaging and attribution that it (in its sole and absolute discretion) shall
deem applicable.
SECTION 4.6. Taxes. All payments by the Borrower of principal of,
and interest on, the Term Loans and all other amounts payable hereunder shall
be made free and clear of and without deduction for any present or future
income, excise, stamp or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or measured by
any Lender's net income or receipts (such non-excluded items being called
"Taxes"). In the event that any withholding or deduction from any payment to
be made by the Borrower hereunder is required in respect of any Taxes pursuant
to any applicable law, rule or regulation, then the Borrower will
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<PAGE> 42
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative
Agent evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of the
Lenders such additional amount or amounts as is necessary to ensure
that the net amount actually received by each Lender will equal the
full amount such Lender would have received had no such withholding or
deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent
or any Lender with respect to any payment received by the Administrative Agent
or such Lender hereunder, the Administrative Agent or such Lender may pay such
Taxes and the Borrower will promptly pay such additional amounts (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such person after the payment of such Taxes (including any Taxes on
such additional amount) shall equal the amount such person would have received
had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the account
of the respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 4.6, a distribution hereunder by the
Administrative Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Borrower.
Upon the request of the Borrower or the Administrative Agent, each
Lender that is organized under the laws of a jurisdiction other than the United
States shall, prior to the due date of any payments under the Term Notes,
execute and deliver to the Borrower and the Administrative Agent, on or about
the first scheduled payment date in each Fiscal Year, one or more (as the
Borrower or the Administrative Agent may reasonably request) United States
Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents (or successor forms or documents), appropriately completed, as may be
applicable to establish the extent, if any, to which a payment to such Lender
is exempt from withholding or deduction of Taxes.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by or on behalf of the Borrower pursuant to this
Agreement, the Term Notes or any other Loan Document shall be made by the
Borrower to the Administrative Agent for the pro rata account of the Lenders,
Agents or Arranger, as applicable, entitled to receive such payment. All such
payments required to be made to the Administrative Agent shall be made, without
setoff, deduction or counterclaim, not later than 11:00 a.m. (Chicago time) on
the date due, in same day or immediately available funds, to such account as
the Administrative Agent shall specify from time to time by notice to the
Borrower. Funds received after that time shall be deemed to have been received
by the Administrative Agent on the next succeeding Business Day. The
Administrative Agent shall promptly remit in same day funds to each Lender,
Agent or Arranger, as the case may be, its share, if any, of such payments
received by the
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Administrative Agent for the account of such Lender, Agent or Arranger, as the
case may be. All interest and fees shall be computed on the basis of the
actual number of days (including the first day but excluding the last day)
occurring during the period for which such interest or fee is payable over a
year comprised of 360 days (or, in the case of interest on a Base Rate Loan
that is not calculated at the Federal Funds Rate, 365 days or, if appropriate,
366 days). Whenever any payment to be made shall otherwise be due on a day
which is not a Business Day, such payment shall (except as otherwise required
by clause (i) of the definition of the term "Interest Period" with respect to
LIBO Rate Loans) be made on the next succeeding Business Day and such extension
of time shall be included in computing interest and fees, if any, in connection
with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Term Loan (other than pursuant to the
terms of Sections 4.3, 4.4 and 4.5) in excess of its pro rata share of payments
then or therewith obtained by all Lenders entitled thereto, such Lender shall
purchase from the other Lenders such participations in the Term Loans made by
them as shall be necessary to cause such purchasing Lender to share the excess
payment or other recovery ratably with each of them; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender shall repay to
the purchasing Lender the purchase price to the ratable extent of such recovery
together with an amount equal to such selling Lender's ratable share (according
to the proportion of (i) the amount of such selling Lender's required repayment
to the purchasing Lender in respect of such recovery, to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid
or payable by the purchasing Lender in respect of the total amount so
recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section may, to the fullest extent
permitted by law, exercise all its rights of payment (including pursuant to
Section 4.9) with respect to such participation as fully as if such Lender were
the direct creditor of the Borrower in the amount of such participation. If
under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff to which this Section applies,
such Lender shall, to the extent practicable, exercise its rights in respect of
such secured claim in a manner consistent with the rights of the Lenders
entitled under this Section to share in the benefits of any recovery on such
secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any
Event of Default described in clause (a) or (b) of Section 8.1.9 with respect
to any Obligor or, with the consent of the Required Lenders, upon the
occurrence of any other Event of Default, to the fullest extent permitted by
law, have the right to appropriate and apply to the payment of the Obligations
then owing to it (whether or not then due), and (as security for such
Obligations) the Borrower hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter maintained with or otherwise held by such Lender;
provided, however, that any such appropriation and application shall be subject
to the provisions of Section 4.8. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application
made by such Lender; provided, however, that the failure to give such notice
shall not affect the validity of such setoff and application. The rights of
each Lender under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which such
Lender may have.
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ARTICLE V
CONDITIONS TO TERM LOAN EXTENSION
The obligation of each Lender to fund its Term Loans shall be subject
to the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Article V.
SECTION 5.1. Resolutions, etc. The Arranger, the Syndication Agent
and the Administrative Agent shall have received from each Obligor a
certificate, dated the Closing Date, of its Secretary or Assistant Secretary as
to (i) resolutions of its Board of Directors then in full force and effect
authorizing the execution, delivery and performance of each Loan Document to be
executed by it, and (ii) the incumbency and signatures of those of its officers
authorized to act with respect to each Loan Document executed by it, upon which
certificate each Agent and each Lender may conclusively rely until it shall
have received a further certificate of the Secretary or Assistant Secretary of
such Obligor canceling or amending such prior certificate.
SECTION 5.2. Delivery of Term Note. Each Lender shall have received
its Term Note duly executed and delivered by the Borrower.
SECTION 5.3. Subsidiary Guaranty. The Syndication Agent shall have
received the Subsidiary Guaranty, dated the date hereof, duly executed by each
Subsidiary Guarantor.
SECTION 5.4. Consummation of Acquisition. The Arranger, the
Syndication Agent and the Documentation Agent shall have received evidence
satisfactory to each of them that all actions necessary to consummate the
Acquisition shall have been taken in accordance with all applicable law and
that the Acquisition shall have been consummated in accordance with the terms
of the Purchase Agreement without amendment or waiver of any material provision
thereof by the Borrower or any of its affiliates. There shall exist at and as
of the Closing Date (after giving effect to the transactions contemplated by
the Purchase Agreement) no conditions that would constitute a default or event
of default under the Purchase Agreement.
SECTION 5.5. Completion of Consent Solicitation. The Arranger, the
Syndication Agent and the Documentation Agent shall have received copies of
fully executed documentation (which documentation shall be satisfactory to each
of them) relating to and executed in connection with the Consent Solicitation
(including, without limitation, the Supplemental Indenture to the Existing
First Mortgage Indenture by and among the Borrower, the Subsidiary Guarantors
and the Existing Trustee).
SECTION 5.6. Completion of Tender Offer. The Tender Offer shall
have been completed pursuant to documentation satisfactory to the Arranger, the
Syndication Agent and the Documentation Agent at a price per $1,000 principal
amount of First Mortgage Notes not exceeding (inclusive of any fee paid in
connection with the Consent Solicitation) 120% of the par value thereof plus
accrued and unpaid interest thereon and, after giving effect to such
completion, no First Mortgage Notes shall be outstanding, all Liens in respect
of mortgages securing Indebtedness relating to the First Mortgage Notes shall
have been terminated and the Arranger and the Syndication Agent shall have
received evidence that releases and other instruments necessary to release and
terminate such Liens have been delivered to the Borrower.
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SECTION 5.7. Issuance of the Senior Notes. The Arranger, the
Syndication Agent and the Documentation Agent shall have received evidence
satisfactory to each of them that the Borrower shall have received gross
proceeds from the issuance of the Senior Notes which, when added to the
aggregate principal amount of Term Loans to be borrowed hereunder, does not
exceed $300,000,000, and the Arranger, the Syndication Agent and the
Documentation Agent shall be satisfied with all terms and provisions of all
documentation relating to such Senior Notes.
SECTION 5.8. Revolving Credit Agreement. The Arranger, the
Syndication Agent and the Documentation Agent shall have received copies of
fully executed versions of the Revolving Credit Agreement, certified to be true
and complete copies thereof by an Authorized Officer of the Borrower, and be
satisfied with the terms of such Revolving Credit Agreement. The Loan and
Security Agreement dated as of April 12, 1995, among PAI and Bank of America
Illinois, as agent and lender, shall have been terminated (including all
commitments to extend credit thereunder and all Liens securing payment of any
Indebtedness thereunder), all amounts payable thereunder (if any) shall have
been paid or transferred to (and payable under) the Revolving Credit Agreement
and the Arranger and Syndication Agent shall have received evidence that
releases, UCC-3 termination statements and other instruments necessary to
release and terminate any such Liens on any Collateral have been delivered to
the Borrower. As of the Closing Date, each condition to the closing
contemplated by the Revolving Credit Agreement shall have been satisfied or,
with appropriate consents, waived. There shall exist at and as of the Closing
Date (after giving effect to the transactions contemplated by the Revolving
Credit Agreement) no conditions that would constitute a default or event of
default under the Revolving Credit Agreement.
SECTION 5.9. Transaction Documents. The Arranger, the Syndication
Agent and the Documentation Agent shall have received (with copies for each
Lender that shall have expressly requested copies thereof) copies of fully
executed versions of all other Transaction Documents, certified to be true and
complete copies thereof by an Authorized Officer of the Borrower, and be
satisfied with the terms of all such agreements and documents. The Arranger,
the Syndication Agent and the Documentation Agent shall be reasonably satisfied
with all other aspects of the Transaction, including the aggregate sources and
uses of proceeds utilized to consummate the Transaction (including fees and
expenses not to exceed $12,000,000 in the aggregate (exclusive of premium paid
with respect to the First Mortgage Notes in connection with the Tender Offer
and any fee paid in connection with the Consent Solicitation)).
SECTION 5.10. Mortgages. PCAC shall have caused to be delivered to
the Collateral Agent, with copies to each of the Agents, the following
documents and instruments with regard to each Mortgaged Property located in
Henderson, Nevada, St. Gabriel, Louisiana, and Tacoma, Washington, providing
for first priority mortgages:
(a) a Mortgage, duly executed by PCAC, together with evidence
of the due recordation thereof in the appropriate recording office of
the political subdivision where such Mortgaged Property is situated
(or evidence reasonably satisfactory to the Arranger, the Syndication
Agent and the Documentation Agent that each Mortgage, as appropriate,
has been delivered to a nationally-recognized title insurance company
for recording and that all fees, taxes and other expenses associated
with such recording have been paid);
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(b) a mortgagee policy of title insurance (or endorsement
thereto, as appropriate) in favor of the Collateral Agent, issued by
such title insurance company, in such amounts, with such endorsements,
affirmative coverages, and reinsurance agreements as the Syndication
Agent shall reasonably require, and otherwise in form and substance
reasonably satisfactory to the Arranger, the Syndication Agent and the
Documentation Agent, insuring each Mortgage as a first lien on the
property and interests covered thereby subject only to such other
matters as are acceptable to the Arranger, the Syndication Agent and
the Documentation Agent, together with evidence that all premiums in
respect of such policies have been paid in full and true and complete
copies of all documents referred to therein;
(c) certified perimeter surveys of the real property covered
by each Mortgage by registered surveyors as of a date and in form and
substance acceptable to the Arranger, the Syndication Agent and the
Documentation Agent, bearing legal descriptions conforming exactly to
those contained in the title insurance policy referred to in the
preceding clause (b); indicating the length of exterior boundary lines
of the Mortgaged Property, locations of all buildings, utility or
other easements, showing the location of all easements of record,
encroachments, if any, and means of access to the real property from a
public way; and the surveyor's original certification to the
Syndication Agent, the Collateral Agent and the title insurance
company issuing the policies described in the preceding clause (b) and
in the case of surveys with respect to the Mortgaged Properties in
Henderson, Nevada and St. Gabriel, Louisiana, such "affidavits of no
change" as may be required by such title companies to omit the
standard survey exception from such title insurance policies or
endorsements;
(d) evidence reasonably satisfactory to the Arranger, the
Syndication Agent and the Documentation Agent of all filings of
financing statements under the UCC necessary or desirable to perfect
the lien granted by each Mortgage (or evidence reasonably satisfactory
to the Arranger, the Syndication Agent and the Documentation Agent
that such financing statements have been delivered to a nationally
recognized title company for filing and that all fees, taxes and other
expenses associated with such filings have been paid), together with
such searches of UCC, judgment and tax lien records as the Arranger,
the Syndication Agent and the Documentation Agent shall reasonably
require;
(e) policies or certificates of insurance with respect to the
insurance required to be maintained in respect of the property covered
by each Mortgage pursuant to the terms of this Agreement and the
Senior Note Indenture, naming the Collateral Agent as loss payee or
additional named insured, as appropriate;
(f) a non-disturbance and attornment agreement among PCAC,
Saguaro Power Company, a Limited Partnership and the Collateral Agent
with respect to the first priority lien Nevada Mortgage, each in form
and substance acceptable to the Arranger, the Syndication Agent and
the Documentation Agent;
(g) a Waiver of the Nevada "One-Action Rule" by the
Subsidiary Guarantors, other than PCAC, with respect to the Agreement,
each in form and substance acceptable to the Arranger, the Syndication
Agent and the Documentation Agent; and
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(h) such other agreements, instruments, approvals, consents,
opinions, or documents as the Trustee, the Syndication Agent, the
Documentation Agent, the Administrative Agent, the Collateral Agent or
their respective counsel may reasonably request.
SECTION 5.11. Additional Security Documents. The Collateral Agent,
the Syndication Agent, the Documentation Agent and the Administrative Agent
shall have received executed versions of each of the other Security Documents
(other than the Mortgages), duly executed by the appropriate Subsidiary
Guarantor party thereto, together with:
(a) duly executed UCC-1 financing statements or other
documents under the provisions of the UCC or any other applicable
state law in proper form for filing in each office where such filing
is necessary or appropriate to grant to the Collateral Agent the Liens
of the character and priority contemplated by the Security Documents;
(b) share certificates representing all Pledged Shares (as
defined in the Stock Pledge Agreement) and undated stock powers for
such certificates executed and endorsed in blank; and
(c) evidence that all other actions necessary to perfect and
protect the Liens created by the Security Documents have been taken.
SECTION 5.12. Existing Intercreditor Agreement. The Existing
Intercreditor Agreement shall have been terminated pursuant to documents and
instruments satisfactory to the Arranger, the Syndication Agent and the
Documentation Agent.
SECTION 5.13. Intercreditor Agreement. The Borrower, PAI, PCAC, the
Trustee, the Administrative Agent, BofA (as agent under the Revolving Credit
Agreement) and the Collateral Agent shall have entered into the Intercreditor
Agreement, and the Arranger and the Syndication Agent shall have received and
be satisfied with the terms of the executed versions thereof.
SECTION 5.14. Closing Date Certificates. The Arranger and the
Syndication Agent shall have received, with counterparts for each Lender, the
Closing Date Certificates, substantially in the form of Exhibits I and J
hereto, respectively, dated the date hereof and duly executed and delivered by
each of:
(a) the chief executive or financial (or equivalent)
Authorized Officer of the Borrower, in which certificate the Borrower
shall agree and acknowledge that the statements made therein shall be
deemed to be true and correct representations and warranties of the
Borrower made as of such date under this Agreement, and, at the time
such certificate is delivered, such statements shall in fact be true
and correct; and
(b) the chief executive or financial (or equivalent)
Authorized Officer of the Parent, in which certificate the Parent
shall agree and acknowledge that the statements made therein shall be
deemed to be true and correct representations and warranties of the
Parent made as of such date under this Agreement, and, at the time
such certificate is delivered, such statements shall in fact be true
and correct.
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SECTION 5.15. Financial Information, etc. The Arranger and the
Syndication Agent shall have received
(a) the audited financial statements of the Borrower as of
December 31, 1996 and for the period from March 6, 1995 through
December 31, 1995;
(b) the audited financial statements of the Borrower's
predecessor, Pioneer Americas, Inc., as of December 31, 1994 and for
the period from January 1, 1995 through April 20, 1995;
(c) the unaudited financial statements of the Borrower for the
period from January 1, 1997 through March 31, 1997; and
(d) a pro forma opening balance sheet of the Borrower as of
March 31, 1997, after giving effect to the contemplated Transaction
and reflecting the proposed legal and capital structure as of the
Closing Date, which legal and capital structure shall be satisfactory
in all respects to the Arranger, the Syndication Agent and the
Documentation Agent.
SECTION 5.16. Pro Forma Balance Sheet Certificate. The Syndication
Agent and the Administrative Agent shall have received a certificate from the
chief executive or financial Authorized Officer of the Borrower, dated the date
of the initial Borrowing, with respect to delivery of the pro forma balance
sheet described in clause (d) of Section 5.15.
SECTION 5.17. Litigation. There shall exist no pending or threatened
material litigation, proceedings or investigations which (x) contest the
consummation of the Transaction or (y) could reasonably be expected to have a
Material Adverse Effect.
SECTION 5.18. Material Adverse Change. Since December 31, 1996,
there has not occurred or arisen any event or condition which has had or is
reasonably likely to have a Material Adverse Effect on the Borrower, its
Subsidiaries or the Tacoma Business.
SECTION 5.19. Consents and Approvals, etc.. All governmental and
third party approvals necessary or advisable in connection with each aspect of
the Transaction and the continuing operations of the Borrower, its Subsidiaries
and the Tacoma Business shall have been obtained and be in full force and
effect or waived, and all applicable waiting periods shall have expired without
any action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on any aspect of the
Transaction.
SECTION 5.20. Reliance Letters. The Syndication Agent and the
Administrative Agent shall, unless otherwise agreed, have received reliance
letters, dated the Closing Date and addressed to each Lender and each Agent, in
respect of each of the legal opinions (other than "disclosure" and other
similar opinions) delivered in connection with the Transaction.
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SECTION 5.21. Opinions of Counsel. The Syndication Agent and the
Administrative Agent shall have received opinions, dated the Closing Date and
addressed to the Agents and all Lenders from
(a) Willkie, Farr & Gallagher, special New York counsel for
the Borrower and the Subsidiary Guarantors, in form and substance
satisfactory to the Arranger, the Syndication Agent and the
Documentation Agent,
(b) Kent R. Stephenson, Esq., the General Counsel of the
Parent, in form and substance satisfactory to the Arranger, the
Syndication Agent and the Documentation Agent,
(c) Jackson & Walker, environmental counsel to the Borrower
and the Subsidiary Guarantors, in form and substance satisfactory to
the Arranger, the Syndication Agent and the Documentation Agent,
(d) Allen, Matkins, Leck, Gamble & Mallory, special
California counsel, regarding matters of California law, in form and
substance satisfactory to the Arranger, the Syndication Agent and the
Documentation Agent,
(e) Lionel, Sawyer & Collins, special Nevada counsel,
regarding the first and second mortgages on PCAC's Henderson facility
and other matters of Nevada law, in form and substance satisfactory to
the Arranger, the Syndication Agent and the Documentation Agent,
(f) Nesser, King & LeBlanc, special Louisiana counsel,
regarding the first and second mortgages on PCAC's St. Gabriel
facility and other matters of Louisiana law, in form and substance
satisfactory to the Arranger, the Syndication Agent and the
Documentation Agent, and
(g) Foster Pepper & Shefelman PLC, special Washington
counsel, regarding the Purchase Agreement, the first mortgage on the
Tacoma Facility and other matters of Washington law, in form and
substance satisfactory to the Arranger, the Syndication Agent and the
Documentation Agent.
SECTION 5.22. Closing Fees, Expenses, etc. The Agents and the
Arranger shall have received, each for their own respective accounts (including
in their capacity as a Lender), as the case may be, all fees, costs and
expenses due and payable pursuant to Sections 3.3 and 10.3 if then invoiced).
SECTION 5.23. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligors shall be reasonably satisfactory in form and
substance to the Arranger, the Syndication Agent and the Documentation Agent
and their counsel; the Arranger, the Syndication Agent and the Documentation
Agent and their counsel shall have received all information, approvals,
opinions, documents or instruments as the Arranger, the Syndication Agent and
the Documentation Agent or their counsel may reasonably request.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agents to enter into this
Agreement and to make the Term Loans hereunder, the Borrower represents and
warrants unto the Agents and each Lender as set forth in this Article VI.
SECTION 6.1. Organization, etc. Each of the Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its respective incorporation.
Each of the Borrower and its Subsidiaries 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, except for those
states in which its failure to qualify to do business would not be reasonably
likely to have a Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The Borrower
is duly authorized to execute and deliver this Agreement, the Term Notes, and
each other Loan Document to be executed by it and is duly authorized to borrow
monies hereunder and to perform its obligations under this Agreement, the Term
Notes and each other Loan Document to be executed by it. Each Subsidiary
Guarantor is duly authorized to execute and deliver the Subsidiary Guaranty and
each other Loan Document to be executed by it and is and will continue to be
duly authorized to perform its obligations thereunder. The execution, delivery
and performance by (a) the Borrower of this Agreement, the Term Notes and each
other Loan Document to which it is a party and the Borrowings hereunder and (b)
each Subsidiary Guarantor of the Subsidiary Guaranty and each other Loan
Document to which it is a party do not and will not require any consent or
approval of any governmental agency or authority.
SECTION 6.3. No Conflicts. The execution, delivery and performance
by (a) the Borrower of this Agreement, the Term Notes and each other Loan
Document to which it is a party and (b) each Subsidiary Guarantor of the
Subsidiary Guaranty and each other Loan Document 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 bylaws, of the Borrower or such
Subsidiary, (iii) any agreement binding upon the Borrower or such Subsidiary
which conflict is reasonably likely to have a Material Adverse Effect or (iv)
any court or administrative order or decree applicable to the Borrower or such
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 the Borrower or any Subsidiary, except
as provided herein.
SECTION 6.4. Validity and Binding Effect. This Agreement, the Term
Notes and each other Loan Document contemplated by this Agreement, when duly
executed and delivered, will be legal, valid and binding obligations of the
Borrower and each Subsidiary party thereto, as applicable, enforceable against
the Borrower and each such Subsidiary in accordance with their respective
terms.
SECTION 6.5. No Default. Neither the Borrower nor any Subsidiary of
the Borrower is in default under any agreement or instrument to which the
Borrower or such Subsidiary is a party or by which any of their respective
properties or assets is bound or affected, which default is
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reasonably likely to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
SECTION 6.6. Financial Statements. Each of financial statements of
the Borrower and of the Borrower's predecessor, Pioneer Americas, Inc.,
referred to in clauses (a), (b) and (c) of Section 5.15 have been furnished to
the Agents, 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 its 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.
The Pro Forma Balance Sheet includes appropriate pro forma adjustments to give
pro forma effect to the Transaction (including assumptions that have been made
on a reasonable basis). Since December 31, 1996, there has not occurred or
arisen any event or condition which has had or is reasonably likely to have a
Material Adverse Effect.
SECTION 6.7. Insurance. Item 6.7 ("Insurance") of the Disclosure
Schedule is a complete and accurate summary of the property and casualty
insurance program carried by the Borrower and its Subsidiaries on the date
hereof. Such Item 6.7 includes name(s) of insurer(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 the Borrower or any Subsidiary or imposed upon the
Borrower or any Subsidiary by any such insurer. This summary also includes any
self-insurance program that is in effect.
SECTION 6.8. Litigation; Contingent Liabilities. (a) As of the date
hereof, except for those referred to in Item 6.8 ("Litigation") of the
Disclosure Schedule, there are no claims, litigation, arbitration proceedings
or governmental proceedings pending or threatened against or affecting the
Borrower, the Parent or any of their respective Subsidiaries, any 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 Item 6.8 or 6.19 of the
Disclosure Schedule or provided for or disclosed in the financial statements
referred to in Section 6.6, neither the Borrower nor any of its Subsidiaries
has any contingent liabilities which are reasonably likely to have a Material
Adverse Effect.
SECTION 6.9. Liens. None of the Collateral or other property,
revenues or assets of the Borrower or any Subsidiary is subject to any Lien
except Liens permitted by clauses (a) and (b) of Section 7.2.2.
SECTION 6.10. Subsidiaries. As of the date hereof, all of the
Borrower's Subsidiaries are listed in Item 6.10 ("Subsidiaries") of the
Disclosure Schedule. Item 6.10 of the Disclosure Schedule sets forth, for each
such Subsidiary, a complete and accurate statement of (a) the Borrower's
percentage ownership of each of the Subsidiaries, (b) the state or other
jurisdiction of formation or incorporation of each Subsidiary and (c) each
state in which each Subsidiary is qualified to do business. Each Subsidiary of
the Borrower has executed and delivered the Subsidiary Guaranty.
SECTION 6.11. Partnerships; Joint Ventures. As of the date hereof,
neither the Borrower nor any of its Subsidiaries is a partner or joint venturer
in any partnership or joint
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venture other than the partnerships and joint ventures listed in Item 6.11
("Partnerships and Joint Ventures") of the Disclosure Schedule. Item 6.11 of
the Disclosure Schedule sets forth, for each such partnership or joint venture,
a complete and accurate statement of (a) the Borrower's and each 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 and (c) each state in which each such
partnership or joint venture is qualified to do business.
SECTION 6.12. Senior Notes. The Senior Notes have been issued and
sold to the initial Purchasers thereof 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 issuance of the Senior Notes and the execution of the
Senior Note Indenture have been duly authorized by all necessary corporate
action on the part of the Borrower and each of its Subsidiaries 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 Note Indenture do not conflict
with (i) any provision of law, (ii) the Certificate or Articles of
Incorporation or by-laws of the Borrower or any of its Subsidiaries, (iii) any
agreement binding upon the Borrower or any of its Subsidiaries which conflict
is reasonably likely to have a Material Adverse Effect, or (iv) any court or
administrative order or decree applicable to the Borrower or any of its
Subsidiaries 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 the Borrower or any of its Subsidiaries
(other than the Liens created under the Security Documents). All
representations and warranties of the Borrower and the Parent contained in the
purchase agreement relating to the Senior Notes are true and correct in all
material respects as of the date hereof.
SECTION 6.13. Intellectual Property. The Borrower and each of its
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 the Borrower or any Subsidiary are listed in Item 6.13 ("Intellectual
Property") of the Disclosure Schedule.
SECTION 6.14. Solvency. Each of the Borrower and the Subsidiary
Guarantors, immediately after giving effect to the Transaction on the Closing
Date, will be Solvent. As used herein, the term "Solvent" means, with respect
to any such entity on a particular date (i) the fair value of the property of
such entity is greater than the total amount of liabilities (including
contingent liabilities) of such entity, (ii) the present fair saleable value of
the assets of such entity is greater than the probable liability of such entity
on its total existing debts (including contingent liabilities) as they become
absolute and matured, (iii) such entity will be able to pay its debts and
liabilities as they mature and (iv) such entity will not have unreasonably
small capital for the business in which it is engaged, as now conducted and as
proposed to be conducted following the consummation of the Transaction.
SECTION 6.15. Contracts; Labor Matters. Except as disclosed in Item
6.15 ("Contracts and Labor Matters") of the Disclosure Schedule: (a) neither
the Borrower nor any of its
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Subsidiaries 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 the Borrower or any of its Subsidiaries is a party or is
otherwise subject is scheduled to expire prior to the Stated Maturity Date; (c)
neither the Borrower nor any of its Subsidiaries 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 Worker Adjustment and Retraining Notification Act of
1988 or any similar applicable federal, state or local law, and the Borrower
has no reasonable expectation that any such action is or will be required any
time prior to the Stated Maturity Date; and (d) on the date of this Agreement
(i) neither the Borrower nor any of its Subsidiaries is a party to any labor
dispute and (ii) there are no strikes or walkouts relating to any labor
contracts to which the Borrower or any of its Subsidiaries is a party or is
otherwise subject.
SECTION 6.16. 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 the
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 the 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 the 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 Item 6.16 ("Pension and Welfare Plans") of the Disclosure
Schedule, neither the Borrower nor any ERISA Affiliate, to the extent there is
joint and several liability with the 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.
SECTION 6.17. Regulations G, U and X. Neither the Borrower nor any
of its Subsidiaries 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 Term Loans 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.
SECTION 6.18. Compliance. The Borrower and each of its Subsidiaries
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.
SECTION 6.19. Taxes. Each of the Borrower its Subsidiaries 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
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appropriate provisions as may be required by GAAP have been maintained. The
federal income tax liability of the Parent, the Borrower and each of its
Subsidiaries 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, 1995. The
Borrower is not aware of any proposed assessment against the Parent, the
Borrower or any of its Subsidiaries for additional Taxes (or any basis for any
such assessment).
SECTION 6.20. Investment Company Act Representation. Neither the
Borrower nor any of its Subsidiaries is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 6.21. Public Utility Holding Company Act Representation.
Neither the Borrower nor any of its Subsidiaries 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.
SECTION 6.22. Environmental and Safety and Health Matters. The
Borrower and its Subsidiaries and/or each property, operations and facility
that the Borrower or any such Subsidiary owns, operates or controls
(a) complies in all respects with (i) all applicable
Environmental Laws, except for those laws the failure with which to
comply is not reasonably likely to have a Material Adverse Effect and
(ii) all applicable Occupational Safety and Health Laws, except for
those laws the failure with which to comply is not 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 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 under any Environmental
Law or Occupational Safety and Health Law, 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 the 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 regulated under any
Environmental Law which is reasonably likely to have a Material
Adverse Effect or (ii) any allegedly unsafe or unhealthful condition
regulated under any Environmental Law or Occupational Safety and
Health Law which is reasonably likely to have a Material Adverse
Effect;
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(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
regulated under any Environmental Law 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 the Borrower or any Subsidiary or on any other
premises, which is reasonably likely to have a Material Adverse
Effect.
There are no Hazardous Materials on, in or under any property or facilities
owned, operated or controlled by the Borrower or any 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.).
SECTION 6.23. Related Agreements and Transaction Documents. As of
the date hereof, all representations and warranties of the Parent, the Borrower
and each of their respective Subsidiaries contained in any Loan Document
(including each of the Security Documents) and all representations and
warranties of the Parent, the Borrower and each of their respective
Subsidiaries contained in any Transaction Document (whether such
representations and warranties were made to the 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 the Borrower hereby adopts and affirms all such
representations and warranties which the Borrower agrees shall be incorporated
by reference herein and made a part hereof.
SECTION 6.24. Holding Companies. Each of the Parent, the Borrower,
PAI, BMPH, Pioneer East, TCH and Imperial is a holding company without material
assets, operations or business, other than (i) in the case of the Parents, the
ownership of all of the Capital Stock of the Borrower and Pioneer Water
Technologies, Inc., (ii) in the case of the Borrower, all of the Capital Stock
of PAI, (iii) in the case of PAI, all of the Capital Stock of its Subsidiaries,
(iv) in the case TCH, all of the Capital Stock of T.C. Products, Inc. and (v)
in the case of Imperial, 50% of the Capital Stock of Kenwater. None of the
Parent, the Borrower, PAI, BMPH, Pioneer East, TCH and Imperial has any
Indebtedness or other obligations other than, in the case of the Borrower,
Indebtedness of the Borrower in respect of the Term Loans, the loans made to
the Borrower pursuant to the Revolving Credit Agreement and the Senior Notes,
and, in the case of PAI, BMPH, Pioneer East, TCH and Imperial, guaranties
thereof.
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ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the
Agents and each Lender that, until all Term Loan Commitments have terminated
and all Obligations have been paid and performed in full, the Borrower will
perform the obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender and each
Agent copies of the following financial statements, reports, notices and
information (except to the extent any such Lender shall have provided written
notice to the Borrower and the Administrative Agent that it is not to receive
any of the following statements, reports, notices and information):
(a) Annual Audited Financial Statements. Within ninety (90)
days after each Fiscal Year, a copy of the annual audited financial
statements of the Parent, the 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 the Agents, together with (i) a certificate from
such accountant 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 Default or Event of Default that has
occurred and is continuing and that relates to financial or other
accounting matters or the covenants set forth in this Article VII or,
if such accountant has become aware of any such event, describing it
and (ii) if prepared in connection with the annual audit report, the
annual operating statements of the Parent, the 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 the Borrower's chief financial
officer or assistant treasurer.
(b) Monthly Financial Statements. Within thirty (30) days
after the end of each month of each Fiscal Year of the 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 the
Parent, the 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 the 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 the Borrower's budget
(delivered pursuant to paragraph (c) below, for the current Fiscal
Year).
(c) Annual Budgets. Within thirty (30) days after the end of
each Fiscal Year of the Borrower, a copy of an annual budget of the
Parent 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 the
Borrower's chief financial officer or assistant treasurer and
consisting of at least a balance sheet, an
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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 the Borrower under the preceding clauses (a)
and (b), a certificate of the chief executive or financial officer or
assistant treasurer of the Borrower stating that a review of the
activities of the Borrower 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 obligations under this Agreement and the
other Loan Documents, 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 Agreement and the other Loan Documents 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).
(e) SEC and Other Reports. Copies of each filing and report
made by the Parent, the Borrower or any Restricted Subsidiary with or
to any securities exchange or the Securities and Exchange Commission,
including any registration statement and all amendments thereto filed
with respect to the Senior Notes, or as required pursuant to the
Senior Note Indenture, the Senior Note or any other document relating
thereto, promptly upon the filing or making thereof.
(f) Notice of Default. Notice of the occurrence of (i) a
Default or an Event of Default or (ii) a default by the Parent, the
Borrower, any other Obligor or any Restricted Subsidiary under any
material note, indenture, loan agreement, mortgage, lease, deed or
other material similar agreement to which the Parent, the Borrower,
any other Obligor or any Restricted Subsidiary, as appropriate, is a
party or by which it is bound (including any of the Loan Documents).
(g) Notice of Judgment. Notice of the entry of any judgment
or decree against the Parent, the Borrower, any other Obligor or any
Restricted Subsidiary, if the amount of such judgment exceeds
$500,000.
(h) Notice of Other Indebtedness. 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 the Parent, the Borrower or any Restricted
Subsidiary in connection with the Loan Documents other than any such
notice or other written materials already sent to the Agents pursuant
to any other Section of this Agreement.
(i) Security Documents. Any statement, report, notice and/or
information required to be delivered to the Collateral Agent pursuant
to any of the Security Documents.
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(j) 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 the Agents on
behalf of itself or any Lender.
SECTION 7.1.2. Corporate Existence. Subject to Section 7.2.5, the
Borrower shall, subject to provisions herein, 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 Borrower
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 Borrower and its Subsidiaries taken as a whole and that
the loss thereof is not adverse in any material respect to the Lenders.
SECTION 7.1.3. Maintenance of Properties. The Borrower shall, and
shall cause its Restricted Subsidiaries to, maintain their respective
properties and assets in normal working order and condition as of the date
hereof (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 Borrower and
its Restricted Subsidiaries taken as a whole; provided that nothing herein
shall prevent the Borrower or any of its Restricted Subsidiaries from
discontinuing any maintenance of any such properties if such discontinuance is
desirable in the conduct of the business of the Borrower and its Restricted
Subsidiaries taken as a whole.
SECTION 7.1.4. Insurance. The Borrower shall, and shall cause its
Restricted Subsidiaries to, maintain liability, casualty and other insurance
(subject to the customary deductibles and retentions) with responsible
insurance companies in such amounts and against such risks as it customarily
carried by responsible companies engaged in similar businesses and owning
similar assets in the general areas in which the Borrower and its Restricted
Subsidiaries operate (which may include self-insurance in comparable form to
that maintained by such responsible companies).
SECTION 7.1.5. Taxes. The Borrower 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 Borrower)
are being maintained in accordance with GAAP.
SECTION 7.1.6. Books and Records. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect in
all material respects all of its business affairs and transactions and permit
the Agents and each Lender or any of their respective representatives, at
reasonable times and intervals, and upon reasonable notice, to visit all of its
offices, to discuss its financial matters with its officers and, after notice
to the Borrower and provision of an opportunity for the Borrower to participate
in such discussion, its independent public accountant (and the Borrower hereby
authorizes such independent public accountant to discuss the Borrower's
financial matters with each Lender or its representatives whether or not any
representative of the Borrower is present, so long as the Borrower has been
afforded a reasonable opportunity to be present) and to examine, and photocopy
extracts from,
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any of its books or other corporate records. The cost and expense of each such
visit shall be borne by the applicable Agent or Lender, except that each Agent
may make one such visit each Fiscal Year and the cost and expense thereof shall
be borne by the Borrower.
SECTION 7.1.7. Use of Proceeds, etc. The Borrower shall apply the
proceeds of the Term Loans to fund the Acquisition and the Tender Offer and pay
certain related fees and expenses.
SECTION 7.1.8. Subsidiary Guarantees. (a) If (i) any Subsidiary of
the Borrower becomes a Restricted Subsidiary after the Closing Date, (ii) the
Borrower or any Subsidiary of the Borrower that is a Subsidiary Guarantor
transfers or causes to be transferred, in one transaction or a series of
related transactions, property or assets (including, without limitation,
businesses, divisions, real property, assets or equipment) which in the
aggregate have a value equal to or greater than 15% of the Borrower's and its
Subsidiaries' total assets determined on a consolidated basis as of the time of
transfer to any Subsidiary or Subsidiaries of the Borrower that is not a
Subsidiary Guarantor or are not Subsidiary Guarantors, (iii) any Subsidiary of
the Borrower which has a value equal to or greater than 5% of the Borrower'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 or (iv) any Subsidiary of the
Borrower becomes a guarantor of the Senior Notes after the date hereof, the
Borrower shall cause such Subsidiary or Subsidiaries to execute and deliver to
the Administrative Agent a duly executed supplement to the Subsidiary Guaranty,
substantially in the form attached thereto, pursuant to which such Subsidiary
or Subsidiaries shall unconditionally guarantee, in accordance with the
provisions of the Subsidiary Guaranty, all of the Borrower's obligations under
this Agreement and the other Loan Documents on the same terms as the other
Subsidiary Guarantors, which guarantee shall rank pari passu with Senior
Indebtedness of such Subsidiary.
(b) Each guarantee created pursuant to the provisions
described in the foregoing paragraph shall be deemed to be a "Subsidiary
Guaranty" and the issuer of each such Subsidiary Guaranty shall be referred to
as a "Subsidiary Guarantor". Notwithstanding the foregoing, any Subsidiary
Guaranty shall be automatically and unconditionally released and discharged
upon any sale, exchange, transfer or other disposition to any Person of all of
the Borrower'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 Agreement, including Section 7.2.6.
SECTION 7.1.9. Stock Pledge Agreements. If (i) any Restricted
Subsidiary of the Borrower engages in any business activity other than the
holding of the Capital Stock of one or more Subsidiaries of the Borrower (or in
the case of Imperial, engaging in any business activity other than the holding
of its Investment in Kemwater) and (ii) such Restricted Subsidiary has a value
equal to or greater than 5% of the Borrower's total assets determined on a
consolidated basis as of the time of determination, then the Borrower will, and
will cause the applicable Subsidiary or Subsidiaries of the Borrower (the
"Pledgor Subsidiary" or "Pledgor Subsidiaries") to, execute and deliver to the
Administrative Agent and the Collateral Agent one or more stock pledge
agreements substantially in the form of the Stock Pledge Agreement providing
for the pledge to the Collateral Agent for the benefit of (x) the
Administrative Agent, for itself and the Lenders, and (y) the Trustee, for
itself and the holders of Senior Notes, of all the Capital Stock of such
Restricted Subsidiary held by the Borrower and the Pledgor Subsidiary or
Pledgor
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Subsidiaries, together with delivery to the Collateral Agent of stock
certificates evidencing such Capital Stock (together with undated stock powers
executed in blank), which Capital Stock and stock powers will become
"Collateral" for purposes of the Intercreditor Agreement.
SECTION 7.1.10. Concerning the Collateral and the Loan Documents.
(a) In order to secure the due and punctual payment of the Obligations,
including principal of, premium (if any) and interest (including interest on
overdue principal) on the Term Loans, when and as the same shall become due and
payable, whether on the scheduled payment date therefor, at maturity, by
acceleration or otherwise, and performance of all other obligations of the
Borrower to the Agents and the Lenders under this Agreement and each other Loan
Document and of all obligations of the Borrower's Restricted Subsidiaries under
the Subsidiary Guaranty and each other Loan Document, the Borrower and the
other Obligors have entered into each of the applicable Security Documents to
which each is a party.
(b) The Borrower shall, and shall cause PCAC and PAI to,
perform at their sole cost and expense any and all acts and execute any and all
documents (including, without limitation, the execution, amendment or
supplementation of any financing statement and continuation statement or other
statement) for filing under the provisions of the UCC and the rules and
regulations thereunder, or any other statute, rule or regulation of any
applicable federal, state or local jurisdiction, including any filings in local
real estate land record offices, which are necessary or advisable and shall do
such other acts and execute such other documents as may be required under any
of the Security Documents, from time to time, in order to grant and maintain
valid and perfected Liens on the Collateral in favor of the Collateral Agent in
the priorities purported to be created by the Security Documents, subject only
to Liens permitted under the Security Documents to be senior or pari passu to
the Liens of the Collateral Agent, and to fully preserve and protect the rights
of the Agents and the Lenders under this Agreement and the other Loan
Documents. The Borrower shall, and shall cause PCAC and PAI to, pay and
satisfy promptly all mortgage and financing and continuation statement
recording and/or filing fees, charges and taxes relating to this Agreement, the
Security Documents and the other Loan Documents, any amendments thereto and any
other instruments of further assurance.
(c) The Borrower shall, on each anniversary of the Closing
Date beginning in the 1998 year and upon each delivery of a stock pledge
agreement pursuant to Section 7.1.9, the Borrower shall furnish to the
Administrative Agent an Opinion of Counsel, dated as of such date, either (a)
to the effect that, in the opinion of such counsel, such action has been taken
with respect to the recordings, registerings, filings, re-recordings, re-
registerings and refilings of all financing statements, continuation statements
or other instruments of further assurance as is necessary to maintain the Lien
of each of the Security Documents and reciting with respect to such Liens the
details of such action or referencing prior Opinions of Counsel in which such
details are given, and stating that all financing statements and continuation
statements have been executed and filed that are necessary as of such date and
during the succeeding twelve months fully to preserve and protect the rights of
the Collateral Agent, the Lenders and the Administrative Agent hereunder and
under each of the Security Documents with respect to the Liens, or (b) to the
effect that, in the opinion of such counsel, no such action is necessary to
maintain such Liens.
SECTION 7.1.11. Maintenance of Corporate Separateness. The Borrower
will, and will cause each of its Subsidiaries to, satisfy customary corporate
formalities, including the holding of regular board of directors' and
shareholders' meetings and the maintenance of corporate
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offices and records. Neither the Borrower nor any of its Restricted
Subsidiaries shall make any payment to a creditor of any Unrestricted
Subsidiary in respect of any liability of such Unrestricted Subsidiary, and no
bank account of an Unrestricted Subsidiary shall be commingled with any bank
account of the Borrower or any of its Restricted Subsidiaries. Any financial
statements distributed to any creditors of an Unrestricted Subsidiary shall
clearly establish the separateness of such Unrestricted Subsidiary from the
Borrower and its Restricted Subsidiaries. Neither the Borrower nor any of its
Subsidiaries shall take any action, or conduct its affairs in a manner, which
is likely to result in the corporate existence of any Unrestricted Subsidiary
or any Restricted Subsidiary being ignored by any court of competent
jurisdiction, or in the assets and liabilities of the Borrower or any
Restricted Subsidiary being substantively consolidated with those of any
Unrestricted Subsidiary in a bankruptcy, reorganization or other insolvency
proceeding.
SECTION 7.1.12. Working Capital Line. The Borrower shall use its
best efforts to maintain a revolving credit facility or similar arrangement to
the extent it deems necessary based on its cash position and cash flows to fund
the foreseeable capital expenditure and working capital requirements of its
Restricted Subsidiaries.
SECTION 7.2. Negative Covenants. The Borrower agrees with the Agents
and each Lender that, until the Term Loan Commitments have terminated, and all
Obligations have been paid and performed in full, the Borrower will perform the
obligations set forth in this Section 7.2.
SECTION 7.2.1. Indebtedness. The Borrower will not, and will 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 Borrower, or a Restricted Subsidiary
of the Borrower, may incur Indebtedness if at the time of such incurrence and
after giving pro forma effect thereto, the Borrower's Consolidated Cash Flow
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 2.0 to 1.0. For purposes of determining the
Borrower's Consolidated Cash Flow Coverage Ratio, Cash Flow and Consolidated
Interest Expense for all periods prior to the Closing Date shall be calculated
on a consolidated basis including each of the Borrower's and its Subsidiaries'
predecessors. Notwithstanding the foregoing limitations, the incurrence of the
following will not be prohibited:
(a) Indebtedness in respect of the Term Loans and the
Subsidiary Guaranty and all other Obligations;
(b) Indebtedness of the Borrower evidenced by the Senior
Notes and Indebtedness of the Subsidiary Guarantors in respect of
guarantees of such Senior Notes;
(c) Indebtedness of the Borrower or any Restricted Subsidiary
constituting Existing Indebtedness and any extension, deferral,
renewal, refinancing or refunding thereof;
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(d) Indebtedness of the Borrower or any Restricted Subsidiary
incurred under one or more Credit Facilities in an aggregate principal
amount at any one time outstanding not to exceed the Borrowing Base at
the time such Indebtedness was incurred, less the aggregate amount of
all permanent repayments of revolving loans under such Credit
Facilities made on account of the receipt by the Borrower or any of
its Restricted Subsidiaries of proceeds from the sale of any of its
assets (as expressly permitted pursuant to the terms of any Senior
Indebtedness);
(e) Capitalized Lease Obligations of the Borrower or any
Restricted Subsidiary and Indebtedness of the Borrower 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 date hereof;
provided, however, that the aggregate principal amount of such
Capitalized Lease Obligations plus such Indebtedness of the Borrower
and all of the Restricted Subsidiaries does not exceed $10,000,000
outstanding at any time;
(f) Indebtedness of the Borrower to any Restricted Subsidiary
or of any Restricted Subsidiary to the Borrower or another Restricted
Subsidiary (but only so long as such Indebtedness is held by the
Borrower or a Restricted Subsidiary);
(g) 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 Borrower 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;
(h) Indebtedness in respect of performance, completion,
guarantee, surety and similar bonds, banker's acceptances or letters
of credit provided by the Borrower or any Restricted Subsidiary in the
ordinary course of business;
(i) in addition to any Indebtedness otherwise permitted to be
incurred pursuant to the preceding clauses (a) through (h), up to
$10,000,000 aggregate principal amount of Indebtedness at any one time
outstanding;
(j) any refinancing, refunding, deferral, renewal or extension
(each, a "Refinancing") of any Indebtedness of the Borrower or any
Restricted Subsidiary permitted by the first sentence of this Section
or clause (b) above (the "Refinancing Indebtedness"); provided,
however, that (i) such Refinancing Indebtedness does not exceed the
aggregate principal amount of the Indebtedness so refinanced, plus the
amount of any premium required to be paid in connection with such
Refinancing in accordance with the terms of such Indebtedness or the
amount of any premium reasonably determined by the Borrower as
necessary to accomplish such Refinancing, plus the amount of
reasonable and customary out-of-pocket fees and expenses payable in
connection therewith, (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
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refinanced, refunded, deferred, renewed or extended is subordinated to
the Term Notes, the Refinancing Indebtedness incurred to refinance,
refund, defer, renew or extend such Indebtedness is subordinated in
right of payment to the Obligations on terms at least as favorable to
the Lenders as those contained in the documentation governing the
Indebtedness being so refinanced, refunded, deferred, renewed or
extended; and
(k) Indebtedness in respect of any guarantee provided by the
Borrower or any Restricted Subsidiary in respect of any other
Indebtedness permitted to be incurred pursuant to this Section 7.2.1;
provided, however, that in the event such Indebtedness guaranteed is
subordinated in right of payment to any other Indebtedness of the
obligor thereof, then such guarantee shall be subordinated to
Indebtedness of such guarantor to the same extent.
SECTION 7.2.2. Liens. The Borrower will not, and will 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, 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 or document in existence on the Closing Date, in each case
as set forth and described in Item 7.2.2(a) ("Existing Liens") of the
Disclosure Schedule, (ii) securing the Obligations, (iii) on accounts
receivable, inventory and related general intangibles securing
obligations under the Revolving Credit Agreement and (iv) securing the
Senior Notes to the extent referred to in the Intercreditor Agreement;
(b) Permitted Liens;
(c) Liens on assets or property of the Borrower, or on assets
or property of Restricted Subsidiaries of the Borrower, 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 does not exceed the
original cost or purchase price of the assets or property so acquired
(including the reasonable and customary costs of installation of such
acquired assets) or constructed, (ii) the Indebtedness secured by such
Liens is otherwise permitted to be incurred hereunder, (iii) such
Liens do not encumber any other assets or property of the Borrower or
any of its Restricted Subsidiaries and (iv) the Indebtedness secured
by such Liens may not be created more than 100 days after the later of
the acquisition, completion of construction, repair, improvement,
addition or commencement of full operation of the property subject to
such Liens;
(d) Liens on assets or property acquired by the Borrower or
any Restricted Subsidiary after the date hereof; provided, however,
that (i) such Liens existed on the date such assets or property were
acquired and were not incurred as a result of or in anticipation of
such acquisition and (ii) such Liens do not extend to or cover any
assets or property of the Borrower or any of its Restricted
Subsidiaries other than the assets or property so acquired;
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(e) Liens securing Indebtedness which is incurred to
refinance Indebtedness which has been secured by a Lien permitted
hereunder and which is permitted to be refinanced hereunder; provided,
however, that such Liens do not extend to or cover any assets or
property of the Borrower or any of its Restricted Subsidiaries not
securing the Indebtedness so refinanced;
(f) Liens on assets or property of the Borrower or any
Restricted Subsidiary that is subject to a Sale and Leaseback
Transaction; provided, however, that the aggregate principal amount of
Attributable Indebtedness in respect of all Sale and Leaseback
Transactions then outstanding does not at the time such a Lien is
incurred exceed $10,000,000;
(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 are not created, incurred or assumed in
contemplation of the acquisition thereof by the Borrower or a
Subsidiary and; provided, further, that such Liens may not extend to
any other property owned by the Borrower or a Restricted Subsidiary;
(h) Liens securing Indebtedness of a Restricted Subsidiary
owing to the Borrower or a Wholly-Owned Restricted Subsidiary of the
Borrower;
(i) Liens on inventory, accounts receivable or related
general intangibles of any Restricted Subsidiary securing Indebtedness
which may be incurred under clause (d) of Section 7.2.1;
(j) pari passu Liens on the Collateral securing up to an
aggregate principal amount of $50,000,000 of Indebtedness permitted to
be incurred under the first sentence of Section 7.2.1; provided that
(i) the proceeds of such Indebtedness are used to acquire or construct
additional property, plant and equipment that will be utilized in one
or more Related Businesses, (ii) the aggregate principal amount of
Indebtedness secured by such Liens does not exceed the original cost
or purchase price of the assets or property so acquired (including the
reasonable and customary costs of installation of such acquired
assets) or constructed, and (iii) the assets or property acquired or
constructed with such Indebtedness are pledged to the Collateral Agent
in accordance with the Intercreditor Agreement to become part of the
Collateral securing the Obligations and the Senior Notes on a pari
passu basis with such Indebtedness, and in connection therewith (A)
the holders of such Indebtedness or any trustee or other
representative thereof becomes party to the Intercreditor Agreement,
as amended, and is authorized to exercise rights and remedies in
accordance therewith, and (B) the Collateral Agent receives an
endorsement to its title insurance policies relating to the mortgage
liens constituting part of the Collateral insuring the continuing
priority of such mortgage liens as set forth in the title insurance
policies; and
(k) Liens on assets or property of the Borrower, or on assets
or property of Restricted Subsidiaries of the Borrower, acquired or
constructed after the date hereof other than in the ordinary course of
business and other than assets or property acquired or constructed in
replacement, repair or improvement of any assets or property
constituting Collateral; provided, however, that (i) the aggregate
principal amount of Indebtedness secured by such Liens does not exceed
the original cost or purchase price of the assets or
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property so acquired (including the reasonable and customary costs of
installation of such acquired assets) or constructed, (ii) the
Indebtedness secured by such Liens is otherwise permitted to be
incurred hereunder and (iii) such Liens do not encumber any
Collateral.
SECTION 7.2.3. Restricted Payments, etc. The Borrower will not, nor
will 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 Borrower or such Restricted Subsidiary (other
than dividends or distributions payable or paid by a Wholly-Owned Restricted
Subsidiary of the Borrower on account of its Equity Interests held by the
Borrower or another Restricted Subsidiary or payable or paid in shares of
Capital Stock of the Borrower 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 Borrower or
any Restricted Subsidiary (all of the foregoing 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 (3) 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
"Restricted Payment Computation Date"):
(1) no Default or Event of Default has occurred and is
continuing or would result from the making of such Restricted Payment;
(2) at the Restricted Payment Computation Date for such
Restricted Payment and after giving effect to such Restricted Payment
on a pro forma basis, the Borrower or such Restricted Subsidiary could
incur $1.00 of additional Indebtedness pursuant to the first sentence
of Section 7.2.1; and
(3) the aggregate amount of Restricted Payments declared,
paid or distributed subsequent to the date hereof (including the
proposed Restricted Payment) will not exceed the sum of (i) 50% of the
cumulative Consolidated Net Income of the Borrower for the period
subsequent to July 1, 1997 to and including the last day of the
Borrower's last fiscal quarter ending prior to the Restricted Payment
Computation Date (each such period to constitute a "Restricted Payment
Computation Period") (or, if such aggregate cumulative Consolidated
Net Income is a loss, minus 100% of such loss of the Borrower during
the Restricted Payment Computation Period), (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 Borrower or any of its Subsidiaries for the benefit
of their employees) of the Borrower'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 Borrower that have been converted into
or exchanged for Equity Interests (other than Redeemable Stock) of the
Borrower to the extent such debt securities were originally issued or
sold for cash, plus the aggregate Net Cash Proceeds received by the
Borrower at the time of such conversion or exchange, in each case
subsequent to the Closing Date, (iv) cash
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contributions to the Borrower's capital subsequent to the Closing Date
and (v) $5,000,000.
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 7.2.6; provided, however, that such Restricted Investments will be
excluded in the calculation of the amount of Restricted Payments previously
made for purposes of clause (3) above; (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
Borrower (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 will be excluded in the calculation of the
amount of Restricted Payments previously made for purposes of clause (3) above
and (y) the Net Cash Proceeds from such sale will be excluded for purposes of
clause (3) above to the extent utilized for purposes of such purchase or
redemption; (C) any purchase or redemption of Subordinated Indebtedness of the
Borrower made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Subordinated Indebtedness of the Borrower or any Restricted
Subsidiary which is permitted to be issued pursuant to Section 7.2.1; provided,
however, that such purchase or redemption will be excluded in the calculation
of the amount of Restricted Payments previously made for purposes of clause (3)
above; (D) the repurchase, redemption or other acquisition or retirement for
value of Capital Stock of the Borrower or the Parent held by management or
other employees of the Borrower, the Parent or any Restricted Subsidiary
pursuant to any shareholders agreement, management or employee stock option
agreement or management or employee equity subscription agreement, in
accordance with the provisions of any such arrangement, in an amount not
greater than $500,000 in any calendar year plus the portion of any such amounts
which remains unused at the end of the two prior calendar years, but in no
event to exceed $1,500,000 in any calendar year; provided, however, that any
such repurchase, redemption, acquisition or retirement for value will be
excluded in the calculation of the amount of Restricted Payments previously
made for purposes of clause (3) above; (E) payments to the Parent pursuant to
any tax sharing arrangement so long as payments thereunder do not exceed the
amount of the Borrower and its consolidated subsidiaries' share of Federal and
state income taxes actually paid or to be paid by the Parent; provided,
however, that such payments will be excluded in the calculation of the amount
of Restricted Payments previously made for purposes of clause (3) above; (F)
payments to the Parent 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 will be excluded in the calculation of the amount of Restricted
Payments previously made for purposes of clause (3) above; and (G) Investments
described in clause (vi) of the definition of Permitted Investments; provided,
however, that such Investments will be included in the calculation of the
amount of Restricted Payments previously made for purposes of clause (3) above.
For purposes of this Section, (a) the amount of any Restricted Payment
declared, paid or distributed in property of the Borrower or any Restricted
Subsidiary will 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
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tangible property at the Restricted Payment 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 Borrower or any Restricted Subsidiary will 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 Borrower or such Restricted
Subsidiary authorizing such Restricted Payment; and (c) a distribution to
holders of the Borrower's Equity Interests of (i) shares of Capital Stock or
other Equity Interests of any Restricted Subsidiary of the Borrower or (ii)
other assets of the Borrower, without, in either case, the receipt of
equivalent consideration therefor will 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. Not later than the date of the
making of any such Restricted Payment, the Borrower shall deliver to the
Administrative Agent a certificate of an Authorized Officer certifying that
such Restricted Payment is permitted, attaching a copy of the applicable
resolution of the Board of Directors pursuant to which the value of the
Restricted Payment to be made was determined and setting forth the basis upon
which the calculations required by this Section were computed.
SECTION 7.2.4. Payment Restrictions Affecting Restricted
Subsidiaries. The Borrower will not, and will 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 Borrower or its Restricted Subsidiaries on its Equity
Interests, (ii) pay any Indebtedness owed to the Borrower or any other
Restricted Subsidiary, (iii) make loans or advances to the Borrower or any
other Restricted Subsidiary or (iv) transfer any of its property or assets to
the Borrower or any other Restricted Subsidiary, except:
(a) consensual encumbrances or restrictions contained in or
created pursuant to the Revolving Credit Agreement, the Security
Documents, the Intercreditor Agreement and other Existing
Indebtedness;
(b) consensual encumbrances or restrictions in the Senior
Notes (if any) and the Senior Note Indenture;
(c) any restriction, with respect to a Restricted Subsidiary
of the Borrower that is not a Subsidiary of the Borrower on the
Closing Date, in existence at the time such entity becomes a
Restricted Subsidiary of the Borrower; provided that such encumbrance
or restriction is not created in anticipation of or in connection with
such entity becoming a Subsidiary of the Borrower 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
clause (a) or (c) of this Section 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 Borrower) than those
provided for in such Indebtedness being refinanced or amended;
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(e) encumbrances or restrictions contained in any other
Indebtedness permitted to be incurred subsequent to the Closing Date
pursuant to Section 7.2.1, 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
Borrower) than the most restrictive of those provided for in the
Indebtedness referred to in clause (a) or (c) of this Section;
(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 provisions hereof
pending the closing of such sale or disposition; or
(h) any encumbrance or restriction due to applicable law.
SECTION 7.2.5. Consolidation, Merger, etc. (a) The Borrower will 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 Borrower under this Agreement, the
Term Notes and each other Loan Document to which the Borrower is a
party pursuant to amendments in form and substance reasonably
satisfactory to the Administrative Agent and the Required Lenders;
(ii) such Person is 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
first sentence of Section 7.2.1 (assuming a market rate of interest
with respect to such additional Indebtedness);
(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 is equal to or greater than the
Consolidated Net Worth of the Borrower immediately prior to such
transaction;
(v) each Subsidiary Guarantor, to the extent applicable, will
acknowledge and confirm in writing that its Subsidiary Guaranty will
apply to such Person's obligations under this Agreement, the Term
Notes and each other Loan Document to which it is (or will become) a
party; and
(vi) immediately before and immediately after giving effect
to such transaction and treating any Indebtedness which becomes an
obligation of the Borrower or any of its Restricted Subsidiaries or of
such Person as a result of such transaction as having been incurred by
the Borrower or such Restricted Subsidiary or such Person, as the case
may
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be, at the time of such transaction, no Default or Event of Default
shall have occurred and be continuing.
The Borrower shall deliver to the Administrative Agent 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 amendments comply
with this Agreement.
(b) No Subsidiary Guarantor will, and the Borrower will not permit a
Subsidiary Guarantor to, in a single transaction or series of related
transactions merge or consolidate with or into any other Person (other than the
Borrower or any other Subsidiary Guarantor), or sell, assign, convey, transfer,
lease or otherwise dispose of all or substantially all of its properties and
assets to any Person (other than the Borrower or any other Subsidiary
Guarantor) unless at the time and giving effect thereto: (i) either (1) such
Subsidiary Guarantor is the continuing corporation or (2) the Person (if other
than such Subsidiary Guarantor) formed by such consolidation or into which such
Subsidiary Guarantor is merged or the Person which acquires by sale,
assignment, conveyance, transfer, lease or disposition the properties and
assets of such Subsidiary Guarantor is 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 all the obligations of such
Guarantor under the Subsidiary Guaranty and each other Loan Document to which
it is a party pursuant to amendments in form and substance reasonably
satisfactory to the Administrative Agent and the Required Lenders; 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 Administrative Agent prior to the
consummation of the proposed transaction, in form and substance reasonably
satisfactory to the Administrative Agent, an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, conveyance, transfer, lease or disposition and such amendments, if
required, comply with this Agreement. The provisions of this paragraph (b)will
not apply to any transaction (including any Asset Sale made in accordance with
Section 7.2.6) with respect to any Subsidiary Guarantor if the Guaranty of such
Subsidiary Guarantor is released in connection with such transaction in
accordance with the applicable provisions of this Agreement and the other Loan
Documents. Upon any sale, exchange, transfer or other disposition to any Person
of all of the Borrower's or a Restricted Subsidiary's Equity Interests in, or
all or substantially all of the assets of, any Subsidiary Guarantor which is in
compliance with this Agreement and the other Loan Documents, such Subsidiary
Guarantor will be released from all its obligations under the Subsidiary
Guaranty.
(c) 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 Borrower or any Subsidiary Guarantor in
accordance with the foregoing provisions of this Section 7.2.5, the successor
Person formed by such consolidation or into which the Borrower 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 Borrower or such Subsidiary Guarantor, as the case may be, under
this Agreement, the Term Notes and/or the Subsidiary Guaranty, as the case may
be, with the same effect as if such successor had been named as the Borrower or
such Subsidiary Guarantor, as the case may be, herein, in the Term Notes and/or
in the Subsidiary Guaranty, as the case may be. When a successor assumes all
the obligations of its predecessor under this Agreement, the Term Notes or the
Subsidiary Guaranty, as the case may be, the predecessor
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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, or any other Obligation relating to, this Agreement,
the Term Notes or the Subsidiary Guaranty, as the case may be.
SECTION 7.2.6. Asset Dispositions, etc. (a) The Borrower will not,
and will not permit any Restricted Subsidiary to, make any Asset Sale (other
than to the Borrower or other Restricted Subsidiary) unless (i) the Borrower 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 Borrower or
such Restricted Subsidiary from such Asset Sale is in the form of cash and no
portion thereof shall consist of inventory or accounts receivable or other
property that would become subject to a Lien held by any other creditor of the
Borrower or of any Restricted Subsidiary of the Borrower; provided, however,
that the amount of any cash equivalent or note or other obligation received by
the Borrower or such Restricted Subsidiary from the transferee in any such
transaction that is converted within 90 days by the Borrower or such Restricted
Subsidiary into cash will be deemed upon such conversion to be cash for
purposes of this provision; (ii) to the extent such Asset Sale involves
Collateral, (x) the consent of the Required Lenders shall be obtained prior to
the consummation of such sale and (y) the Borrower shall cause the aggregate
cash proceeds received by the Borrower or such Restricted Subsidiary in respect
of such Asset Sale which are allocated to the Collateral, net of the items set
forth in clauses (i) through (vi) of the definition of Net Proceeds (the
"Collateral Proceeds") to be deposited with the Collateral Agent in the
Intercreditor Collateral Account as and when received by the Borrower or any of
its Restricted Subsidiaries and shall otherwise comply with the Intercreditor
Agreement provided, that no Senior Indebtedness other than the Obligations, the
Senior Notes or Indebtedness described in clause (j) of Section 7.2.2 may be
permanently repaid or prepaid out of, or on account of, any Collateral
Proceeds; and (iii) the Net Proceeds received by the Borrower or such
Restricted Subsidiary from such Asset Sale are applied in accordance with the
following paragraphs.
(b) When the aggregate amount of Net Proceeds from all Asset Sales
since the Closing Date exceeds $35,000,000, the Borrower shall apply, subject
to Section 3.1.2 and the provisions, if applicable, of the Intercreditor
Agreement, 100% of such Net Proceeds in excess of $35,000,000 (including,
without limitations, 100% of the Net Proceeds of each Asset Sale subsequent to
the Asset Sale which results in Net Proceeds from all Asset Sales since the
date hereof exceeding $35,000,000) to prepay the Term Loans on or prior to the
tenth Business Day following the date on which such Net Proceeds are received
by the Borrower or any of its Restricted Subsidiaries at a price equal to 100%
of the principal amount thereof, plus accrued interest thereon to the date of
prepayment.
(c) If all or a portion of the Net Proceeds of any Asset Sale are not
required to be applied to prepay the Term Loans pursuant to the preceding
paragraph (b), then the Borrower may, within 365 days of such Asset Sale,
invest such Net Proceeds in the Borrower or in one or more Restricted
Subsidiaries of the Borrower engaged in a Related Business. The amount of such
Net Proceeds not used to or invested as set forth in this paragraph shall be
applied by the Borrower, subject to Section 3.1.2 and the provisions, if
applicable, of the Intercreditor Agreement, to the prepayment of the Term Loans
on or prior to the tenth Business Day following the date such Net Proceeds are
not so used or invested at a price equal to 100% of the principal amount
thereof, plus accrued interest thereon to the date of prepayment; provided,
however, that to the extent
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such Net Proceeds are subject to Section 1009 of the Senior Note Indenture the
principal amount of Term Loans required to be prepaid on account of such Net
Proceeds shall not exceed the Pro Rata Share (as defined in the Intercreditor
Agreement) of such Net Proceeds applicable to the Term Loans.
(d) Until such time as the Net Proceeds from any Asset Sale are
applied in accordance with this Section, such Net Proceeds will be segregated
from the other assets of the Borrower and its Subsidiaries and invested in cash
or Eligible Investments, except that the Borrower or any Restricted Subsidiary
may use any Net Proceeds pending the utilization thereof in the manner (and
within the time period) described above, and (except as to Collateral Proceeds)
to repay revolving loans (under the Revolving Credit Agreement or otherwise)
without a permanent reduction of the commitment thereunder.
(e) The Borrower will not, and will 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 Borrower) than
those in effect under Existing Indebtedness and the Revolving Credit Agreement
that would materially impair the ability of the Borrower to comply with the
provisions of this Section.
(f) If at any time any non-cash consideration (other than any such
consideration consisting of inventory, accounts receivable and certain related
assets securing or permitted to secure the Revolving Credit Agreement) is
received by the Borrower or any Restricted Subsidiary, as the case may be, in
connection with any Asset Sale of assets which includes Collateral, such non-
cash consideration shall be made subject to the Lien of the Security Documents
in the manner contemplated in the Intercreditor Agreement to the extent of the
purchase price allocated to the Collateral. If and when any such non-cash
consideration received from any Asset Sale (whether or not relating to
Collateral) is converted into or sold or otherwise disposed of for cash, then
such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Proceeds thereof shall be applied in accordance with this
Section 7.2.6.
(g) All Insurance Proceeds and all Net Awards required to be
delivered to the Collateral Agent pursuant to any Security Document shall
constitute Trust Moneys and shall be delivered by the Borrower or a Restricted
Subsidiary, as the case may be, to the Collateral Agent contemporaneously with
receipt by the Borrower or such Restricted Subsidiary and be deposited into the
Intercreditor Collateral Account and applied in accordance with the applicable
provisions of the Intercreditor Agreement. Insurance Proceeds and Net Awards
so deposited that may be applied by the Borrower or a Restricted Subsidiary to
effect a Restoration of the affected Collateral under the applicable Security
Document may be withdrawn from the Intercreditor Collateral Account only in
accordance with the applicable provisions of the Intercreditor Agreement.
Insurance Proceeds and Net Awards so deposited that are not applied to effect a
Restoration of the affected Collateral under the applicable Security Document
may only be withdrawn in accordance with applicable provisions of the
Intercreditor Agreement.
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SECTION 7.2.7. Modification of Certain Agreements. The Borrower will
not, and will not permit any Restricted Subsidiary to, amend, modify or
supplement, or permit or consent to any amendment, modification or supplement
of, (i) the Security Documents in any manner or to any extent that would
constitute an Event of Default hereunder or under the Security Documents
(provided that this Agreement and the Security Documents may be amended,
modified or supplemented as set forth in Section 10.1), (ii) the Purchase
Agreement or any Acquisition Agreement, except to the extent such amendment,
modification or supplement would not have an adverse effect on the Lenders,
(iii) the Senior Notes or the Senior Note Indenture, except to the extent such
amendment, modification or supplement would not have a material adverse effect
on the Lenders (it being acknowledged by the Borrower that, without limitation,
any increase in the interest rate on the Senior Notes, any reduction in the
tenor or average life thereof and any modification of (including any addition
to) the covenants, defaults and remedies set forth therein (without a
corresponding modification to the covenants, defaults, defaults and remedies
applicable to the Obligations) which make such provisions more burdensome as a
whole to the Borrower and the Subsidiary Guarantors shall in each case be
deemed to be materially adverse to the Lenders) or (iv) the Revolving Credit
Agreement, except to the extent such amendment, modification or supplement
would not have a material adverse effect on the Lenders (it being acknowledged
by the Borrower that the extension or similar modification of any grace period
set forth therein shall in each case be deemed to be materially adverse to the
Lenders).
SECTION 7.2.8. Transactions with Affiliates. (a) The Borrower and
its Restricted Subsidiaries will 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 Borrower 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 $750,000, the Borrower
delivers Board Resolutions to the Administrative Agent 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 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 Borrower 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 Borrower 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
$7,500,000, the Borrower delivers to the Administrative Agent Board Resolutions
as described in clause (x)(i) above and an opinion of a nationally recognized
investment banking firm, unaffiliated with the Borrower 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 Borrower 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 Borrower or
its Subsidiaries, as the case may be, and (y) all such transactions referred to
in clauses (x)(i) and (ii) above are entered
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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 Section 7.2.3, (ii) any
Investment made in Kemwater during a period of three years following the
Closing Date, provided that such Investment matures or is required to be
redeemed within one year of its being made, (iii) 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, (iv) 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, (v)
the payment of fees and compensation to, and indemnity provided on behalf of,
officers, directors, employees or consultants of the Borrower or any of its
Subsidiaries, as determined by the board of directors of the Borrower or any of
its Subsidiaries in good faith 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 Borrower than the terms of such agreement prior to such
amendment, or (B) if such terms are, in the aggregate, less favorable to the
Borrower, such amendment satisfies the requirements of the preceding paragraph.
SECTION 7.2.9. Impairment of Security Interest. (a) The Borrower
will not, and will not cause or permit any Restricted Subsidiaries to, take or
omit to take any action which action or omission might or would have the result
of affecting or impairing the Liens and security interest in favor of the
Collateral Agent for the benefit of the Lenders with respect to the Collateral
and the Borrower will not grant to any Person, or suffer any Person to have any
interest whatsoever in the Collateral, in each case other than as otherwise
permitted by this Agreement or the Security Documents.
(b) The Borrower will not, and will not cause or permit any
Restricted Subsidiaries to, enter into any agreement or instrument that by its
terms requires that the proceeds received from any sale of Collateral be
applied to repay, redeem, defease or otherwise acquire or retire any
Indebtedness of any Person, other than pursuant to this Agreement, the Senior
Note Indenture or any instrument governing Indebtedness permitted to be secured
by a Lien on the Collateral pursuant to Section 7.2.2. A release of any of the
Collateral strictly in accordance with the terms and conditions of this
Agreement and the Security Documents will not be deemed for any purpose to be
an impairment of security under this Agreement.
SECTION 7.2.10. Stock of Subsidiaries. The Borrower (a) will not,
and will not permit any Wholly-Owned Restricted Subsidiary of the Borrower to,
transfer, convey, sell or otherwise dispose of any Capital Stock of any Wholly-
Owned Restricted Subsidiary of the Borrower (other than All-Pure and its
Subsidiaries) to any Person (other than the Borrower or a Wholly-Owned
Restricted Subsidiary of the Borrower), unless (i) such transfer, conveyance,
sale or other disposition is of all the Capital Stock of such Wholly-Owned
Restricted Subsidiary and (ii) the Net Proceeds from such transfer, conveyance,
sale, lease or other disposition are applied in accordance with Section 7.2.6,
and (b) will not permit any Wholly-Owned Restricted Subsidiary of the Borrower
(other than All-Pure and its Subsidiaries) to issue any of its Equity Interests
(other than, if necessary, Capital Stock constituting directors' qualifying
shares or interests held by directors or shares or interests required to be
held by foreign nationals, to the extent mandated
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by applicable law) to any Person other than to the Borrower or a Wholly-Owned
Restricted Subsidiary of the Borrower.
SECTION 7.2.11. Sale and Leaseback. The Borrower will not, and will
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 Borrower or such Restricted Subsidiary could incur $1.00
of additional Indebtedness pursuant to the first sentence of Section 7.2.1,
(ii) at the time of the occurrence of such transaction, the Borrower 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 7.2.2, and
(iii) the transfer of assets in such Sale and Leaseback Transaction is
permitted by, and the Borrower applies the proceeds of such transaction in
compliance, with Section 7.2.6.
SECTION 7.2.12. Limitation on Applicability of Certain Covenants.
Notwithstanding anything to the contrary herein, the covenants set forth in
Sections 7.2.1, 7.2.2, 7.2.3, 7.2.4, 7.2.6, and 7.2.8 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 Borrower or a Restricted Subsidiary, (ii)
any assets or property transferred by the Borrower or a Restricted Subsidiary,
(iii) the application of any proceeds received by the Borrower 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
Borrower or a Restricted Subsidiary, (v) any Investment of such escrowed or
segregated moneys by the Borrower or a Restricted Subsidiary or any other
Investment under the Contingent Payment Agreement, (vi) any obligation of the
Borrower 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
Borrower or a Restricted Subsidiary that is non-recourse to the assets of the
Borrower, 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 Borrower nor any
Restricted Subsidiary (other than the borrower) provides credit support or is
directly or indirectly liable, or (viii) any Lien incurred by the Borrower or
any Restricted Subsidiary in connection with Indebtedness described in clause
(vii) above that does not extend to assets of the Borrower 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 VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an "Event
of Default".
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SECTION 8.1.1. Non-Payment of Obligations. (a) The Borrower shall
default in the payment or prepayment of any principal of, or premium with
respect to, any Term Loan when due or (b) any Obligor (including the Borrower)
shall default (and such default shall continue unremedied for a period of five
Business Days) in the payment when due of any interest or fee with respect to
any Term Loan or any other monetary Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower, any other Obligor or the Parent made or deemed to be made
hereunder or in any other Loan Document executed by it or any other writing or
certificate (including each Closing Date Certificate) furnished by or on behalf
of the Borrower, any other Obligor or Parent to any Agent, the Arranger or any
Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to Article
V) is or shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
Any Obligor (including the Borrower) shall default in the due performance and
observance of any of its obligations under Sections 7.1.7, 7.1.9, 7.2.1,
7.2.2, 7.2.3, 7.2.5, 7.2.6, 7.2.10 or 7.2.11.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.
Any Obligor (including the Borrower) shall default in the due performance and
observance of any other agreement contained herein or in any other Loan
Document executed by it, and such default shall continue unremedied for a
period of 30 days after written notice thereof shall have been given to the
Borrower by the Administrative Agent at the direction of the Required Lenders
specifying such default and demanding that it be remedied.
SECTION 8.1.5. Disaffirmation of Obligations. (a) The Borrower shall
either deny or disaffirm its obligations under this Agreement or any other Loan
Document or (b) any Subsidiary Guarantor or other Obligor shall either deny or
disaffirm its obligations under the Subsidiary Guarantor or any other Loan
Document executed by it.
SECTION 8.1.6. Effectiveness and Enforceability of Guarantees. The
Subsidiary Guaranty for any reason ceases to be, or is asserted in writing by
any Subsidiary Guarantor or the Borrower not to be, in full force and effect
and enforceable in accordance with its terms, except to the extent contemplated
in the Subsidiary Guaranty).
SECTION 8.1.7. Default on Other Indebtedness. A default shall occur
(i) in the payment when due (subject to any applicable grace period), whether
by acceleration or otherwise, of any Indebtedness, other than Indebtedness
described in Section 8.1.1, of the Borrower or any of its Subsidiaries having a
principal amount in excess of $5,000,000 or (ii) a default shall occur in the
performance or observance of any obligation or condition with respect to such
Indebtedness if the effect of such default is to accelerate the maturity of any
such Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or holders of such Indebtedness,
or any trustee or agent for such holders, to cause such Indebtedness to become
due and payable prior to its expressed maturity.
SECTION 8.1.8. Judgments. A final judgment or final judgments for
the payment of money are entered by a court or courts of competent jurisdiction
against the Borrower or any of its Restricted Subsidiaries and such judgment or
judgments remain undischarged, unbonded or unstayed for a period of sixty days,
provided that the aggregate of all such judgments (other than
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any judgment as to which, and only to the extent, a reputable insurance company
has acknowledged coverage of such claim in writing) equals or exceeds
$5,000,000.
SECTION 8.1.9. Bankruptcy, Insolvency, etc.
(a) The Borrower, any Subsidiary Guarantor or any other
Restricted Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case in which it is a debtor,
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors, or
(v) admits in writing its inability to pay debts as
the same become due; or
(b) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Borrower, any
Subsidiary Guarantor or any other Restricted Subsidiary in an
involuntary case in which it is a debtor,
(ii) appoints a Custodian of the Borrower, any
Subsidiary Guarantor or any other Restricted Subsidiary or for
all or substantially all of their property,
(iii) orders the liquidation of the Borrower, any
Subsidiary Guarantor or any other Restricted Subsidiary,
and the order or decree remains unstayed and in effect for sixty days.
SECTION 8.1.10. Impairment of Security, etc. Any of the Security
Documents ceases to give the Collateral Agent a valid and perfected Lien of the
priority required thereby or the rights, powers and privileges purported to be
created thereby (other than in accordance with their respective terms), or any
of the Security Documents is declared null and void, or the Borrower, PCAC, PAI
or any other Obligor denies any of its obligations under any of the Security
Documents or any Collateral becomes subject to any Lien other than the Liens
created or permitted by the Security Documents or this Agreement.
SECTION 8.2. Action if Bankruptcy, etc. If any Event of Default
described in clause (a) or (b) of Section 8.1.9 shall occur the Term Loan
Commitments (if not theretofore terminated) shall automatically terminate and
the outstanding principal amount of all outstanding Term Loans and all other
Obligations shall automatically be and become immediately due and payable,
without notice or demand.
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SECTION 8.3. Action if Other Event of Default. If any Event of
Default (other than an Event of Default described in clause (a) or (b) of
Section 8.1.9) shall occur for any reason, whether voluntary or involuntary,
and be continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Term Loans and other Obligations to be due
and payable and/or declare the Term Loan Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of such Term
Loans and other Obligations which shall be so declared due and payable shall be
and become immediately due and payable, without further notice, demand or
presentment, and/or, as the case may be, the Term Loan Commitments shall
terminate.
ARTICLE IX
THE AGENTS
SECTION 9.1. Appointment of Agents. Each Lender hereby irrevocably
appoints DLJ as Syndication Agent, Salomon as Documentation Agent and BofA as
its Administrative Agent under and for purposes of this Agreement, the Term
Notes and each other Loan Document. Each Lender authorizes the Administrative
Agent to act on behalf of such Lender under this Agreement, the Term Notes and
each other Loan Document and, in the absence of other written instructions from
the Required Lenders received from time to time by the Administrative Agent
(with respect to which the Administrative Agent agrees that it will comply,
except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of the Administrative Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto.
The provisions of this Article IX are solely for the benefit of the Agents and
Lenders, and neither the Borrower nor any other Obligor shall have any rights
as a third-party beneficiary of any of the provisions hereof other than with
respect to an Agent's resignation. In performing their functions and duties
under this Agreement and each other Loan Document, the Agents shall act solely
as agents of the Lenders and do not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for
the Borrower or any other Obligor.
SECTION 9.2. Nature of Duties of the Agents. The Agents shall have
no duties, obligations or responsibilities except those expressly set forth in
this Agreement and each other Loan Document. Neither the Agents nor any of
their officers, directors, employees or agents shall be liable for any action
taken or omitted by it as such hereunder or under each other Loan Document or
in connection herewith or therewith, unless caused by its or their gross
negligence or willful misconduct. The duties of the Agents shall be mechanical
and administrative in nature; the Agents shall not have by reason of this
Agreement or any other Loan Document a fiduciary relationship in respect of any
Lender; and nothing in this Agreement or any other Loan Document, expressed or
implied, is intended to or shall be so construed as to impose upon the Agents
any obligations in respect of this Agreement or any other Loan Document 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 any Agent or
shall become effective in the event of any temporary or partial exercise of
such rights, power or authority.
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SECTION 9.3. General Immunity. Neither the Agents, the Arranger nor
any of their 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 any other Loan Document or in connection herewith or
therewith except for its or their own willful misconduct or gross negligence.
Without limiting the generality of the foregoing, the Agents and the Arranger:
(i) shall not be responsible to the Lenders for any recitals, statements,
warranties or representations under this Agreement or any other Loan Document
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, enforceability, collectibility or sufficiency
of this Agreement or any other Loan Document 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 any other Loan Document 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 the Lenders or to any other Person
to assure that the Collateral exists or is owned by the Borrower or another
Obligor or is cared for, protected or insured or that the Liens granted to the
Administrative Agent herein or in any other Loan Document 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 any
other Loan Document 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 the
Agents to be genuine and signed or sent by the proper party. The Agents may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by the Agents 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.
SECTION 9.4. Successor. Each of the Syndication Agent and the
Documentation Agent may resign as such upon one Business Day's notice to the
Borrower and the Administrative Agent. The Administrative Agent may resign as
such at any time upon at least 30 days' prior notice to the Borrower and all
Lenders. If the Administrative Agent at any time shall resign, the Required
Lenders may, with the prior consent of the Borrower (which consent shall not be
unreasonably withheld), appoint another Lender as a successor Administrative
Agent which shall thereupon become the Administrative Agent hereunder. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 20 days after the
retiring Administrative Agent's giving notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the United States or a United States
branch or agency of a commercial banking institution, and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall be entitled to receive from
the retiring Administrative Agent such documents of transfer and assignment as
such successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations under
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this Agreement. After any retiring Administrative Agent's resignation
hereunder as the Administrative Agent, the provisions of (i) this Article IX
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent under this Agreement, and (ii) Section
10.3 and Section 10.4 shall continue to inure to its benefit.
SECTION 9.5. Agents in their Capacity as Lenders. With respect to
their obligation (if any) to lend under this Agreement and each other Loan
Document, the Agents shall have the same rights and powers under this Agreement
and each other Loan Document as any Lender and may exercise the same as though
it were not an Agent. "Lender" or "Lenders" shall, unless the context otherwise
indicates, include each Agent in its capacity as a Lender hereunder. The
Agents, 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 the Borrower or any other Obligor, as if it were not an Agent or as if it
or they were not a Lender hereunder and without any duty to account therefor to
the other parties to this Agreement; provided, that the obligations of the
Borrower under such transactions shall not be deemed to be Obligations secured
by any Collateral without the prior written agreement of the Required Lenders.
In furtherance of the foregoing, each Lender acknowledges that, as of the date
hereof, (i) BofA is not a Lender under this Agreement, (ii) BofA is the sole
lender (and the administrative agent) under the Revolving Credit Agreement and
(iii) pursuant to the Revolving Credit Agreement, BofA is the beneficiary of
certain Liens on the inventory, receivables and related general intangibles of
the Borrower and its Subsidiaries.
SECTION 9.6. Actions by Each Agent. (a) Actual Knowledge. Each
Agent may assume that no Event of Default has occurred and is continuing,
unless such Agent has actual knowledge of the Event of Default, has received
notice from the Borrower or the 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. Each Agent shall have the right to request
instructions from the Required Lenders by notice to each Lender. If such Agent
shall request instructions from the Required Lenders with respect to any act or
action (including the failure to act) in connection with this Agreement or any
other Loan Document, such Agent shall be entitled to refrain from such act or
taking such action unless and until it shall have received instructions from
the Required Lenders, and such 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 whatsoever against any Agent as a result of such Agent
acting or refraining from acting hereunder or under any other Loan Document in
accordance with the instructions of the Required Lenders. Each Agent may give
any notice required under Article VIII hereof without the consent of any of the
Lenders unless otherwise directed by the Required Lenders in writing and will,
at the direction of the Required Lenders, give any such notice required under
Article VIII. Except for any obligation expressly set forth in this Agreement
or any other Loan Document, each Agent may, but shall not be required to,
exercise its discretion to act or not act, except that such Agent shall be
required to act or not act upon the instructions of the Required Lenders
(unless all of the Lenders are required to provide such instructions as
provided in Section 10.1) and those instructions shall be binding upon each
Agent and all Lenders; provided, however, that each Agent shall not be required
to act or not act if to do so would expose such Agent to liability or would be
contrary to this Agreement or any other Loan Document or to applicable law.
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SECTION 9.7. Right to Indemnity. Each Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any other
Loan Document or in relation hereto or thereto unless it shall first be
indemnified (upon requesting such indemnification) to its satisfaction by the
Lenders against any and all liability and expense which it may incur by reason
of taking or continuing to take any such action. The Lenders further agree to
indemnify each Agent ratably in accordance with their Percentages 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 such Agent in any way
relating to or arising out of this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby, or the enforcement of any of the
terms hereof or thereof or of any other documents, and either not indemnified
by the Borrower pursuant to Section 10.4 or with respect to which the Borrower
has failed to fully honor its indemnification obligations under Section 10.4;
provided, however, that no such liability, obligation, loss, damage, penalty,
action, judgment, suit, cost, expense or disbursement results from such Agent's
gross negligence or willful misconduct. Each Lender agrees to reimburse each
Agent in the amount of its pro rata share of any out-of-pocket expenses for
which such Agent is entitled to receive, but has not received, reimbursement
pursuant to this Agreement. The agreements in this Section 9.7 shall survive
the payment and fulfillment of the Obligations and termination of this
Agreement.
SECTION 9.8. Collateral Agent. Each Lender consents and agrees to
all of the terms and provisions of the Intercreditor Agreement and the other
Security Documents, as the same may be in effect from time to time or may be
amended, supplemented or otherwise modified from time to time in accordance
with the provisions of the Security Documents and this Agreement, and
authorizes and directs the Collateral Agent to act as mortgagee or secured
party with respect thereto or to act as collateral agent pursuant to the
Intercreditor Agreement (including pursuant to the appointment thereof under
Section 2.1 of the Intercreditor Agreement).
SECTION 9.9. Suits to Protect Collateral. Subject to the provisions
of the Intercreditor Agreement, the Administrative Agent, acting at the written
direction of the Required Lenders, shall have power to institute and to
maintain, or direct the Collateral Agent to institute and maintain, such suits
and proceeds as the Administrative Agent may deem expedient to prevent any
impairment of the Collateral by any acts which may be unlawful or in violation
of any of the Security Documents or this Agreement, and such suits and
proceedings as the Administrative Agent may deem expedient to preserve or
protect its interest and the interests of the Lenders in the Collateral
(including the power to institute and maintain suits or proceedings to restrain
the enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the Liens of the Collateral Agent in the Collateral or be prejudicial to
the interests of the Lender or the Administrative Agent).
SECTION 9.10. Determinations Relating to Collateral. In the event
(i) the Administrative Agent shall receive any written request from the
Borrower or any other Obligor under any Security Document for consent or
approval with respect to any matter relating to any Collateral or the
Borrower's or such Obligor's obligations with respect thereto or (ii) there
shall be due to or from the Administrative Agent under the provisions of any
Security Document, any performance or the delivery of any instrument or (iii)
the Administrative Agent shall become aware of any nonperformance by the
Borrower or any other Obligor of any covenant or any breach of any
representation or warranty for the Borrower or any other Obligor set forth in
any
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Security Document, then, in each such event, the Administrative Agent shall be
entitled, at the expense of the Borrower and subject to Section 9.6(b), to hire
experts, consultants, agents and attorneys (including internal counsel) to
advise the Administrative Agent on the manner in which the Administrative Agent
should respond to such request or render any requested performance or response
to such nonperformance or breach. The Administrative Agent shall be fully
protected in the taking of any action recommended or approved by any such
expert, consultant, agent or attorney (including internal counsel) or agreed to
by the Required Lenders pursuant to Section 9.6(b).
SECTION 9.11. Trust Moneys. To the extent Trust Moneys consist of
insurance proceeds or condemnation or other taking awards, any such moneys
which may be used to effect a restoration of the affected Collateral shall be
permitted to be withdrawn by the Borrower and paid by the Collateral Agent in
accordance with the Intercreditor Agreement.
SECTION 9.12. Release of Collateral. Each Lender hereby irrevocably
authorizes the Administrative Agent, at its option and in its discretion, to
release any and all guaranties of the Obligations and any Lien granted to or
held by or for the benefit of the Administrative Agent with respect to any
Restricted Subsidiary or Collateral (i) upon termination of the Lenders'
obligations to make Term Loans and payment and satisfaction of all Term Loans
and all other Obligations and which the Administrative Agent has been notified
in writing are then due and payable; (ii) constituting Collateral being sold or
disposed of if the Borrower certifies to the Administrative Agent pursuant to
an Officers' Certificate that the sale or disposition is made in compliance
with the terms of this Agreement and the other Loan Documents (and, absent any
actual knowledge of the Administrative Agent to the contrary, the
Administrative Agent may rely conclusively on any such certificate, without
further inquiry); (iii) as provided in Section 7.1.8(b); (iv) constituting
property in which the Borrower or any other Obligor owned no interest at the
time the Lien was granted and at all times thereafter; or (v) if approved,
authorized or ratified in writing by the Administrative Agent at the direction
of all Lenders. Upon request by the Administrative Agent at any time, each
Lender will confirm in writing the Administrative Agent's authority to release
particular types or items of Collateral pursuant to this Section 9.12.
Section 9.13. Application of Proceeds of Collateral. The
Administrative Agent shall apply the proceeds of any collection of the
Collateral payable to the Administrative Agent for the benefit of it and the
Lenders, first, to the payment of all costs and expenses incurred by the
Administrative Agent in connection with such collection or otherwise in
connection with this Agreement or any other Loan Document, including and
together with any amounts then due and payable to the Administrative Agent (in
its capacity as such) hereunder (including any amount then due and payable to
the Administrative Agent pursuant to its rights to indemnification under
Sections 10.4 and 9.7), and, second, to the payment in full of the Obligations
then due and payable to the Lenders (such payment to be distributed among the
Lenders pro rata in accordance with the amount of such Obligations owed to them
on the date of such distribution).
SECTION 9.14. Rights and Remedies to be Exercised by Administrative
Agent Only. In the event any remedy may be exercised with respect to this
Agreement or any other Loan Document or the Collateral, the Administrative
Agent shall pursue remedies designated by the Required Lenders subject to the
proviso set forth in Section 9.6(b). Each Lender agrees that no Lender shall
have any right individually to realize upon the security created by this
Agreement or any other Loan Document.
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SECTION 9.15. Credit Decisions. Each Lender acknowledges that it
has, independently of and without reliance upon each Agent, the Arranger and
each other Lender, and based on such Lender's review of the financial
information of the Borrower and each other Obligor, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Lender
has deemed appropriate, made its own credit decision to extend its . Each
Lender also acknowledges that it will, independently of and without reliance
upon each Agent, the Arranger and each other Lender, and based on such other
documents, information and investigations as it shall deem appropriate at any
time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Loan Document. Except as otherwise expressly
provided for herein, the Agents shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition, litigation, liabilities or business of the Parent, the
Borrower or any other Obligor.
SECTION 9.16. Copies, etc. The Administrative Agent shall give
prompt notice to each Lender of each notice or request required or permitted to
be given to the Administrative Agent by the Borrower pursuant to the terms of
this Agreement (unless concurrently delivered to the Lenders by the Borrower).
The Administrative Agent will distribute to each Lender each document or
instrument received for such Lender's account and copies of all other
communications received by the Administrative Agent from the Borrower for
distribution to the Lenders by the Administrative Agent in accordance with the
terms of this Agreement (except to the extent any such Lender shall have
provided written notice to the Administrative Agent that it is not to receive
any such documents, instruments or communications). In the event such
information is so furnished by any Agent, such Agent shall have no duty to
confirm or verify its accuracy or completeness and shall have no liability
whatsoever with respect thereto.
SECTION 9.17. The Syndication Agent, the Documentation Agent and the
Administrative Agent. Notwithstanding anything else to the contrary contained
in this Agreement or any other Loan Document, the Agents, in their respective
capacities as such, each in such capacity, shall have no duties or
responsibilities under this Agreement or any other Loan Document nor any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Syndication Agent, the Documentation
Agent or the Administrative Agent, as applicable, in such capacity except as
are explicitly set forth herein or in the other Loan Documents.
SECTION 9.18. 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. The Lenders also agree, from time to time, at
the request of the Agents, 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 other Loan Documents.
SECTION 9.19. 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 the Lenders, and will, upon receipt therefor, deliver
such Collateral or proceeds thereof to the Administrative Agent.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however, that
no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 10.1, or clause (a) of Section 10.10,
change the definition of "Required Lenders", increase the Term Loan
Commitment Amount or the Percentage of any Lender, reduce any fees
described in Section 3.3, release any Subsidiary Guarantor from its
obligations under the Subsidiary Guaranty or release a substantial
portion of the Collateral (except in each case as otherwise
specifically provided in this Agreement, such Subsidiary Guaranty or
applicable Security Document) or extend the Term Loan Commitment
Termination Date shall be made without the consent of each Lender
adversely affected thereby;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment or prepayment of principal of or interest on or
fees payable in respect of any Term Loan or reduce the principal
amount of or rate of interest on any Term Loan shall be made without
the consent of the holder of the Term Note evidencing such Term Loan;
or
(d) affect adversely the interests, rights or obligations of
any Agent or Arranger (in its capacity as Agent or Arranger), unless
consented to by such Agent or Arranger, as the case may be.
No failure or delay on the part of any Agent, any Lender or the holder of any
Term Note in exercising any power or right under this Agreement or any other
Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by any Agent, any Lender
or the holder of any Term Note under this Agreement or any other Loan Document
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 10.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party
at its address or facsimile number set forth in Schedule II hereto or, in the
case of a Lender that becomes a party hereto after the date hereof, as set
forth in the Lender Assignment Agreement pursuant to which such Lender becomes
a Lender hereunder or at such other address or facsimile number as may be
designated by such party in a
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notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when transmitted (and electronic confirmation of receipt
thereof has been received).
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to
pay on demand all expenses of each of the Agents (including the fees and out-
of-pocket expenses of counsel to the Agents (including internal counsel) and of
local counsel, if any, who may be retained by counsel to the Agents) in
connection with
(a) the syndication by the Syndication Agent and the Arranger
of the Term Loans, the negotiation, preparation, execution and
delivery of this Agreement and of each other Loan Document, including
schedules and exhibits, and any amendments, waivers, consents,
supplements or other modifications to this Agreement or any other Loan
Document as may from time to time hereafter be required, whether or
not the transactions contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of each
Mortgage, each Pledge Agreement and the Security Agreement and/or any
Uniform Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to any thereof and any and
all other documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms hereof or of
such Mortgage, Pledge Agreement or Security Agreement; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Agents and the Lenders
harmless from all liability for, any stamp or other similar taxes which may be
payable in connection with the execution or delivery of this Agreement, the
Term Loans made hereunder or the issuance of the Term Notes or any other Loan
Documents. The Borrower also agrees to reimburse each Agent and each Lender
upon demand for all reasonable out-of-pocket expenses (including attorneys'
fees and legal expenses (including those of internal counsel)) incurred by such
Agent or such Lender in connection with (x) the negotiation of any
restructuring or "work-out", whether or not consummated, of any Obligations,
(y) the enforcement of any Obligations and (z) any litigation relating to the
Obligations, this Agreement or any Loan Document.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Term Loan
Commitments, the Borrower hereby, to the fullest extent permitted under
applicable law, indemnifies, exonerates and holds each Agent, the Arranger and
each Lender and each of their respective Affiliates, and each of their
respective partners, officers, directors, employees and agents, and each other
Person controlling any of the foregoing within the meaning of either Section 15
of the Securities Act of 1933, as amended, or Section 20 of the Securities
Exchange Act of 1934, as amended (collectively, the "Indemnified Parties"),
free and harmless from and against any and all actions, causes of action,
suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements
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(including those of internal counsel) (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Term Loan;
(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including
any action brought by or on behalf of the Borrower as the result of
any determination by the Required Lenders pursuant to Article V not to
fund any Borrowing);
(c) any investigation, litigation or proceeding related to
any acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not such Agent, such Arranger or such Lender is
party thereto;
(d) any investigation, litigation or proceeding related to
any environmental cleanup, audit, compliance or other matter relating
to the protection of the environment or the Release by the Borrower or
any of its Subsidiaries of any Hazardous Material;
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Borrower or any Subsidiary
thereof of any Hazardous Material (including any losses, liabilities,
damages, injuries, costs, expenses or claims asserted or arising under
any Environmental Law), regardless of whether caused by, or within the
control of, the Borrower or such Subsidiary; or
(f) with respect to BofA, any action taken by BofA in its
capacity as agent under the Revolving Credit Agreement,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or willful misconduct If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders
under Section 9.1, shall in each case survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Term Loan Commitments. The representations and warranties made by the Borrower
and each other Obligor in this Agreement and in each other Loan Document shall
survive the execution and delivery of this Agreement and each such other Loan
Document.
SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such other Loan Document or affecting the
validity or enforceability of such provision in any other jurisdiction.
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SECTION 10.7. Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
TERM NOTES AND, EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED THEREIN, EACH
OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the
Term Notes and the other Loan Documents constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and
supersede any prior agreements, written or oral, with respect thereto. Upon
the execution and delivery of this Agreement by the parties hereto, all
obligations and liabilities of the Arranger under or relating or with respect
to the Commitment Letter shall be terminated and of no further force or
effect.
SECTION 10.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that (i) the Borrower may
not assign or transfer its rights or obligations hereunder without the prior
written consent of each of the Agents and all Lenders, and (ii) the rights of
sale, assignment and transfer of the Lenders are subject to Section 10.11.
SECTION 10.11. Sale and Transfer of Term Loans and Term Notes;
Participations in Term Loans and Term Notes. Each Lender may assign, or sell
participations in, its Term Loan and Term Loan Commitment to one or more other
Persons in accordance with this Section 10.11.
SECTION 10.11.1. Assignments. Any Lender (the "Assignor Lender"),
(a) with written notice to the Administrative Agent and the
written consents of the Borrower and the Syndication Agent (which
consents shall not be (i) unreasonably delayed or withheld or (ii)
required in the case of any assignments made by the Syndication Agent
or any of its Affiliates and which consent in the case of the
Borrower, shall be deemed to have been given in the absence of a
written notice delivered by the Borrower to the Administrative Agent,
on or before the fifth Business Day after receipt by the Borrower of
such Assignor Lender's request for consent, stating, in reasonable
detail, the reasons why the Borrower proposes to withhold such
consent), may at any time assign and delegate to one or more
commercial banks or other financial institutions (including funds
engaged in the business of investing in loans), and
(b) with notice to the Borrower, the Syndication Agent and
the Administrative Agent, but without the consent of the Borrower or
any Agent, may assign and delegate to any of its Affiliates or to any
other Lender or to any Person whose investment manager or investment
advisor is the investment manager or investment advisor of such Lender
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(each Person described in either of the foregoing clauses as being the Person
to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Assignor
Lender's total Term Loans and Term Loan Commitment in a minimum aggregate
amount of (i) $1,000,000 or (ii) the then remaining amount of such Lender's
Term Loans and Term Loan Commitment; provided, however, that any such Assignee
Lender will comply, if applicable, with the provisions contained in the last
sentence of Section 4.6 and provided, further, however, that, the Borrower,
each other Obligor and the Agents shall be entitled to continue to deal solely
and directly with such Assignor Lender in connection with the interests so
assigned and delegated to an Assignee Lender until
(i) written notice of such assignment and delegation,
together with payment instructions, addresses and related information
with respect to such Assignee Lender, shall have been given to the
Borrower and the Agents by such Assignor Lender and such Assignee
Lender;
(ii) such Assignor Lender and such Assignee Lender shall have
executed and delivered to the Borrower and the Agents a Lender
Assignment Agreement, accepted by the Administrative Agent; and
(iii) the processing fees described below shall have been
paid.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within ten Business Days after its receipt of notice that the
Administrative Agent has accepted an executed Lender Assignment Agreement, the
Borrower shall execute and deliver to the Administrative Agent (for delivery to
the relevant Assignee Lender) a new Term Note evidencing such Assignee Lender's
assigned Term Loans and Term Loan Commitments and, if the Assignor Lender has
retained Term Loans and Term Loan Commitments hereunder, a replacement Term
Note in the principal amount of the Term Loans and Term Loan Commitments
retained by the Assignor Lender hereunder (such Term Note to be in exchange
for, but not in payment of, that Term Note then held by such Assignor Lender).
Each such Term Note shall be dated the date of the predecessor Term Note. The
Assignor Lender shall mark the predecessor Term Note "exchanged" and deliver it
to the Borrower. Accrued interest on that part of the predecessor Term Note
evidenced by the new Term Note, and accrued fees, shall be paid as provided in
the Lender Assignment Agreement. Accrued interest on that part of the
predecessor Term Note evidenced by the replacement Term Note shall be paid to
the Assignor Lender. Accrued interest and accrued fees shall be paid at the
same time or times provided in the predecessor Term Note and in this Agreement.
Such Assignor Lender or such Assignee Lender must also pay a processing fee to
the Administrative Agent upon delivery of any Lender Assignment Agreement in
the amount of $2,500, unless such assignment and delegation is by a Lender to
its Affiliate or if such assignment and delegation is by a Lender to a Federal
Reserve Bank, as provided below or is otherwise consented to by the
Administrative Agent. Any attempted assignment and delegation not made in
accordance with this Section 10.11.1 shall be null and void. Nothing contained
in
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this Section 10.11.1 shall prevent or prohibit any Lender from pledging its
rights (but not its obligations to make Loans) under this Agreement and/or its
Loans and/or its Term Note hereunder to a Federal Reserve Bank in support of
Borrowings made by such Lender from such Federal Reserve Bank.
SECTION 10.11.2. Participations. Any Lender may at any time sell to
one or more commercial banks or other Persons (each such commercial bank and
other Person being herein called a "Participant") participating interests in
any of the Term Loans, Term Loan Commitments or other interests of such Lender
hereunder; provided, however, that
(a) no participation contemplated in this Section shall
relieve such Lender from its Term Loan Commitments or its other
obligations hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Term Loan Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Agents shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and
each of the other Loan Documents;
(d) no Participant, unless such Participant is an Affiliate
of such Lender, or is itself a Lender, shall be entitled to require
such Lender to take or refrain from taking any action hereunder or
under any other Loan Document, except that such Lender may agree with
any Participant that such Lender will not, without such Participant's
consent, agree to (i) any reduction in the interest rate or amount of
fees that such Participant is otherwise entitled to, (ii) a decrease
in the principal amount, or an extension of the final Stated Maturity
Date, of any Term Loan in which such Participant has purchased a
participating interest or (iii) a release of all or substantially all
of the collateral security under the Loan Documents or any Subsidiary
Guarantor under any Subsidiary Guaranty, in each case except as
otherwise specifically provided in a Loan Document; and
(e) the Borrower shall not be required to pay any amount
under Section 4.6, that is greater than the amount which it would have
been required to pay had no participating interest been sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a
Lender.
SECTION 10.12. Other Transactions. Nothing contained herein shall
preclude any Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 10.13. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR
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WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS OR THE BORROWER RELATING THERETO
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY (TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW) IN THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY, OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY, AND OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW
YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE
BORROWER HEREBY IRREVOCABLY WAIVES (TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW) SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
SECTION 10.14. Waiver of Jury Trial. THE AGENTS, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS OR THE BORROWER RELATING
THERETO. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO THIS AGREEMENT
AND EACH SUCH OTHER LOAN DOCUMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
PIONEER AMERICAS ACQUISITION CORP.
By: /s/ PHILIP J. ABLOVE
--------------------------------------
Title: Vice President and Chief
Financial Officer
DLJ CAPITAL FUNDING, INC., as the
Syndication Agent and as Lender
By: /s/ HAROLD J. PHILIPS
--------------------------------------
Title: Managing Director
SALOMON BROTHERS HOLDING
COMPANY INC, as the Documentation
Agent and as Lender
By: /s/ RICHARD H. IVERS
--------------------------------------
Title: Managing Director
BANK OF AMERICA ILLINOIS, as the
Administrative Agent
By: /s/ DAVID A. JOHANSON
--------------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 4.3(b)
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Guaranty"), dated as of
June 17, 1997, is made by each of the signatories hereto and each other Person
which may from time to time hereafter become a party hereto pursuant to Section
5.5 (each, individually, an "Additional Subsidiary Guarantor", and,
collectively, the "Additional Subsidiary Guarantors", and, together with each
of the signatories hereto, each, individually, a "Subsidiary Guarantor", and,
collectively, the "Subsidiary Guarantors"), in favor of BANK OF AMERICA
ILLINOIS, as administrative agent (the "Administrative Agent") for each of the
Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Term Loan Agreement, dated as of June 17, 1997
(as amended, supplemented, amended and restated or otherwise modified from time
to time, the "Term Loan Agreement"), among Pioneer Americas Acquisition Corp.,
a Delaware corporation (the "Borrower"), the various financial institutions as
are, or may from time to time become, parties thereto (each, individually, a
"Lender", and collectively, the "Lenders"), DLJ Capital Funding, Inc., as
Syndication Agent for the Lenders, Salomon Brothers Holding Company Inc, as
Documentation Agent for the Lenders and Bank of America Illinois, as
Administrative Agent for the Lenders, the Lenders have extended commitments to
make Term Loans to the Borrower;
WHEREAS, as a condition precedent to the making of the Term Loans
under the Term Loan Agreement, each Subsidiary Guarantor is required to execute
and deliver this Guaranty;
WHEREAS, each Subsidiary Guarantor has duly authorized the execution,
delivery and performance of this Guaranty; and
WHEREAS, it is in the best interests of each Subsidiary Guarantor to
execute this Guaranty inasmuch as each Subsidiary Guarantor will derive
substantial direct and indirect benefits from the making of Term Loans to the
Borrower by the Lenders pursuant to the Term Loan Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders to make the
Term Loans to the Borrower pursuant to the Term Loan Agreement, each Subsidiary
Guarantor agrees, for the benefit of each Secured Party, as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Additional Subsidiary Guarantor" and "Additional Subsidiary
Guarantors" are defined in the preamble.
"Administrative Agent" is defined in the preamble.
"Borrower" is defined in the first recital.
"Guaranteed Obligations" is defined in clause (a) of Section 2.1.
"Guaranty" is defined in the preamble.
"Lender" and "Lenders" are defined in the first recital.
"PAI" means Pioneer Americas, Inc., a Delaware corporation and direct
Wholly-Owned Restricted Subsidiary of the Borrower, and any successor thereto.
"PCAC" means Pioneer Chlor Alkali Company, Inc., a Delaware
corporation and direct Wholly-Owned Restricted Subsidiary of the Borrower, and
any successor thereto.
"Secured Parties" means, collectively, the Administrative Agent, the
Lenders and each of their respective successors, transferees and assigns.
"Subsidiary Guarantor" and "Subsidiary Guarantors" are defined in the
preamble.
"Term Loan Agreement" is defined in the first recital.
SECTION 1.2. Term Loan Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Guaranty,
including its preamble and recitals, have the meanings provided in the Term
Loan Agreement.
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ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Each Subsidiary Guarantor hereby absolutely,
unconditionally and irrevocably
(a) guarantees the full and punctual payment when due,
whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise, of all Obligations of the Borrower
and each other Obligor, now or hereafter existing, whether for
principal, interest, fees, expenses or otherwise (including all such
amounts which would become due but for the operation of the automatic
stay under Section 362(a) of the United States Bankruptcy Code, 11
U.S.C. Section 362(a), and the operation of Sections 502(b) and 506(b)
of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b)) (the "Guaranteed Obligations"), and
(b) indemnifies and holds harmless each Secured Party and
each holder of a Term Note for any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by such
Secured Party or such holder, as the case may be, in enforcing any
rights under this Guaranty;
provided, however, that each Subsidiary Guarantor shall be liable under this
Guaranty for the maximum amount of such liability that can be hereby incurred
without rendering this Guaranty, as it relates to such Subsidiary Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount. This Guaranty constitutes a guaranty
of payment when due and not of collection, and each Subsidiary Guarantor
specifically agrees that it shall not be necessary or required that any Secured
Party or any holder of any Term Note exercise any right, assert any claim or
demand or enforce any remedy whatsoever against the Borrower or any other
Obligor (or any other Person) before or as a condition to the obligations of
such Subsidiary Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. Each Subsidiary Guarantor
agrees that, in the event of any Default of the nature set forth in clause (a)
or (b) of Section 8.1.9 of the Term Loan Agreement, and if such event shall
occur at a time when any of the Guaranteed Obligations may not then be due and
payable, such Subsidiary Guarantor will pay to the Lenders forthwith the full
amount which would be payable hereunder by such Subsidiary Guarantor if all
such Guaranteed Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Guaranteed
Obligations have been paid in full in cash, all obligations of each Subsidiary
Guarantor hereunder shall have been paid in full in cash and all Term Loan
Commitments shall have terminated. Each Subsidiary Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms
of the Term Loan Agreement, the
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<PAGE> 4
Term Notes and each other Loan Document under which they arise, regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Term Note with respect thereto. The liability of each Subsidiary Guarantor
under this Guaranty shall be absolute, unconditional and irrevocable
irrespective of:
(a) any lack of validity, legality or enforceability of the
Term Loan Agreement, any Term Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any
Term Note
(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or any
other Person (including any other guarantor (including any
Subsidiary Guarantor)) under the provisions of the Term Loan
Agreement, any Term Note, any other Loan Document or
otherwise, or
(ii) to exercise any right or remedy against any
other guarantor (including any Subsidiary Guarantor) of, or
collateral securing, any Obligations of the Borrower or any
other Obligor;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
other extension, compromise or renewal of any Guaranteed Obligation;
(d) any reduction, limitation, impairment or termination of
any Guaranteed Obligations for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be
subject to (and each Subsidiary Guarantor hereby waives any right to
or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any
other event or occurrence affecting, any Guaranteed Obligations or
otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Term Loan Agreement, any Term Note or any other Loan Document;
(f) any addition, exchange, release, surrender or
non-perfection of any collateral, or any amendment to or waiver or
release or addition of, or consent to departure from, any other
guaranty, held by any Secured Party or any holder of any Term Note
securing any of the Guaranteed Obligations;
(g) 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
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or otherwise affect, any of the Guaranteed Obligations and the
obligations of any Subsidiary Guarantor hereunder;
(h) the application by the Administrative Agent or the
Lenders of all monies at any time and from time to time received from
the Borrower, any Subsidiary Guarantor or any other Person on account
of any Indebtedness owing by the Borrower or any Subsidiary Guarantor
to the Administrative Agent or the Lenders, in such manner as the
Administrative Agent or the Lenders 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 Guaranteed Obligations;
(i) any change in the name, business, capital structure or
governing instrument of the Borrower or any Subsidiary Guarantor or
any refinancing or restructuring of any of the Guaranteed Obligations;
(j) the sale of the Borrower's or any Subsidiary Guarantor's
business or any part thereof;
(k) subject to Section 7.2.5 of the Term Loan Agreement, any
merger or consolidation, arrangement or reorganization of the
Borrower, any Subsidiary Guarantor, any Person resulting from the
merger or consolidation of the Borrower 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 Borrower or any Subsidiary Guarantor; or
(l) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the
Borrower, any other Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. Each Subsidiary Guarantor agrees
that this Guaranty shall continue to be effective or be reinstated, as the case
may be, if at any time any payment (in whole or in part) of any of the
Guaranteed Obligations is rescinded or must otherwise be restored by any
Secured Party or any holder of any Term Note, upon the insolvency, bankruptcy
or reorganization of the Borrower or any other Obligor or otherwise, all as
though such payment had not been made.
SECTION 2.5. Waiver, etc. Each Subsidiary Guarantor hereby waives
promptness, diligence, notice of acceptance and any other notice with respect
to any of the Guaranteed Obligations and of this Guaranty and any requirement
that the Administrative Agent, any other Secured Party or any holder of any
Term Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against
the Borrower, any other Obligor or any other Person (including any other
guarantor) or entity or any collateral securing the Guaranteed Obligations.
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<PAGE> 6
SECTION 2.6. Postponement of Subrogation, etc. Each Subsidiary
Guarantor hereby agrees that it will not exercise any rights which it may
acquire by way of rights of subrogation under this Guaranty, by any payment
made hereunder or otherwise, until the prior payment in full in cash of all
Guaranteed Obligations, until the prior payment in full in cash of all
obligations of such Subsidiary Guarantor hereunder and the termination of all
Term Loan Commitments. Any amount paid to any Subsidiary Guarantor on account
of any such subrogation rights prior to the payment in full in cash of all
Guaranteed Obligations shall be held in trust for the benefit of the Secured
Parties and each holder of a Term Note and shall immediately be paid to the
Administrative Agent for the benefit of the Secured Parties and each holder of
a Term Note and credited and applied against the Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of the Term Loan
Agreement; provided, however, that if
(a) such Subsidiary Guarantor has made payment to the Secured
Parties and each holder of a Term Note of all or any part of the
Guaranteed Obligations, and
(b) all Guaranteed Obligations have been paid in full in
cash, all obligations of such Subsidiary Guarantor hereunder shall
have been paid in full in cash and all Term Loan Commitments have been
permanently terminated,
each Secured Party and each holder of a Term Note agrees that, at such
Subsidiary Guarantor's request, the Administrative Agent, on behalf of the
Secured Parties and the holders of the Term Notes, will execute and deliver to
such Subsidiary Guarantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation
to such Subsidiary Guarantor of an interest in the Guaranteed Obligations
resulting from such payment by such Subsidiary Guarantor. In furtherance of
the foregoing, for so long as any Guaranteed Obligations, obligations of any
Guarantor hereunder or Term Loan Commitments remain outstanding, each
Subsidiary Guarantor shall refrain from taking any action or commencing any
proceeding against the Borrower or any other Obligor (or any of their
respective successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amount in respect of any payment made
under this Guaranty to any Secured Party or any holder of a Term Note;
provided, however, that a Subsidiary Guarantor may file appropriate proofs of
claim in any bankruptcy or insolvency proceeding of the Borrower or any other
Subsidiary Guarantor; provided further, however, that such Subsidiary Guarantor
shall not accept any payment or distribution of cash, securities or other
property in respect of any such proof of claim unless and until each of the
conditions referred to in clause (b) of the proviso to the preceding sentence
shall have occurred and, in the event such Subsidiary Guarantor shall in any
case receive or be entitled to receive any such payment or distribution in
contravention of this proviso, such payment or distribution shall be received
and held in trust for, and/or shall be promptly paid over or delivered to, the
Secured Parties to the extent necessary to pay the Guaranteed Obligations and
other obligations referred to in such clause (b) in full.
SECTION 2.7. Right of Contribution. Each Subsidiary Guarantor hereby
agrees that to the extent that a Subsidiary Guarantor shall have paid more than
its proportionate share of any
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payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and
receive contribution from and against any other Subsidiary Guarantor hereunder
who has not paid its proportionate share of such payment. Each Subsidiary
Guarantor's right of contribution shall be subject to the terms and conditions
of Section 2.6. The provisions of this Section 2.7 shall in no respect limit
the obligations and liabilities of any Subsidiary Guarantor to the
Administrative Agent and each other Secured Party, and each Subsidiary
Guarantor shall remain liable to the Administrative Agent and each other
Secured Party for the full amount guaranteed by such Subsidiary Guarantor
hereunder.
SECTION 2.8. Successors, Transferees and Assigns; Transfers of Term
Notes, etc. This Guaranty shall:
(a) be binding upon each Subsidiary Guarantor, and its
successors, transferees and assigns; and
(b) inure to the benefit of and be enforceable by the
Administrative Agent and each other Secured Party.
Without limiting the generality of clause (b), any Lender may assign or
otherwise transfer (in whole or in part) any Term Note or Term Loan held by it
to any other Person in accordance with the provisions of the Term Loan
Agreement, and such other Person shall thereupon become vested with all rights
and benefits in respect thereof granted to such Lender under any Loan Document
(including this Guaranty) or otherwise, subject, however, to any contrary
provisions in such assignment or transfer, and to the provisions of Section
10.11 and Article IX of the Term Loan Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Each Subsidiary
Guarantor hereby represents and warrants for itself unto each Secured Party as
to all matters contained in Article VI of the Term Loan Agreement and this
Article III, in each case insofar as applicable to such Subsidiary Guarantor or
such Subsidiary Guarantor's properties, together with all related definitions
and ancillary provisions, all of which are hereby incorporated into this
Article III as though specifically set forth herein.
SECTION 3.2. Organization, etc. Each Subsidiary Guarantor and such
Subsidiary Guarantor's Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
respective incorporation. Each Subsidiary Guarantor and such Subsidiary
Guarantor's Subsidiaries 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
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is required, except for those states in which its failure to qualify to do
business would not be reasonably likely to have a Material Adverse Effect.
SECTION 3.3. Due Authorization, Non-Contravention, etc. Each
Subsidiary Guarantor is duly authorized to execute and deliver this Guaranty
and each other Loan Document to be executed by it and to perform its
obligations under this Guaranty and each other Loan Document to be executed by
it and is and will continue to be duly authorized to perform its obligations
thereunder. The execution, delivery and performance by each Subsidiary
Guarantor of this Guaranty and each other Loan Document to which it is a party
do not and will not require any consent or approval of any governmental agency
or authority.
SECTION 3.4. No Conflicts. The execution, delivery and performance
by each Subsidiary Guarantor of this Guaranty and each other Loan Document 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 bylaws, of
such Subsidiary Guarantor, (iii) any agreement binding upon which conflict is
reasonably likely to have a Material Adverse Effect or (iv) any court or
administrative order or decree applicable to such Subsidiary Guarantor 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 such Subsidiary Guarantor, except to the extent created pursuant to
any Loan Document.
SECTION 3.5. Validity and Binding Effect. This Guaranty and each
other Loan Document, when duly executed and delivered, will be legal, valid and
binding obligations of each Subsidiary Guarantor party thereto, as applicable,
enforceable against such Subsidiary Guarantor in accordance with their
respective terms.
SECTION 3.6. Investment Company Act Representation. No Subsidiary
Guarantor or any of its Subsidiaries is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 3.7. Public Utility Holding Company Act Representation. No
Subsidiary Guarantor or any of its Subsidiaries 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.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Affirmative Covenants. Each Subsidiary Guarantor
covenants and agrees that, until all Term Loan Commitments have terminated, all
Guaranteed Obligations have been paid in full in cash and all obligations of
such Subsidiary Guarantor hereunder shall have
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been paid in full in cash, such Subsidiary Guarantor will perform, comply with
and be bound by all the agreements, covenants and obligations contained in the
Term Loan Agreement applicable to such Subsidiary Guarantor or such Subsidiary
Guarantor's properties. Each such agreement, covenant and obligation contained
in the Term Loan Agreement and all related definitions and ancillary provisions
are hereby incorporated into this Guaranty as though specifically set forth
herein.
SECTION 4.2. Concerning the Collateral and the Loan Documents. (a)
In order to secure the due and punctual payment of the Guaranteed Obligations,
including principal of, premium (if any) and interest (including interest on
overdue principal) on the Term Loans, when and as the same shall become due and
payable, whether on the scheduled payment date therefor, at maturity, by
acceleration or otherwise, and performance of all other obligations of the
Borrower to the Agents and the Lenders under the Term Loan Agreement and each
other Loan Document and all obligations of each Subsidiary Guarantor under this
Guaranty and each other Loan Document, the Borrower, the Subsidiary Guarantors
and the other Obligors have entered into each of the applicable Security
Documents (including, without limitation, this Guaranty) to which each is a
party.
(b) PCAC and PAI shall perform at their sole cost and expense any and
all acts and execute any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable federal, state or local jurisdiction, including
any filings in local real estate land record offices, which are necessary or
advisable and shall do such other acts and execute such other documents as may
be required under any of the Security Documents, from time to time, in order to
grant and maintain valid and perfected Liens on the Collateral in favor of the
Collateral Agents in the priorities purported to be created by the Security
Documents, subject only to Liens permitted under the Security Documents to be
senior or pari passu to the Liens of the Collateral Agents, and to fully
preserve and protect the rights of the Agents and the Lenders under the Term
Loan Agreement and the other Loan Documents. PCAC and PAI shall pay and
satisfy promptly all mortgage and financing and continuation statement
recording and/or filing fees, charges and taxes relating to this Term Loan
Agreement, the Security Documents and the other Loan Documents, any amendments
thereto and any other instruments of further assurance.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document
executed pursuant to the Term Loan Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.
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SECTION 5.2. Binding on Successors, Transferees and Assigns;
Assignment. In addition to, and not in limitation of, Section 2.8, this
Guaranty shall be binding upon each Subsidiary Guarantor and its successors,
transferees and assigns and shall inure to the benefit of and be enforceable by
each Secured Party and each holder of a Term Note and their respective
successors, transferees and assigns (to the fullest extent provided pursuant to
Section 2.8); provided, however, that no Subsidiary Guarantor may assign any of
its obligations hereunder without the prior written consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any
provision of this Guaranty, nor consent to any departure by any Subsidiary
Guarantor herefrom, shall in any event be effective unless the same shall be in
writing and signed by the Administrative Agent (on behalf of the Lenders or the
Required Lenders, as the case may be) and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 5.4. Notices. All notices and other communications provided
for hereunder shall be in writing and mailed or telecopied or delivered, if to
a Subsidiary Guarantor, to such Subsidiary Guarantor in care of the Borrower at
the address of the Borrower specified in the Term Loan Agreement, and, if to
the Administrative Agent, to the Administrative Agent at the address of the
Administrative Agent specified in the Term Loan Agreement, or as to any party,
at such other address as shall be designated by such party in a written notice
to the Agent or the Subsidiary Guarantors (in care of the Borrower), as the
case may be, complying as to delivery with the terms of this Section. All such
notices and other communications, if mailed and properly addressed with postage
prepaid or if properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any such notice or communication, if transmitted by
facsimile, shall be deemed given when electronic confirmation thereof is
received by the transmitter.
SECTION 5.5. Additional Subsidiary Guarantors. Upon the execution
and delivery by any other Person of an instrument in the form of Annex I
hereto, such Person shall become a "Subsidiary Guarantor" hereunder with the
same force and effect as if originally named as a Subsidiary Guarantor herein.
The execution and delivery of any such instrument shall not require the consent
of any other Subsidiary Guarantor hereunder. The rights and obligations of
each Subsidiary Guarantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Subsidiary Guarantor as a party to this
Guaranty.
SECTION 5.6. Guaranty Is in Addition to Other Security. This
Guaranty shall be in addition to and not in substitution for any other
guarantees or other security which the Administrative Agent may now or
hereafter hold in respect of the Guaranteed Obligations owing to the
Administrative Agent or the Lenders by the Borrower and (except as may be
required by law) the Administrative Agent shall be under no obligation to
marshal in favor of each of the Subsidiary Guarantors any other guarantees or
other security or any monies or other assets which
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<PAGE> 11
the Administrative Agent may be entitled to receive or upon which the
Administrative Agent or the Lenders may have a claim.
SECTION 5.7. No Waiver; Remedies. In addition to, and not in
limitation of, Section 2.3 and Section 2.5, no failure on the part of any
Secured Party or any holder of a Term Note to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 5.8. Captions. Section captions used in this Guaranty are
for convenience of reference only, and shall not affect the construction of
this Guaranty.
SECTION 5.9. Setoff. In addition to, and not in limitation of, any
rights of any Secured Party or any holder of a Term Note under applicable law,
each Secured Party and each such holder shall, upon the occurrence of any
Default described in any of clause (a) or (b) of Section 8.1.9 of the Term Loan
Agreement or with the consent of the Required Lenders, any Event of Default,
have the right to appropriate and apply to the payment of the obligations of
any Subsidiary Guarantor owing to it hereunder, whether or not then due, and
such Subsidiary Guarantor hereby grants to each Secured Party and each such
holder a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of such Subsidiary Guarantor then or thereafter
maintained with such Secured Party, or such holder or any agent or bailee for
such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section 4.8
of the Term Loan Agreement.
SECTION 5.10. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this 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 Guaranty.
SECTION 5.11. Governing Law, Entire Agreement, etc. THIS GUARANTY
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 5.12. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE SECURED PARTIES
OR THE SUBSIDIARY GUARANTORS SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT
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<PAGE> 12
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. EACH SUBSIDIARY GUARANTOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK,
NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. SUCH SERVICE MAY BE MADE BY MAILING OR
DELIVERING A COPY OF SUCH PROCESS TO SUCH SUBSIDIARY GUARANTOR IN CARE OF THE
PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND SUCH SUBSIDIARY
GUARANTOR HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT
SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, EACH
SUBSIDIARY GUARANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. EACH SUBSIDIARY GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE
OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY SUBSIDIARY
GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, SUCH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY WAIVES
SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS.
SECTION 5.13. Waiver of Jury Trial. EACH SUBSIDIARY GUARANTOR HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE SECURED PARTIES OR ANY SUBSIDIARY GUARANTOR. EACH SUBSIDIARY
GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH SUCH SUBSIDIARY GUARANTOR IS A
PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SECURED
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<PAGE> 13
PARTIES ENTERING INTO THE TERM LOAN AGREEMENT AND EACH SUCH OTHER LOAN
DOCUMENT.
SECTION 5.14. Counterparts. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
PIONEER AMERICAS, INC.
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
PIONEER CHLOR ALKALI COMPANY, INC.
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
ALL-PURE CHEMICAL CO.
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
IMPERIAL WEST CHEMICAL CO.
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
BLACK MOUNTAIN POWER COMPANY
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
<PAGE> 15
ALL PURE CHEMICAL NORTHWEST, INC.
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
PIONEER CHLOR ALKALI INTERNATIONAL, INC.
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President
G.O.W. CORPORATION
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
PIONEER (EAST), INC.
By /s/ KENT R. STEPHENSON
--------------------------------------
Name: Kent R. Stephenson
Title: President
T.C. HOLDINGS, INC.
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
T.C. PRODUCTS, INC.
By /s/ PHILIP J. ABLOVE
--------------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
<PAGE> 16
ANNEX I to
the Subsidiary Guaranty
SUPPLEMENT NO. ___ dated as of ________________, 19__
(this "Supplement"), to the Subsidiary Guaranty, dated as of
June 17, 1997 (together with all amendments, supplements,
restatements and other modifications, if any, from time to
time thereafter made thereto, the "Guaranty"), among the
initial signatories thereto and each other Person which from
time to time thereafter became a party thereto pursuant to
Section 5.5 thereof (each, individually, a "Subsidiary
Guarantor", and, collectively, the "Subsidiary Guarantors"),
in favor of the Secured Parties (as defined in the Guaranty).
W I T N E S S E T H:
WHEREAS, capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Guaranty; and
WHEREAS, the Guaranty provides that additional parties may become
Subsidiary Guarantors under the Guaranty by execution and delivery of an
instrument in the form of this Supplement; and
WHEREAS, pursuant to the provisions of Section 5.5 of the Guaranty,
the undersigned is becoming an Additional Subsidiary Guarantor under the
Guaranty; and
WHEREAS, the undersigned desires to become a Subsidiary Guarantor
under the Guaranty in order to induce the Secured Parties to continue to make
Term Loans under the Term Loan Agreement as consideration therefor;
NOW, THEREFORE, the undersigned agrees, for the benefit of each
Secured Party, as follows:
SECTION 1. In accordance with the Guaranty, the undersigned by its
signature below becomes a Subsidiary Guarantor under the Guaranty with the same
force and effect as if it were an original signatory thereto as a Subsidiary
Guarantor and the undersigned hereby (a) agrees to all the terms and provisions
of the Guaranty applicable to it as a Subsidiary Guarantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Subsidiary Guarantor thereunder are true and correct on and as of the date
hereof. In furtherance of the foregoing, each reference to a "Subsidiary
Guarantor" or an "Additional Subsidiary Guarantor" in the Guaranty shall be
deemed to include the undersigned.
<PAGE> 17
SECTION 2. The undersigned hereby represents and warrants that this
Supplement has been duly authorized, executed and delivered by the undersigned
and constitutes a legal, valid and binding obligation of the undersigned,
enforceable against it in accordance with its terms.
SECTION 3. Except as expressly supplemented hereby, the Guaranty
shall remain in full force and effect in accordance with its terms.
SECTION 4. In the event any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and in the Guaranty shall not in any way be affected or
impaired.
SECTION 5. Without limiting the provisions of the Term Loan Agreement
(or any other Loan Document, including the Guaranty), the undersigned agrees to
reimburse the Administrative Agent for its reasonable out-of-pocket expenses in
connection with this Supplement, including reasonable attorneys' fees and
expenses of the Administrative Agent.
SECTION 6. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. WITHOUT LIMITING THE EFFECT ON SECTION 5.12 OF THE
GUARANTY, ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS SUPPLEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE UNDERSIGNED SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE
UNDERSIGNED HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. SUCH SERVICE MAY BE MADE BY MAILING OR
DELIVERING A COPY OF SUCH PROCESS TO THE UNDERSIGNED IN CARE OF THE PROCESS
AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE UNDERSIGNED HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON
ITS BEHALF. AS AN ALTERNATIVE METHOD OF SERVICE, THE UNDERSIGNED FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF
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<PAGE> 18
PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR
WITHOUT THE STATE OF NEW YORK. THE UNDERSIGNED HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
UNDERSIGNED HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY
IN RESPECT OF ITS OBLIGATIONS UNDER THIS SUPPLEMENT AND THE OTHER LOAN
DOCUMENTS.
SECTION 8. WITHOUT LIMITING THE EFFECT OF SECTION 5.13 OF THE
GUARANTY, THE ADMINISTRATIVE AGENT AND THE UNDERSIGNED HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS SUPPLEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE UNDERSIGNED. THE UNDERSIGNED ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS
A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE
LENDERS ENTERING INTO THE TERM LOAN AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT
AND THE ADMINISTRATIVE AGENT ACCEPTING THIS SUPPLEMENT.
SECTION 9. This Supplement hereby incorporates by reference the
provisions of the Guaranty, which provisions are deemed to be a part hereof,
and this Supplement shall be deemed to be a part of the Guaranty.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 19
IN WITNESS WHEREOF, the undersigned has caused this Supplement to the
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the day and year first above written.
[NAME OF ADDITIONAL SUBSIDIARY GUARANTOR]
By
--------------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.4
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of June 17, 1997, made by PIONEER
CHLOR ALKALI COMPANY, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware (the "Company") in favor of UNITED
STATES TRUST COMPANY OF NEW YORK, as collateral agent (the "Collateral Agent")
under the Intercreditor and Collateral Agency Agreement dated as of the date
hereof (as the same may be amended, supplemented or otherwise modified from
time to time, the "Intercreditor Agreement") among the Company, Pioneer
Americas Acquisition Corp. ("PAAC"), Pioneer Americas, Inc., United States
Trust Company of New York, as trustee, for its own benefit and for the benefit
of the Holders (as hereinafter defined) under the Indenture (as hereinafter
defined) and Bank of America Illinois, as Agent, for its own benefit and for
the benefit of the Term Loan Lenders (as hereinafter defined) under the Term
Loan Agreement (as hereinafter defined).
WHEREAS, pursuant to that certain Indenture dated as of the
date hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time, the "Indenture") among PAAC, the
Subsidiary Guarantors (as defined therein) and United States Trust Company of
New York, as trustee (the "Trustee") for the holders of the Notes (as
hereinafter defined) (the "Holders"), PAAC will issue its 9 1/4% Senior Secured
Notes due 2007 (as the same may be amended, amended and restated, supplemented
or otherwise modified from time to time, including all notes issued in exchange
or substitution therefor upon the registration of such notes pursuant to the
Securities Act of 1933 or otherwise, the "Notes") in an aggregate principal
amount of $200 million;
WHEREAS, pursuant to that certain Term Loan Agreement dated as
of the date hereof (as the same may be amended, amended and restated,
supplemented or otherwise modified from time to time, the "Term Loan
Agreement") among PAAC, Bank of America Illinois, as administrative agent (the
"Term Loan Agent"), DLJ Capital Funding, Inc., as syndication agent, Salomon
Brothers Holding Company Inc, as documentation agent and the lenders named
therein (the "Term Loan Lenders"), the Term Loan Lenders will
<PAGE> 2
extend credit to PAAC to be evidenced by notes (as the same may be amended,
amended and restated, supplemented or otherwise modified from time to time,
including all notes issued in exchange or substitution therefor, the "Term Loan
Notes") in an aggregate principal amount of $100 million;
WHEREAS, pursuant to Article Thirteen of the Indenture, the
Company has guaranteed (such guarantee by the Company being hereinafter
referred to as the "Note Guarantee") the payment and performance of the
Indenture Obligation (as hereinafter defined);
WHEREAS, pursuant to the Subsidiary Guaranty dated as of the
date hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time), the Company has guaranteed (such
guarantee by the Company being hereinafter referred to as the "Term Loan
Guarantee") the payment and performance of the Term Loan Obligation (as
hereinafter defined);
WHEREAS, pursuant to that certain Asset Purchase Agreement
dated as of May 14, 1997 (the "Purchase Agreement"), among Pioneer Companies,
Inc. ("Pioneer") and OCC Tacoma, Inc., Pioneer acquired the Tacoma, Washington-
based business of OCC Tacoma, Inc. (the "Tacoma Acquisition");
WHEREAS, prior to the closing of the Tacoma Acquisition,
Pioneer will assign its rights and obligations under the Purchase Agreement to
the Company;
WHEREAS, it is a condition precedent for the Initial
Purchasers (as defined in the Indenture) to purchase the Notes and for the Term
Loan Lenders to extend credit under the Term Loan Agreement to PAAC that the
Company shall have executed and delivered this Agreement to the Collateral
Agent for the ratable benefit of the Trustee for its own benefit and for the
benefit of the Holders and for the Term Loan Agent for its own benefit and for
the benefit of the Term Loan Lenders.
NOW, THEREFORE, to induce the Initial Purchasers to purchase
the Notes and the Term Loan Lenders to extend credit under the Term Loan
Agreement to PAAC, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company has agreed to
pledge and grant a security interest in the Collateral (as hereinafter defined)
as
2
<PAGE> 3
security for the Secured Obligations (as hereinafter defined). Accordingly the
parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Intercreditor
Agreement are used herein as defined therein. In addition, as used herein:
"Agreement" shall mean this Security Agreement, as the same
may be amended, modified or otherwise supplemented from time to time.
"Collateral" shall have the meaning ascribed thereto in
Section 3 hereof.
"Indenture Obligation" shall mean the payment of and
performance of any and all indebtedness, obligations and liabilities
of the Company now or hereafter existing under or in respect of the
Note Guarantee, including, without limitation, payment of principal,
premium, if any, and interest, and Liquidated Damages, if any, when
due and payable, and all other amounts due or to become due under or
in connection with the Indenture (including, without limitation, all
sums due to the Trustee pursuant to Section 606 thereof) and the Notes
and the performance of all other obligations to the Trustee and the
Holders under the Indenture and the Notes, according to the terms
thereof.
"Secured Obligations" shall mean, collectively, (i) the
Indenture Obligation, (ii) the Term Loan Obligation and (iii) all
present and future obligations of the Company under this Agreement.
"Term Loan Obligation" shall mean the payment of and
performance of any and all indebtedness, obligations and liabilities
of the Company now or hereafter existing under or in respect of the
Term Loan Guarantee, including, without limitation, payment of
principal, premium, if any, and interest when due and payable, and all
other amounts due or to become due under or in connection with the
Term Loan Agreement (including without limitation, all sums due to the
Term Loan Agent pursuant to Sections 10.3 and 10.4 thereof) and the
Term Loan Notes and the performance of all other obligations to the
Term Loan Agent and the Term Loan Lenders
3
<PAGE> 4
under the Term Loan Agreement and the Term Loan Notes according to the
terms thereof.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect from time to time in the State of New York.
Section 2. Representations and Warranties. The Company
represents and warrants to the Collateral Agent, the Trustee, the Holders, the
Term Loan Agent and the Term Loan Lenders that:
(a) The Company is the sole beneficial owner of the
Collateral and no Lien exists or will exist upon the Collateral at any
time (and no right or option to acquire the same exists in favor of
any other Person), except for Permitted Liens under the Indenture and
the Term Loan Agreement and except for the pledge and security
interest in favor of the Collateral Agent for the ratable benefit of
the Trustee, the Holders, the Term Loan Agent and the Term Loan
Lenders created or provided for herein, which pledge and security
interest constitute a valid, first priority perfected security
interest in and to all of the Collateral (except for Permitted Liens
under the Indenture and the Term Loan Agreement); and
(b) Annex 1 hereto sets forth the chief executive office for
the Company and the office where the Company keeps its records
concerning the Collateral.
Section 3. Collateral. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, the Company hereby pledges and grants to
the Collateral Agent, for the ratable benefit of the Trustee, the Holders, the
Term Loan Agent and the Term Loan Lenders, as hereinafter provided, a security
interest in all of the Company's right, title and interest in the following
property, whether now owned by the Company or hereafter acquired and whether
now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
(a) all of the Company's right, title and interest in each
agreement of the Company listed on Annex 2 hereto, as
4
<PAGE> 5
any such agreements have been or may be amended or supplemented from
time to time; including, without limitation, (i) all rights of the
Company to receive monies due and to become due under or pursuant to
such agreements, (ii) all rights of the Company to receive proceeds of
any insurance, indemnity, warranty or guaranty with respect to such
agreements, (iii) all claims of the Company for damages arising out of
or for breach of or default under such agreements and (iv) all rights
of the Company to terminate, amend, supplement, modify or waive
performance under such agreements, to compel performance or otherwise
to exercise all remedies thereunder; and
(b) all proceeds of and to any of the property of the Company
described in the preceding clause (a) of this Section 3 (including,
without limitation, all causes of action, claims and warranties now or
hereafter held by the Company in respect of any of the items listed
above) and, to the extent related to any property described in said
clause (a) or such proceeds, all books, correspondence, credit files,
records, invoices and other papers.
The security interest in the Collateral is granted as security only and shall
not subject the Collateral Agent, any Holder, any Term Loan Lender, the Trustee
or the Term Loan Agent to, or in any way alter or modify, any obligation or
liability of the Company with respect to or arising out of any of the
Collateral.
Section 4. Further Assurances; Remedies. In furtherance of
the grant of the pledge and security interest pursuant to Section 3 hereof, the
Company hereby agrees with the Collateral Agent, each Holder, each Term Loan
Lender, the Trustee and the Term Loan Agent as follows:
4.01 Delivery and Other Perfection. The Company shall at its
own expense:
(a) Keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Collateral Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
5
<PAGE> 6
(b) Permit representatives of the Collateral Agent, upon
reasonable notice, at any time during normal business hours to inspect
and make abstracts from its books and records pertaining to the
Collateral, and forward copies of any notices or communications
received by the Company with respect to the Collateral, all in such
manner as the Collateral Agent may require;
(c) Give, execute, deliver, file and/or record any
financing statement, notice, instrument, document, agreement or other
papers that may be necessary or desirable (in the judgment of the
Collateral Agent) to create, preserve, perfect or validate the
security interest granted pursuant hereto or to enable the Collateral
Agent to exercise and enforce its rights hereunder with respect to
such security interest; and
(d) Upon the occurrence and during the continuance of any
Event of Default, upon request of the Collateral Agent, promptly
notify (and the Company hereby authorizes the Collateral Agent so to
notify) each debtor in respect of any Collateral that has been
assigned to the Collateral Agent hereunder, and that any payments due
or to become due in respect of such Collateral are to be made directly
to the Collateral Agent.
4.02 Other Financing Statements and Liens. Except as
otherwise permitted under Article 3 of the Intercreditor Agreement, without the
prior written consent of the Collateral Agent, the Company shall not file or
suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to
the Collateral in which the Collateral Agent is not named as the sole secured
party for the ratable benefit of the Trustee, the Holders, the Term Loan Agent
and the Term Loan Lenders.
4.03 Preservation of Rights. The Collateral Agent shall not
be required to take steps necessary to preserve any rights against prior
parties to any of the Collateral.
6
<PAGE> 7
4.04 Events of Default, Etc. Subject to the provisions of
the Indenture and the Term Loan Agreement and in addition to all other rights
and remedies granted to the Collateral Agent in this Agreement, during the
period during which an Event of Default shall have occurred and be continuing:
(a) the Company shall, at the request of the Collateral
Agent, assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Collateral Agent and the Company,
designated in its request;
(b) the Collateral Agent may make any reasonable compromise
or settlement deemed desirable with respect to any of the Collateral
and may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, any of the Collateral;
(c) the Collateral Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral
as if the Collateral Agent were the sole and absolute owner thereof
(and the Company agrees to take all such action as may be appropriate
to give effect to such right);
(d) the Collateral Agent in its discretion may, in its name
or in the name of the Company otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral, but shall be
under no obligation to do so; and
(e) the Collateral Agent may, upon ten Business Days' prior
written notice to the Company of the time and place, with respect to
the Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of the
Collateral Agent, the Trustee, the
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Holders, the Term Loan Agent or the Term Loan Lenders or any of their
respective agents, sell, lease, assign or otherwise dispose of all or
any part of such Collateral, at such place or places as the Collateral
Agent deems best, and for cash or for credit or for future delivery
(without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice
as is required above or by applicable statute including the Uniform
Commercial Code, and cannot be waived), and the Collateral Agent, the
Trustee, any Holder, the Term Loan Agent, any Term Loan Lender or
anyone else may be the purchaser, lessee, assignee or recipient of any
or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the
same absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or otherwise),
of the Company, any such demand, notice and right or equity being
hereby expressly waived and released. The Collateral Agent may,
without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at
any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.04 shall be applied in accordance with Article 6 of the Intercreditor
Agreement.
4.05 Deficiency. If the proceeds of sale, collection or
other realization of or upon the Collateral pursuant to Section 4.04 hereof are
insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, the Company shall remain liable for
any deficiency.
4.06 Removals, Etc. Without at least 30 days' prior written
notice to the Collateral Agent, the Company shall not (i) maintain any of its
books and records with respect to the Collateral at any office or maintain its
principal place of business at any place, other than at the address of the
Company specified in the Indenture or at one of the locations identified in
Annex 1 hereto under its name or in transit from one of such
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locations to another or (ii) change its name, or the name under which it does
business, from the name shown on the signature pages hereto.
4.07 Private Sale. None of the Collateral Agent, the
Trustee, the Holders, the Term Loan Agent or the Term Loan Lenders shall incur
any liability as a result of the sale of the Collateral, or any part thereof,
at any private sale pursuant to Section 4.04 hereof conducted in a commercially
reasonable manner. The Company hereby waives, to the maximum extent permitted
under applicable law, any claims against the Collateral Agent, the Trustee, any
Holder, the Term Loan Agent and any Term Loan Lender arising by reason of the
fact that the price at which the Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Collateral Agent accepts the first offer received and does not offer the
Collateral to more than one offeree.
4.08 Application of Proceeds. The proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Collateral Agent
under this Agreement, shall be applied by the Collateral Agent in the manner
set forth in Article 6 of the Intercreditor Agreement.
As used in this Section 4, "proceeds" of the Collateral shall
mean cash, securities and other property realized in respect of, and
distributions in kind of, the Collateral, including any thereof received under
any reorganization, liquidation or adjustment of debt of the Company or any
issuer of or obligor on any of the Collateral.
4.09 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement, the Company hereby irrevocably constitutes and
appoints the Collateral Agent and any officer or agent of the Collateral Agent,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Company and
in the name of the Company or in the Collateral Agent's own name, from time to
time in the Collateral Agent's discretion, for the purpose of carrying out the
terms of this Agreement and taking any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to
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accomplish the purposes of this Agreement, which appointment as
attorney-in-fact is irrevocable and coupled with an interest, including,
without limitation, any financing statements, endorsements, assignments or
other instruments of transfer.
4.10 Perfection. Prior to or concurrently with the execution
and delivery of this Agreement, the Company shall file such financing
statements and other documents in such offices as the Collateral Agent may
request to perfect the security interests granted by Section 3 of this
Agreement.
4.11 Termination. When all the Secured Obligations and all
obligations under the Intercreditor Agreement, the Indenture and the Term Loan
Agreement shall have been paid in full, this Agreement shall terminate, and the
Collateral Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the Company. The Collateral Agent shall also execute and
deliver to the Company upon such termination or release of Collateral such
Uniform Commercial Code termination statements and such other documentation as
shall be reasonably requested by the Company to effect the termination and
release of the Liens on the Collateral.
4.12 Further Assurances. The Company agrees that, from time
to time at its own expense upon the written request of the Collateral Agent,
the Company will execute and deliver such further documents and do such other
acts and things as the Collateral Agent may reasonably request in order fully
to effect the purposes of this Agreement.
Section 5. Miscellaneous.
5.01 Authority of Collateral Agent. The Company acknowledges
that the rights and responsibilities of the Collateral Agent under this
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between the Collateral Agent and the
Trustee, the Holders, the Term Loan Agent and the Term Loan Lenders, be
governed by the Intercreditor
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Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Collateral Agent and the Company,
the Collateral Agent shall be conclusively presumed to be acting as agent with
full and valid authority so to act or refrain from acting, and the Company
shall be under no obligation, or entitlement, to make any inquiry respecting
such authority.
5.02 No Waiver. No failure on the part of the Collateral
Agent or the Trustee, any Holder, the Term Loan Agent or any Term Loan Lender
to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Collateral Agent or
the Trustee, any Holder, the Term Loan Agent or any Term Loan Lender of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
5.03 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied (or transmitted by facsimile or
similar electronic transfer) and delivered to the intended recipient at its
address or transmission number for notices provided in Section 11.2 of the
Intercreditor Agreement.
5.04 Expenses. The Company agrees to reimburse each of the
Collateral Agent, the Trustee, the Holders, the Term Loan Agent and the Term
Loan Lenders for all reasonable costs and expenses of such parties (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Event of Default and any enforcement or collection
proceeding resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (w) performance by the Collateral
Agent of any obligations of the Company in respect of the Collateral that the
Company has failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceeding, or any actual
or attempted sale, or any exchange, enforcement, collection, or attempted sale,
or any exchange, enforcement, collection, compromise or settlement in respect
of any of the Collateral, and for the care of the Collateral and defending or
asserting rights and claims of the Collateral Agent in respect thereof, by
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litigation or otherwise, (y) judicial or regulatory proceedings and (z)
workout, restructuring or other negotiations or proceedings (whether or not the
workout, restructuring or transaction contemplated thereby is consummated) and
(ii) the enforcement of this Section 5.04, and all such costs and expenses
shall be Secured Obligations entitled to the benefits of the collateral
security provided pursuant to Section 3 hereof.
5.05 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
the Company and the Collateral Agent (with the consent of the Holders and the
Term Loan Lenders as specified in the Intercreditor Agreement). Any such
amendment or waiver shall be binding upon the Collateral Agent, the Trustee,
each Holder, the Term Loan Agent, each Term Loan Lender, each holder of any of
the Secured Obligations and the Company.
5.06 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Company, the Collateral Agent, the Trustee, the Holders, the Term Loan Agent,
the Term Loan Lenders and each holder of any of the Secured Obligations
(provided, however, that the Company shall not assign or transfer its rights or
obligations hereunder without the prior written consent of the Collateral
Agent).
5.07 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
5.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
5.09 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the law of the State of New York.
5.10 Agents and Attorneys-in-Fact. The Collateral Agent may
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
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5.11 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Collateral
Agent and the Trustee, the Holders, the Term Loan Agent and the Term Loan
Lenders in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
5.12 Additional Agreements. Reference is made to Article 7
of the Intercreditor Agreement for additional agreements of PAAC, the Company
and the other Subsidiary Guarantors with respect to the rights of the
Collateral Agent, including, without limitation, rights to compensation and
indemnification.
5.13 Security Interest Absolute. All rights of the
Collateral Agent hereunder, the security interest and all obligations of the
Company hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Indenture or the Term Loan Agreement,
any agreement with respect to any of the Secured Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of or any or any consent
to any departure from the Indenture or the Term Loan Agreement or any other
agreement or instrument, (c) any exchange, release or non-perfection of any
lien on other collateral, or any guarantee of all or any of the Secured
Obligations, or (d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Company in respect of the Secured
Obligations or this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this
Security Agreement to be duly executed and delivered as of the day and year
first above written.
PIONEER CHLOR ALKALI COMPANY, INC.
By /s/ PHILIP J. ABLOVE
------------------------------------
Name: Philip J. Ablove
Title: Vice President
UNITED STATES TRUST COMPANY OF
NEW YORK, as Collateral Agent
By /s/ JAMES J. McGINLEY
------------------------------------
Name: James J. McGinley
Title: Vice President
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ANNEX 1
CHIEF EXECUTIVE OFFICE
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
A-1
<PAGE> 16
ANNEX 2
THE AGREEMENTS
1. Asset Purchase Agreement, dated as of May 14, 1997, between OCC
Tacoma, Inc. ("OCC Tacoma") and Pioneer Companies, Inc. ("PCI").
Pursuant to the Assignment and Assumption Agreement dated as of June
17, 1997, PCI assigned to the Company substantially all of its rights
and all of its obligations under the Purchase Agreement and such
rights and obligations have been assumed by the Company.
2. Environmental Operating Agreement, dated as of June 17, 1997, between
OCC Tacoma and the Company.
3. Chlorine and Caustic Soda Sales Agreement, dated as of June 17, 1997
between the Company and Occidental Chemical Corporation.
4. Chlorine Purchase Agreement, dated as of June 17, 1997, between the
Company and OCC Tacoma.
A-2
<PAGE> 1
EXHIBIT 4.5
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT dated as of June 17, 1997 made by PIONEER
AMERICAS, INC., a corporation duly organized and validly existing under the
laws of the State of Delaware (the "Company") in favor of UNITED STATES TRUST
COMPANY OF NEW YORK, as collateral agent (the "Collateral Agent") under the
Intercreditor and Collateral Agency Agreement dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the
"Intercreditor Agreement") among Pioneer Americas Acquisition Corp. ("PAAC"),
the Company, Pioneer Chlor Alkali Company, Inc., United States Trust Company of
New York, as trustee, for its own benefit and for the benefit of the Holders
(as hereinafter defined) under the Indenture (as hereinafter defined) and Bank
of America Illinois, as Agent, for its own benefit and for the benefit of the
Term Loan Lenders (as hereinafter defined) under the Term Loan Agreement (as
hereinafter defined).
WHEREAS, pursuant to that certain Indenture dated as of the date
hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time, the "Indenture") among PAAC, the
Subsidiary Guarantors (as defined therein) and United States Trust Company of
New York, as trustee (the "Trustee") for the holders of the Notes (as
hereinafter defined) (the "Holders"), PAAC will issue its 9 1/4% Senior Secured
Notes due 2007 (as the same may be amended, amended and restated, supplemented
or otherwise modified from time to time, including all notes issued in exchange
or substitution therefor upon the registration of such notes pursuant to the
Securities Act of 1933 or otherwise, the "Notes") in an aggregate principal
amount of $200 million;
WHEREAS, pursuant to that certain Term Loan Agreement dated as of
the date hereof (as the same may be amended, amended and restated, supplemented
or otherwise modified from time to time, the "Term Loan Agreement") among PAAC,
Bank of America Illinois, as administrative agent (the "Term Loan Agent"), DLJ
Capital Funding, as syndication agent, Salomon Brothers Holding Company Inc, as
documentation agent and the lenders named therein (the "Term Loan Lenders"),
the Term Loan Lenders will extend credit to PAAC to be evidenced by notes (as
the same may be amended, amended and restated, supplemented or otherwise
modified
<PAGE> 2
from time to time, including all notes issued in exchange or substitution
therefor, the "Term Loan Notes") in an aggregate principal amount of $100
million;
WHEREAS, pursuant to Article Thirteen of the Indenture, the
Company has guaranteed (such guarantee by the Company being hereinafter
referred to as the "Note Guarantee") the payment and performance of the
Indenture Obligation (as hereinafter defined);
WHEREAS, pursuant to the Subsidiary Guaranty dated as of the date
hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time), the Company has guaranteed (such
guarantee by the Company being hereinafter referred to as the "Term Loan
Guarantee") the payment and performance of the Term Loan Obligation (as
hereinafter defined);
WHEREAS, it is a condition precedent for the Initial Purchasers
(as defined in the Indenture) to purchase the Notes and for the Term Loan
Lenders to extend credit under the Term Loan Agreement to PAAC that the Company
shall have executed and delivered this Agreement to the Collateral Agent for
the ratable benefit of the Trustee for its own benefit and for the benefit of
the Holders and for the Term Loan Agent for its own benefit and for the benefit
of the Term Loan Lenders.
NOW, THEREFORE, to induce the Initial Purchasers to purchase the
Notes and the Term Loan Lenders to extend credit under the Term Loan Agreement
to PAAC, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company has agreed to pledge
and grant a security interest in the Collateral (as hereinafter defined) as
security for the Secured Obligations (as hereinafter defined). Accordingly the
parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Intercreditor
Agreement are used herein as defined therein. In addition, as used herein:
"Agreement" shall mean this Stock Pledge Agreement, as the same
may be amended, modified or otherwise supplemented from time to time.
"Collateral" shall have the meaning ascribed thereto in Section 3
hereof.
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"Indenture Obligation" shall mean the payment of and performance
of any and all indebtedness, obligations and liabilities of the Company
now or hereafter existing under or in respect of the Note Guarantee,
including, without limitation, payment of principal, premium, if any,
interest and Liquidated Damages, if any, when due and payable, and all
other amounts due or to become due under or in connection with the
Indenture (including, without limitation, all sums due to the Trustee
pursuant to Section 606 thereof) and the Notes and the performance of
all other obligations to the Trustee and the Holders under the Indenture
and the Notes, according to the terms thereof.
"Issuers" shall mean, collectively, the respective corporations
identified on Annex 1 hereto under the caption "Issuer."
"Pledged Stock" shall have the meaning ascribed thereto in
Section 3(a) hereof.
"Secured Obligations" shall mean, collectively, (a) the Indenture
Obligation, (ii) the Term Loan Obligation and (iii) all present and
future obligations of the Company under this Agreement.
"Term Loan Obligation" shall mean the payment of and performance
of any and all indebtedness, obligations and liabilities of the Company
now or hereafter existing under or in respect of the Term Loan
Guarantee, including, without limitation, payment of principal, premium,
if any, and interest when due and payable, and all other amounts due or
to become due under or in connection with the Term Loan Agreement
(including, without limitation, all sums due to the Term Loan Agent
pursuant to Sections 10.3 and 10.4 thereof) and the Term Loan Notes and
the performance of all other obligations to the Term Loan Agent and the
Term Loan Lenders under the Term Loan Agreement and the Term Loan Notes
according to the terms thereof.
"Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect from time to time in the State of New York.
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Section 2. Representations and Warranties. The Company
represents and warrants to the Collateral Agent, the Trustee, the Holders, the
Term Loan Agent and the Term Loan Lenders that:
(a) The Company is the sole beneficial owner of the Collateral
and no Lien exists upon the Collateral (and no right or option to
acquire the same exists in favor of any other Person), except for
Permitted Liens under the Indenture and the Term Loan Agreement and
except for the pledge and security interest in favor of the Collateral
Agent for the ratable benefit of the Trustee, the Holders, the Term Loan
Agent and the Term Loan Lenders created or provided for herein, which
pledge and security interest constitute a valid perfected pledge and
security interest in and to all of the Collateral securing the payment
of the Secured Obligations. Upon delivery to the Collateral Agent of
the stock certificates evidencing the Pledged Stock, the Lien granted
pursuant to this Agreement will constitute a valid, perfected first
priority Lien on the Pledged Stock, enforceable as such against all
creditors of the Company and any Persons purporting to purchase
Collateral from the Company.
(b) The Pledged Stock represented by the certificates identified
in Annex 1 hereto is, and all other Pledged Stock in which the Company
shall hereafter grant a security interest pursuant to Section 3 hereof
will be, duly authorized, validly existing, fully paid and
non-assessable and none of such Pledged Stock is or will be subject to
any contractual restriction, or any restriction under the charter or
by-laws of the respective Issuer of such Pledged Stock, upon the
transfer of such Pledged Stock (except for any such restriction
contained herein or in the Intercreditor Agreement).
(c) The Pledged Stock represented by the certificates identified
in Annex 1 hereto constitutes all of the issued and outstanding shares
of capital stock of any class of the Issuers beneficially owned by the
Company on the date hereof (whether or not registered in the name of the
Company) and said Annex 1 correctly identifies, as at the date hereof,
the respective Issuers of such Pledged Stock, the respective class and
par value of the shares comprising such Pledged
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<PAGE> 5
Stock and the respective number of shares (and registered owners
thereof) represented by each such certificate.
Section 3. The Pledge. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, the Company hereby pledges and grants to
the Collateral Agent, for the ratable benefit of the Trustee, the Holders, the
Term Loan Agent and the Term Loan Lenders, as hereinafter provided, a security
interest in all of the Company's right, title and interest in the following
property, whether now owned by the Company or hereafter acquired and whether
now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
(a) the shares of common stock of the Issuers represented by the
certificates identified in Annex 1 hereto and all other shares of
capital stock of whatever class of the Issuers, now or hereafter owned
by the Company, in each case together with the certificates evidencing
the same (collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Company under any
provision prohibiting such action hereunder or under the Intercreditor
Agreement, in the event of any consolidation or merger in which an
Issuer is not the surviving corporation, all shares of each class of the
capital stock of the successor corporation owned by the Company (unless
such successor corporation is the Company itself) formed by or resulting
from such consolidation or merger; and
(d) all proceeds of and to any of the property of the Company
described in the preceding clauses of this Section 3 (including, without
limitation, all causes of action, claims
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and warranties now or hereafter held by the Company in respect of any of
the items listed above) and, to the extent related to any property
described in said clauses or such proceeds, all books, correspondence,
credit files, records, invoices and other papers.
Section 4. Further Assurances; Remedies. In furtherance of the
grant of the pledge and security interest pursuant to Section 3 hereof, the
Company hereby agrees with the Collateral Agent, each Holder, each Term Loan
Lender, the Trustee and the Term Loan Agent as follows:
4.01 Delivery and Other Perfection. The Company shall at its
own expense:
(a) if any of the shares, securities, moneys or property
required to be pledged by the Company under clauses (a), (b) and (c) of
Section 3 hereof are received by the Company, forthwith either (x)
transfer and deliver to the Collateral Agent such shares or securities
so received by the Company (together with the certificates for any such
shares and securities duly endorsed in blank or accompanied by undated
stock powers duly executed in blank), all of which thereafter shall be
held by the Collateral Agent, pursuant to the terms of this Agreement,
as part of the Collateral or (y) take such other action as the
Collateral Agent shall deem necessary or appropriate to duly record the
Lien created hereunder in such shares, securities, moneys or property;
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Collateral Agent)
to create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Collateral Agent to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the
Collateral to be transferred of record into the name of the Collateral
Agent or its nominee (and the Collateral Agent agrees that if any
Collateral is transferred into its name or the name of its nominee, the
Collateral Agent will thereafter promptly give to the Company copies of
any notices and communications received by it with respect to the
Collateral);
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<PAGE> 7
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Collateral Agent may reasonably require in order to
reflect the security interests granted by this Agreement; and
(d) permit representatives of the Collateral Agent, upon
reasonable notice, at any time during normal business hours to inspect
and make abstracts from its books and records pertaining to the
Collateral, and permit representatives of the Collateral Agent to be
present at the Company's place of business to receive copies of all
communications and remittances relating to the Collateral, and forward
copies of any notices or communications received by the Company with
respect to the Collateral, all in such manner as the Collateral Agent
may require.
4.02 Other Financing Statements and Liens. Except as otherwise
permitted under Article 3 of the Intercreditor Agreement, without the prior
written consent of the Collateral Agent, the Company shall not file or suffer
to be on file, or authorize or permit to be filed or to be on file, in any
jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Collateral Agent is not named as the sole secured party
for the ratable benefit of the Trustee, the Holders, the Term Loan Agent and
the Term Loan Lenders.
4.03 Preservation of Rights. The Collateral Agent shall not be
required to take steps necessary to preserve any rights against prior parties
to any of the Collateral.
4.04 Collateral.
(1) Except as otherwise permitted by the Indenture, the Company
will cause the Collateral to constitute at all times 100% of the total number
of shares of each class of capital stock of each Issuer then outstanding.
(2) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral for all purposes not
inconsistent with the terms of this Agreement, the Intercreditor Agreement, the
Indenture, the Term Loan Agreement or any other instrument or
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<PAGE> 8
agreement referred to herein or therein, provided that the Company agrees that
it will not vote the Collateral in any manner that will have a material adverse
effect on the Collateral or on the ability of the Company to perform its
obligations under this Agreement, the Intercreditor Agreement, the Indenture,
the Term Loan Agreement or any such other instrument or agreement; and the
Collateral Agent shall execute and deliver to the Company or cause to be
executed and delivered to the Company all such proxies, powers of attorney,
dividend and other orders, and all such instruments, without recourse, as the
Company may reasonably request for the purpose of enabling the Company to
exercise the rights and powers that it is entitled to exercise pursuant to this
Section 4.04(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Company shall be entitled to receive and retain any dividends
on the Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Collateral Agent
or the Trustee, any Holder, the Term Loan Agent or any Term Loan Lender
exercises any available right to declare any Secured Obligation due and payable
or seeks or pursues any other relief or remedy available to it under applicable
law or under this Agreement, the Intercreditor Agreement, the Indenture, the
Term Loan Agreement, or any other agreement relating to such Secured
Obligation, all dividends and other distributions on the Collateral shall be
paid directly to the Collateral Agent and retained by it as part of the
Collateral, subject to the terms of this Agreement, and, if the Collateral
Agent shall so request in writing, the Company agrees to execute and deliver to
the Collateral Agent appropriate additional dividend, distribution and other
orders and documents to that end, provided that if such Event of Default is
cured, any such dividend or distribution theretofore paid to the Collateral
Agent shall (except to the extent theretofore applied to the Secured
Obligations) be returned by the Collateral Agent to the Company.
4.05 Events of Default, Etc. During the period during which an
Event of Default shall have occurred and be continuing:
(a) the Collateral Agent shall have all of the rights and
remedies with respect to the Collateral of a secured
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<PAGE> 9
party under the Uniform Commercial Code (whether or not said Code is in
effect in the jurisdiction where the rights and remedies are asserted)
and such additional rights and remedies to which a secured party is
entitled under the laws in effect in any jurisdiction where any rights
and remedies hereunder may be asserted, including, without limitation,
the right, to the maximum extent permitted by law, to exercise all
voting, consensual and other powers of ownership pertaining to the
Collateral as if the Collateral Agent were the sole and absolute owner
thereof (and the Company agrees to take all such action as may be
appropriate to give effect to such right);
(b) the Collateral Agent in its discretion may, in its name or
in the name of the Company or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on
account of or in exchange for any of the Collateral, but shall be under
no obligation to do so; and
(c) the Collateral Agent may, upon ten Business Days' prior
written notice to the Company of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter
come into the possession, custody or control of the Collateral Agent,
the Trustee, the Holders, the Term Loan Agent, the Term Loan Lenders or
any of their respective agents, sell, lease, assign or otherwise dispose
of all or any part of such Collateral, at such place or places as the
Collateral Agent deems best, and for cash or for credit or for future
delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute, including the
Uniform Commercial Code, and cannot be waived), and the Collateral
Agent, the Trustee, any Holder, the Term Loan Agent, any Term Loan
Lender or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public
sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any right or equity of redemption (statutory
or otherwise), of the Company, any such demand, notice and right or
equity being hereby expressly waived and released. The Collateral Agent
9
<PAGE> 10
may, without notice or publication, adjourn any public or private sale
or cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at any
time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this
Section 4.05 shall be applied in accordance with Article 6 of the Intercreditor
Agreement.
The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Collateral Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who
will agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. The Company acknowledges that any such private sales may be at prices
and on terms less favorable to the Collateral Agent than those obtainable
through a public sale without such restrictions, and acknowledges that any such
private sale shall not be deemed to have been made other than in a commercially
reasonable manner solely by virtue of such circumstances and that the
Collateral Agent shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time necessary
to permit the respective Issuer thereof to register it for public sale.
After any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Company of the Collateral Agent's
intention to exercise its voting power under this Section 4.05,
(i) the Collateral Agent may exercise (to the exclusion
of the Company) the voting power and all other incidental rights of
ownership with respect to any Pledged Stock or other shares of capital
stock constituting Collateral and the Company hereby grants the
Collateral Agent an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Stock and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such
additional proxies and other documents as may be
10
<PAGE> 11
necessary to allow the Collateral Agent to exercise such voting power.
4.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 4.05 hereof are
insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, the Company shall remain liable for
any deficiency.
4.07 Removals, Etc. Without at least 30 days' prior written
notice to the Collateral Agent, the Company shall not (i) maintain any of its
books and records with respect to the Collateral at any office or maintain its
principal place of business at any place other than at the address indicated on
the signature page hereto or (ii) change its name, or the name under which it
does business, from the name shown on the signature page hereto.
4.08 Private Sale. None of the Collateral Agent, the Trustee,
the Holders, the Term Loan Agent or the Term Loan Lenders shall incur any
liability as a result of the sale of the Collateral, or any part thereof, at
any private sale pursuant to Section 4.05 hereof conducted in a commercially
reasonable manner. The Company hereby waives, to the maximum extent permitted
under applicable law, any claims against the Collateral Agent, the Trustee, any
Holder, the Term Loan Agent and any Term Loan Lender arising by reason of the
fact that the price at which the Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Collateral Agent accepts the first offer received and does not offer the
Collateral to more than one offeree.
4.09 Application of Proceeds. The proceeds of any collection,
sale or other realization of all or any part of the Collateral pursuant hereto,
and any other cash at the time held by the Collateral Agent under this
Agreement, shall be applied by the Collateral Agent in the manner set forth in
Article 6 of the Intercreditor Agreement.
As used in this Section 4, "proceeds" of the Collateral shall
mean cash, securities and other property realized in respect of, and
distributions in kind of, the Collateral, including any thereof received under
any reorganization,
11
<PAGE> 12
liquidation or adjustment of debt of the Company or any issuer of or obligor on
any of the Collateral.
4.10 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement, the Company hereby irrevocably constitutes and
appoints the Collateral Agent and any officer or agent of the Collateral Agent,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Company and
in the name of the Company or in the Collateral Agent's own name, from time to
time in the Collateral Agent's discretion, for the purpose of carrying out the
provisions of this Agreement and taking any and all appropriate action and
executing any and all documents and instruments which may be necessary or
desirable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Collateral Agent shall be
entitled under this Section 4 to make collections in respect of the Collateral,
the Collateral Agent shall have the right and power to receive, endorse and
collect all checks made payable to the order of the Company representing any
dividend, payment or other distribution in respect of the Collateral or any
part thereof and to give full discharge for the same.
4.11 Perfection. Prior to or concurrently with the execution
and delivery of this Agreement, the Company shall deliver to the Collateral
Agent all certificates identified in Annex 1 hereto, accompanied by undated
stock powers duly executed in blank.
4.12 Termination. When all the Secured Obligations and all the
obligations under the Intercreditor Agreement, the Indenture and the Term Loan
Agreement shall have been paid in full, this Agreement shall terminate, and the
Collateral Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the Company.
4.13 Further Assurances. The Company agrees that, from time to
time, at its own expense, upon the written request of the Collateral Agent, the
Company will execute and deliver such further documents and do such other acts
and things as the
12
<PAGE> 13
Collateral Agent may reasonably request in order fully to effect the purposes
of this Agreement.
Section 5. Miscellaneous.
5.01 Authority of Collateral Agent. The Company acknowledges
that the rights and responsibilities of the Collateral Agent under this
Agreement with respect to any action taken by the Collateral Agent or the
exercise or non-exercise by the Collateral Agent of any option, voting right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between the Collateral Agent and the
Trustee, the Holders, the Term Loan Agent and the Term Loan Lenders, be
governed by the Intercreditor Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Collateral Agent and the Company, the Collateral Agent shall be conclusively
presumed to be acting as agent with full and valid authority so to act or
refrain from acting, and the Company shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.
5.02 No Waiver. No failure on the part of the Collateral Agent
or the Trustee, any Holders, the Term Loan Agent or any Term Loan Lenders to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Collateral Agent or the Trustee,
any Holders, the Term Loan Agent or any Term Loan Lender of any right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein are cumulative and
are not exclusive of any remedies provided by law.
5.03 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied (or transmitted by facsimile or
similar electronic transfer) and delivered to the intended recipient at its
address or transmission number for notices provided in Section 11.2 of the
Intercreditor Agreement.
5.04 Expenses. The Company agrees to reimburse each of the
Collateral Agent, the Trustee, the Holders, the Term Loan
13
<PAGE> 14
Agent and the Term Loan Lenders for all reasonable costs and expenses of such
parties (including, without limitation, the reasonable fees and expenses of
legal counsel) in connection with (i) any Event of Default and any enforcement
or collection proceeding resulting therefrom, including, without limitation,
all manner of participation in or other involvement with (w) performance by the
Collateral Agent of any obligations of the Company in respect of the Collateral
that the Company has failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Collateral Agent
in respect thereof, by litigation or otherwise, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 5.04, and all such
costs and expenses shall be Secured Obligations entitled to the benefits of the
collateral security provided pursuant to Section 3 hereof.
5.05 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
the Company and the Collateral Agent (with the consent of the Holders and the
Term Loan Lenders as specified in the Intercreditor Agreement). Any such
amendment or waiver shall be binding upon the Collateral Agent, the Trustee,
each Holder, the Term Loan Agent, each Term Loan Lender, each holder of any of
the Secured Obligations and the Company.
5.06 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Company, the Collateral Agent, the Trustee, the Holders, the Term Loan Agent,
the Term Loan Lenders and each holder of any of the Secured Obligations
(provided, however, that the Company shall not assign or transfer its rights or
obligations hereunder without the prior written consent of the Collateral
Agent).
5.07 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
14
<PAGE> 15
5.08 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
5.09 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
5.10 Agents and Attorneys-in-Fact. The Collateral Agent may
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
5.11 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Collateral
Agent, the Trustee, the Holders, the Term Loan Agent and the Term Loan Lenders
in order to carry out the intentions of the parties hereto as nearly as may be
possible and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
5.12 Additional Agreements. Reference is made to Article 7 of
the Intercreditor Agreement for additional agreements of PAAC, the Company and
the other Subsidiary Guarantors with respect to the rights of the Collateral
Agent, including without limitation, rights to compensation and
indemnification.
5.12 Security Interest Absolute. All rights of the Collateral
Agent hereunder, the security interest and all obligations of the Company
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Indenture or the Term Loan Agreement, any
agreement with respect to any of the Secured Obligations or any other agreement
or instrument relating to any of the foregoing, (b) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of or any consent to any
departure from
15
<PAGE> 16
the Indenture or the Term Loan Agreement or any other agreement or instrument,
(c) any exchange, release or non-perfection of any lien on other collateral, or
any guarantee of all or any of the Secured Obligations or (d) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company in respect of the Secured Obligations or this
Agreement.
[Signature Page Follows]
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered as of the day and year first above
written.
PIONEER AMERICAS, INC.
By /s/ PHILIP J. ABLOVE
------------------------------
Name: Philip J. Ablove
Title: Vice President and Chief
Financial Officer
Address:
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Collateral Agent
By /s/ JAMES J. MCGINLEY
------------------------------
Name: James J. McGinley
Title: Vice President
Address:
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust
Department
17
<PAGE> 18
ANNEX 1
PLEDGED STOCK
[See Section 2(b) and (c)]
<TABLE>
<CAPTION>
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------
<S> <C> <C> <C>
Pioneer Chlor 7 Pioneer 1,000 shares of
Alkali Company, Inc. Americas, common stock,
Inc. par value
$1.00 per share
All-Pure Chemical Co. 34 Pioneer 1,000 shares of
Americas, common stock, no
Inc. par value
</TABLE>
<PAGE> 1
EXHIBIT 4.6(a)
LOAN AND SECURITY AGREEMENT
DATED AS OF JUNE 17, 1997
AMONG PIONEER AMERICAS ACQUISITION CORP., AS BORROWER,
BANK OF AMERICA ILLINOIS, AS AGENT AND A LENDER,
AND
THE OTHER LENDERS PARTY HERETO
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS AND OTHER TERMS..........................................................1
1.1. Definitions...............................................................1
1.2. Other Definitional Provisions............................................20
1.3. Interpretation of Agreement..............................................20
1.4. Compliance with Financial Restrictions...................................21
2. LOANS; LETTERS OF CREDIT; OTHER MATTERS.............................................21
2.1. Loans....................................................................21
2.2. Letters of Credit........................................................23
2.3. Loan Account; Demand Deposit Account.....................................25
2.4. Interest and Fees........................................................25
2.5. Requests for Loans; Borrowing Base Certificates; Other Information.......26
2.6. Statements...............................................................27
2.7. Overdraft Loans..........................................................27
2.8. Over Advances............................................................28
2.9. All Loans One Obligation.................................................28
2.10. Making of Payments; Application of Collections; Charging of Accounts....28
2.11. Agent's Election Not to Enforce.........................................30
2.12. Reaffirmation...........................................................30
2.13. Setoff..................................................................30
2.14. Upfront Closing Fee.....................................................31
2.15. Settlements, Distributions and Apportionment of Payments................31
3. COLLATERAL..........................................................................32
3.1. Grant of Security Interest...............................................32
3.2. Accounts Receivable......................................................33
3.3. Inventory................................................................36
3.4. Supplemental Documentation...............................................37
3.5. Collateral for the Benefit of Agent and Lenders..........................37
3.6. Certain Intellectual Property............................................37
3.7. Landlord's Agreements....................................................37
4. REPRESENTATIONS AND WARRANTIES......................................................38
4.1. Organization.............................................................38
4.2. Authorization............................................................38
4.3. No Conflicts.............................................................39
4.4. Validity and Binding Effect..............................................39
4.5. No Default...............................................................39
4.6. Financial Statements.....................................................39
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.7. Insurance................................................................40
4.8. Litigation; Contingent Liabilities.......................................40
4.9. Liens....................................................................40
4.10. Subsidiaries............................................................41
4.11. Partnerships; Joint Ventures............................................41
4.12. Business and Collateral Locations.......................................41
4.13. Senior Secured Notes....................................................42
4.14. Term Loans..............................................................42
4.15. Eligibility of Collateral...............................................43
4.16. Patents, Trademarks, etc................................................43
4.17. Solvency................................................................43
4.18. Contracts; Labor Matters................................................43
4.19. Pension and Welfare Plans...............................................44
4.20. Regulations G, U and X..................................................44
4.21. Compliance..............................................................44
4.22. Taxes...................................................................45
4.23. Investment Company Act Representation...................................45
4.24. Public Utility Holding Company Act Representation.......................45
4.25. Environmental and Safety and Health Matters.............................45
4.26. Related Agreements and Transaction Documents............................46
4.27. Capitalized Lease Obligations...........................................47
4.28. Other Transactions......................................................47
4.29. Holding Companies.......................................................47
5. BORROWER COVENANTS..................................................................48
5.1. Financial Statements and Other Reports...................................48
5.2. Notices..................................................................50
5.3. Existence................................................................52
5.4. Nature of Business.......................................................53
5.5. Books, Records and Access................................................53
5.6. Insurance................................................................53
5.7. Repair...................................................................54
5.8. Taxes....................................................................54
5.9. Compliance...............................................................55
5.10. Pension Plans...........................................................55
5.11. Merger, Purchase and Sale...............................................55
5.12. Restricted Payments.....................................................56
5.13. Stock...................................................................57
5.14. Indebtedness............................................................57
5.15. Liens...................................................................58
5.16. Guaranties..............................................................58
5.17. Investments.............................................................59
5.18. Designated Subsidiaries.................................................59
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
5.19. Loans to Designated Subsidiaries.................................59
5.20. Change in Accounts Receivable....................................60
5.21. Environmental Issues.............................................60
5.22. Related Agreements...............................................60
5.23. Unconditional Purchase Options...................................60
5.24. Use of Proceeds..................................................61
5.25. Transactions with Related Parties................................61
5.26. Amendment of Documents...........................................61
5.27. Designated Subsidiary............................................62
5.28. Limitation on Applicability of Covenants.........................62
5.29. Merger...........................................................62
5.30. Holding Companies................................................62
5.31. Banking Relationships............................................62
6. DEFAULT......................................................................63
6.1. Event of Default..................................................63
6.2. Effect of Event of Default; Remedies..............................65
7. ADDITIONAL PROVISIONS REGARDING COLLATERAL AND AGENT'S RIGHTS................66
7.1. Notice of Disposition of Collateral...............................66
7.2. Application of Proceeds of Collateral.............................66
7.3. Care of Collateral................................................67
7.4. Performance of Borrower's Obligations.............................67
7.5. Agent's Rights....................................................67
8. CONDITIONS PRECEDENT; DELIVERY OF DOCUMENTS AND OTHER MATTERS................68
8.1. Conditions Precedent to Initial Loans and Letters of Credit.......68
8.2. Continuing Conditions Precedent to all Loans; Certification.......70
9. INDEMNITY....................................................................70
9.1. Environmental and Safety and Health Indemnity.....................70
9.2. General Indemnity.................................................71
9.3. Capital Adequacy..................................................72
10. AGENT.......................................................................72
10.1. Appointment of Agent.............................................72
10.2. Nature of Duties of Agent........................................73
10.3. Agent in its Capacity as Lender..................................73
10.4. Independent Credit Analysis......................................73
10.5. General Immunity.................................................74
10.6. Action by Agent..................................................75
10.7. Right to Indemnity...............................................75
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
10.8. Rights and Remedies to be Exercised by Agent Only..................76
10.9. Agent's Resignation................................................76
10.10. Disbursement of Proceeds of Loans and Other Advances..............76
10.11. Release of Collateral.............................................77
10.12. Agreement to Cooperate............................................77
10.13. Sharing of Collateral.............................................77
10.14. Lenders to Act as Agents..........................................78
11. ADDITIONAL PROVISIONS.........................................................78
12. GENERAL.......................................................................78
12.1. Borrower Waiver....................................................78
12.2. Power of Attorney..................................................78
12.3. Expenses; Attorneys' Fees..........................................79
12.4. BAI's Fees and Charges.............................................80
12.5. Lawful Interest....................................................80
12.6. No Waiver by Agent or any Lender; Amendments.......................81
12.7. Termination of Revolving Credit....................................81
12.8. Notices............................................................82
12.9. Assignments and Participations; Information........................82
12.10. Severability......................................................84
12.11. Successors........................................................84
12.12. Construction......................................................84
12.13. Consent to Jurisdiction...........................................85
12.14. Subsidiary Reference..............................................85
12.15. Waiver of Jury Trial..............................................85
</TABLE>
-iv-
<PAGE> 6
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT ("Agreement") is made as of this 17th day of
June, 1997 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 ACQUISITION
CORP. ("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 PCAC of the assets
of the Tacoma, Washington chlor-alkali facility of OCC and (b) the transactions
contemplated in connection therewith, including without limitation (i) the
issuance by Parent to Occidental Chemical Corporation of 55,000 shares of its
convertible preferred stock, par value $0.01 per share and (ii) the execution
by Occidental Chemical Corporation and
<PAGE> 7
Borrower of a certain Chlorine Purchase 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.
"Applicable Margin" means, at any time, a percentage determined with
reference to Borrower's Total Debt to EBITDA Ratio for the twelve month period
ending on the last day of Borrower's most recent fiscal quarter, as set forth
below for the applicable interest rate or fee:
<TABLE>
<CAPTION>
Total Debt to Applicable Margin Applicable Margin Applicable Margin
EBITDA Ratio for LIBOR Rate Loans for Floating Rate Loans for Nonuse Fee
------------ -------------------- ----------------------- --------------
<S> <C> <C> <C>
Equal to or greater 2.50% 0.00% 0.375%
than 4.0:1.0
Less than 4.0:1.0 and 2.25% 0.50% 0.25%
equal to or greater
than 3.5:1.0
</TABLE>
Less than 3.5:1.0 2.00% 0.50% 0.25% The Total Debt to EBITDA Ratio for any
fiscal quarter shall be determined pursuant to Borrower's monthly financial
statements for the last month in such quarter delivered pursuant to Section
5.1.1(b) or, with respect to the last fiscal quarter in any Fiscal Year,
Borrower's annual audited financial statements for such Fiscal Year delivered
pursuant to Section 5.1.1(a). Changes in the Applicable Margin shall become
prospectively effective 5 days after receipt by Agent of the applicable
financial statements, accompanied by a calculation of the Total Debt to EBITDA
Ratio. The Applicable Margin for the period from the Closing Date until five
(5) days after receipt by Agent of Borrower's financial statements for June,
1997, shall be set at the level that would be applicable if the Total Debt to
EBITDA Ratio were equal to or greater than 4.0:1.0.
"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).
-2-
<PAGE> 8
"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 time to time by Borrower to Agent pursuant to
resolutions of the Board of Directors of Borrower.
"BMPC" means Black Mountain Power Company, a Subsidiary of PCAC.
"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 Original Closing Date among Parent, Borrower
and Sellers.
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"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).
"East" means Pioneer (East), Inc., a Subsidiary of PAI.
"EBITDA" for any period means net earnings (excluding interest income)
before interest expense, tax expense, depreciation and amortization, all
determined for Borrower and its Subsidiaries on a consolidated basis and in
accordance with GAAP; provided, that for purposes hereof (a) 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 income and (b) net earnings
for periods that include any portion of the 1997 Fiscal Year shall exclude up
to $31,000,000 related to prepayment premiums paid or incurred by Borrower in
connection with the refinancing of some or all of the First Mortgage Notes on
or about the Closing Date.
"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,
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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 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");
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<PAGE> 11
(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, 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;
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(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.
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 advance payment
which is or may be against any Account Receivable generated upon the sale or
lease of any such goods;
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(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.
ss.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.
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)
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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
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,
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<PAGE> 15
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.
"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.
"First Mortgage Loans" means, collectively, all Indebtedness of Borrower
represented by the First Mortgage Notes.
"First Mortgage Note Documents" means, collectively, the agreements,
instruments and documents evidencing and governing the First Mortgage Notes,
including the First Mortgage Note Indenture, as each of the same may be
amended, modified or supplemented from time to time in compliance with Section
5.26 hereof.
"First Mortgage Note Indenture" means the Indenture dated as of April 1,
1995 among Borrower, PAI, the Designated Subsidiaries, certain other
Subsidiaries of PAI and IBJ Schroder Bank and Trust Company as Trustee.
"First Mortgage Notes" means, collectively, Borrower's 13 3/8% First
Mortgage Notes due 2005 in the aggregate principal amount due upon maturity of
not more than $__________.
"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 1997") refer to the Fiscal Year ending
on the thirty-first (31st) day of December occurring during such calendar year.
"Floating Rate" means, at any time, the Reference Rate minus the Applicable
Margin.
"Floating Rate Loan" means any portion of the Revolving Loan which bears
interest at a rate determined with reference to the Floating Rate.
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"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 all general intangibles now owned or hereafter
acquired by Borrower or any Designated Subsidiary, to the extent that any of
the foregoing arises out of or relates to Accounts or Inventory, 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.
"Hazardous Materials" means any toxic substance, hazardous substance,
hazardous material, hazardous chemical or hazardous waste defined or qualifying
as such in any Environmental Law, 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.
"Imperial" means Imperial West Chemical Co., an indirect Subsidiary of
Borrower.
"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, 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.
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"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 1.1:1.0.
"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), three (3) or six (6) 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.
"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.
"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.
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"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.
"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 rate per annum (rounded upward, if necessary, to the
nearest one hundredth of one percent (1/100%)) at which U.S. Dollar deposits in
immediately available funds are offered to the LIBOR 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 LIBOR 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 LIBOR 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 Rate. A LIBOR Office of any Lender may be, at the
option of such Lender, either a domestic or foreign office.
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"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 plus the Applicable Margin
----------------------------------
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.
"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 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, 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
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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 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, 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.
"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.
"OCC" means OCC Tacoma, Inc., a Delaware corporation.
"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.
"Offering Memorandum" means that certain Offering Memorandum relating to
the issuance of the Senior Secured Notes dated June 11, 1997.
"Original Closing Date" means April 12, 1995.
"Over Advance" has the meaning ascribed to such term in Section 2.8.
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"Overdraft Loan" has the meaning ascribed to such term in Section 2.7.
"PAI" means Pioneer Americas, Inc., a Subsidiary of Borrower.
"Parent" means Pioneer Companies, Inc., (formerly known as GEV
Corporation), a Delaware corporation.
"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., an indirect 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 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.
"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.
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"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 Floating Rate 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.
"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%).
"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.
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"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 Borrower 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 Secured Loans" means, collectively, all Indebtedness of Borrower
represented by the Senior Secured Notes.
"Senior Secured Note Documents" means, collectively, the agreements,
instruments and documents evidencing and governing the Senior Secured Notes,
including the Senior Secured Note Indenture, as each of the same may be
amended, modified or supplemented from time to time in compliance with Section
5.26 hereof.
"Senior Secured Note Indenture" means the Indenture dated as of June 17,
1997 among Borrower, the Subsidiary Guarantors (as defined therein) and United
States Trust Company of New York as Trustee (the "Trustee") for the Senior
Secured Notes.
"Senior Secured Notes" means, collectively, Borrower's 9 1/4% Senior
Secured Notes due 2007 in the aggregate principal amount due upon maturity of
not more than $200,000,000.
"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 Borrower and GEV Corporation
(predecessor-in-interest to Parent), as purchasers, and Richard C. Kellogg,
Jr., Frans G.J. Speets, D.A. Huckabay, and all common shareholders, warrant
holders and option holders of PAI, 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.
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"Subsidiary" means any Person of which or in which Borrower and its other
Subsidiaries own directly or indirectly fifty percent (50%) or more 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.
"TC Notes" means, collectively, the subordinated promissory notes issued by
All-Pure Chemical Co. on July 31, 1996 to the sellers of the stock of T.C.
Holdings, Inc., in the original aggregate principal amount of $4,500,000.
"TCH" means T.C. Holdings, Inc., a Subsidiary of All Pure Chemical Co.
"Term Lenders" means the lenders of the Term Loans pursuant to the Term
Loan Documents.
"Term Loan Agreement" means the Term Loan Agreement dated as of June 17,
1997 among Borrower, Term Lenders, DLJ Capital Funding, Inc., as Syndication
Agent for the Term Lenders, Salomon Brothers Holding Company, Inc., as
Documentation Agent for the Term Lenders and Bank of America Illinois, as
Administrative Agent for the Term Lenders.
"Term Loan Documents" means, collectively, the agreements, instruments and
documents evidencing and governing the Term Loans, including the Term Loan
Agreement, as each of the same may be amended, modified or supplemented from
time to time in compliance with Section 5.26 hereof.
"Term Loans" means, collectively, all indebtedness of Borrower under the
Term Loan Documents, in the aggregate principal amount due upon maturity of not
more than $100,000,000.
"Termination Date" means June 17, 2002.
"Total Debt to EBITDA Ratio" for any period means the ratio of (a) all
Indebtedness for borrowed money as of the last day of such period to (b) EBITDA
for such period, all determined for Borrower and its Subsidiaries on a
consolidated basis and in accordance with GAAP.
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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 PAI 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 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.
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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 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
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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 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
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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 permanently reduce the Revolving Credit Amount
by multiples of $1,000,000, so long as 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 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 $10,000,000 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. Prior to the
Closing Date, Issuing Bank issued letters of credit for the account of PAI
under a certain Loan and Security Agreement dated the Original Closing Date
(the "Existing Letters of Credit"). All Existing Letters of Credit still
outstanding on the date hereof are listed on Exhibit G. Agent, Issuing Bank,
Lenders and Borrower hereby agree that the Existing Letters of Credit shall be
deemed to be Letters of Credit issued under this Agreement for the account of
Borrower and the Letter of Credit Obligations in respect thereof shall be
primary obligations of Borrower.
(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
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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 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 Floating 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
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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 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 principal balance outstanding in such Loan Account
in the amount thereof.
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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 the Applicable Margin 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.
The fee provided for in this Section 2.4.2 shall be payable monthly in arrears
on the last day of each month commencing June 30, 1997, 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
determined at the Floating Rate shall be calculated on the basis of a year
consisting of three hundred sixty-five (365) days and paid for actual days
elapsed; and interest determined at the LIBOR Rate and any fees payable under
this Agreement 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.
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 any 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.
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(c) Borrower further agrees to provide to Agent and Lenders a current
Borrowing Base Certificate on the last 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 later than 10:00 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.
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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 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.
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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 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
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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 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
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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 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. Upfront Closing Fee.
Borrower agrees to pay to BAI, for its own account, in connection with the
closing of this Agreement, an upfront closing fee of $87,500, 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
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(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
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 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;
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(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 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
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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 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,
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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 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
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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 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. 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 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
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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 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
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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.
3.7. Landlord's Agreements.
In the event that Borrower shall at any time, or from time to time (a)
make a request for a Loan hereunder or (ii) be deemed to have requested an
Overdraft Loan, Borrower shall, at Agent's request, promptly deliver to Agent
such Landlord's Agreements with respect to leased locations of Borrower and the
Designated Subsidiaries as Agent shall request; provided, that until such time
as such Landlord's Agreements are delivered, Agent shall have the right, in its
reasonable business judgment, to establish reserves against the Borrowing Base
in the amount of three (3) month's rent for each leased location for which
Agent has requested but not received such a Landlord's Agreement.
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 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 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, 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
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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
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.
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4.5. No Default.
Neither Borrower nor any Designated Subsidiary is in default under any
agreement or instrument to which Borrower 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 December 31,
1996 and Borrower's consolidated and consolidating unaudited financial
statements as of March 31, 1997, 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,
1996, there has been no Material Adverse Change with respect to Borrower and
the Designated Subsidiaries. OCC's audited financial statements as of December
31, 1996 and OCC's unaudited financial statements as of March 31, 1997, copies
of which have been furnished to Agent, have been prepared in conformity with
GAAP and present fairly the financial condition of OCC as of such dates and the
results of its operations for the periods then ended, subject (in the case of
the interim financial statements) to year-end audit adjustments. Since December
31, 1996, there has been no material adverse change in the condition (financial
or otherwise), operations, performance, prospects, properties or affairs of OCC
or in the ability of OCC to perform its obligations under any material
agreement to which OCC is a party. Borrower's consolidated and consolidating
unaudited pro forma balance sheets as of the Closing Date reflect pro forma
changes in Borrower's financial condition since March 31, 1997, 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 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
insurer. This summary also includes any self-insurance program that is in
effect.
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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 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 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 Borrower
or any Designated Subsidiary is subject to any Lien (including but not limited
to Liens pursuant to Capitalized Leases under which 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.
4.11. Partnerships; Joint Ventures.
As of the date hereof, neither Borrower 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
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such partnership or joint venture, a complete and accurate statement of (a)
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 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 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 Secured Notes.
The Senior Secured 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 issuance of the Senior Secured Notes and the execution of
the Senior Secured Note Documents has been duly authorized by all necessary
corporate action on the part of 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 Secured Notes and the execution of the Senior Secured Note
Documents does not conflict with (i) any provision of law, (ii) the Certificate
or Articles of Incorporation or by-laws of Borrower or any Designated
Subsidiary party thereto, (iii) any agreement binding upon 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 Borrower or any Designated Subsidiary party thereto which
conflict is reasonably likely to have a Material Adverse Effect. The Senior
Secured Note Documents are legal, valid and binding obligations of Borrower and
each Designated Subsidiary party thereto, enforceable against Borrower and each
Designated Subsidiary party thereto in accordance with their respective terms.
All representations and
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warranties of Borrower or any Designated Subsidiary contained in the Senior
Secured Note Documents are true and correct in all material respects as of the
date hereof.
4.14. Term Loans.
The Term Loans have been consummated on or prior to the Closing Date in
accordance with and pursuant to the terms of the Term Loan Documents and in
compliance with all laws and in connection therewith, the Term Lenders have
advanced term loans to Borrower in the aggregate amount of $100,000,000. The
execution of the Term Loan Documents have been duly authorized by all necessary
corporate action on the part of 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 waived by the Term Lenders or obtained prior to
the date hereof. The execution of the Term Loan Documents does not conflict
with (i) any provision of law, (ii) the Certificate or Articles of
Incorporation or by-laws of Borrower or any Designated Subsidiary party
thereto, (iii) any agreement binding upon 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
Borrower or any Designated Subsidiary party thereto which conflict is
reasonably likely to have a Material Adverse Effect. The Term Loan Documents
are legal, valid and binding obligations of Borrower and each Designated
Subsidiary party thereto, enforceable against Borrower and each Designated
Subsidiary party thereto in accordance with their respective terms. All
representations and warranties of Borrower or any Designated Subsidiary
contained in the Term Loan Documents are true and correct in all material
respects as of the date hereof.
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.
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.
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4.17. Solvency.
Each of (i) Borrower and each Designated Subsidiary and (ii) 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) Borrower and each Designated Subsidiary, and (ii)
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 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 Borrower or any Designated Subsidiary is a party or
is otherwise subject is scheduled to expire prior to the Termination Date; (c)
neither 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 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 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 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
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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, U and X.
Neither Borrower nor any Designated Subsidiary 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 Secured Loans, the Term 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 Borrower
and each 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 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, 1995. Except as described on Schedule 4.22, as updated
from time to time, Borrower is not aware of any proposed assessment against
Borrower or any of the Designated Subsidiaries for additional Taxes (or any
basis for any such assessment).
4.23. Investment Company Act Representation.
Neither Borrower nor 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.
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4.24. Public Utility Holding Company Act Representation.
Neither Borrower nor 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, Borrower and each of the Designated
Subsidiaries and/or each property, operations and facility that Borrower or any
Designated Subsidiary owns, operates or controls (a) complies in all respects
with (i) all applicable Environmental Laws, except for those laws the failure
with which to comply is not reasonably likely to have a Material Adverse Effect
and (ii) all applicable Occupational Safety and Health Laws, except for those
laws the failure with which to comply is not 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 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 under Environmental Law or Occupational Safety and Health Law,
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 regulated under Environmental Law
which is reasonably likely to have a Material Adverse Effect or (ii) any
allegedly unsafe or unhealthful condition regulated under Environmental Law
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
regulated under Environmental Law or (ii) any 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
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on any premises owned or occupied by 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
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 with respect to the termination of its term on April 12, 1999, to
the best of Borrower's knowledge, the ZENECA Indemnity 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 Parent, 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 Borrower and each Designated
Subsidiary under Capitalized Leases is as set forth on Schedule 4.27.
4.28. Other Transactions.
(a) The Final Offer to Purchase and Solicitation of Consents (the
"Offer") with respect to the First Mortgage Note has become effective and
pursuant thereto (a) holders of an aggregate of ___% in principal amount of the
First Mortgage Notes have consented to the amendments and modifications of the
First Mortgage Note Indenture described in the Offer and evidenced by the
certain Third Supplemental Indenture and the Third Supplemental Indenture has
become effective and (b) holders of an aggregate of ___% in principal amount of
the First Mortgage Notes have tendered their First Mortgage Note pursuant to
the Offer. After payment by Borrower of the tender price pursuant to the Offer,
no more than $__________ in aggregate principal amount of the First Mortgage
Note will be outstanding.
(b) Each of the Transactions other than the issuance of the Senior
Secured Notes, the consummation of the Term Loans and the tender and consent
solicitation for the First Mortgage Notes, has been consummated in accordance
with and pursuant to the terms of
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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 and Parent, as applicable, and will not require any
consent or approval of any governmental agency or authority that has not been
duly waived or 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 Borrower, any Designated
Subsidiary party thereto or Parent, (iii) any agreement binding upon Borrower,
any Designated Subsidiary party thereto or Parent which conflict is reasonably
likely to have a Material Adverse Effect or (iv) any court or administrative
order or decree applicable to Borrower, any Designated Subsidiary or Parent
party thereto which conflict is reasonably likely to have a Material Adverse
Effect.
(c) After consummation of the Transactions, the capitalization of
Borrower and each Designated Subsidiary shall be as set forth on Schedule 4.28.
4.29. Holding Companies.
As of the Closing Date, each of Parent, Borrower, PAI, BMPC, East, TCH
and Imperial is a holding company without material assets, operations or
business, other than the ownership by (a) Parent of the common stock of
Borrower and Pioneer Water Technologies, Inc., (b) Borrower of the common stock
of PAI, (c) PAI of the common stock of its Subsidiaries, (d) TCH of the common
stock of T.C. Products, Inc. and (e) Imperial of 50% of the common stock of
Kemwater North America Company. Upon consummation of the Transactions, as of
the Closing Date, none of Parent, Borrower, PAI, BMPC, East, TCH or Imperial
has any Indebtedness or other obligations other than Indebtedness of each of
them in respect of the First Mortgage Loans, the Senior Secured Loans, the Term
Loans and under this Agreement.
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 Borrower
and the Subsidiaries prepared on a consolidated and consolidating basis and in
conformity with GAAP and certified
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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 become aware of any such event, describing it and (ii) if
prepared in connection with the annual audit report, the annual operating
statements of 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 or assistant treasurer.
(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 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), 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 the
case of the consolidated statements only, 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). Each such financial
statement delivered with respect to a month which is not closing a fiscal
quarter or Fiscal Year of Borrower shall be signed by the chief financial
officer or assistant treasurer.
(c) Annual Budgets. Within thirty (30) days after the end of each Fiscal
Year of Borrower, a copy of an annual budget of Borrower 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 or assistant treasurer 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 or assistant treasurer 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.
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5.1.2. Agings. If so requested by Agent, and, even if no such request has
been received, within thirty (30) days after the end of each month after
Borrower has requested the initial disbursement of Revolving Loans hereunder,
an aging of all Accounts Receivable of 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. If so requested by Agent, and, even if no
such request has been received, within thirty (30) days after the end of each
month after Borrower has requested the initial disbursement of Revolving Loans
hereunder, 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
Parent, Borrower or any Designated Subsidiary with or to any securities
exchange or the Securities and Exchange Commission, promptly upon the filing or
making thereof;
(b) Intercompany Loans. Upon request therefor by Agent and, even if no
such request has been received, within thirty (30) days after the end of each
month after Borrower has requested the initial disbursement of Revolving Loans
hereunder, 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 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 Parent, 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 Parent, Borrower, any other
Obligor or any Designated Subsidiary, as appropriate, is a party or by which it
is bound (including without limitation any First Mortgage Note Documents,
Senior
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Secured Note Documents, Term Loan Documents, the Seller Notes, the TC Notes or
any Subordinated Debt Document);
(b) Intentionally Omitted.
(c) Judgment. The entry of any judgment or decree against 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;
(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
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 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
Borrower, any Designated Subsidiary, or any other Obligor;
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(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 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 Borrower, such Obligor or Designated
Subsidiary if the amount payable under such 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 Borrower or any Designated Subsidiary, or any
change in 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 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 Parent, Borrower or any Designated
Subsidiary in connection with the First Mortgage Loans, the Senior Secured
Loans, the Term Loans, the Seller Notes or the TC 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;
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(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 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 Schedule 4.11 concerning 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
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 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 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 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 each Designated
Subsidiary to permit, access by Agent and its agents and employees to the books
and records of Borrower and such Designated Subsidiary at 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
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cause each Designated Subsidiary to permit Agent and its agents and employees
to inspect the books and records and location of such Designated Subsidiary, as
applicable, and to inspect, audit, check and make copies and/or extracts from
the books, records, computer data and 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
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. 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 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
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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 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 each Designated Subsidiary to pay, when due, all of its
Taxes, unless and only to the extent that Borrower or such Designated
Subsidiary is contesting such Taxes in good faith and by appropriate
proceedings and Borrower 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 Borrower and the
Designated Subsidiaries may file consolidated returns with Parent pursuant to
that certain Tax Sharing Agreement dated on or about the Original Closing Date;
and not change its Fiscal Year or tax year without Agent's prior written
consent.
5.9. Compliance.
Comply, and cause 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 any Designated Subsidiary to permit, any
condition 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 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
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occur, or permit 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 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 Secured Note Indenture as it exists on the Closing Date
and, if any First Mortgage Notes remain outstanding, the terms of the First
Mortgage Note Indenture as it existed on the Original 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, 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 (A) repay the Liabilities, (B) repay
Indebtedness in respect of the First Mortgage Notes, the Senior Secured Notes
and the Term Loans, on a pro rata basis, or (C) purchase replacement assets,
all as provided in the Senior Secured 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; (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 capital stock in any
Designated Subsidiary by Borrower or another Designated Subsidiary and (ii) any
such purchase or acquisition by Borrower or any Designated Subsidiary, so long
as (A) such purchase or acquisition does not create Indebtedness or Liens not
otherwise permitted by this Agreement, (B) such purchase or acquisition is
permitted by the terms of the Senior Secured Note Indenture as it exists on the
Closing Date and, if any First Mortgage Notes remain outstanding, the terms of
the First Mortgage Note Indenture as it existed on the Original Closing Date,
and (C) total consideration (including cash purchase price, liabilities assumed
by Borrower or any Designated Subsidiary and deferred purchase price and
related payments, including current and future payments in respect of covenants
not to compete, consulting agreements and the like) (I) for any such purchase
or acquisition does not exceed $15,000,000 and (II) for all such purchases and
acquisitions prior to the Termination Date does not exceed $20,000,000; or (d)
become a party to or participate in any joint venture, partnership or similar
business organization not in existence on the Closing Date.
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5.12. Restricted Payments.
Not, and not permit 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 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, plus the portion of any such amounts that remain unused at the
end of the two prior calendar years, but in no event shall the total thereof in
any calendar year exceed $1,500,000; (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 First Mortgage Loans, Senior Secured Loans or Term Loans
(including without limitation any mandatory prepayment required by the terms of
the applicable First Mortgage Note Documents, Senior Secured Note Documents or
Term Loan Documents upon a change of control or an asset sale, or any optional
prepayment, redemption or defeasance allowed by the terms of the First Mortgage
Note Documents, Senior Secured Note Documents or Term Loan Documents) 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.
Notwithstanding the foregoing, (x) (i) each Designated Subsidiary may make
direct or indirect Upstream Payments to Borrower at any time, and (ii) Borrower
may make Upstream Payments to Parent to the extent permitted under the terms of
the Senior Secured Note Indenture, as its exists on the Closing Date; and (y)
payments by Borrower or any Designated Subsidiary may be made at any time
pursuant to the Contingent Payment Agreement as it existed on the Original
Closing Date, to the extent permitted in the Senior Secured Note Indenture as
it exists on the Closing Date.
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
Borrower, and not take any action, or permit any Designated Subsidiary to take
any action, which will result in a decrease in Borrower's ownership interest in
any Designated Subsidiary.
5.14. Indebtedness.
Not, and not permit 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 Borrower and the Designated Subsidiaries in
respect of the Senior Secured Notes in an aggregate principal amount of not
more than $200,000,000; (c) Indebtedness of Borrower
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and the Designated Subsidiaries in respect of the Term Loans in an aggregate
principal amount of not more than $100,000,000; (d) Indebtedness of Borrower
and the Designated Subsidiaries in respect of the First Mortgage Notes in an
aggregate principal amount of not more than $0; (e) other Indebtedness
outstanding on the date hereof and listed on Schedule 5.14; (f) 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 $10,000,000 in the aggregate
for Borrower and the Designated Subsidiaries on a consolidated basis at any
time, and any refinancing of any of the foregoing; (g) Permitted Intercompany
Indebtedness and Indebtedness of Borrower to the Designated Subsidiaries; (h)
Indebtedness under Hedging Obligations (as defined in the Senior Secured Note
Indenture as it exists on the Closing Date), to the extent permitted in the
Senior Secured Note Indenture as it exists on the Closing Date; (i)
Indebtedness in respect of performance, completion, guarantee, surety and
similar bonds, banker's acceptances or letters of credit provided by Borrower
or any Designated Subsidiary in the ordinary course of business; (j)
Indebtedness permitted pursuant to the first paragraph of Section 1008 of the
Senior Secured Note Indenture as it exists on the Closing Date; (k) in addition
to any other Indebtedness permitted hereunder, up to $10,000,000 aggregate
principal amount of Indebtedness at any one time outstanding; and (l) other
Indebtedness approved in writing by Requisite Lenders.
5.15. Liens.
Not, and not permit 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 definition of "Permitted Liens" in the Senior Secured
Note Indenture as it exists on the Closing Date, and, if any First Mortgage
Notes remain outstanding, clause (b) of the definition of "Permitted Liens" in
the First Mortgage Note Indenture as its existed on the Original Closing Date,
in an aggregate 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 Borrower or any Designated Subsidiary, or to secure
surety or appeal bonds to which 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 Secured Note Indenture as it
exists on the Closing Date, and, if any First Mortgage Notes remain
outstanding, clauses (d) and (e) of the definition of "Permitted Liens" in the
First Mortgage Note Indenture as it existed on the Original 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
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Senior Secured Note Indenture as it exists on the Closing Date, and, if any
First Mortgage Notes remain outstanding, clause (f) of the definition of
"Permitted Liens" or clauses (c), (d) and (e) of Section 1012 of the First
Mortgage Note Indenture as it existed on the Original 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(f); (h) Liens permitted under clauses (f), (g), (j) and (k)
of Section 1012 of the Senior Secured Note Indenture as it exists on the
Closing Date, and, if any First Mortgage Notes remain outstanding, Liens
permitted under clauses (f), (g), (j) and (k)of Section 1012 of the First
Mortgage Note Indenture as its existed on the Original Closing Date; (i) Liens
on certain equipment, real property and stock securing the obligations of the
First Mortgage Loans, the Term Loans and the Senior Secured Loans; and (j)
Liens consented to in writing by Requisite Lenders.
5.16. Guaranties.
Not, and not permit 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 First Mortgage
Notes, the Senior Secured Notes or the Term Loans and (d) any guaranty of any
Indebtedness permitted under this Agreement.
5.17. Investments.
Except as provided in Section 5.19 or Section 5.11, not, and not permit
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 Secured Note Indenture as it exists on the Closing Date); (c)
Investments consisting of Indebtedness permitted under Section 5.14 (g); (d)
Investments (other than loans) by Borrower in any Designated Subsidiary or by
any Designated Subsidiary in another 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; (i) other Investments that are permitted pursuant to clause
(vi) of the definition of the term "Permitted Investment" contained in Section
101 of the Senior Secured Note
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Indenture as it exists on the Closing Date; and (j) 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 (a)
not designated as such on the Closing Date, without prior written notice of
such loan or advance to Agent and (b) until such time as Agent has received
resolutions of such Designated Subsidiary's board of directors authorizing or
ratifying the execution, delivery and performance of all Related Agreements
executed by such Designated Subsidiary, in form and substance satisfactory 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.
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 Borrower or
any Designated Subsidiary which Agent may reasonably request from time to time
pertaining to the environmental aspects of Borrower and the Designated
Subsidiaries and any property owned, operated or controlled by 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
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direct or control, the conduct or action or inaction of 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 each Designated Subsidiary to maintain,
in full force and effect all third-party indemnities in favor of Borrower or
any Designated Subsidiary with respect to any of the foregoing.
5.22. Related Agreements.
After the date hereof, not enter into, or permit any Designated
Subsidiary to enter into, any agreement containing any provision which would be
violated or breached by the performance by 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 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 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 any Designated Subsidiary to use or
permit, any proceeds of the Senior Secured Loans, the Term Loans, the Loans or
Letters of Credit to be used, either directly or indirectly, for the purpose,
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 any Designated
Subsidiary to, (a) pay any management, consulting or similar fees to any
Related Party, whether for services rendered to 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 Borrower's or such Designated Subsidiary's business and upon
fair and reasonable terms no less favorable to 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 Secured Note Indenture, as it exists on
the Closing Date.
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5.26. Amendment of Documents.
Not, and not permit Parent or any Designated Subsidiary to, amend, modify
or alter, or permit to be amended, modified or altered, (a) any First Mortgage
Note Document, any Senior Secured Note Document or any Term Loan Document, (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 payable
thereunder more than 200 basis points in excess of the highest interest rate
applicable under the First Mortgage Note Documents, the Senior Secured Note
Documents or the Term Loan Documents, as applicable (including application of
any "default rate" thereunder), in each case as they exist on the date hereof,
(ii) with respect to the First Mortgage Note Documents and the Senior Secured
Note Documents, alter the timing or amount of any payment terms thereunder, if
applicable, or with respect to the Term Loan Documents only, alter the timing
or amount of any payment terms during the first seven (7) years after the date
hereof, (iii) increase the aggregate amount of Indebtedness thereunder, if
applicable, or (iv) 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 (a) a
guaranty in favor of Agent, for the benefit of itself and Lenders, pursuant to
which such Designated Subsidiary has unconditionally guarantied the
Liabilities; (b) 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 described in
Section 3.1, as collateral for the guaranty described in clause (i) above, (c)
such UCC financing statements as Agent shall reasonably require in order to
perfect such Lien and (d) appropriate evidence of such Designated Subsidiary's
corporate authority for the foregoing. No otherwise Eligible Inventory or
Eligible Accounts Receivable of any Designated Subsidiary shall be included in
the Borrowing Base unless (i) such Designated Subsidiary has complied in all
respects with this Section 5.27, to Agent's reasonable satisfaction, (ii) Agent
has satisfied itself that Agent's Liens on the Collateral of such Designated
Subsidiary are fully perfected senior Liens thereon, (iii) Borrower has
demonstrated to Agent that such Collateral is insured in compliance with
Section 5.6 and (iv) Agent has received such landlord's and bailee's agreements
with respect to such Collateral as Agent shall reasonably request.
5.28. Limitation on Applicability of Covenants.
Notwithstanding the covenants contained in this Agreement, Borrower 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
existed on the
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Original Closing Date. The consummation of any such transaction shall not
constitute a breach of the otherwise applicable covenants, contained in this
Agreement.
5.29. Merger.
Complete the merger of Borrower and PAI, pursuant to agreements
reasonably acceptable to Agent, on or before July 17, 1997.
5.30. Holding Companies.
Not, and not permit any of PAI, East, TCH, BMPC or Imperial to, conduct
any material business or have any material operations, assets or liabilities,
other than as set forth in Section 4.29.
5.31. Banking Relationships.
Maintain, and cause each of the Designated Subsidiaries to maintain,
their principal bank accounts and banking relationships with BAI.
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 the
Liabilities when due or declared due or the payment of any of the other
Liabilities other than principal 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, 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 First Mortgage Loans, the Senior Secured Loans and the Term
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, 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 First Mortgage
Loans, the Senior Secured Loans and the Term 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.
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(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, 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,
any other Obligor or any Designated Subsidiary to or 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, such other Obligor or such
Designated Subsidiary, as the case may be, in good faith and by appropriate
proceedings and Borrower, 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, 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, such other Obligor or such Designated
Subsidiary, or for a substantial part of the property of Borrower, 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,
any other Obligor or any Designated Subsidiary, or for a substantial part of
the property of Borrower, 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, 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, any other Obligor or any
Designated Subsidiary.
(f) Insolvency. Borrower, 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 withdrawal of Borrower or any ERISA
Affiliate 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
5.31 or in
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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, 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 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 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, 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, 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, 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, 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, any Designated Subsidiary or
any other Obligor, or if this Agreement or any Related Agreement shall fail to
remain in full force and effect.
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(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 Borrower or Parent 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 Borrower or Parent on a fully
diluted basis; or (ii) if any Change of Control (as defined in the Senior
Secured Note Indenture as it exists on the Closing Date) occurs or (iii) if
Borrower ceases to retain record and beneficial ownership of 100% of the issued
and outstanding stock of PAI.
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 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;
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(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.
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
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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;
(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,
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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) Borrower shall have issued the Senior Secured
Notes, the gross proceeds of such Senior Secured Notes, in an amount not less
than $200,000,000, shall have been received by Borrower and the proceeds
thereof shall have been used by Borrower in substantially the manner described
in "The Acquisition and Use of Proceeds" section of the Offering Memorandum,
(ii) the Acquisition shall have been consummated in accordance with all
applicable laws, (iii) Borrower shall have consummated the Term Loans, the
gross proceeds thereof, in an amount not less than $100,000,000, should have
been received by Borrower and the proceeds thereof shall have been used by
Borrower substantially in the manner described in "The Acquisition and Use of
Proceeds" section of the Offering Memorandum and (iv) the Third Supplemental
Indenture relating to the First Mortgage Notes shall have become effective and
the holders of at least ___% of the aggregate principal amount of the First
Mortgage Note shall have tendered their First Mortgage Notes pursuant to the
Offer (the transactions referred to herein 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, 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 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 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.
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.
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.
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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 upfront 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 December 31, 1996
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 Parent,
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.
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. Resolutions. Agent shall have received resolutions of Borrower's
board of directors authorizing or ratifying the execution, delivery and
performance of this Agreement and all Related Agreements executed by Borrower,
in form and substance 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:
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(a) No Change in Condition. No change in the condition or operations,
financial or otherwise, of 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 in all material respects 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 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 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 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 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.
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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 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
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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 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
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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 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 Parent, 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 Parent, 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.
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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, 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
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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 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
Agreements, (b) enforce any provision of this Agreement or
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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 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
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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.
11. ADDITIONAL PROVISIONS.
Additional provisions are set forth in Supplement A.
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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 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
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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 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
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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 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
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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 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.
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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.
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
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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).
(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 fixed for any payment of
principal of, or interest on, the Loans subject to such participation.
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(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 Parent, 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
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,
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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 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.
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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 ACQUISITION CORP.
By /s/ PHILIP J. ABLOVE
-----------------------------------
Title Vice President and Chief
--------------------------------
Financial Officer
--------------------------------
Address: 4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Telecopier Number: (713) 225-4426
Attention: Chief Financial Officer and
Corporate Secretary
BANK OF AMERICA ILLINOIS, as a Lender
By /s/ RICHARD A. BEUTEL
-----------------------------------
Title Senior Vice President
--------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Telecopier Number: (312) 974-0761
Attention: Richard Beutel
Maximum Loan Amount: $35,000,000
BANK OF AMERICA ILLINOIS, as Agent
By /s/ DAVID A. JOHANSON
-----------------------------------
Title Vice President
--------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Telecopier Number: (312) 974-9102
Attention: Agency Management Services
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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
Exhibit G - Existing Letters of Credit
Schedules:
Schedule 4.1 Schedule of Tradenames and State of Incorporation and States
of 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 4.16 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 4.28 Schedule of Capitalization
Schedule 5.14 Schedule of Indebtedness
Schedule 5.17 Schedule of Investments
Schedule 5.25 Schedule of Affiliate Transactions
<PAGE> 94
SUPPLEMENT A
to
LOAN AND SECURITY AGREEMENT
Dated as of June 17, 1997 among
Pioneer Americas Acquisition Corp.,
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 June 17, 1997
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 $35,000,000.
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, subject to Section 5.1 hereof, (b) up to 50%
(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.
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 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.
<PAGE> 95
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
Floating 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 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 Rate, by means
of a written notice to Agent specifying (i) the amount of such
Revolving Loans that will bear interest at a LIBOR 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 Floating 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 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.
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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 Floating
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 June 30, 1997, 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 Rate less the Applicable Margin at such time,
whether or not the Lender actually funded the Loan in that manner. 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
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<PAGE> 97
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 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) EBITDA 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 Borrower
and its Subsidiaries on a consolidated basis, and in accordance with GAAP, to
be less than 1.1:1.0 at the end of each month for the preceding twelve month
period.
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For purposes of Section 5.1, interest expense shall include,
without limitation, implicit interest expense on Capitalized Leases.
PIONEER AMERICAS ACQUISITION CORP.
By /s/ PHILIP J. ABLOVE
-------------------------------------------
Title Vice President and Chief
----------------------------------------
Financial Officer
----------------------------------------
Address: 4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Telecopier Number: (713) 225-4426
Attention: Chief Financial Officer and
Corporate Secretary
BANK OF AMERICA ILLINOIS, as a Lender
By /s/ RICHARD A. BEUTEL
-------------------------------------------
Title Senior Vice President
----------------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Telecopier Number: (312) 974-0761
Attention: Richard Beutel
BANK OF AMERICA ILLINOIS, as Agent
By /s/ DAVID A. JOHANSON
-------------------------------------------
Title Vice President
----------------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Telecopier Number: (312) 974-9102
Attention: Agency Management Services
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<PAGE> 1
EXHIBIT 4.6(b)
MASTER CORPORATE GUARANTY
Pioneer Americas Acquisition Corp., 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 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.
<PAGE> 2
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.
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,
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<PAGE> 3
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.
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
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<PAGE> 4
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 canceled.
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 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
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<PAGE> 5
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 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
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<PAGE> 6
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> 7
IN WITNESS WHEREOF, this Master Corporate Guaranty has been
duly executed by each Guarantor listed below this 17th day of June, 1997.
EACH OF THE SUBSIDIARIES SET FORTH ON
EXHIBIT A HERETO
By /s/ PHILIP J. ABLOVE
---------------------------------------
Vice President of each of such Subsidiaries
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<PAGE> 8
EXHIBIT A
PIONEER AMERICAS, INC.
PIONEER CHLOR ALKALI COMPANY, INC.
IMPERIAL WEST CHEMICAL CO.
ALL-PURE CHEMICAL CO.
ALL-PURE CHEMICAL NORTHWEST, INC.
BLACK MOUNTAIN POWER COMPANY
<PAGE> 1
EXHIBIT 4.6(c)
MASTER SECURITY AGREEMENT
THIS MASTER SECURITY AGREEMENT is made as of the 17th day of
June, 1997 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 Acquisition Corp., a
Delaware corporation and the direct or indirect 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;
(e) To the extent related to the property described in
clauses (a) through (d) above, all books, correspondence, credit
files, records, invoices and
<PAGE> 2
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.
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.
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<PAGE> 3
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:
(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;
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<PAGE> 4
(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 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
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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 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
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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 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.
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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 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
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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.
(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
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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;
(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
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<PAGE> 10
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.
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.
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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 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) demand
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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 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 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
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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 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
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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.
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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/ DAVID A. JOHANSON
----------------------------------------
Its Vice President
----------------------------------------
EACH OF THE SUBSIDIARIES SET
FORTH ON EXHIBIT A HERETO
By /s/ PHILIP J. ABLOVE
----------------------------------------
Vice President of each such Subsidiaries
--------------
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EXHIBIT A
Pioneer Americas, Inc.
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Fax (713) 225-6475
Pioneer Chlor Alkali Company, Inc.
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Fax (713) 225-6475
Imperial West Chemical Co.
2185 N. California Blvd.
Suite 500
Walnut Creek, California 94596
Fax (510) 280-4465
All-Pure Chemical Co.
2185 N. California Blvd.
Suite 500
Walnut Creek, California 94596
Fax (510) 280-4465
All-Pure Chemical Northwest, Inc.
2185 N. California Blvd.
Suite 500
Walnut Creek, California 94596
Fax (510) 280-4465
Black Mountain Power Company
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Fax (713) 225-6475
<PAGE> 1
EXHIBIT 4.7
INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT
INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT dated as of this
17th day of June, 1997, by and among UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee for its own benefit and for the benefit of the Holders (as
hereinafter defined) under the Indenture (as hereinafter defined) (in such
capacity, the "Trustee"), BANK OF AMERICA ILLINOIS, as Administrative Agent for
its own benefit and for the benefit of the lenders under the Term Loan
Agreement (as hereinafter defined) (in such capacity, the "Term Loan Agent"),
BANK OF AMERICA ILLINOIS, as Agent under the Bank Credit Agreement (as
hereinafter defined) (in such capacity, the "Agent Bank"), UNITED STATES TRUST
COMPANY OF NEW YORK, as collateral agent (the "Collateral Agent"), PIONEER
AMERICAS ACQUISITION CORP. ("PAAC"), PIONEER AMERICAS, INC. ("PAI") and
PIONEER CHLOR ALKALI COMPANY, INC. ("PCAC"; and together with PAAC and PAI
sometimes hereinafter referred to collectively as the "Companies").
Recitals
A. Pursuant to that certain Indenture dated as of the
date hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time, the "Indenture") among PAAC, the
Subsidiary Guarantors (as defined therein) and the Trustee, as trustee for the
holders of the Notes (as hereinafter defined) (the "Holders"), PAAC will issue
its 9 1/4% Senior Secured Notes due 2007 (as the same may be amended, amended
and restated, supplemented or otherwise modified from time to time, including
all notes issued in exchange or substitution therefor, upon the registration of
such notes pursuant to the Securities Act of 1933 or otherwise, the "Notes") in
the aggregate principal amount of $200 million.
B. Pursuant to that certain Loan Agreement dated as of
the date hereof (as the same may be amended, amended and restated, supplemented
or otherwise modified from time to time, the "Term Loan Agreement") among PAAC,
the Term Loan Agent, DLJ Capital Funding, Inc., as syndication agent, Salomon
Brothers Holding Company Inc, as documentation agent, and the lenders
<PAGE> 2
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named therein (the "Term Loan Lenders"), the Term Loan Lenders will make loans
to PAAC to be evidenced by notes (as the same may be amended, amended and
restated, supplemented or otherwise modified from time to time, including all
notes issued in exchange or substitution therefor, the "Term Loan Notes") in an
aggregate principal amount of $100 million.
C. PAAC has entered into a Loan and Security Agreement,
dated as of the date hereof (as in effect on the date hereof, the "Bank Credit
Agreement"), among PAAC, as borrower, the Agent Bank, as agent and a lender,
and the other lenders party thereto, under which the Agent Bank and such other
lenders (collectively, the "Bank Lenders") agreed to provide certain revolving
loan and letter of credit facilities to PAI in an aggregate principal or face
amount not in excess of $35 million.
D. Pursuant to Article Thirteen of the Indenture, PCAC
has guaranteed (such guarantee by PCAC being hereinafter referred to as the
"Note Guarantee") the payment and performance of the Indenture Obligation (as
hereinafter defined).
E. Pursuant to the Subsidiary Guaranty dated as of the
date hereof (as the same may be amended, amended and restated, supplemented or
otherwise modified from time to time), PCAC has guaranteed (such guarantee by
PCAC being hereinafter referred to as the "Term Loan Guarantee") the payment
and performance of the Term Loan Obligation (as hereinafter defined).
F. PCAC has executed and delivered the following
documents (those listed in clauses (i), (ii) and (iii) of this paragraph F,
collectively, and as amended, amended and restated, supplemented or otherwise
modified from time to time, the "Mortgages") to the Collateral Agent to secure
the payment and performance of its obligations under the Note Guarantee and the
Term Loan Guarantee:
(i) First Priority Deed of Trust, Assignment of Leases and
Rents, Security Agreement, Fixture Filing and Financing Statement dated as of
the date hereof in respect of certain premises in Tacoma, Washington and
further described on Schedule 1 hereto by PCAC, as trustor, to Transnation
Title Insurance Company, as Deed of Trust Trustee, for the benefit of
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the Collateral Agent, as beneficiary, for the benefit of the Trustee, the Term
Loan Agent, the Holders and the Term Loan Lenders;
(ii) First Priority Deed of Trust, Assignment of Leases
and Rents, Security Agreement, Fixture Filing and Financing Statement dated as
of the date hereof in respect of certain premises in Henderson, Nevada and
further described on Schedule 2 hereto by PCAC, as trustor, to First American
Title Insurance Company of Nevada, as Deed of Trust Trustee, for the benefit of
the Collateral Agent, as beneficiary, for the benefit of the Trustee, the Term
Loan Agent, the Holders and the Term Loan Lenders;
(iii) First Priority Mortgage, Assignment of Leases and
Rents, Security Agreement, Fixture Filing and Financing Statement dated as of
the date hereof in respect of certain premises in St. Gabriel, Louisiana and
further described on Schedule 3 hereto by PCAC, as mortgagor, to the Collateral
Agent, as mortgagee, for the benefit of the Trustee, the Term Loan Agent, the
Holders and the Term Loan Lenders;
(iv) Security Agreement (as the same may be amended, amended and
restated, supplemented or otherwise modified from time to time, the "Security
Agreement") dated as of the date hereof by PCAC, as debtor, to the Collateral
Agent, as secured party, in respect of certain agreements related to PCAC's
facility in Tacoma, Washington; and
(v) Stock Pledge Agreement (as the same may be amended,
amended and restated, supplemented or otherwise modified from time to time, the
"Stock Pledge Agreement") from PAI, as debtor, to the Collateral Agent, as
secured party, in respect of all of the issued and outstanding stock owned by
PAI of PCAC and All-Pure Chemical Co.
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A g r e e m e n t :
The parties agree as follows:
ARTICLE 1
DEFINITIONS
Definitions. (a) Capitalized terms that are not otherwise
defined herein are used herein with the meanings given thereto in the Mortgages
as in effect on the date of execution of this Agreement.
(b) The following terms shall have the respective meanings
set forth below:
"Collateral" means the Mortgaged Property, the Collateral (as
defined in the Security Agreement), the Collateral (as defined in the Stock
Pledge Agreement), the New Collateral and any other property or assets which
may from time to time be subject to one or more of the Liens evidenced or
created by any of the Collateral Documents.
"Collateral Account" has the meaning set forth in Section 5.1.
"Collateral Agent's Fees" means all fees, costs and expenses
of the Collateral Agent of the type described in Sections 7.3, 7.4, 7.5 and
7.6.
"Collateral Documents" means, collectively, (i) the Mortgages,
(ii) the Security Agreement, (iii) the Stock Pledge Agreement, (iv) this
Intercreditor and Collateral Agency Agreement, (v) the documentation relating
to the Collateral Account and (vi) all security agreements, mortgages, deeds of
trust, pledges, collateral assignments or any other instruments evidencing or
creating any security interest in favor of the Collateral Agent for the benefit
of the Secured Parties in all or any portion of any property or assets of any
Obligor, in each case as amended, supplemented or otherwise modified from time
to time.
"Companies" has the meaning set forth in the first paragraph
of this Agreement.
"Debt Instrument" means each of the Notes and the Term Loan
Notes.
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"Default" means a Default under the Term Loan Agreement or
under the Indenture, as the case may be.
"Distribution Date" means the date on which any funds are
distributed by the Collateral Agent in accordance with the provisions of
Section 6.1.
"Enforcement Notice" has the meaning set forth in Section
2.2(a).
"Event of Default" means an Event of Default under the Term
Loan Agreement or under the Indenture, as the case may be.
"Indenture Obligation" has the meaning set forth in the
Mortgages.
"Majority Holders" means the holders of Debt Instruments which
in principal amount constitute more than 50% of the Total Amount of Secured
Obligations; provided, however, that for purposes of this definition there
shall not be counted any interests in any Debt Instrument (A) for which (and to
the extent that) there are at such time on deposit with the Collateral Agent,
or the Trustee or the Term Loan Agent, as the case may be, amounts to be
applied to the payment of principal thereof or (B) which are held by any of the
Companies or any Affiliate (as defined in the Indenture as in effect on the
date hereof) of any of the Companies.
"New Collateral" shall mean any Collateral pledged to the
Collateral Agent pursuant to stock pledge agreements executed and delivered
pursuant to Section 1017 of the Indenture or Section 7.1.9 of the Term Loan
Agreement.
"Note Majority Holders" shall mean the holders of the Notes
which in principal amount constitute more than 50% of the Indenture Obligation
provided that for purposes for this definition, there shall not be counted any
interest in the Notes (i) for which (and to the extent that) there are at such
time on deposit with the Collateral Agent or the Trustee amounts to be applied
to the payment of principal thereof or (ii) which are held by any of the
Companies or any Affiliate of any of the Companies.
<PAGE> 6
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"Obligor" means PCAC, PAI and any other mortgagor, pledgor or
assignor under a Collateral Document.
"Officers' Certificate" has the meaning set forth in the
Indenture as in effect on the date hereof.
"Opinion of Counsel" has the meaning set forth in the
Indenture as in effect on the date hereof.
"Pro Rata Share" with respect to any Secured Party means, at
any date of determination thereof, the percentage derived by dividing (i) the
total, without duplication, of all outstanding Indenture Obligation or Term
Loan Obligation, as the case may be (whether by virtue of acceleration or
otherwise) under or in respect of the Debt Instruments held or administered by
such Secured Party, including all fees, expenses and other amounts owing to the
Trustee or the Term Loan Agent, less the amount of any cash collateral on
deposit with the Trustee or the Term Loan Agent, as the case may be, with
respect thereto, by (ii) the Total Amount of Secured Obligations.
"Real Property" means any interest in any real property or any
portion thereof, whether owned in fee or leased or otherwise owned.
"Secured Obligations" means, at any time, the obligations of
the Companies from time to time under or in respect of the Debt Instruments.
"Secured Party" means each of the Trustee (acting for its own
benefit and for the benefit of the Holders) and the Term Loan Agent (acting for
its own benefit and for the benefit of the Term Loan Lenders), and their
respective successors and assigns.
"Survey" means a survey of any parcel of real property (and
all improvements thereon): (i) prepared by a surveyor or engineer licensed to
perform surveys in the state in which such property is located, (ii) dated (or
redated) not earlier than six months prior to the date of delivery thereof
(unless there shall have occurred within six months prior to such date of
delivery any exterior construction on the site of such property, in which event
such survey shall be dated (or redated) to a date after the
<PAGE> 7
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completion of such construction, (iii) certified by the surveyor (in a manner
reasonably acceptable to the title company providing title insurance in respect
of the Liens of the Collateral Documents) and (iv) complying in all respects
with the minimum detail requirements of the American Land Title Association, or
local equivalent, as such requirements are in effect on the date of preparation
of such survey.
"Term Loan Collateral Proceeds" shall have the meaning set
forth in Section 3.2(b)(iv) hereof.
"Term Loan Note Majority Holders" shall mean the holders of
the Term Loan Notes which in principal amount constitute more than 50% of the
Term Loan Obligation, provided that for purposes of this definition there shall
not be counted any interest in the Term Loan Notes (i) for which (and to the
extent that) there are at such time on deposit with the Collateral Agent or the
Term Loan Agent amounts to be applied to the payment of principal thereof and
(ii) which are held by any of the Companies or any Affiliate of any of the
Companies.
"Term Loan Obligation" has the meaning set forth in the
Mortgages.
"Title Policies" means the mortgagee policies of title
insurance delivered to the Collateral Agent and insuring the lien of the
Mortgages.
"Total Amount of Secured Obligations" means, at any time, the
total, without duplication, of all amounts then outstanding under or in respect
of each of the Debt Instruments less, in each case, the amount of cash
collateral on deposit with the Trustee or the Term Loan Agent, as the case may
be, with respect thereto.
"Trust Estate" means (i) the right, title and interest of the
Collateral Agent in and to the Collateral and in, to and under each of the
Collateral Documents, (ii) the right, title and interest of the Collateral
Agent in, to and under each of the Title Policies and (iii) any amounts from
time to time held in the Collateral Account.
<PAGE> 8
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(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section
references are to this Agreement unless otherwise specified.
ARTICLE 2
DECLARATION OF TRUST; REMEDIES
2.1 Declaration and Acceptance of Trust. The Collateral
Agent hereby declares, and the Companies agree, that the Collateral Agent holds
the Trust Estate as secured party or mortgagee or deed of trust beneficiary, as
the case may be, in trust under this Agreement and the Collateral Documents for
the equal and ratable benefit of the Secured Parties (and the Persons for whom
the Secured Parties act as trustee, agent or fiduciary, as applicable), without
preference, priority or distinction of any thereof over any other by reason of
difference in time of issuance, sale or otherwise, as provided herein. Each
Secured Party, by executing and delivering this Agreement, and each Person for
whom such Secured Party acts as trustee, agent or fiduciary, as applicable, by
acceptance of the benefits of this Agreement and the Collateral Documents, (i)
consents to the appointment of the Collateral Agent as agent hereunder and
grants to the Collateral Agent all rights and powers necessary for the
Collateral Agent to perform its obligations hereunder, (ii) confirms that the
Collateral Agent shall have the authority, subject to the terms of this
Agreement, to act as the exclusive agent of such Secured Party (or Person, as
applicable) to make claims under and otherwise act in all respects as the
beneficiary of the Title Policies, to enforce any remedies under or with
respect to any Collateral Document, to give or withhold any consent or approval
relating to any Collateral or the Collateral Documents or any obligations with
respect thereto, and otherwise to take any action on behalf of the Secured
Parties (and such Persons) contemplated in the Collateral Documents (including,
without limitation, receiving opinions, maintaining collateral accounts and
exercising remedies) and (iii) agrees that, except as provided in this
Agreement, such Secured Party (or Person, as applicable) shall not take any
action to enforce any of such
<PAGE> 9
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remedies or give any such consents or approvals relating to any Collateral or
the Collateral Documents or itself make any claim under the Title Policies. If
the Companies request that the Collateral Agent or the Secured Parties (or any
Person for whom such Secured Party acts as a trustee, agent or fiduciary, as
applicable) elect to defer for 3 years the effective date of regulatory
amendments effective July 1, 1997 with respect to Washington State Business and
Occupancy Tax, the Collateral Agent or such Secured Party is hereby authorized
to do so, and by accepting the benefits of this Agreement, each Person for whom
a Secured Party acts as trustee, agent or fiduciary, as applicable, hereby
consents to such action.
2.2 Remedies. (a) Upon the occurrence and during the
continuance of an Event of Default under the Indenture, the Note Majority
Holders shall have the right at any time, and, upon the occurrence and during
the continuance of an Event of Default under the Term Loan Agreement, the Term
Loan Note Majority Holders shall have the right at any time, to direct in one
or more writings (each, an "Enforcement Notice") addressed to the Collateral
Agent and the Secured Parties that any right or remedy available to the
Collateral Agent and the Trustee or the Term Loan Agent, as the case may be,
with respect to the Collateral be exercised by the Collateral Agent on behalf
of both Secured Parties (subject to Section 6.3 hereof), which Enforcement
Notice shall be effective 10 days from the date of delivery thereof, provided,
however, that the Note Majority Holders or the Term Loan Note Majority Holders,
as the case may be, taking such action must hold an aggregate principal amount
of Notes or Term Loan Notes, as the case may be, representing at least 15% of
the Total Amount of Secured Obligations. Each Enforcement Notice shall state
that an Event of Default either under the Indenture or the Term Loan Agreement
exists and generally describe the nature of and any relevant facts relating to
such Event of Default. Following receipt of any Enforcement Notice, the
Collateral Agent shall, subject to the provisions hereof relating to
indemnification of the Collateral Agent by the Companies, take the actions
directed therein and any other actions which it deems proper and which are not
inconsistent with such direction, provided, however, the Collateral Agent is
not obligated to take any actions outside the Enforcement Notice.
<PAGE> 10
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(b) Upon the effective date of an Enforcement Notice from the
Note Majority Holders or the Term Loan Note Majority Holders, as the case may
be, the Collateral Agent shall notify PCAC and/or PAI, as applicable, in
writing that the Collateral Agent has received such Enforcement Notice,
enclosing a copy of such Enforcement Notice. An Enforcement Notice shall be
deemed to be in effect hereunder only if such notice shall have been given and
not rescinded, annulled or withdrawn in writing by the Note Majority Holders or
the Term Loan Note Majority Holders, as applicable, by whom such notice was
given.
(c) Whether or not the Collateral Agent has been directed
to exercise any right or remedy with respect to the Collateral pursuant to the
provisions of this Section 2.2, the Bank Lenders shall have the right, subject
to all relevant provisions of the Bank Credit Agreement, to pursue remedies
with respect to Obligor Collateral in accordance with the provisions of the
Bank Credit Agreement, all related agreements and this Agreement. In the event
that the Collateral Agent has been so instructed to pursue remedies with
respect to the Collateral, the Collateral Agent shall take such steps as it
deems reasonable and appropriate to avoid interfering with the Agent Bank's
exercise of rights and remedies with respect to Obligor Collateral.
(d) In the event that the Agent Bank shall attempt to
exercise any of its remedies with respect to Obligor Collateral, the Collateral
Agent (i) shall not hinder, delay or otherwise prevent the Agent Bank from
taking any and all action to the extent permitted by law which the Agent Bank
deems necessary to enforce its security interest in the Obligor Collateral and
realize thereon and (ii) to the extent that the Collateral Agent is in
possession of the Mortgaged Property, shall permit the Agent Bank to access and
occupy the Mortgaged Property and to use the Equipment, in each case without
rent, for a period not to exceed 90 days from the date Agent Bank receives
written notice from the Collateral Agent that it has acquired possession of the
Mortgaged Property, or such shorter period as is necessary for the Agent Bank
to complete Obligor Collateral consisting of work-in-process, to store Obligor
Collateral constituting inventory and to otherwise remove such Obligor
Collateral and complete its exercise of remedies in respect thereof. Agent
Bank shall indemnify the Collateral Agent for all damage to the Mortgaged
<PAGE> 11
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Property or the Equipment (ordinary wear and tear excepted) proximately caused
by the negligence or willful misconduct of the Agent Bank or its agents or
employees. The Collateral Agent further agrees that it will not enforce any
statutory, possessory or other liens (including, without limitation, rights of
levy) with respect to the Obligor Collateral without the prior written consent
of the Agent Bank.
(e) Without limiting the provisions of the preceding
paragraphs (c) and (d), the Collateral Agent shall not seek to enforce any
rights under or with respect to the agreements (the "Tacoma Sales Agreements")
listed as items 3 and 4 on Annex 2 to the Security Agreement (as in effect of
the date hereof) or any related Collateral (as defined in the Security
Agreement) and shall not retain any proceeds thereof until the Agent Bank has
collected all Accounts Receivable (as defined in the Bank Credit Agreement as
in effect on the date hereof in existence under the Tacoma Sales Agreements and
completed and sold all Inventory (as defined in the Bank Credit Agreement as in
effect on the date hereof) pursuant to the terms of the Tacoma Sales Agreements
to the purchasers thereunder, to the extent that such Accounts Receivable and
Inventory were included in the calculation of the Borrowing Base (as defined on
the Bank Credit Agreement as in effect on the date hereof) prepared by PAAC for
the purpose of calculating loans made to PAAC under the Bank Credit Agreement
and delivered to the Agent Bank most recently prior to the acceleration of any
of the Secured Obligations (and in connection therewith the Agent Bank may
enforce Contract Rights under the Tacoma Sales Agreements), provided that (i)
the Agent Bank shall seek to collect such Accounts Receivable, sell such
Inventory and otherwise enforce Contract Rights in respect of the Tacoma Sales
Agreements reasonably promptly and otherwise in a commercially reasonable
manner that will not unreasonably prejudice the remaining rights of the
Collateral Agent and the Secured Parties with respect to such agreements; and
(ii) upon payment in full of such Accounts Receivable and the sale of such
Inventory pursuant to the Tacoma Sales Agreements, (x) the Agent Bank shall
have no further lien on or other interest in the Tacoma Sales Agreements or in
any Accounts Receivable or Contract Rights (as defined on the Bank Credit
Agreement as in effect on the date hereof) in respect thereof and (y) the
Tacoma Sales Agreements and all
<PAGE> 12
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Accounts Receivable and Contract Rights in respect thereof shall be deemed
deleted from the definition of Obligor Collateral.
2.3 Determinations Relating to Collateral. In the event
(i) the Collateral Agent shall receive any written request from any Obligor
under any Collateral Document for consent or approval with respect to any
matter or thing relating to any Collateral or such Obligor's obligations with
respect thereto or (ii) there shall be due to or from the Collateral Agent
under the provisions of any Collateral Document any material performance or the
delivery of any material instrument or (iii) the Collateral Agent shall have
actual knowledge of any nonperformance by any Obligor of any covenant or any
breach of any representation or warranty of any Obligor set forth in any
Collateral Document, then, in each such event, the Collateral Agent shall,
within five Business Days (as defined in the Indenture, as in effect on the
date hereof), advise the Secured Parties in writing of the matter or thing as
to which consent has been requested or the performance or instrument required
to be delivered or the nonperformance or breach of which the Collateral Agent
has become aware. The Majority Holders shall have the exclusive authority to
direct the Collateral Agent's response to any of the circumstances contemplated
in clauses (i), (ii) and (iii) above, provided that the Majority Holders
include the Term Loan Note Majority Holders.
2.4 Right to Make Advances. If an advance of funds shall
at any time be required for the preservation or maintenance of any Collateral,
then, upon three Business Days' notice to the applicable Obligor, the
Collateral Agent or either Secured Party shall be entitled (but shall not be
obligated) to make such advance (it being understood that the Trustee shall not
be obligated to make any such advance other than in accordance with the terms
of the Indenture and that the Term Loan Agent shall not be obligated to make
any such advance other than in accordance with the terms of the Term Loan
Agreement). Each such advance shall be reimbursed, with interest from the date
such advance was made (at the rate initially borne by the Notes or the Term
Loan Notes, as applicable), by the applicable Obligor, upon demand by the
Collateral Agent or such Secured Party, as the case may be, and if the
applicable Obligor fails to comply with any such demand, out of the proceeds of
any sale of or other realization
<PAGE> 13
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upon any Collateral distributed pursuant to clause FIRST of Section 4.1. In
the event either Secured Party shall receive any funds which, under this
Section 2.4, belong to the Collateral Agent or the other Secured Party, such
Secured Party shall remit such funds promptly to the Collateral Agent for
distribution to the Collateral Agent or such other Secured Party, as the case
may be, and prior to such remittance shall hold such funds in trust for the
Collateral Agent or such other Secured Party, as the case may be.
2.5 Nature of Secured Parties' Rights. Both Secured
Parties (and each Person for whom a Secured Party acts as trustee, agent or
fiduciary) shall be bound by any instruction or direction properly given by the
Majority Holders, the Note Majority Holders or the Term Loan Note Majority
Holders, as the case may be, as required by and subject to the provisions of
this Agreement.
2.6 Voting. In each case where any vote or consent of
the Holders or Term Loan Lenders, as the case may be, is required or desired to
be made or determined hereunder each Secured Party shall, to the extent
required pursuant to and in accordance with the provisions of the Indenture or
the Term Loan Agreement, respectively, advise in writing the Persons for whom
it acts as trustee, agent or fiduciary of the matters or thing to which such
vote or consent pertain and afford such Persons an opportunity to indicate
(which may be accomplished by affirmative act or failure to act within a
prescribed time period) a response to the matters or things set forth in such
writing. The results of such voting or consent solicitation shall be promptly
reported in writing to the Collateral Agent and shall be certified as correct
to the best knowledge of such Secured Party. Any determination as to whether
the requisite vote or consent has been obtained shall be made by the Collateral
Agent on the basis of such written information, which information may be
conclusively relied upon by the Collateral Agent. The Collateral Agent shall
not be liable for errors in such determinations unless the Collateral Agent
shall have been grossly negligent or shall have acted in bad faith in
connection therewith.
<PAGE> 14
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ARTICLE 3
COLLATERAL DOCUMENTS
3.1 Recording; Priority; Opinions, Etc. (a) Each Obligor
shall at their sole cost and expense perform any and all acts and execute any
and all documents (including, without limitation, the execution, amendment or
supplementation of any financing statement and continuation statement or other
statement) for filing under the provisions of the Uniform Commercial Code and
the rules and regulations thereunder, or any other statute, rule or regulation
of any applicable federal, state or local jurisdiction, including any filings
in local real estate land record offices, which are necessary or advisable and
shall do such other acts and execute such other documents as may be required
from time to time, in order to grant and maintain in favor of the Collateral
Agent for the benefit of the Secured Parties a valid and perfected first
priority Lien on the Collateral, subject only to Liens permitted under the
Collateral Documents to be senior to the Liens of the Collateral Agent, and to
fully preserve and protect the rights of the Collateral Agent under the
Collateral Documents.
Each Obligor shall from time to time promptly pay and satisfy
all mortgage and financing and continuation statement recording and/or filing
fees, charges and taxes relating to the Collateral Documents to which such
Obligor is a party, any amendments thereto and any other instruments of further
assurance. Without limiting the generality of the foregoing, if at any time
the Trustee, the Term Loan Agent or the Collateral Agent shall determine that
additional mortgage recording, transfer or similar taxes are required to be
paid to perfect or continue any Lien on any Collateral, the applicable Obligor
shall pay such taxes promptly upon demand by the Collateral Agent.
(b) The Obligors shall, with respect to clause (i) below, on
or prior to the date hereof, and, with respect to clause (ii) below, at such
times as contemplated therein, furnish to the Trustee, the Term Loan Agent and
the Collateral Agent:
(i) Opinion(s) of Counsel either (a) to the effect that, in
the opinion of such counsel, this Agreement and the
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grants of security interests in the Collateral intended to be made by
the Collateral Documents and all other instruments of further
assurance, including, without limitation, financing statements and
each of the Mortgages, the Security Agreement and the Stock Pledge
Agreement have been properly registered, recorded and filed to the
extent necessary to perfect the Lien on the Collateral created by the
Collateral Documents and reciting the details of such action, and
stating that as to the Liens created pursuant to the Collateral
Documents, such recordings, registrations and filings are the only
recordings, registrations and filings necessary to give notice thereof
and that no re-recordings, re-registrations or refilings are necessary
to maintain such notice (other than as stated in such opinion), or (b)
to the effect that, in the opinion of such counsel, no such action is
necessary to perfect such Lien; and
(ii) on each anniversary of the Closing Date (as defined in the
Indenture, as in effect on the date hereof), beginning with such
anniversary in the year 1998, an Opinion of Counsel dated as of such
date, either (a) to the effect that, in the opinion of such counsel,
such action has been taken with respect to the recordings,
registerings, filings, re-recordings, re-registerings and refilings of
all financing statements, continuation statements or other instruments
of further assurance as is necessary to maintain the Lien of each of
the Collateral Documents and reciting with respect to such Liens the
details of such action or referencing prior Opinions of Counsel in
which such details are given, and stating that all financing
statements and continuation statements have been executed and filed
that are necessary as of such date and during the succeeding twelve
months fully to preserve and protect the rights of the Collateral
Agent, the Holders, the Trustee, the Term Loan Lenders and the Term
Loan Agent hereunder and under each of the Collateral Documents with
respect to such Liens, or (b) to the effect that, in the opinion of
such counsel, no such action is necessary to maintain such Liens.
3.2 Release of Collateral. To the extent applicable, the
Obligors shall cause Trust Indenture Act Section 314(d) relating to the release
of property or Liens to be complied with.
<PAGE> 16
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(a) Satisfaction and Discharge of Indenture Obligation and
Term Loan Obligation. The Obligors shall be entitled to obtain a full release
of all of the Collateral from the Lien of the Collateral Documents upon
compliance with all of the conditions precedent set forth in Section 1201 of
the Indenture for complete satisfaction and discharge of all of PAAC's
obligations under the Indenture and in Section 9.12 of the Term Loan Agreement
for complete satisfaction of all of PAAC's obligations under the Term Loan
Agreement and the termination thereof. Upon delivery by PAAC to the Trustee,
the Term Loan Agent and the Collateral Agent of (i) an Officers' Certificate
and an Opinion of Counsel and (ii) an Officers' Certificate (as defined in the
Term Loan Agreement) and an Opinion of Counsel (as defined in the Term Loan
Agreement), all to the effect that such conditions precedent have been complied
with, the Trustee and the Term Loan Agent shall, at the written request and
expense of PAAC, promptly direct the Collateral Agent to release and reconvey
to PAI or PCAC, as applicable, all of their respective Collateral, and upon
receipt of such direction by the Trustee and the Term Loan Agent, the
Collateral Agent shall do so and deliver any Collateral in its possession to
PAI or PCAC, as applicable.
(b) Sales of Collateral Permitted by Section 1009 of the
Indenture and Section 7.2.6 of the Term Loan Agreement. PAAC shall be entitled
to obtain a release of all or any part of the Collateral (other than Trust
Moneys) (the "Released Interests") subject to an Asset Sale (as defined in the
Indenture) or to an Asset Sale (as defined in the Term Loan Agreement and for
purposes hereof a "Term Loan Asset Sale"), and the Trustee and the Term Loan
Agent shall direct the Collateral Agent to release the Released Interests from
the Liens of the Mortgages, the Security Agreement or the Stock Pledge
Agreement, as the case may be, promptly upon (x) compliance with (i) the
conditions precedent specified in Section 1009 of the Indenture for any Asset
Sale involving Collateral, and (ii) the conditions precedent specified in
Section 7.2.6 of the Term Loan Agreement for any Term Loan Asset Sale involving
Collateral and (y) delivery by PAAC to the Trustee, the Term Loan Agent and the
Collateral Agent of the following:
(i) Release Notice. A notice (each, an "Asset Sale Release
Notice"), which shall (A) refer to this Section 3.2,
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(B) attach all the documents referred to below, (C) describe with
particularity the Released Interests, (D) specify the fair market
value of such Released Interests on a date within 60 days of the Asset
Sale Release Notice (the "Valuation Date"), (E) certify that the
purchase price received is not less than the fair market value of the
Released Interests as of the date of such release, (F) state that the
release of the Released Interests will not interfere with or impede
the Collateral Agent's ability to realize the value of the remaining
Collateral and will not impair the maintenance and operation of the
remaining Collateral, and (G) be accompanied by a counterpart of the
instruments proposed to give effect to the release fully executed and
acknowledged (if applicable) by all parties thereto other than the
Collateral Agent;
(ii) Officers' Certificate. An Officers' Certificate
certifying that (A) such Asset Sale covers only the Released Interests
and complies with the terms and conditions of an Asset Sale pursuant
to Section 1009 of the Indenture and Section 7.2.6 of the Term Loan
Agreement, (B) all Collateral Proceeds (as defined in the Indenture)
from the sale of the Released Interests will be applied pursuant to
Section 1009 of the Indenture and Section 7.2.6 of the Term Loan
Agreement, (C) there is no Default under either the Indenture or the
Term Loan Agreement or Event of Default under either the Indenture or
the Term Loan Agreement in effect or continuing on the date thereof,
the Valuation Date or the date of such Asset Sale or Term Loan Asset
Sale, (D) the release of the Released Interests will not result in a
Default under either the Indenture or the Term Loan Agreement or Event
of Default under either the Indenture or the Term Loan Agreement and
(E) all conditions precedent to such release have been complied with;
(iii) Regarding Real Property. If any Released Interest is
only a portion of a discrete parcel of real property, evidence that a
title company shall have committed to issue an endorsement to the
title insurance policy relating to the affected Mortgaged Property,
confirming that after such release, the Lien of the applicable
Mortgage shall continue unimpaired as a first priority perfected Lien
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upon the remaining Mortgaged Property subject only to Excepted Liens
(as defined in the applicable Mortgage), and that the remaining
Mortgaged Property satisfies all applicable subdivision, zoning and
land use requirements and is not part of a larger tax lot;
(iv) Proceeds of Asset Sale. The Collateral Proceeds (as
defined in the Indenture) and the Net Proceeds (as defined in the Term
Loan Agreement) resulting from an Asset Sale in respect of Collateral
("Term Loan Collateral Proceeds") and other non-cash consideration
received from an Asset Sale or Term Loan Asset Sale shall be required
to be delivered to the Collateral Agent to be deposited in the
Collateral Account to be applied pursuant to Article 4 hereof; and if
any property other than cash or Cash Equivalents (as defined in the
Indenture and the Term Loan Agreement) is included in such
consideration, such instruments of conveyance, assignment and
transfer, if any, delivered to the Collateral Agent as may be
necessary, in the opinion of counsel to the Collateral Agent, to
subject to the Lien of the Collateral Documents all right, title and
interest of the applicable Obligor in and to such property;
(v) Opinions of Counsel. One or more Opinions of Counsel
which, when considered collectively, shall be substantially to the
effect (A) that any obligation included in the consideration for any
Released Interest and to be received by the Collateral Agent pursuant
to paragraph (iv) above is a valid and binding obligation enforceable
in accordance with its terms, subject to such customary exceptions
regarding equitable principles and creditors' rights generally as
shall be reasonably acceptable to the Collateral Agent, the Trustee
and the Term Loan Agent, and the Collateral Documents are effective to
create a valid and perfected security interest in such obligations,
subject to customary exceptions, (B) either (1) that such instruments
of conveyance, assignment and transfer as have been or are then
delivered to the Collateral Agent are sufficient to subject to the
Lien of the Collateral Documents all right, title and interest of the
applicable Obligor in and to any property, other than cash or Cash
Equivalents included in the consideration for the Released Interests
and to be
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received by the Collateral Agent pursuant to paragraph (iv) above, or
(2) that no instruments of conveyance, assignment or transfer are
necessary for such purpose, (C) that the applicable Obligor has
corporate power to own all property included in the consideration for
such release and (D) that all conditions precedent provided in the
Indenture, the Term Loan Agreement and the Collateral Documents
relating to the Asset Sale or Term Loan Asset Sale and such release of
the Released Interests have been complied with; and
(vi) Other Documents. All documentation required by Trust
Indenture Act Section 314(d).
(c) Other Release of Collateral. In the event PAI or
PCAC desires to release any Collateral not otherwise permitted by Section
3.2(b) or 3.3 of this Agreement (the "Other Released Interest"), PAI or PCAC,
as applicable, shall be entitled to obtain a release of such Collateral upon
(x) the consent of the Majority Holders provided that such Majority Holders
include Term Loan Lenders holding 100% of the aggregate outstanding principal
amount of the Term Loan Notes (provided that for purposes of this Section there
shall not be counted any interest in Notes or Term Loan Notes (A) for which
(and to the extent that) there are at such time on deposit with the Collateral
Agent, the Trustee or the Term Loan Agent amounts to be applied to the payment
of principal thereof and (B) which are held by any of the Companies or any
Affiliate of any of the Companies) and (y) delivery by PAAC to the Trustee, the
Term Loan Agent and the Collateral Agent of the following:
(i) Release Notice. A notice (each a "Release Notice"
which shall (A) refer to this Section 3.2(c), (B) attach all the
documents referred to below, (C) describe with particularity the Other
Released Interest, (D) specify the fair market value of such Other
Released Interest on a date within 60 days of the Release Notice (the
"Other Valuation Date"), (E) certify that the purchase price to be
received is not less than the fair market value of the Other Released
Interest as of the date of the proposed release, (F) state that the
release of the Other Released Interest will not interfere with or
impede the Collateral Agent's ability to realize the value of the
remaining Collateral and will not
<PAGE> 20
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impair the maintenance and operation of the remaining Collateral and
(G) be accompanied by a counterpart of the instruments proposed to
give effect to the release fully executed and acknowledged (if
applicable) by all parties thereto other than the Collateral Agent.
(ii) Officers' Certificate. An Officers' Certificate
certifying that (A) such sale covers only the Other Released Interest,
(B) all proceeds from the sale of the Other Released Interest will be
deemed Trust Moneys (as hereinafter defined) and deposited into the
Collateral Account to be applied pursuant to Article 4 hereof, (C)
there is no Default under either the Indenture or the Term Loan
Agreement or Event of Default under either the Indenture or the Term
Loan Agreement in effect or continuing on the date thereof, the Other
Valuation Date or the date of such sale, (D) the release of the Other
Released Interests will not result in a Default under either the
Indenture or the Term Loan Agreement or Event of Default under either
the Indenture or the Term Loan Agreement, (E) all conditions precedent
to such release have been complied with, (F) requirements of Section
3.2(b)(iii) have been met with respect to the Other Released Interest,
as if such Other Released Interest were a Released Interest.
(iii) Proceeds of Asset Sale. The Collateral Proceeds (as defined
in the Indenture) and the Term Loan Collateral Proceeds and other
non-cash consideration received from the sale of the Other Released
Interest shall be required to be delivered to the Collateral Agent to
be deposited in the Collateral Account to be applied pursuant to
Article 4 hereof; and if any property other than cash or Cash
Equivalents (as defined in the Indenture and the Term Loan Agreement)
is included in such consideration, such instruments of conveyance,
assignment and transfer, if any, delivered to the Collateral Agent as
may be necessary, in the opinion of counsel to the Collateral Agent,
to subject to the Lien of the Collateral Documents all right, title
and interest of the applicable Obligor in and to such property.
(iv) Opinion. One or more Opinions of Counsel meeting the
requirements of Section 3.2(b)(v).
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At any time when an Event of Default under either the
Indenture or the Term Loan Agreement shall have occurred and be continuing, no
release of Collateral pursuant to the provisions of this Agreement or the other
Collateral Documents shall be effective as against the Collateral Agent or the
Secured Parties.
(d) Release of New Collateral. The New Collateral shall
be released by the Collateral Agent upon delivery by PAAC of an Officer's
Certificate to the Trustee, the Term Loan Agent and the Collateral Agent that
the conditions set forth in Section 1017 of the Indenture have been satisfied.
3.3 Disposition of Collateral Not Requiring Consent. (a) So
long as no Event of Default under either the Indenture or the Term Loan
Agreement shall have occurred and be continuing, PCAC may, without any consent
by the Collateral Agent, sell or otherwise dispose of any Collateral the sale
or disposition of which would not constitute an Asset Sale (as defined in the
Indenture) or Term Loan Asset Sale by virtue of clauses (i) and (iv) of the
definitions thereof; provided, that notwithstanding the foregoing, if any such
Collateral consists of Real Property, PAAC shall deliver to the Trustee, the
Term Loan Agent and the Collateral Agent an Officers' Certificate confirming
that the requirements of Section 3.2(b)(iii) have been met and containing the
statement set forth in Section 3.2(b)(i)(F).
(b) In the event that PCAC has sold, exchanged, or otherwise
disposed of or proposed to sell, exchange or otherwise dispose of any portion
of the Collateral which under the provisions of this Section 3.3 may be sold,
exchanged or otherwise disposed of by PCAC without any release or consent of
the Collateral Agent, and PCAC requests in writing that the Collateral Agent
furnish a written disclaimer, release or quit-claim of any interest in such
property under any of the Collateral Documents, the Collateral Agent shall
promptly execute such an instrument upon delivery to the Trustee, the Term Loan
Agent and the Collateral Agent of (i) an Officers' Certificate by PCAC
reciting the sale, exchange or other disposition made or proposed to be made
and describing in reasonable detail the property affected thereby, and stating
and demonstrating that such property is property which by the provisions of
this Section 3.3 may be sold, exchanged or otherwise disposed of or dealt with
<PAGE> 22
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by PCAC without any release or consent of the Collateral Agent and (ii) an
Opinion of Counsel stating that the sale, exchange or other disposition made or
proposed to be made was duly made by PCAC in conformity with this Agreement
and that the execution of such written disclaimer, release or quitclaim is
appropriate to confirm the propriety of such sale, exchange or other
disposition under this Section 3.3. Notwithstanding the preceding sentence,
all purchasers and grantees of any property or rights purporting to be released
herefrom shall be entitled to rely upon any release executed by the Collateral
Agent hereunder as sufficient for the purposes hereof.
3.4 Eminent Domain and Other Governmental Takings. Subject
to the provisions of the Collateral Documents, should any of the Collateral be
taken by eminent domain or be sold pursuant to the exercise by the United
States of America or any State, municipality or other governmental authority of
any right which any of them may then have to purchase, or to designate a
purchaser or to order a sale of, all or any part of the Collateral, the
Collateral Agent shall release the property so taken or purchased, but only
upon receipt by the Trustee, the Term Loan Agent and the Collateral Agent of
the following:
(a) Officers' Certificates. An Officers' Certificate stating
that (i) such property has been taken by eminent domain and the amount of the
award therefor, or that such property has been sold pursuant to a right vested
in the United States of America or a state, municipality or other governmental
authority to purchase, or to designate a purchaser or order a sale of such
property and the amount of the proceeds of such sale, and (ii) that all
conditions precedent herein provided for relating to such release have been
complied with;
(b) Proceeds of Taking. The proceeds of such taking or
purchase, delivered to the Collateral Agent, to be held by the Collateral Agent
and applied as provided herein; and
(c) Opinion of Counsel. An Opinion of Counsel substantially
to the effect:
(i) that such property has been lawfully taken by exercise of
the right of eminent domain, or has been sold
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pursuant to the exercise of a right vested in the United States of
America or a State, municipality or other governmental authority to
purchase, or to designate a purchaser or order a sale of, such
property;
(ii) in the case of any taking by eminent domain, that the
award for the property so taken has become final or that appeal from
such award is not advisable in the interests of PAAC or the Secured
Parties;
(iii) in the case of any such sale, that the amount of the
proceeds of the property so sold is not less than the amount to which
PCAC is legally entitled under the terms of such right to purchase or
designate a purchaser, or under the order or orders directing such
sale, as the case may be;
(iv) in the event that the award for such property or the
proceeds of such sale, or a specified portion thereof, shall be
certified to have been deposited with the trustee, mortgagee or other
holder of a Lien which is permitted by the Collateral Documents to be
prior to the Lien of the Collateral Documents, that the property to be
released, or a specified portion thereof, is or immediately before
such taking or purchase was subject to such prior Lien permitted by
the Collateral Documents, and that such deposit is required by such
prior Lien permitted by the Collateral Documents; and
(v) that the instrument or the instruments and the award or
proceeds of such sale which have been or are therewith delivered to
and deposited with the Collateral Agent conform to the requirements of
this Agreement and the other Collateral Documents and that, upon the
basis of such application, the Collateral Agent is permitted by the
terms hereof and of the other Collateral Documents to execute and
deliver the release requested, and that all conditions precedent
herein provided for relating to such release have been complied with.
In any proceedings for the taking or purchase or sale of any
part of the Collateral, by eminent domain or by virtue of any such right to
purchase or designate a purchaser or to order a
<PAGE> 24
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sale, the Collateral Agent may be represented by counsel who may be counsel for
PAAC.
3.5 Suits to Protect Collateral. Subject to the provisions
hereof, the Majority Holders (provided that such Majority Holders include the
Term Loan Majority Holders) shall have the right to direct the Collateral
Agent, and if so directed, the Collateral Agent shall have the power, to
institute and to maintain such suits and proceedings as such Majority Holders
may deem expedient to prevent any impairment of the Collateral by any acts
which may be unlawful or in violation of any of the Collateral Documents, and
such suits and proceedings as such Majority Holders may deem expedient to
preserve or protect their interests in the Collateral (including power to
institute and maintain suits or proceedings to restrain the enforcement of or
compliance with any legislative or other governmental enactment, rule or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the Liens of the
Collateral Agent in the Collateral or be prejudicial to the interests of the
Secured Parties).
3.6 Purchaser Protected. In no event shall any purchaser in
good faith of any property purported to be released hereunder be bound to
ascertain the authority of the Collateral Agent to execute the release or to
inquire as to the satisfaction of any conditions required by the provisions
hereof for the exercise of such authority or to see to the application of any
consideration given by such purchaser or other transferee; nor shall any
purchaser or other transferee of any property or rights permitted by this
Article 3 to be sold be under obligation to ascertain or inquire into the
authority of PAI or PCAC to make any such sale or other transfer.
3.7 Powers Exercisable by Receiver or Trustee. In case the
Collateral shall be in the possession of a receiver or trustee, lawfully
appointed, the powers conferred in this Article 3 upon PAI and PCAC with
respect to the release, sale or other disposition of such property may be
exercised by such receiver or trustee, and an instrument signed by such
receiver or trustee shall be deemed the equivalent of any similar instrument
<PAGE> 25
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of PAI or PCAC, as the case may be, or of any officer or officers thereof
required by the provisions of this Article 3.
3.8 Determinations Relating to Collateral. In the event (i)
the Collateral Agent shall receive any written request from PCAC or PAI under
any Collateral Document for consent or approval with respect to any matter or
thing relating to any Collateral or the obligations of any Obligor with respect
thereto or (ii) there shall be due to or from the Collateral Agent under the
provisions of any Collateral Document any performance or the delivery of any
instrument or (iii) the Collateral Agent shall have actual knowledge of any
nonperformance by any Obligor of any covenant or any breach of any
representation or warranty of such Obligor set forth in any Collateral
Document, then, in each such event, the Collateral Agent shall be entitled to
hire experts, consultants, agents and attorneys to advise the Collateral Agent
on the manner in which the Collateral Agent should respond to such request or
render any requested performance or response to such nonperformance or breach.
The Collateral Agent shall be fully protected in the taking of any action
recommended or approved by any such expert, consultant, agent or attorney or
agreed to by the Majority Holders and the Term Loan Note Majority Holders.
3.9 Form and Sufficiency of Release. In the event that PAI
or PCAC has sold, exchanged, or otherwise disposed of or proposes to sell,
exchange or otherwise dispose of any portion of the Collateral which under the
provisions of this Article 3 may be sold, exchanged or otherwise disposed of by
PAI or PCAC, and the applicable Obligor requests the Collateral Agent to
furnish a written disclaimer, release or quitclaim of any interest in such
property under any of the Collateral Documents, the Collateral Agent shall
execute such an instrument promptly after satisfaction of the conditions set
forth herein for delivery of such instrument. Notwithstanding the preceding
sentence, all purchasers and grantees of any property or rights purporting to
be released herefrom shall be entitled to rely upon any release executed by the
Collateral Agent hereunder as sufficient for the purposes of this Indenture and
as constituting a good and valid release of the property therein described from
the Lien of this Indenture and the Collateral Documents.
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3.10 Possession and Use of Collateral. Subject to and in
accordance with the provisions of this Agreement and the other Collateral
Documents, so long as no Default under either the Indenture or the Term Loan
Agreement or Event of Default under either the Indenture or the Term Loan
Agreement shall have occurred and be continuing, the Obligors shall have the
right to remain in possession and retain exclusive control of the Collateral
(other than Trust Moneys, as defined in Section 4.1 hereof, securities and
other personal property held by, or required to be deposited or pledged with,
the Collateral Agent hereunder or under the other Collateral Documents), to
operate, manage, develop, use and enjoy the Collateral (other than Trust
Moneys, securities and other personal property held by, or required to be
deposited or pledged with, the Collateral Agent hereunder or under the other
Collateral Documents) and to collect, receive, use, invest and dispose of the
reversions, remainders, rates, interest, rents, issues, profits, revenues,
proceeds and other income thereof (other than Trust Moneys, securities and
other personal property held by, or required to be deposited or pledged with,
the Collateral Agent hereunder or under the other Collateral Documents).
3.11 Additional Indebtedness and Additional Collateral. In
the event that PAAC or the Subsidiary Guarantors incur additional Indebtedness
(the "Additional Obligation") as permitted under Section 1008 of the Indenture
and Section 7.2.2 of the Term Loan Agreement, and provided that (a) the assets
or property acquired or constructed with the Additional Obligation (the
"Additional Collateral") are pledged and a first priority mortgage or security
interest (as applicable) therein is granted to the Collateral Agent to become a
part of the Collateral securing the Secured Obligations on a pari passu basis,
and the other conditions set forth in Section 1012(j) of the Indenture and
clause (j) of Section 7.2.2 of the Term Loan Agreement are satisfied, and (b)
the Collateral Agent shall have received an endorsement to its Title Policies
insuring the continuing priority of the Mortgages as set forth in the Title
Policies, then this Agreement shall be amended to add as Secured Parties the
holders of the Additional Obligation or any trustee or other representative
thereof (the "Additional Secured Party") and to permit the Additional Secured
Party to exercise rights and remedies in accordance therewith, and the other
Collateral
<PAGE> 27
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Documents will be amended to add the Additional Obligation to the definition of
Secured Obligations therein.
ARTICLE 4
APPLICATION OF TRUST MONEYS
4.1 "Trust Moneys" Defined. All cash or Cash Equivalents
received by the Collateral Agent:
(a) upon the release of property from the Lien of any of the
Collateral Documents; or
(b) as proceeds of insurance upon any, all or part of the
Collateral (other than any liability insurance proceeds payable to either of
the Secured Parties or to the Collateral Agent, respectively, for any loss,
liability or expense incurred by it), including, without limitation, proceeds
of any insurance received pursuant to subsection IV(q) of any Mortgage; or
(c) as proceeds of any other sale or other disposition of all
or any part of the Collateral by or on behalf of the Collateral Agent
(including any proceeds received pursuant to subsection IV(q) of any Mortgage
in respect of the sale or other disposition of all or any part of the
Collateral taken by eminent domain or purchased by, or sold pursuant to any
order of a governmental authority) or any collection, recovery, receipt,
appropriation or other realization of or from all or any part of the Collateral
pursuant to the Collateral Documents or otherwise; or
(d) for application under this Article 4 as elsewhere
provided in this Agreement or the other Collateral Documents, or whose
disposition is not elsewhere otherwise specifically provided for herein or in
the Collateral Documents;
(all such moneys being herein sometimes called "Trust Moneys") shall be subject
to a Lien and security interest in favor of the Collateral Agent and shall be
held by the Collateral Agent in the Collateral Account for the benefit of the
Secured Parties as a part of the Collateral.
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The Collateral Agent shall apply such amount or proceeds as
soon as practicable after receipt as follows:
FIRST: To the Collateral Agent in an amount equal to the
Collateral Agent's Fees which are unpaid as of the applicable Distribution Date
and to any Secured Party which has theretofore advanced or paid any such
Collateral Agent's Fees in an amount equal to the amount thereof so advanced or
paid by such Secured Party and to reimburse to the Collateral Agent and any
Secured Party the amount of any advance made pursuant to Section 2.4 (with
interest thereon at the rate initially borne by the Notes or the Term Loan
Notes, as applicable);
SECOND: Provided that no Default under either the Indenture
or the Term Loan Agreement or Event of Default under either the Indenture or
the Term Loan Agreement shall have occurred and be continuing, (i) any such
Trust Moneys constituting Insurance Proceeds or Net Awards may be withdrawn by
PAAC or PCAC pursuant to Section 4.2 hereof to be applied to effect a
Restoration in accordance with the applicable Mortgage; (ii) in accordance with
the terms of Section 1009 of the Indenture governing Net Proceeds and Section
7.2.6 of the Term Loan Agreement governing Net Proceeds (as defined in the Term
Loan Agreement as in effect on the date hereof), any such Trust Moneys
constituting Collateral Proceeds (as defined in the Indenture) or Term Loan
Collateral Proceeds, Insurance Proceeds or Net Awards may be withdrawn by PAAC
pursuant to Sections 4.3 or 4.4 hereof to be applied to a reinvestment in PAAC
or in one of its Subsidiaries that is a Restricted Subsidiary for purposes of
both the Indenture and the Term Loan Agreement in a Related Business (as
defined in the Indenture as in effect on the date hereof) or to the permanent
repayment or prepayment of any Senior Indebtedness (as defined in the Indenture
as in effect on the date hereof) then outstanding; and (iii) any such Trust
Moneys not so withdrawn and applied shall be transferred by the Collateral
Agent to the Trustee and shall thereupon become Excess Proceeds which shall be
used to make an Asset Sale Offer pursuant to Section 1009 of the Indenture.
<PAGE> 29
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4.2 Withdrawals of Insurance Proceeds and Net Awards for
Restoration. To the extent that any Trust Moneys consist of either Insurance
Proceeds or Net Awards received by the Collateral Agent pursuant to subsection
IV(q) of any Mortgage and such Insurance Proceeds or Net Awards may be applied
by PAAC to effect a Restoration of the affected Collateral, such Trust Moneys
may be withdrawn by PAAC and shall be paid by the Collateral Agent, upon a
request by a Company Order (as defined in the Indenture as in effect on the
date hereof) to reimburse the applicable Obligor for expenditures made, or to
pay costs incurred, by such Obligor to repair, rebuild or replace the
Collateral destroyed, damaged or taken, upon receipt by the Trustee, the Term
Loan Agent and the Collateral Agent of the following:
(a) Officers' Certificate. An Officers' Certificate of PAAC,
dated not more than 30 days prior to the date of the application for the
withdrawal and payment of such Trust Moneys:
(i) that expenditures have been made, or costs incurred, by
the Obligor in a specified amount for the purpose of making certain
repairs, rebuildings and replacements of the Collateral, which shall
be briefly described, and stating the fair market value thereof at the
date of the expenditure or incurrence thereof by PAAC or PCAC;
(ii) that no part of such expenditures or costs has been or
is being made the basis for the withdrawal of any Trust Moneys in any
previous or then pending application pursuant to this Agreement;
(iii) that there is no outstanding Indebtedness (as defined
in the Indenture as in effect on the date hereof) other than costs for
which payment is being requested, for the purchase price or
construction of such repairs, rebuildings or replacements, or for
labor, wages, materials or supplies in connection with the making
thereof, which, if unpaid, might become the basis of a vendor's,
mechanic's, laborer's, materialman's statutory or other similar Lien
upon any Collateral;
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(iv) that the property to be repaired, rebuilt or replaced is
necessary or desirable in the conduct of PAAC's business;
(v) whether any part of such repairs, rebuildings or
replacements within six months before the date of acquisition thereof
by the Obligor has been used or operated by any person other than such
Obligor in a business similar to that in which such property has been
or is to be used or operated by such Obligor, and whether the fair
value to such Obligor, at the date of such acquisition, of such part
of such repairs, rebuildings or replacement is more than $25,000;
(vi) that no Default under either the Indenture or the Term
Loan Agreement or Event of Default under either the Indenture or the
Term Loan Agreement shall have occurred and be continuing; and
(vii) that all conditions precedent provided for herein and
in the Indenture and the Term Loan Agreement (if any) relating to such
withdrawal and payment have been complied with;
(b) Opinion of Counsel. An Opinion of Counsel substantially
stating:
(i) that the instruments that have been or are therewith
delivered to the Collateral Agent, the Trustee and the Term Loan Agent
conform to the requirements of this Agreement and the other Collateral
Documents, and that, upon the basis of such request of PAAC and the
accompanying documents specified in this Section 4.2, all conditions
precedent provided for herein and in the Indenture and the Term Loan
Agreement (if any) relating to such withdrawal and payment have been
complied with, and the Trust Moneys whose withdrawal is then requested
may be lawfully paid over under this Section 4.2;
(ii) that the Collateral Agent has a valid and perfected lien
on such repairs, rebuildings and replacements, that the same and every
part thereof are
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subject to no Liens prior to the Lien of the Collateral Documents,
except Liens permitted under the Collateral Documents to which the
property so destroyed or damaged shall have been subject at the time
of such destruction or damage; and
(iii) that all of the Obligor's right, title and interest in
and to said repairs, rebuildings or replacements, or combination
thereof, are then subject to the Lien of the Collateral Documents;
(c) Architect's Certificate. An Architect's Certificate (as
defined in the applicable Mortgage) stating:
(i) that all Restoration work to which such request relates
has been done in compliance with the approved Plans and Specifications
(as defined in the applicable Mortgage) and in accordance with all
provisions of law;
(ii) the sums requested are required to reimburse the Obligor
for payments by such Obligor to, or are due to, the contractors,
subcontractors, materialmen, laborers, engineers, architects or other
persons rendering services or materials for the Restoration, and that,
when added to the sums, if any, previously paid out by the Collateral
Agent, such sums do not exceed the cost of the Restoration to the date
of such Architect's Certificate;
(iii) whether or not the Estimate (as defined in the
applicable Mortgage) continues to be accurate, and if not, what the
entire cost of such Restoration is then estimated to be; and
(iv) that the amount of the Insurance Proceeds or Net Awards,
as the case may be, plus any amount received by the Collateral Agent
under an Additional Undertaking (as defined in the applicable
Mortgage) remaining after giving effect to such payment, will be
sufficient on completion of the Restoration to pay for the same in
full (including, in detail, an estimate by trade of the remaining
costs of completion);
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(d) Final Request Documentation. If such request is the
final request for any payment, in addition to the documentation required by
(a), (b) and (c) above, such request shall be accompanied by:
(i) an Opinion of Counsel or a title insurance policy, binder
or endorsement satisfactory to the Collateral Agent confirming that
there has not been filed with respect to all or any part of the
applicable Mortgaged Property any Lien which is not either discharged
of record or bonded and which could have priority over the Lien of the
applicable Mortgage; and
(ii) an Officers' Certificate stating that all occupancy
certificates, operating and other permits, licenses, waivers, other
documents, or any combination of the foregoing required by law in
connection with or as a result of such Restoration have been obtained;
and
(e) Other Documents. All documentation required under Trust
Indenture Act Section 314(d).
Upon compliance with the foregoing provisions of this Section
4.2, the Collateral Agent shall pay on the written request of the applicable
Obligor, as the case may be, an amount of Trust Moneys of the character
aforesaid equal to the amount of the expenditures or costs stated in the
Officers' Certificate required by clause (i) of subsection (a) of this Section
4.2, or the fair value to such Obligor, as the case may be, of such repairs,
rebuildings and replacements covered by such Officers' Certificate, whichever
is less.
4.3 Withdrawal of Trust Moneys on Basis of Retirement of
Securities or other Senior Indebtedness. (a) Except with respect to Trust
Moneys subject to release pursuant to Section 4.3(b) and Section 4.4 hereof,
and as otherwise permitted by the Collateral Documents, (x) the Collateral
Agent shall transfer to the Term Loan Agent, at the written direction of PAAC,
and the Term Loan Agent shall apply, Trust Moneys from time to time to the
payment of the principal of and interest on any Term Loan Notes then due and
payable or to the prepayment thereof, including, without limitation, pursuant
to a Change of Control
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(as defined in the Term Loan Agreement) or a Term Loan Asset Sale, or (y) the
Collateral Agent shall apply, at the direction of the Obligors, Trust Moneys
from time to time to the permanent repayment or prepayment of Senior
Indebtedness (as defined in the Indenture as in effect on the date hereof) in
accordance with its terms and pursuant to Section 7.2.6 of the Term Loan
Agreement and Section 1009 of the Indenture, in each case as the Obligors shall
request in writing, upon receipt by the Trustee, the Term Loan Agent and the
Collateral Agent of the following:
(i) Board Resolution. Board Resolutions of each of the
Obligors directing the application pursuant to this Section 4.3 of a
specified amount of Trust Moneys and (A) if any such moneys are to be
applied to the payment of Term Loan Notes and/or Securities,
designating the Term Loan Notes and/or Securities so to be paid and,
in case any such moneys are to be applied to the prepayment or
purchase of Term Loan Notes and/or Securities, prescribing the method
of prepayment or purchase, the price or prices to be paid and the
maximum principal amount of Term Loan Notes and/or Securities to be
prepaid or purchased and any other provisions of this Agreement, the
Term Loan Agreement or the Indenture governing such prepayment or
purchase, and (B) in case any such moneys are to be applied to the
payment of other Senior Indebtedness, specifying such other Senior
Indebtedness and the principal amount thereof to be paid, together
with payment instructions therefor;
(ii) Purchase Price. Cash in the maximum amount of the
accrued interest, if any, required to be paid in connection with any
such payment, prepayment or purchase, which cash shall be held by the
Collateral Agent, in trust for such purpose;
(iii) Officers' Certificate. An Officers' Certificate, dated
not more than five Business Days prior to the date of the relevant
application, stating (A) that no Default under either this Indenture
or the Term Loan Agreement or Event of Default under either this
Indenture or the Term Loan Agreement exists unless such Default or
Event of Default would be cured thereby and that no such Default or
Event of Default would result from such application, and
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(B) that all conditions precedent and covenants provided for herein
and in the Indenture and the Term Loan Agreement (if any) relating to
such application of Trust Moneys have been complied with; and
(iv) Opinion of Counsel. An Opinion of Counsel stating that
the documents and the cash or Cash Equivalents (as defined in the
Indenture as in effect on the date hereof), if any, which have been or
are therewith delivered to and deposited with the Collateral Agent,
the Term Loan Agent or the Trustee conform to the requirements of the
Indenture and that all conditions precedent provided for herein and in
the Term Loan Agreement and the Indenture relating to such application
of Trust Moneys have been complied with.
Upon compliance with the foregoing provisions of this Section
4.3(a), the Collateral Agent shall apply Trust Moneys as directed and specified
by such Board Resolution, up to, but not exceeding, the principal amount of the
Term Loan Notes, Securities or other Senior Indebtedness so paid, prepaid or
purchased, using the cash deposited pursuant to paragraph (ii) of this Section
4.3(a), to the extent necessary, to pay any accrued interest required in
connection with such payment, prepayment or purchase.
(b) To the extent that any Trust Moneys consist of (i) Term
Loan Collateral Proceeds received by the Collateral Agent that result in the
requirement to prepay principal in respect of the Term Loan Notes pursuant to
Section 7.2.6 of the Term Loan Agreement and a Term Loan Lender refuses any
such prepayment or (ii) Collateral Proceeds received by the Collateral Agent
that result in the requirement pursuant to Section 1009 of the Indenture to
make an Asset Sale Offer (as defined in the Indenture) and PAAC has made such
Asset Sale Offer which is not fully subscribed to by the Holders (as defined in
the Indenture), the Trust Moneys remaining after completion of such prepayment
or Asset Sale Offer may be withdrawn by PAAC and shall be paid by the
Collateral Agent to PCAC (or as otherwise directed by the Obligors) upon a
Company Order to the Collateral Agent and upon receipt by the Secured Parties
and the Collateral Agent of the following:
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(i) Notice. A notice which shall (A) refer to this Section
4.3(b) and (B) describe with particularity the Asset Sale or Term Loan
Asset Sale or the destruction or condemnation in respect of which such
Trust Moneys were held as Collateral, the amount of Trust Moneys
applied to the prepayment of principal in respect of Term Loan Notes
or the purchase of Securities pursuant to the Asset Sale Offer and the
remaining amount of Trust Moneys to be released to PAAC;
(ii) Officers' Certificate. An Officer's Certificate
certifying that (A) the release of the Trust Moneys complies with the
terms and conditions of Section 1009 of the Indenture and Section
7.2.6 of the Term Loan Agreement, (B) there is no Default under either
the Indenture or the Term Loan Agreement or Event of Default under
either the Indenture or the Term Loan Agreement in effect or
continuing on the date thereof, (C) the release of the Trust Moneys
will not result in a Default under either the Indenture or the Term
Loan Agreement or Event of Default under either the Indenture or the
Term Loan Agreement, and (D) all conditions precedent and covenants
provided for herein and in the Indenture and the Term Loan Agreement
(if any) relating to such release have been complied with;
(iii) Opinion of Counsel. An Opinion of Counsel stating that
the documents that have been or are therewith delivered to the
Collateral Agent or the Secured Parties conform to the requirements of
this Agreement and that all conditions precedent provided for herein
and in the Indenture and the Term Loan Agreement (if any) relating to
such application of Trust Moneys have been complied with; and
(iv) Other Documents. All documentation required under Trust
Indenture Act Section 314(d).
4.4 Withdrawal of Trust Moneys for Reinvestment. To the
extent that any Trust Moneys consist of Term Loan Collateral Proceeds received
by the Collateral Agent pursuant to the provisions hereof and to the extent the
aggregate amount of such Term Loan Collateral Proceeds since the date hereof
(when added to the aggregate amount of other Net Proceeds of Term Loan Asset
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Sales since the date hereof) does not exceed $35,000,000, or to the extent that
any Trust Moneys consist of Collateral Proceeds received by the Collateral
Agent pursuant to the provisions of Section 1009 of the Indenture, and PAAC
intends to reinvest such Term Loan Collateral Proceeds in PAAC or in one or
more Restricted Subsidiaries in a Related Business (the "Released Trust
Moneys"), such Trust Moneys may be withdrawn by PAAC and shall be paid by the
Collateral Agent to PAAC (or as otherwise directed by PAAC) upon a Company
Order to the Trustee and the Collateral Agent and upon receipt by the Trustee,
the Agent Bank and the Collateral Agent of the following:
(a) Notice. A notice which shall (i) refer to this Section
4.4, (ii) contain all documents referred to below, (iii) describe with
particularity the Released Trust Moneys and the Term Loan Asset Sale from which
such Released Trust Moneys were held as Collateral, (iv) describe with
particularity the investment to be made with respect to the Released Trust
Moneys and (v) be accompanied by a counterpart of the instruments proposed to
give effect to the release fully executed and acknowledged (if applicable) by
all parties thereto other than the Collateral Agent;
(b) Officers' Certificate. An Officer's Certificate
certifying that (i) the release of the Released Trust Moneys complies with the
terms and conditions of Section 7.2.6 of the Term Loan Agreement and Section
1009 of the Indenture, (ii) there is no Default either under the Indenture or
the Term Loan Agreement or Event of Default under either the Indenture or the
Term Loan Agreement in effect or continuing on the date thereof, (iii) the
release of the Released Trust Moneys will not result in a Default either under
the Indenture or the Term Loan Agreement or Event of Default either under the
Indenture or the Term Loan Agreement, (iv) the parties executing any and all
documents required under this Section 4.4 were duly authorized to do so, and
(v) all conditions precedent and covenants provided for herein and in the
Indenture and Term Loan Agreement (if any) relating to such release and
application of the Released Trust Moneys have been complied with;
(c) Real Property Investment Documentation. If the Released
Trust Moneys are to be invested in Real Property:
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(i) a Mortgage or other instrument or instruments in
recordable form sufficient to grant to the Collateral Agent for the
benefit of the Secured Parties (A) substantially the same rights and
remedies in respect of such Real Property as granted thereto under the
Mortgages executed and delivered on the date hereof and (B) a valid
first priority mortgage Lien on such Real Property subject to no Liens
other than Excepted Liens permitted under the Mortgages delivered on
the date hereof and, if the Real Property is a leasehold or easement
interest, such Mortgage or other instrument or instruments shall
include normal and customary provisions with respect thereto, in each
case together with evidence of the filing of all such financing
statements and other instruments as may be necessary to perfect such
Lien;
(ii) a policy of title insurance (or a paid commitment to
issue title insurance) insuring that the Lien of the instruments
delivered pursuant to clause (i) above constitutes a valid and
perfected first priority mortgage Lien on such Real Property in an
aggregate amount equal to the lesser of the fair market value of the
Real Property and the then outstanding principal amount of the Secured
Obligations, together with an Officers' Certificate stating that any
specific exceptions to such title insurance are Excepted Liens,
together with such endorsements and other opinions of the type
included in the title insurance policy or otherwise delivered to the
Collateral Agent on the date hereof with respect to the Mortgaged
Property;
(iii) in the event such Real Property has a fair market value
in excess of $250,000, a Survey with respect thereto;
(iv) evidence of payment or a closing statement indicating
payments to be made by the applicable Obligor of all title premiums,
recording charges, transfer taxes and other costs and expenses,
including reasonable legal fees and disbursements of counsel for the
Collateral Agent (and any local counsel), that may be incurred to
validly and effectively subject the Real Property to the Lien of any
applicable Collateral Document to perfect such Lien;
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(v) an Officers' Certificate stating that PAAC has caused
there to be conducted by a reputable expert a review and analysis of
the environmental conditions relating to such Real Property and that,
in the reasonable and good faith judgment of the issuer thereof such
Real Property does not contain any conditions which would cause a
prudent institutional lender to decline to fund loans secured by such
Real Property, together with a copy of the written report of such
expert; and
(vi) such further documents, opinions, certificates or
instruments (including, without limitation (A) policies or
certificates of insurance, (B) Uniform Commercial Code, judgment and
tax lien searches, (C) consents, approvals, estoppels and tenant
subordination agreements and (D) Officers' Certificates in respect of
compliance with local codes or ordinances relating to building or fire
safety or structural soundness and the adequacy of utility services)
as are customarily provided to institutional mortgage lenders and as
the Collateral Agent, the Trustee or Term Loan Agent may require;
(d) Personal Property Investment Documentation. If the
Released Trust Moneys are not invested in Real Property:
(i) an instrument sufficient to grant to the Collateral Agent,
for the benefit of the Secured Parties (A) substantially the same
rights and remedies in respect of such personal property interest as
granted thereto under the Collateral Documents executed and delivered
on the date hereof and (B) a valid first priority Lien on such
personal property interest subject to no Liens other than Liens
permitted under such instrument, together with evidence of the filing
of such financing statements and other instruments as may be necessary
to perfect such Liens, provided that in no event shall the Collateral
Agent be granted any security interests in any Obligor Collateral; and
(ii) evidence of payment or a closing statement indicating
payments to be made by the applicable Obligor of all filing fees,
recording charges, transfer taxes and other
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costs and expenses, including reasonable legal fees and disbursements
of counsel for the Collateral Agent (and any local counsel), that may
be incurred to validly and effectively subject such personal property
to the Lien of any Collateral Document;
(e) Opinion of Counsel. An Opinion of Counsel stating that
the documents that have been or are therewith delivered to the Collateral Agent
or the Secured Parties are enforceable (subject to customary exceptions),
create the Liens purported to be created thereby, have been duly authorized,
executed and delivered and do not conflict with any other agreements, conform
to the requirements of this Agreement and that all conditions precedent
provided for herein and in the Indenture and Term Loan Agreement (if any)
relating to such application of Trust Moneys have been complied with; and
(f) Other Documentation. All documentation required under
Trust Indenture Act Section 314(d).
Upon compliance with the foregoing provisions of this Section,
the Collateral Agent, at the direction of the Trustee, shall apply or cause to
be applied the Released Trust Moneys as directed and specified by PAAC.
4.5 Powers Exercisable Notwithstanding Default or Event of
Default. In case a Default either under the Indenture or the Term Loan
Agreement or an Event of Default either under the Indenture or the Term Loan
Agreement shall have occurred and shall be continuing, the Obligors, while in
possession of the Collateral (other than cash, Cash Equivalents (as defined in
the Indenture as in effect on the date hereof), securities and other personal
property held by, or required to be deposited or pledged with, the Collateral
Agent hereunder or under the Collateral Documents), may do any of the things
enumerated in Sections 4.2, 4.3 and 4.4 hereof if the Majority Holders and Term
Loan Note Majority Holders shall consent to such action, in which event any
certificate filed under any of such Sections shall omit the statement to the
effect that no Default either under the Indenture or the Term Loan Agreement or
Event of Default either under the Indenture or the Term Loan Agreement has
occurred and is continuing. This Section 4.5 shall not apply, however, during
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the continuance of an Event of Default (as defined in the Indenture) of the
type specified in Section 501(1) or (2) of the Indenture or an Event of Default
(as defined in the Term Loan Agreement) of the type specified in Section 8.1.1
of the Term Loan Agreement.
4.6 Powers Exercisable by Trustee or Receiver. In case the
Collateral (other than any cash, Cash Equivalents, securities and other
personal property held by, or required to be deposited or pledged with, the
Collateral Agent hereunder or under the Collateral Documents) shall be in the
possession of a receiver or trustee lawfully appointed, the powers hereinbefore
in this Article 4 conferred upon the Obligors with respect to the withdrawal or
application of Trust Moneys may be exercised by such receiver or trustee, in
which case a certificate signed by such receiver or trustee shall be deemed the
equivalent of any Officers' Certificate required by this Article. If the
Collateral Agent shall be in possession of any of the Collateral hereunder or
under any of the Collateral Documents, such powers may be exercised by the
Collateral Agent in its discretion, provided, however, that the Collateral
Agent shall not be required to exercise any such powers.
ARTICLE 5
COLLATERAL ACCOUNT
5.1 Collateral Account. The Collateral Agent shall
establish and maintain until all amounts due to all Secured Parties have been
paid to such Secured Parties, at the office of its corporate trust division, a
separate collateral trust account (the "Collateral Account"), which may be a
notional account, for the benefit of the Secured Parties. All funds on deposit
in the Collateral Account shall be held, applied and disbursed by the
Collateral Agent as part of the Trust Estate in accordance with the terms of
this Agreement.
5.2 Investment of Funds. The Collateral Agent shall
invest and reinvest moneys on deposit in the Collateral Account at any time in
Eligible Investments (as defined in the Indenture as in effect on the date
hereof) as directed in a writing from
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the Companies. The Companies shall bear the risk of loss on any such
investment (including loss of principal) made hereunder and shall, upon demand
of the Collateral Agent, deliver immediately available funds to the Collateral
Agent in an amount equal to such loss or losses.
ARTICLE 6
APPLICATION OF CERTAIN AMOUNTS UPON DEFAULT
6.1 Application of Trust Moneys upon Default. (a) If a
Default either under the Indenture or the Term Loan Agreement or an Event of
Default either under the Indenture or the Term Loan Agreement has occurred and
is continuing, and either the Indenture Obligation or the Term Loan Obligation
has been accelerated, then upon the instructions of either the Note Majority
Holders or the Term Loan Note Majority Holders, the Collateral Agent shall, as
soon as practicable, apply the Trust Moneys and any Insurance Proceeds, Net
Awards, Rents (as defined in the Mortgages) or other amounts or proceeds from
the sale or other disposition of or realization upon any Collateral (including
proceeds of any claim under the Title Policies) as follows: first to the
Collateral Agent's Fees and thereafter (i) to the Trustee in an amount equal to
the product of (x) the total amount available for distribution on such
Distribution Date under this Section 6.1 (such amount, "Total Net Proceeds")
and (y) the Trustee's Pro Rata Share as of such Distribution Date and (ii) to
the Term Loan Agent in an amount equal to the product of (x) Total Net Proceeds
and (y) the Term Loan Agent's Pro Rata Share as of such Distribution Date.
(b) Upon payment in full of all Collateral Agent's Fees and
all Secured Obligations, any balance shall be paid by the Collateral Agent to
PAAC or the successors or assigns of PAAC, as their interests may appear, or to
such Person who may be lawfully entitled to receive the same.
6.2 Payment Provisions. For the purposes of Section 6.1,
all interest accrued and unpaid on any of the Secured Obligations pursuant to
the terms of any Debt Instrument shall, as between the Secured Parties and
irrespective of whether
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recognized or allowed by any bankruptcy proceeding, be treated as due and owing
on the Secured Obligations.
6.3 Foreclosure of Less than the Total Secured Obligations.
In the event that the Collateral Agent is not authorized pursuant to Section
2.2(b) to accelerate the Secured Obligations as a whole in connection with an
exercise of remedies with respect to the Collateral, and the Trustee or the
Term Loan Agent, as the case may be, does not otherwise accelerate its
respective obligation prior to the exercise of remedies by the Collateral Agent
under the applicable Mortgage, the proceeds of such exercise of remedies shall
be applied, notwithstanding Section 6.1, solely to the obligation being
accelerated.
ARTICLE 7
AGREEMENTS WITH COLLATERAL AGENT
7.1 Delivery of Debt Instruments. On the date hereof,
each of the Companies shall deliver to the Collateral Agent a true and complete
copy of each document evidencing or securing the Term Loan Obligation and the
Indenture Obligation to which it is a party as in effect on the date hereof.
Promptly upon the execution thereof, each of the Companies shall deliver to the
Collateral Agent a true and complete copy of any and all amendments,
modifications or supplements of or to any of the foregoing to which it is a
party and copies of any such document or agreement it hereafter delivers.
7.2 Information as to Holders. The Companies shall
deliver to the Collateral Agent on or before each anniversary of the date of
this Agreement, and from time to time upon request of the Collateral Agent, a
list setting forth, for the Term Loan Agreement and for the Indenture, (i) the
aggregate principal amount outstanding thereunder, (ii) the interest rate or
rates then in effect thereunder, and (iii) to the extent known to the
Companies, the names of the Term Loan Lenders and Holders and the unpaid
principal amount owing to each. The Companies shall furnish to the Collateral
Agent within 30 days after the date hereof a list setting forth the name and
address of each party to whom notices must be sent under the Term Loan
Agreement and the
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Indenture, respectively, and the Companies shall furnish promptly to the
Collateral Agent any changes or additions to such list.
7.3 Compensation and Expenses. The Companies shall pay
to the Collateral Agent, from time to time upon demand, (i) compensation (which
shall be reasonable and not in excess of the Collateral Agent's customary
compensation for similar services and shall not be limited by any provision of
law in regard to compensation of a trustee of an express trust) for its
services hereunder and for administering the Trust Estate and (ii) all of the
fees, costs and expenses of the Collateral Agent (including, without
limitation, the reasonable fees and disbursements of its counsel) (a) arising
in connection with the preparation, execution, delivery, modification and
termination of this Agreement, and the enforcement of any provisions hereof, or
(b) incurred or required to be advanced in connection with the administration
of the Trust Estate, and the preservation, protection or defense of the
Collateral Agent's rights under this Agreement under the Collateral Documents
and in and to the Collateral and the Trust Estate. The obligations of the
Companies under this Section 7.3 shall survive the termination of the other
provisions of this Agreement.
7.4 Stamp and Other Similar Taxes. The Companies shall
indemnify and hold harmless the Collateral Agent and each Secured Party (and
each Person for whom any Secured Party acts as trustee, agent or fiduciary)
from any present or future claim for liability for any mortgage, stamp,
recording, intangibles or other similar tax and any penalties or interest with
respect thereto, which may be assessed, levied or collected by any jurisdiction
in connection with this Agreement, any Collateral Document or any Secured
Obligation. The obligations of the Companies under this Section 7.4 shall
survive the termination of the other provisions of this Agreement.
7.5 Filing Fees, Excise Taxes, etc. The Companies shall
pay or reimburse the Collateral Agent for any and all amounts in respect of all
search, filing, intangibles, transfer, recording and registration fees, taxes,
excise taxes and other similar imposts which may be payable or determined to be
payable in respect of the execution, delivery, performance and enforcement of
this Agreement, any Collateral Document or any
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Secured Obligation to the extent the same may be paid or reimbursed by the
Companies without subjecting the Collateral Agent or any Secured Party to any
civil or criminal liability. The obligations of the Companies under this
Section 7.5 shall survive the termination of the other provisions of this
Agreement.
7.6 Indemnification. (a) The Companies agree to pay,
indemnify, and hold the Collateral Agent harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of this Agreement and the Collateral Documents unless arising from the gross
negligence or willful misconduct of the Collateral Agent.
(b) In any suit, proceeding or action brought by the
Collateral Agent with respect to the Collateral or for any sum owing in respect
of Secured Obligations, or to enforce the provisions of any Collateral
Document, the Companies shall save, indemnify and keep the Collateral Agent
harmless from and against all expenses, loss or damage suffered by reason of
any defense, set-off, counterclaim, recoupment or reduction of liability
whatsoever incurred or suffered by the Collateral Agent arising out of a breach
by the Companies of any obligation set forth in this Agreement, and all such
obligations of the Companies shall be and remain enforceable against and only
against the Companies. The provisions of this Section 7.6 shall survive the
termination of the other provisions of this Agreement.
7.7 Further Assurances. At any time and from time to
time, upon the written request of the Collateral Agent, and at the expense of
the Companies, the Companies shall promptly execute and deliver any and all
such further instruments and documents and take such further action as the
Collateral Agent reasonably deems necessary or desirable in obtaining the full
benefits intended to be provided by this Agreement.
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ARTICLE 8
COLLATERAL AGENT
8.1 Acceptance of Trust. The Collateral Agent, for
itself and its successors, hereby accepts the trust created by this Agreement
upon the terms and conditions hereof. The Collateral Agent's duties in respect
of the Trust Estate shall include, without limitation, the review of
applications of PCAC, PAI or others for consents, waivers, releases or other
matters relating to the Trust Estate or the Collateral and the prosecution
following any Event of Default under either the Indenture or the Term Loan
Agreement of any action or proceeding or the taking of any nonjudicial remedial
action as shall be determined to be required pursuant to Sections 2.2 and 2.3.
The Collateral Agent shall forward copies of any written communication it
receives from the Companies to the Secured Parties.
8.2 Exculpatory Provisions. (a) The Collateral Agent
shall not be responsible in any manner whatsoever for the correctness of any
recitals, statements, representations or warranties made by the Companies
herein or in any other Collateral Document. The Collateral Agent makes no
representations as to the value or condition of the Trust Estate or any part
thereof, or as to the title of PCAC or PAI, as applicable, thereto or as to the
security afforded by the Collateral Documents or this Agreement or as to the
validity, execution (except its own execution thereof), enforceability,
legality or sufficiency of the Collateral Documents or this Agreement or of the
Secured Obligations, and the Collateral Agent shall incur no liability or
responsibility in respect of any such matters. The Collateral Agent shall not
be responsible for insuring the Trust Estate or for the payment of taxes,
charges, assessments or Liens upon the Trust Estate, except that, subject to
the provisions of Section 8.4(c), in the event the Collateral Agent enters into
possession of a part or all of the Collateral, the Collateral Agent shall use
reasonable efforts to preserve the part in its possession.
(b) The Collateral Agent shall not be required to
ascertain or inquire as to the performance by any Obligor of any of the
covenants or agreements contained herein, in any Collateral Document or in any
Debt Instrument or other document
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evidencing or securing the Secured Obligations. Whenever it is necessary, or
in the opinion of the Collateral Agent advisable, for the Collateral Agent to
ascertain the amount of Secured Obligations then held by a Secured Party (or
any Person for whom a Secured Part acts as trustee, agent or fiduciary), the
Collateral Agent may rely on a certificate as to such amount from any trustee,
agent or fiduciary constituting or representing such Secured Party and if any
such Secured Party shall not provide such information to the Collateral Agent,
such Secured Party shall not be entitled to receive payments hereunder (in
which case the amounts otherwise payable to such Secured Party shall be held in
trust for such Secured Party in the Collateral Account) until such Secured
Party has provided such information to the Collateral Agent.
(c) The Collateral Agent shall not be personally liable
for any action taken or omitted to be taken by it in accordance with this
Agreement or any Collateral Document or any Debt Instrument or other document
evidencing or securing the Secured Obligations except for its own gross
negligence or willful misconduct.
8.3 Delegation of Duties. The Collateral Agent may
execute any of the trusts or powers hereof and perform any duty hereunder
either directly or by or through agents or attorneys-in-fact. The Collateral
Agent shall be entitled to advice of counsel concerning all matters pertaining
to such trusts, powers and duties. The Collateral Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it without gross negligence of willful misconduct in the employment
of such agents or attorneys-in-fact.
8.4 Reliance by the Collateral Agent. (a) The Collateral
Agent may consult with counsel, and any opinion of such counsel shall be full
and complete authorization and protection in respect of any action taken or
suffered by it hereunder in accordance therewith. The Collateral Agent shall
have the right at any time to seek instructions concerning the administration
of the Trust Estate from any court of competent jurisdiction.
<PAGE> 47
47
(b) The Collateral Agent may rely, and shall be fully
protected in acting, upon any resolution, statement, certificate, instrument,
opinion, direction, instruction, report, notice, request, consent, order, bond
or other paper or document which it has no reason to believe to be other than
genuine and to have been signed or presented by the proper party or parties or,
in the case of cables, telecopies and telexes, to have been sent by the proper
party or parties. In the absence of its gross negligence or willful
misconduct, the Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Collateral Agent and conforming to
the requirements of this Agreement or any Collateral Document.
(c) The Collateral Agent shall not be under any
obligation to exercise any of the rights or powers vested in the Collateral
Agent by this Agreement unless the Collateral Agent shall have been provided
adequate security and indemnity against the costs, expenses and liabilities
that may be incurred by it in compliance with such request or direction,
including, without limitation, such reasonable advances as may be requested by
the Collateral Agent. Nothing in this Agreement shall obligate any Secured
Party or any Person for whom a Secured Party acts as trustee, agent or
fiduciary, as applicable to provide any such security or indemnity or to make
any such advance unless such Secured Party or Person agrees to do so, in its
sole discretion.
8.5 Resignation or Removal of the Collateral Agent. (a)
The Collateral Agent may at any time, (i) by giving 60 days' prior written
notice to the Secured Parties and the Companies, resign and be discharged of
the responsibilities hereby created, such resignation to become effective upon
the appointment of a successor collateral agent or collateral agents by the
Majority Holders and the acceptance of such appointment by such successor
collateral agent or collateral agents or (ii) be removed from its capacity as
the Collateral Agent with or without cause by the Majority Holders. If no
successor collateral agent or collateral agents shall be appointed and approved
within 60 days from the date of the giving of the aforesaid notice of
resignation or within 60 days from the date of such removal, the Collateral
Agent (notwithstanding the termination of all of its other duties
<PAGE> 48
48
and obligations hereunder by reason of such resignation or such removal) shall,
or any Secured Party may, apply to any court of competent jurisdiction to
appoint a successor collateral agent or collateral agents to act hereunder.
Any successor collateral agent or collateral agents so appointed by such court
shall immediately and without further act be superseded by any successor
collateral agent or collateral agents appointed by the Majority Holders upon
the acceptance of such appointment by such successor collateral agent or
collateral agents.
(b) If at any time the Collateral Agent shall resign or
otherwise become incapable of acting, or if at any time a vacancy shall occur
in the office of the Collateral Agent by virtue of the removal of the
Collateral Agent pursuant to clause (ii) of Section 8.5(a) or for any other
cause, a successor collateral agent or collateral agents may be appointed by
the Majority Holders, and the powers, duties, authority and title of the
predecessor collateral agent or collateral agents shall be terminated and
cancelled without procuring the resignation of such predecessor collateral
agent or collateral agents, and without any other formality (except as may be
required by applicable law).
(c) The appointment and designation referred to in
subsection 8.5(b) shall, after any required filing, be full evidence of the
right and authority to make the same and of all the facts therein recited, and
this Agreement shall vest in such successor collateral agent or collateral
agents, without any further act, deed or conveyance, all of the estate and
title of its predecessor or their predecessors, and upon such filing for record
the successor collateral agent or collateral agents shall become fully vested
with all the estates, properties, rights, powers, trusts, duties, authority and
title of its predecessor or their predecessors; but such predecessor or
predecessors shall, nevertheless, on the written request of the Majority
Holders, the Companies or its or their successor collateral agent or collateral
agents, execute and deliver an instrument transferring to such successor or
successors all the estates, properties, rights, powers, trusts, duties,
authority and title of such predecessor or predecessors hereunder. Each such
predecessor or predecessors shall deliver all securities and moneys held by it
or them to such successor collateral agent or collateral agents.
<PAGE> 49
49
(d) Any required filing for record of the instrument
appointing a successor collateral agent or collateral agents as hereinabove
provided shall be at the expense of the Companies. The resignation of any
collateral agent or collateral agents and the instrument or instruments
removing any collateral agent or collateral agents, together with all other
instruments, deeds and conveyances provided for in this Article 8 shall, if
required by law, be forthwith recorded, registered and filed by and at the
expense of the Companies, wherever this Agreement is recorded, registered and
filed.
8.6 Status of Successors to the Collateral Agent. Every
successor to the Collateral Agent appointed pursuant to Section 8.5 shall be a
bank or trust company in good standing and having power so to act, incorporated
under the laws of the United States or any State thereof or the District of
Columbia, and having its principal corporate trust office within the 48
contiguous States, and shall also have capital, surplus and undivided profits
of not less than $100,000,000, if there be such an institution with such
capital, surplus and undivided profits willing, qualified and able to accept
the trust upon reasonable or customary terms.
8.7 Merger of the Collateral Agent. Any corporation into
which the Collateral Agent may be merged, or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Collateral Agent shall be a party, shall be the Collateral Agent under this
Agreement without the execution or filing of any paper or any further act on
the part of the parties hereto.
8.8 Appointment of Additional and Separate Collateral
Agent. Whenever (i) the Collateral Agent shall deem it necessary or prudent
(in accordance with the advice or opinion of its counsel) in order to conform
to any law of any jurisdiction in which all or any part of the Collateral shall
be situated or to make any claim or bring any suit with respect to or in
connection with the Collateral, or (ii) the Collateral Agent shall be advised
by counsel satisfactory to it that it is so necessary or prudent in the
interest of the Secured Parties, then, in any such case, the Collateral Agent
shall execute and deliver from time to time all instruments and agreements
necessary or proper to
<PAGE> 50
50
constitute another bank or trust company or one or more Persons approved by the
Collateral Agent either to act as additional trustee or trustees of all or any
part of the Trust Estate, jointly with the Collateral Agent, or to act as
separate trustee or trustees of all or any part of the Trust Estate, in any
such case with such powers as may be provided in such instruments or
agreements, and to vest in such bank, trust company or Person as such
additional trustee or separate trustee, as the case may be, any property,
title, right or power of the Collateral Agent deemed necessary or advisable by
the Collateral Agent. The Companies and the Secured Parties hereby consent to
all actions taken by the Collateral Agent under the foregoing provisions of
this Section 8.8.
ARTICLE 9
CERTAIN INTERCREDITOR PROVISIONS
9.1 Contesting Liens or Security Interest. The Collateral
Agent, each Secured Party and, by acceptance of the benefits of this Agreement
and the Collateral Documents, each Person for whom a Secured Party acts as
trustee, agent or fiduciary, as applicable, hereby agree that (a) the liens and
security interests granted to the Collateral Agent under the Collateral
Documents shall be treated, as among the Secured Parties and each of such
Persons, as having equal priority and shall at all times be shared by the
Secured Parties as provided herein, regardless of any claim or defense
(including, without limitation, any claims under the fraudulent transfer,
preference or similar avoidance provisions of applicable bankruptcy, insolvency
or other laws affecting the rights of creditors generally) to which the
Collateral Agent or any Secured Party or any of such Persons may be entitled or
subject and (b) none of them shall contest the validity, perfection, priority
or enforceability of any lien or security interest granted to the Collateral
Agent.
9.2 No Additional Rights for Companies Hereunder. If a
Secured Party shall enforce its rights or remedies in violation of the terms of
this Agreement, the Companies agree that they shall not raise such violation as
a defense to collection or
<PAGE> 51
51
enforcement by the other Secured Party with respect to the Indenture Obligation
or the Term Loan Obligation, as the case may be, or assert such violation as a
counterclaim or basis for setoff or recoupment against either Secured Party.
9.3 Concerning Collateral Agent. Notwithstanding anything to
the contrary set forth herein, no provision of this Agreement shall require the
Collateral Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of its duties hereunder, or in the
exercise of any of its powers if it shall have reasonable grounds for believing
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
9.4 Authority. Each of the parties hereto represents and
warrants to all other parties hereto that the execution, delivery and
performance by or on behalf of such party of this Agreement has been duly
authorized by all necessary action, corporate or otherwise, does not violate
any provision of law, governmental regulation, or any agreement or instrument
by which such party is bound, and requires no governmental or other consent
that has not been obtained and is not in full force and effect.
ARTICLE 10
TERMINATION; EXPIRATION OF CERTAIN RIGHTS
10.1 Termination. This Agreement shall terminate when all
amounts owing in respect of all the Secured Obligations shall have been paid in
full in cash.
10.2 Amendment of Collateral Documents. Subject to the
requirements of Sections 2.2, 3.2(c) and 4.5 hereof, the Majority Holders
(provided that the Majority Holders include the Term Loan Note Majority
Holders) shall have the exclusive authority to direct the Collateral Agent to
amend, supplement or waive any provision of any Collateral Document or to
direct the Collateral Agent to forebear from enforcing any provision of any
Collateral Document; provided, however, that no such amendment, supplement or
waiver shall affect the right of any Secured Party
<PAGE> 52
52
(or any Person for whom a Secured Part acts as trustee, agent or fiduciary) not
consenting thereto in writing to equal and ratable security under the
Collateral Documents. In addition, no amendment or modification to any of the
Collateral Documents shall impose any additional obligations or
responsibilities upon any Secured Party or otherwise adversely effect its
rights hereunder without the consent of each of the Secured Parties affected
thereby.
ARTICLE 11
MISCELLANEOUS
11.1 Amendments to Financing Arrangements or to This
Agreement. The Collateral Agent, the Term Loan Agent and the Trustee shall
each use its best efforts to notify the other or others of any amendment,
modification or waiver to any document evidencing or securing the Secured
Obligations, but the failure to do so shall not create a cause of action
against the party failing to give such notice or create any claim or right on
behalf of any third party. Each of the parties shall, upon request of the
other or others, provide copies of all such modifications, amendments and
waivers and copies of all other documentation relevant to the Collateral. All
modifications, amendments and waivers of this Agreement must be in writing and
duly executed by an authorized officer of the Collateral Agent and each Secured
Party to be binding and enforceable, and the written consent of the Companies
shall be required only if the amendment, modification or waiver would impose,
or have the effect of imposing, on the Companies, more restrictive covenants or
greater obligations than those applicable to the Companies under this
Agreement, which consent shall not be unreasonably withheld, provided, however,
the written consent of the Companies shall not be required with respect to an
amendment of this Agreement pursuant to clause (b) of Section 3.11.
11.2 Notices, Distributions and Payments. (a) In each
case herein or in any Collateral Document where any payment or distribution is
to be made or notice is to be given to Secured Parties, (i) such payments,
distributions and notices in respect of the Indenture Obligation shall be made
to the Trustee for the
<PAGE> 53
53
benefit of the Holders and (ii) such payments, distributions and notices in
respect of the Term Loan Obligation shall be made to the Term Loan Agent for
the benefit of the Term Loan Lenders.
(b) All notices requests, demands and other communications
provided for or permitted hereunder shall be in writing (including telex and
telecopy communications) and shall be sent by mail, telex, telecopier or hand
delivery:
(i) If to any of the Companies, to such Company at the
following address:
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Attention: Vice President, General Counsel
and Secretary
(ii) If to the Collateral Agent, to the following address:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
(iii) If to the Trustee, to the following address:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Department
(iv) If to the Term Loan Agent, to the following address:
Bank of America Illinois
231 South LaSalle Street
8th Floor
Chicago, Illinois 60697
Attention: Agency
Management Services
<PAGE> 54
54
(v) If to the Agent Bank, to the following address:
Bank of America Illinois
231 South LaSalle Street
8th Floor
Chicago, Illinois 60697
Attention: Agency
Management Services
All such notices, requests, demands and communications shall be deemed to have
been duly given or made, when delivered by hand or five business days after
being deposited in the mail, postage paid, when telexed answer back received
and when telecopied, receipt acknowledged. Any party hereto may change its
address set forth in this Section 11.2(b) by notice to the other parties given
in accordance with the provisions of this Section 11.2(b).
11.3 Headings. Headings used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
11.4 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
11.5 Dealings with the Companies. Upon any application or
demand by the Companies to the Collateral Agent to take or permit any action
under any of the provisions of this Agreement or under any Collateral Document,
the Companies shall furnish to the Collateral Agent an officers' certificate
and opinion of counsel stating that all conditions precedent, if any, provided
for in this Agreement or such Collateral Document, as the case may be, relating
to the proposed action have been complied with, except that in the case of any
such application or demand as to which the furnishing of such documents is
specifically required by any provision of this Agreement or any Collateral
Document relating to such particular application or demand, no additional
certificate or opinion need be furnished.
<PAGE> 55
55
11.6 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of each of the parties hereto and shall inure to the
benefit of the Secured Parties (and the Persons for whom the Secured Parties
act as trustee, agent or fiduciary, as applicable) and their respective
successors and assigns and nothing herein or in any Collateral Document is
intended or shall be construed to give any other Person any right, remedy or
claim under, to or in respect of this Agreement, the Collateral or the Trust
Estate.
11.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
11.8 Counterparts. This Agreement may be executed in
separate counterparts, each of which shall be an original and all of which
taken together shall constitute one and the same instrument.
11.9 Execution by Agent Bank. The Agent Bank has executed
and delivered this Agreement solely for purposes of agreeing to, and receiving
the benefits of, the provisions of Section 2.2(c), (d) and (e) hereof.
11.10 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING HERETO SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY (TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) IN THE
COURTS OF THE STATE OF NEW YORK, NEW YORK COUNTY, OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT
SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE OBLIGORS HEREBY
EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK, NEW YORK COUNTY, AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. THE
<PAGE> 56
56
OBLIGORS IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW
YORK. EACH OBLIGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT ANY OBLIGOR HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH
OBLIGOR HEREBY IRREVOCABLY WAIVES (TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW) SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT.
11.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING HERETO.
EACH OBLIGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION HEREOF AND OF EACH
OTHER DOCUMENT DESCRIBED HEREIN TO WHICH IT IS A PARTY) AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE COLLATERAL AGENT AND SECURED PARTIES ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER DOCUMENT.
[Signature page follows.]
<PAGE> 57
57
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above written.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By /s/ JAMES J. MCGINLEY
----------------------------
Name: James J. McGinley
Title: Vice President
BANK OF AMERICA ILLINOIS, as
Term Loan Agent
By /s/ DAVID A. JOHANSON
----------------------------
Name: David A. Johanson
Title: Vice President
UNITED STATES TRUST COMPANY
OF NEW YORK, as
Collateral Agent
By /s/ JAMES J. MCGINLEY
----------------------------
Name: James J. McGinley
Title: Vice President
PIONEER AMERICAS ACQUISITION
CORP.
By /s/ PHILIP J. ABLOVE
----------------------------
Name: Philip J. Ablove
Title: Vice President
<PAGE> 58
58
PIONEER CHLOR ALKALI COMPANY,
INC.
By /s/ PHILIP J. ABLOVE
----------------------------
Name: Philip J. Ablove
Title: Vice President
PIONEER AMERICAS, INC.
By /s/ PHILIP J. ABLOVE
----------------------------
Name: Philip J. Ablove
Title: Vice President
BANK OF AMERICA ILLINOIS, as
Agent Bank
By /s/ DAVID A. JOHANSON
----------------------------
Name: David A. Johanson
Title: Vice President
<PAGE> 1
EXHIBIT 4.8
PIONEER AMERICAS ACQUISITION CORP.
$200,000,000 AGGREGATE PRINCIPAL
AMOUNT OF 9 1/4% SENIOR
SECURED NOTES DUE 2007
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as
of June 17, 1997, by and among Pioneer Americas Acquisition Corp., a Delaware
corporation (the "Company"), the companies listed on Schedule 1 hereto
(collectively, the "Subsidiary Guarantors" and together with the Company, the
"Registrants") and Donaldson, Lufkin & Jenrette Securities Corporation and
Salomon Brothers Inc (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated June 11, 1997, among the Company, the Subsidiary Guarantors
and the Initial Purchasers (the "Purchase Agreement") relating to the sale by
the Company to the Initial Purchasers of $200,000,000 aggregate principal
amount of the Company's 9 1/4% Senior Secured Notes due 2007 (the "Series A
Notes") and the guarantees thereon of the Subsidiary Guarantors (the
"Guarantees" and together with the Series A Notes, the "Securities"). In order
to induce the Initial Purchasers to enter into the Purchase Agreement, the
Company and the Subsidiary Guarantors have agreed to provide the registration
rights set forth in this Agreement for the equal benefit of the Initial
Purchasers and their respective direct and indirect transferees. The execution
and delivery of this Agreement is a condition to the Initial Purchasers'
obligation to purchase the Securities under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Advice: See Section 5.
<PAGE> 2
Affiliate: An "affiliate" as defined in Rule 405 under the
Securities Act (as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission).
Applicable Period: See Section 2.
Business Day: Each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York
or The New York Stock Exchange are authorized or obligated by law or executive
order to close.
Closing Date: The Closing Date as defined in the Purchase
Agreement.
Commission: The Securities and Exchange Commission.
Company: See the introductory paragraph to this Agreement.
Depositary: The Depository Trust Company, or any other
depositary appointed by the Company, provided that such depositary must have an
address in the Borough of Manhattan, The City of New York.
Effectiveness Date: The 150th day after the Closing Date.
Effectiveness Period: See Section 3.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: See Section 2.
Exchange Offer Registration Statement: See Section 2.
Exchange Securities: See Section 2.
Filing Date: The 30th day after the Closing Date.
Holder: Any holder of Registrable Securities.
2
<PAGE> 3
Indenture: The Indenture, dated as of June 17, 1997 among the
Company, the Subsidiary Guarantors and United States Trust Company of New York,
as trustee, pursuant to which the Securities are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this
Agreement.
Initial Shelf Registration: See Section 3.
Majority: At least a majority of the then Outstanding (within
the meaning of the Indenture) aggregate principal amount of the securities
described.
Managing Underwriters: The investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
Liquidated Damages: See Section 4.
NASD: National Association of Securities Dealers, Inc.
Participating Broker-Dealer: See Section 2.
Person: An individual, trustee, corporation, partnership, joint
stock company, trust, unincorporated association, union, business association,
firm or other legal entity.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance
upon Rule 430A under the Securities Act (as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission)), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
3
<PAGE> 4
Registrable Securities: The Securities upon original issuance
thereof and at all times subsequent thereto, until (i) a Registration Statement
covering such Securities or the Exchange Securities to be exchanged for such
Securities (and in the case of any Resale Securities, any resale thereof) has
been declared effective by the Commission and such Securities have been
disposed of or exchanged (or, in the case where such Registration Statement
covers the resale of Resale Securities, such Securities have been exchanged and
the Resale Securities received therefor have been resold), as the case may be,
in accordance with such effective Registration Statement, (ii) such Securities
are sold in compliance with Rule 144, (iii) any such Securities shall have been
otherwise transferred and new certificate(s) evidencing such Securities not
bearing any legend restricting further transfer shall have been delivered by or
on behalf of the Company and such Securities shall be tradable by each Holder
thereof without restriction under the Securities Act or the Exchange Act and
without material restriction under the applicable state securities or "Blue
Sky" laws or (iv) any such Securities cease to be outstanding.
Registrants: See the introductory paragraph to this Agreement.
Registration Default: See Section 4.
Registration Statement: Any registration statement of the
Registrants, including, but not limited to, the Exchange Offer Registration
Statement, that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus contained therein,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
Resale Securities: Any Exchange Securities received by a
Restricted Person pursuant to the Exchange Offer, and at all times subsequent
thereto, until such Exchange Securities have been resold by such Restricted
Person.
Restricted Person: (i) Any Affiliate of any of the Registrants,
(ii) the Initial Purchasers or (iii) any Affiliate of the Initial Purchasers
(other than Affiliates of the Initial Purchasers that (x) are acquiring the
Exchange Securities in the
4
<PAGE> 5
ordinary course of business and do not have an arrangement with any Person to
distribute the Exchange Securities and (y) may trade such Exchange Securities
without restriction under the Securities Act).
Rule 144: Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the Commission.
Rule 144A: Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the Commission.
Rule 158: Rule 158 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
Rule 415: Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission.
Securities: See the introductory paragraphs to this Agreement.
Securities Act: The Securities Act of 1933, as amended.
Series A Notes: See the introductory paragraphs to this
Agreement.
Series B Notes: See Section 2.
Shelf Filing Date: The 30th day after the date the Shelf Notice
is delivered.
Shelf Notice: See Section 2.
Shelf Registration: See Section 3.
Staff: See Section 2.
Subsidiary Guarantors: See the introductory paragraph to this
Agreement.
5
<PAGE> 6
Subsequent Shelf Registration: See Section 3.
Trust Indenture Act: The Trust Indenture Act of 1939, as
amended.
Trustee: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Securities.
Underwritten registration or underwritten offering: A
registration in which securities of the Registrants are sold to one or more
underwriters for reoffering to the public.
2. Exchange Offer; Shelf Notice
(a) The Company and the Subsidiary Guarantors agree to use
their best efforts, to file with the Commission as soon as practicable after
the Closing Date, but in no event later than the Filing Date, a registration
statement (the "Exchange Offer Registration Statement") on an appropriate form
under the Securities Act with respect to a proposed offer by the Registrants
(the "Exchange Offer") to the Holders of Registrable Securities to issue and
deliver to such Holders, in exchange for the Registrable Securities, a
corresponding principal amount of debt securities of the Company (the "Series B
Notes"), guaranteed by the Subsidiary Guarantors (the Series B Notes together
with such guarantees, the "Exchange Securities"), which are substantially
identical to the Series A Notes and the Guarantees (except that the Exchange
Securities shall have been registered pursuant to an effective Registration
Statement under the Securities Act), and are entitled to the benefits of the
Indenture or a trust indenture which is identical in all material respects to
the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the
Commission to effect or maintain the qualification thereof under the Trust
Indenture Act, and which, in either case, has been qualified under the Trust
Indenture Act).
The Company and the Subsidiary Guarantors agree to use their best
efforts to (x) cause the Exchange Offer Registration Statement to become
effective under the Securities Act on or before the Effectiveness Date; (y)
keep the Exchange Offer open for acceptance for at least 20 Business Days (or
longer if required by applicable law) after the date that notice of the
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Exchange Offer is mailed to Holders and to conduct the Exchange Offer in
accordance with such procedures as may be required by applicable provisions of
the Exchange Act, including, without limitation, the requirements of Rule 13e-4
(other than the filing requirements of such Rule) and Regulation 14E under the
Exchange Act (in each case, as such Rule or Regulation may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission); and (z) consummate the Exchange Offer on or prior to the 30th
Business Day following the date the Exchange Offer Registration Statement is
declared effective; it being the objective of such Exchange Offer to enable
each Holder of Registrable Securities so electing to exchange its Registrable
Securities for Exchange Securities (assuming that such Holder is not an
Affiliate of the Company or any Subsidiary Guarantor, acquires the Exchange
Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in a public distribution of the
Exchange Securities within the meaning of the Securities Act) and to trade in
such Exchange Securities from and after their receipt without any limitations
or restrictions on transfer under the Securities Act or the Exchange Act and
without restrictions on transfer under the securities or Blue Sky laws of a
substantial portion of the several states of the United States.
The Initial Purchasers acknowledge and agree that the foregoing
statement of the objective of the Exchange Offer is based upon existing
interpretations of the staff of the Commission's Division of Corporation
Finance (the "Staff"), which interpretations are subject to change without
notice. Each Holder who participates in the Exchange Offer will be required to
represent to the Registrants that any Exchange Securities received by it will
be acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities, and that such Holder
is not an Affiliate of any of the Registrants (within the meaning of the
Securities Act). The Company shall inform the Initial Purchasers of the names
and addresses of the Holders to whom the Exchange Offer is made, and the
Initial Purchasers shall have the right to contact such Holders and otherwise
facilitate the tender of Registrable Securities in the Exchange Offer. Upon
consummation of the Exchange Offer in accordance with this Section 2, the
provisions of this Agreement shall continue to apply, mutatis mutandis, solely
with respect to (i) Resale
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Securities and (ii) Exchange Securities held by Participating Broker-Dealers,
to the extent set forth in Section 2(b), and the Registrants shall have no
further obligation to register Registrable Securities (other than Resale
Securities) pursuant to Section 3.
(b) The Registrants shall include within each Prospectus
distributed to any Holders of Registrable Securities contained in the Exchange
Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff with respect to
the potential "underwriter" status of any broker-dealer that holds Registrable
Securities acquired for its own account as a result of market-making or other
trading activities and will be the beneficial owner (as defined in Rule 13d-3
under the Exchange Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission) of Exchange
Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"), whether such positions or policies have been
publicly disseminated by the Staff or such positions or policies, in the
reasonable judgment of the Initial Purchasers, represent the prevailing views
of the Staff, including a statement that any such broker-dealer who receives
Exchange Securities for Registrable Securities pursuant to the Exchange Offer
may be deemed to be an "underwriter" within the meaning of the Securities Act
and must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Securities, which prospectus
delivery requirement may be satisfied by the delivery of the final Prospectus
contained in the Exchange Offer Registration Statement. Such "Plan of
Distribution" section shall also state that the delivery by a Participating
Broker-Dealer of the final Prospectus relating to the Exchange Offer in
connection with resales of Exchange Securities shall not be deemed to be an
admission by such Participating Broker-Dealer that it is an "underwriter"
within the meaning of the Securities Act, and shall contain all other
information with respect to resales of the Exchange Securities by Participating
Broker-Dealers that the Commission may require in connection therewith, but
such "Plan of Distribution" shall not name any such Participating Broker-Dealer
or disclose the principal amount of Exchange Securities held by any such
Participating Broker-Dealer, except to the extent required by the Staff. Such
"Plan of Distribution" section shall also state that the Registrants agree to
allow the use of each
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<PAGE> 9
Prospectus distributed to any Holders of Registrable Securities by all persons
subject to the prospectus delivery requirements of the Securities Act,
including all Participating Broker-Dealers, to the extent set forth in the next
paragraph.
The Company and the Subsidiary Guarantors shall use their best
efforts to keep the Exchange Offer Registration Statement effective and to
amend and supplement the Prospectus contained therein as required by Section 5
hereof, to ensure that it is available for delivery by all persons subject to
the prospectus delivery requirements of the Securities Act for such period of
time as such persons must comply with such requirements in order to resell the
Exchange Securities, provided that such period shall not exceed 180 days (or
such longer period if extended pursuant to the last paragraph of Section 5)
(the "Applicable Period").
In connection with the Exchange Offer, the Company shall:
(i) mail or otherwise deliver to each Holder a copy of the
Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(ii) utilize the services of the Depositary for the Exchange
Offer;
(iii) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last Business Day
on which the Exchange Offer shall remain open, by sending to the
institution specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of Securities delivered for exchange, and a statement
that such Holder is withdrawing his election to have such Securities or
a portion thereof exchanged;
(iv) notify each Holder that any Security not tendered will
remain outstanding and continue to accrue interest, but will not retain
any rights under this Agreement (except in the case of the Initial
Purchasers and Participating Broker-Dealers as provided herein); and
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<PAGE> 10
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Company shall:
(A) accept for exchange all Securities or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer;
(B) deliver to the Trustee for cancellation all Securities or
portions thereof so accepted for exchange; and
(C) issue, and cause the Trustee to authenticate and deliver
promptly to each Holder of Securities, Exchange Securities or Resale
Securities equal in principal amount to the Securities of such Holder so
accepted for exchange.
The Exchange Securities may be issued under (i) the Indenture or
(ii) an indenture substantially identical to the Indenture, in either case with
such changes to the Indenture or any such identical trust indenture as are
necessary to comply with any requirements of the Commission to effect or
maintain the qualification thereof under the Trust Indenture Act, which
furthermore will provide that the Exchange Securities will not be subject to
the transfer restrictions set forth in the Indenture and that the Series B
Notes and the Series A Notes will vote and consent together on all matters as
one class and that neither the Series B Notes nor the Series A Notes will have
the right to vote or consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer,
the Company reasonably determines in good faith that (i) the Exchange
Securities would not, upon receipt, be tradeable by the Holders of the
Registrable Securities which are not Affiliates of any of the Registrants
without restriction under the Securities Act and without restrictions under
applicable state securities or Blue Sky laws or (ii) after conferring with
counsel, the Commission is unlikely to permit the consummation of the Exchange
Offer prior to the 30th Business Day following the Effectiveness Date, (2)
either of the Initial Purchasers advises the Company that it continues to hold
any portion of the Registrable Securities purchased by it pursuant to the
Purchase Agreement and requests that a Shelf Registration be filed with respect
to such Registrable Securities, (3) the Exchange Offer is
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<PAGE> 11
commenced and not consummated within 30 Business Days after the Effectiveness
Date for any reason or (4) any Holder of Securities determines that it is not
eligible to participate in the Exchange Offer or does not receive Exchange
Securities in the Exchange Offer which are tradeable without restriction under
the Securities Act and without restrictions under applicable state securities
or Blue Sky laws (other than the prospectus delivery requirements of
Participating Broker-Dealers) and so advises the Company within 10 Business
Days following consummation of the Exchange Offer, then the Company shall
promptly (and in any event within three Business Days) deliver to the Holders
and the Trustee written notice thereof (the "Shelf Notice") and shall file an
Initial Shelf Registration pursuant to Section 3. Following the delivery of a
Shelf Notice to the Holders of Registrable Securities (in the circumstances
contemplated by clauses (1) and (3) of the preceding sentence), the Company and
the Subsidiary Guarantors shall not have any further obligation to conduct the
Exchange Offer under this Section 2.
(d) In the event that the Company reasonably determines in
good faith and after conferring with counsel that (i) (A) the Exchange
Securities would not, upon consummation of any resale thereof by a Restricted
Person to any Person other than another Restricted Person, be tradeable by each
Holder thereof without restriction under the Securities Act and the Exchange
Act and without restriction under applicable state securities or Blue Sky laws,
or (B) the Commission is unlikely to permit the Registration Statement covering
the Exchange Offer to become effective prior to the Effectiveness Date solely
because such Registration Statement covers resales of the Exchange Securities
by Restricted Persons, then the Company shall promptly deliver a Shelf Notice
to the Restricted Persons who are Holders of Registrable Securities, and the
Registrants shall thereafter file an Initial Shelf Registration pursuant to,
and otherwise comply with, the provisions of Section 3; provided that, if a
Shelf Notice is not then otherwise required to be delivered pursuant to Section
2(c), such Initial Shelf Registration shall only cover resales of Registrable
Securities by Restricted Persons. Following the delivery of a Shelf Notice in
accordance with this Section 2(d) and compliance with the provisions of Section
3, the Registrants shall not have any further obligation under this Section 2
with respect to the filing of an offer to exchange the Registrable Securities
held by the Restricted Persons (including, without limitation, any obligation
to provide that a Registration Statement filed pursuant to Section 2(a)
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<PAGE> 12
cover resales of Exchange Securities by Restricted Persons); provided that, the
provisions of this Section 2 shall otherwise remain in full force and effect
with respect to Registrable Securities held by any Person other than a
Restricted Person.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section 2(c) or
2(d), then:
(a) Initial Shelf Registration. The Company and the
Subsidiary Guarantors shall as promptly as practicable after delivery of such
Shelf Notice prepare and file with the Commission a Registration Statement, on
an appropriate form under the Securities Act, for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable
Securities (or, if a Shelf Notice is delivered solely pursuant to Section 2(d),
all of the Registrable Securities held by Restricted Persons) (the "Initial
Shelf Registration"). If the Company and the Subsidiary Guarantors shall have
not yet filed the Exchange Offer Registration Statement, the Company and the
Subsidiary Guarantors shall use their best efforts to file with the Commission
the Initial Shelf Registration on or prior to the Filing Date. Otherwise, the
Company and the Subsidiary Guarantors shall use their best efforts to file with
the Commission the Initial Shelf Registration on or prior to the Shelf Filing
Date. The Company and the Subsidiary Guarantors shall not permit any
securities other than the Registrable Securities to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration. No Holder of
Registrable Securities may include any of its Registrable Securities in any
Shelf Registration pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 15 Business Days after receipt of a
request therefor, such information as the Company may, after conferring with
counsel with regard to information relating to Holders that would be required
by the Staff to be included in such Shelf Registration or Prospectus included
therein, reasonably request for inclusion in any Shelf Registration or
Prospectus included therein. No Holder of Registrable Securities that are to
be included in a Shelf Registration Statement shall be entitled to Liquidated
Damages pursuant to Section 4 unless and until such Holder shall have provided
all such reasonably requested information. Each Holder as to which any Shelf
Registration is being effected agrees to furnish promptly to the Company all
information to be disclosed
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in the applicable Shelf Registration or Prospectus included therein in order to
make the information previously furnished to the Company by such Holder not
materially misleading. The Company and the Subsidiary Guarantors shall use
their best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act on or prior to the 150th day following
delivery of the Shelf Notice and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is two
years from the effective date thereof (subject to extension pursuant to the
last paragraph of Section 5) (the "Effectiveness Period"), or such shorter
period ending when (i) all Registrable Securities covered by the Initial Shelf
Registration have been sold in the manner set forth and as contemplated in the
Initial Shelf Registration, (ii) a Subsequent Shelf Registration covering all
of the Registrable Securities has been declared effective under the Securities
Act or (iii) all Registrable Securities may be sold pursuant to subsection (k)
of Rule 144; provided that the Registrants shall not be required to keep such
Initial Shelf Registration effective where the only Registrable Securities
which have not been sold pursuant to the Initial Shelf Registration are
Registrable Securities held by Holders who would not have been able to trigger
the Registrants' Initial Shelf Registration filing obligations pursuant to
Section 2(c)(2), (3) or (4) hereof.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for
any reason at any time during the Effectiveness Period (other than in
accordance with subparagraph (a)), the Company and the Subsidiary Guarantors
shall use their best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 15 days of
such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Registration Statement pursuant to
Rule 415 covering all of the Registrable Securities covered by such suspended
Shelf Registration (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Company and the Subsidiary Guarantors shall use
their best efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such
Registration Statement continuously effective for a period equal to the number
of days in the Effectiveness Period less the aggregate number of days during
which the Initial Shelf Registration or any
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<PAGE> 14
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Registrants shall
promptly supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if otherwise required by the Securities Act, or if
requested by the Holders of a Majority of the Registrable Securities covered by
such Registration Statement or by the Managing Underwriters of such Registrable
Securities if such Registrable Securities are being sold in connection with an
underwritten offering (except to the extent any supplement or amendment shall,
in the reasonable judgment of counsel to the Registrants, make the statements
therein misleading), and the Company agrees to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly
after its being used or filed with the Commission.
(d) Selection of Underwriters. If at any time or from time to
time any of the Holders of the Registrable Securities included in any Shelf
Registration Statement desire to sell Registrable Securities in an underwritten
offering, Managing Underwriters shall be selected by the Holders of a Majority
of all Registrable Securities included in such offering.
(e) Amendment of Indenture. On or prior to the filing of the
Initial Shelf Registration, the Registrants and the Trustee shall amend or
supplement the Indenture or enter into an indenture substantially identical to
the Indenture, in either case, such document to be in form and substance
reasonably satisfactory to the Trustee, to provide for the Trustee to add to
the covenants therein and to provide additional indemnity to the Trustee and
such other terms as the Trustee and the Company may deem necessary to comply
with any requirements of the Commission to effect or maintain the qualification
thereof under the Trust Indenture Act, which amendment or supplement to the
Indenture or other indenture shall automatically become effective upon the
effectiveness of the Initial Shelf Registration.
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4. Liquidated Damages
(a) The Registrants and the Initial Purchasers agree that the
Holders of Registrable Securities will suffer damages if the Company and the
Subsidiary Guarantors fail to fulfill their obligations under Section 2 or
Section 3. Accordingly, the Company and the Subsidiary Guarantors jointly and
severally agree to pay liquidated damages ("Liquidated Damages") on the
Registrable Securities subject to a Registration Default (as defined below)
under the circumstances and to the extent set forth below:
(i) if the Exchange Offer Registration Statement has not been
filed on or prior to the Filing Date;
(ii) if the Exchange Offer Registration Statement has not been
declared effective on or prior to the Effectiveness Date;
(iii) if the Exchange Offer has not been consummated on or prior to
the 30th Business Day following the date the Exchange Offer Registration
Statement is declared effective;
(iv) if the Initial Shelf Registration has not been filed on or
prior to the Shelf Filing Date or declared effective within 150 days
following the delivery of the Shelf Notice, as the case may be; or
(v) if (A) the Exchange Offer Registration Statement has been
declared effective but ceases to be effective for a period of 15
consecutive days without being succeeded immediately by any additional
Registration Statement filed with the Commission and declared effective
at any time prior to the time that the Exchange Offer is consummated or
(B) the Initial Shelf Registration or any Subsequent Shelf Registration
has been declared effective and such Shelf Registration ceases to be
effective at any time during the Effectiveness Period for a period of 15
consecutive days without being succeeded immediately by any additional
Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (v), a "Registration Default"),
then the Company and the Subsidiary Guarantors shall pay Liquidated Damages to
each applicable Holder of Registrable Securities with respect to the first
90-day period immediately following the occurrence of such Registration Default
in an
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amount equal to $.05 per week per $1,000 principal amount of Registrable
Securities held by such Holder. The amount of Liquidated Damages will increase
by an additional $.05 per week per $1,000 principal amount of Registrable
Securities at the beginning of each subsequent 90-day period, up to a maximum
amount of $.50 per week per $1,000 principal amount of Registrable Securities.
Notwithstanding anything to the contrary set forth herein, (1) upon the filing
of the Exchange Offer Registration Statement (in the case of (i) above), (2)
upon the effectiveness of the Exchange Offer Registration Statement (in the
case of (ii) above), (3) upon the consummation of the Exchange Offer (in the
case of (iii) above), (4) upon the filing of the Initial Shelf Registration or
upon the effectiveness of a Shelf Registration, as applicable (in the case of
(iv) above), or (5) upon the effectiveness of the Exchange Offer Registration
Statement which had ceased to remain effective (in the case of (v)(A) above),
or upon the effectiveness of the Shelf Registration which had ceased to remain
effective (in the case of (v)(B) above), the accrual of Liquidated Damages
payable with respect to the applicable Registrable Securities shall cease.
Notwithstanding the foregoing, the Registrants shall not be
required to pay such Liquidated Damages with respect to Registrable Securities
held by a Holder if the applicable Registration Default arises from the failure
of the Registrants to file, or cause to become effective, a Shelf Registration
Statement within the time periods specified in this Section 4 by reason of the
failure of such Holder to provide such information as (i) the Company may
reasonably request, with reasonable prior written notice, for use in the Shelf
Registration Statement or any Prospectus included therein to the extent the
Company reasonably determines that such information is required to be included
therein by applicable law, (ii) the NASD or the Commission may request in
connection with such Shelf Registration Statement or (iii) is required to
comply with the agreements of such Holder contained in the penultimate
paragraph of Section 5 to the extent compliance thereof is necessary for the
Shelf Registration Statement to be declared effective.
(b) The Company shall notify the Trustee in writing within
three Business Days after each and every date on which a Registration Default
commences. Liquidated Damages shall be paid by depositing with the Trustee, in
trust, for the benefit of the Holders thereof, on or before the next semi-
annual interest payment date following a Registration Default, immediately
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available funds in sums sufficient to pay the Liquidated Damages then due to
Holders of Registrable Securities. The Liquidated Damages due shall be payable
on each interest payment date to the record Holder of Registrable Securities
entitled to receive the interest payment to be paid on such date as set forth
in the Indenture. Each obligation to pay Liquidated Damages as a result of the
occurrence of a Registration Default shall be deemed to accrue from and
including the date of such Registration Default to but excluding the date such
Registration Default is no longer continuing.
5. Registration Procedures
In connection with the registration of any Registrable Securities
or Exchange Securities pursuant to Section 2 or 3, the Company and the
Subsidiary Guarantors shall use their best efforts to effect such registrations
to permit the sale of such Registrable Securities or Exchange Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company and the Subsidiary Guarantors shall:
(a) Prepare and file with the Commission, as soon as
practicable after the Closing Date but in any event prior to the Filing Date
(in the case of an Exchange Offer Registration Statement) or the Shelf Filing
Date (in the case of a Shelf Registration), a Registration Statement or
Registration Statements as prescribed by Section 2 or 3, and use its best
efforts to cause each such Registration Statement to become effective and
remain effective as provided herein, provided that, if (1) such filing is
pursuant to Section 3, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company shall furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement (the "Selling Holders"), and
each such Participating Broker-Dealer, as the case may be, one special counsel
for the Selling Holders or Participating Broker-Dealers, as the case may be
(the "Holders Counsel") and the Managing Underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (at least 10 Business Days prior to such
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filing) and use their best efforts to reflect in each such document, when filed
with the Commission, such comments as the Holders of a Majority of the
Registrable Securities covered by such Registration Statement, or such
Participating Broker-Dealers, as the case may be, the Holders Counsel, or the
Managing Underwriters, if any, may reasonably propose. The Registrants shall
not file any Registration Statement or Prospectus or any amendments or
supplements thereto in respect of which the Holders must be afforded an
opportunity to review prior to the filing of such document if the Holders of a
Majority of the Registrable Securities covered by such Registration Statement,
or such Participating Broker-Dealers, as the case may be, the Holders Counsel,
or the Managing Underwriters, if any, shall reasonably object.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to each Shelf Registration or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period or
the Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Securities Act (as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission); and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder applicable to it with respect to the disposition of all securities
covered by such Registration Statement as so amended or in such Prospectus as
so supplemented and with respect to the subsequent resale of any securities
being sold by a Participating Broker-Dealer covered by any such Prospectus.
The Company and the Subsidiary Guarantors shall be deemed not to
have used their best efforts to cause a Registration Statement to become
effective or to keep a Registration Statement effective during the Applicable
Period if any of them voluntarily takes any action that would result in Selling
Holders seeking to sell Registrable Securities covered thereby or Participating
Broker-Dealers seeking to sell Exchange Securities not being able to sell such
Registrable Securities or such Exchange Securities during that period unless
such action is required by applicable law.
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(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, notify the Selling Holders, or each Participating
Broker-Dealer, as the case may be, the Holders Counsel and the Managing
Underwriters, if any, promptly, and confirm such notice in writing, (i) when a
Prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge,
one conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference therein and exhibits thereto), (ii) of the
issuance by the Commission or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary Prospectus or the
initiation of any proceedings for that purpose, (iii) of the receipt by any of
the Company or any Subsidiary Guarantor of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Securities or the Exchange
Securities for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (iv) of the happening of any
event or any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(v) of any request by the Commission or any state securities authority for
amendments or supplements to the Registration Statement or Prospectus
(including schedules and exhibits thereto).
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(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, use their best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any of the
Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction at the earliest
possible time.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the Managing Underwriters, if any, or the Holders of a Majority
of the Registrable Securities being sold in connection with an underwritten
offering, (i) promptly incorporate in a prospectus supplement or post-effective
amendment such information as the Managing Underwriters, if any, or such
Holders or counsel request to be included therein, (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment, and
(iii) promptly supplement or make amendments to such Registration Statement
(except in the case of (i), (ii) and (iii) to the extent any supplement or
amendment shall, in the reasonable judgment of counsel to the Registrants, make
the statements therein misleading).
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, furnish to each of the Selling Holders and to
each such Participating Broker-Dealer who so requests and to the Holders
Counsel and each Managing Underwriter, if any, without charge, one conformed
copy of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and schedules,
and, if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits thereto.
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(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, deliver to each of the Selling Holders or each
such Participating Broker-Dealer, as the case may be, their counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of preliminary Prospectus) and each amendment
or supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph of this
Section 5, each of the Company and the Subsidiary Guarantors hereby consents to
the use of such Prospectus and each amendment or supplement thereto by each of
the Selling Holders or each such Participating Broker-Dealer, as the case may
be, and the underwriters or agents, if any, and dealers (if any), in connection
with the offering and sale of the Registrable Securities covered by or the sale
by Participating Broker-Dealers of the Exchange Securities pursuant to such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, to use their best efforts to register
or qualify, and to cooperate with the Selling Holders or each such
Participating Broker-Dealer, as the case may be, the underwriters, if any, and
their respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any of the Selling Holders,
Participating Broker-Dealers, or the Managing Underwriters, if any, request in
writing as are necessary to permit the offer and sale of such Securities in
such jurisdictions; and to use their best efforts to keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective, provided
that neither the Company nor any Subsidiary Guarantor shall be required to (A)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then
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so subject or (C) subject itself to taxation in excess of a nominal dollar
amount in any such jurisdiction.
(i) Cooperate with the Trustee and, in the case of a Shelf
Registration, the Selling Holders and the Managing Underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Exchange Securities or Registrable Securities, as the case may be, to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with the Depositary; and enable such Exchange
Securities or Registrable Securities to be in such denominations and registered
in such names as the Holders of Registrable Securities or the Managing
Underwriters, if any, may request.
(j) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(iv) above, as promptly as practicable prepare and (subject to
Section 5(a) above) file with the Commission, at the expense of the Company and
the Subsidiary Guarantors, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder or to the
purchasers of the Exchange Securities to whom such Prospectus will be delivered
by a Participating Broker-Dealer any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use its best efforts to cause the Registrable Securities
covered by a Registration Statement or the Exchange Securities, as the case may
be, to continue to be rated by the rating agencies which initially rated the
Series A Notes, during the period the Registration Statement is required to
remain effective hereunder.
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(l) Not later than the effective date of the first
Registration Statement relating to the Registrable Securities or the Exchange
Securities, as the case may be, obtain a CUSIP number for the Registrable
Securities.
(m) If a Shelf Registration is filed pursuant to Section 3
with respect to an underwritten offering, enter into such agreements (including
an underwriting agreement, if requested) and take all other actions in order to
expedite or facilitate the registration or disposition of such Registrable
Securities and in connection therewith, (i) make such representations and
warranties to the Holders of such Registrable Securities and the underwriters,
with respect to the business of the Company and its subsidiaries (including
without limitation the Subsidiary Guarantors) and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and the Subsidiary
Guarantors and updates thereof in form and substance reasonably satisfactory to
the Managing Underwriters, addressed to each selling Holder of such Registrable
Securities and the underwriters covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may be
reasonably requested by underwriters; (iii) obtain "cold comfort" letters and
updates thereof in form and substance reasonably satisfactory to the Managing
Underwriters from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
parent or subsidiary of the Company (including without limitation the
Subsidiary Guarantors) or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each selling Holder of such
Registrable Securities and the underwriters, such letters to be in customary
form and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings and such other matters as
reasonably requested by underwriters; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable than those set forth in Section 7 (or such other provisions
and procedures acceptable to Holders of a Majority of Registrable Securities
covered by such Registration Statement and the Managing Underwriters or agents)
with respect to all parties to
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<PAGE> 24
be indemnified pursuant to said Section 7; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a Majority of all
of the Registrable Securities being sold and the Managing Underwriters, if any,
to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Registrants. The
foregoing actions set forth in this Section 5(m) shall be performed at (A) the
effectiveness of such Registration Statement and each post-effective amendment
thereto and (B) each closing under any underwriting or similar agreement, as
and to the extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Offer Registration Statement
filed pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, make available for inspection by any Selling
Holder of such Registrable Securities being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney, accountant or
other agent retained by any of such Selling Holders or such Participating
Broker-Dealers, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during business hours, all
financial and other records, pertinent corporate documents and properties of
the issuers and their respective subsidiaries (collectively, the "Records") as
shall be reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and employees of
the Company and its Subsidiaries to supply all information in each case
reasonably requested by any such Inspector in connection with such due
diligence responsibilities. Records which the Company or any Subsidiary
Guarantor determines, in good faith, to be confidential and any Records which
it notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary, in the
reasonable judgment of counsel to each Selling Holder and each such
Participating Broker-Dealer, to avoid or correct a misstatement or omission in
such Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction or
(iii) the information in such Records has been made generally available to the
public, other than by such Selling Holders and Participating Broker-Dealers.
Each of the Selling Holders and each such Participating Broker-Dealer will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company unless and
until such is made generally available to the public. Each of the
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<PAGE> 25
Selling Holders and each such Participating Broker-Dealer will be required to
further agree that it will, upon learning that disclosure of such Records may
be required pursuant to clauses (i) or (ii) above, give notice to the Company
and allow the Company at its expense to undertake appropriate action to prevent
disclosure of the Records deemed confidential.
(o) Provide an indenture trustee for the Registrable
Securities or the Exchange Securities, as the case may be, and cause the
Indenture or the trust indenture provided for in Section 2(a), as the case may
be, to be qualified under the Trust Indenture Act not later than the effective
date of the Exchange Offer or the first Registration Statement relating to the
Registrable Securities; and in connection therewith, cooperate with the Trustee
under any such indenture and the Holders of the Registrable Securities, to
effect such changes to such indenture as may be (i) necessary or desirable to
provide for the Trustee to add to the covenants, and to provide additional
indemnity to the Trustee, and (ii) necessary to comply with any requirements of
the Commission to effect or maintain the qualification thereof under the Trust
Indenture Act; and execute, and use its best efforts to cause the Trustee to
execute, all documents, including the Intercreditor Agreement, as may be
required to effect such changes, and all other forms and documents required to
be filed with the Commission to enable such indenture to be so qualified in a
timely manner.
(p) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its securityholders earnings statements satisfying the provisions
of Section 11(a) of the Securities Act and Rule 158 no later than 45 days after
the end of any 12-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of a Registration
Statement,
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which statements shall cover said 12-month periods. The Company may, at its
option, satisfy such requirement by complying with Rule 158.
(q) If an Exchange Offer is to be consummated, upon delivery
of the Registrable Securities by Holders to the Company (or to such other
Person as directed by the issuers) in exchange for the Exchange Securities, the
Company shall mark, or cause to be marked, on such Registrable Securities that
such Registrable Securities are being canceled in exchange for the Exchange
Securities; in no event shall such Registrable Securities be marked as paid or
otherwise satisfied.
(r) In the case of a Shelf Registration, a reasonable time prior
to the filing of any document which is to be incorporated by reference into a
Registration Statement or Prospectus after the initial filing of a Shelf
Registration, provide a reasonable number of copies of such document to the
Initial Purchasers on behalf of the Holders of Registrable Securities covered
thereby, and make available such of the representatives of the Company and the
Subsidiary Guarantors as shall be reasonably requested by such Holders or the
Initial Purchasers on behalf of such Holders for discussion of such document.
(s) Cooperate with each Holder of Registrable Securities covered
by any Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD.
(t) Use its best efforts to take all other steps necessary to
effect the registration of the Registrable Securities covered by a Registration
Statement contemplated hereby.
The Company may require each seller of Registrable Securities or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Company may, from time to time, reasonably request in writing,
including, without limitation, a written representation to the Registrants
(which may be contained in the
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letter of transmittal contemplated by the Exchange Offer Registration Statement
or Shelf Registration, as applicable) stating that (A) it is not an Affiliate
of any of the Registrants, (B) the amount of Registrable Securities held by
such Holder prior to the Exchange Offer, (C) the amount of Registrable
Securities owned by such Holder to be exchanged in the Exchange Offer and
representing that such Holder is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with any Person to participate in,
a distribution of the Exchange Securities to be issued and (D) it is acquiring
the Exchange Securities in its ordinary course of business. The Company may
exclude from such registration the Registrable Securities of any seller or
Participating Broker-Dealer who fails to furnish such information within a
reasonable time after receiving such request.
No Holder may participate in any registration in which Securities
or Exchange Securities are sold to an underwriter for reoffering to the public
unless such Holder completes and executes all reasonable questionnaires, powers
of attorneys, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of the applicable underwriting arrangements.
Each Holder of Registrable Securities and each Participating Broker-
Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v),
such Holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto. In
the event the Company shall give any such notice, each of the Effectiveness
Period and the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities covered by such
Registration Statement or Exchange Securities to be sold by such Participating
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Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) or (y) the
Advice.
6. Registration Expenses
The Registrants shall jointly and severally bear all expenses
incurred in connection with the performance of their respective obligations
under Sections 2, 3 and 5 and in the event of a Shelf Registration Statement,
shall bear or reimburse the Holders for the reasonable fees and disbursements
of one firm of counsel designated by the Holders of a Majority of the
Registrable Securities to act as counsel for all Holders of the Registrable
Securities in connection therewith; provided, however, that in an underwritten
offering, the Company shall not be responsible for any fees and expenses of any
underwriter including any underwriting discounts and commissions or any legal
fees and expenses of counsel to the underwriters (except for the reasonable
fees and disbursements of counsel in connection with state securities or Blue
Sky qualification of any of the Registrable Securities or the Exchange
Securities).
7. Indemnification
(a) The Company and the Subsidiary Guarantors, jointly and
severally, agree to indemnify and hold harmless (i) each Holder (including each
of the Initial Purchasers, if such Initial Purchaser holds Registrable
Securities, including Resale Securities, for its own account) and (ii) each
person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) any Holder (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person
(any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Person") to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments, actions
and expenses (including without limitation and as incurred, reimbursement of
all reasonable costs of investigating, preparing, pursuing or defending any
claim or action, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, including the reasonable fees and expenses of
counsel to any Indemnified Person) directly or indirectly caused by, related
to, based upon, arising out of
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or in connection with any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment or
supplement thereto), or any preliminary Prospectus or Prospectus relating to
any Registration Statement (or any amendment or supplement thereto), or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities, judgments, actions
or expenses are caused by an untrue statement or omission or alleged untrue
statement or omission that is made in reliance upon and in conformity with
information relating to any Holder furnished in writing to the Company and the
Subsidiary Guarantors by such Holder expressly for use therein, provided,
however, that the indemnity obligations arising under this Section 7(a) with
respect to a specific untrue statement or omission or alleged untrue statement
or omission of a material fact in any preliminary Prospectus shall not inure to
the benefit of a Holder or its related Indemnified Persons if the person
asserting any losses, claims, damages, liabilities, judgments, actions and
expenses with respect to such untrue statement or omission purchased the
Securities from such Holder and if it is established in the related proceeding
that a copy (provided, that the Registrants have furnished to such Holder as
many copies of a final Prospectus and any amendments or supplements thereto as
such Holder has reasonably requested) of the final Prospectus was not sent or
given by or on behalf of such Holder to such person at or prior to the written
confirmation of the sale of the Securities to such person if required by
applicable law, and if the final Prospectus would have cured the untrue
statement or omission giving rise to such losses, claims, damages, liabilities,
judgments, actions and expenses provided, further, that the Company and the
Subsidiary Guarantors shall not be relieved thereby of their indemnity
obligation with respect to any other untrue statement or omission or alleged
untrue statement or omission of a material fact. The Company and the
Subsidiary Guarantors shall notify the Initial Purchasers promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation) or litigation in connection with the matters
addressed by this Agreement which involve the Company or the Subsidiary
Guarantors or an Indemnified Person.
(b) In case any action or proceeding (including any
governmental investigation) shall be brought or asserted against
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any of the Indemnified Persons with respect to which indemnity may be sought
against the Company or the Subsidiary Guarantors, such Indemnified Person shall
promptly notify the Company and the Subsidiary Guarantors in writing (provided,
that the failure to give such notice shall not relieve the Company or the
Subsidiary Guarantors of its obligations pursuant to this Agreement unless the
Company or the Subsidiary Guarantors were otherwise unaware of such obligations
and only to the extent they were actually and materially prejudiced by such
failure). In case any such action shall be brought against any Indemnified
Person and it shall notify Pioneer, the Company and the Subsidiary Guarantors
of the commencement thereof, Pioneer, the Company and the Subsidiary Guarantors
shall be entitled to participate therein and, to the extent that any of
Pioneer, the Company and the Subsidiary Guarantors shall wish, jointly with any
of Pioneer, the Company or the Subsidiary Guarantors similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
Indemnified Person, and after notice from Pioneer, the Company and the
Subsidiary Guarantors to such Indemnified Person of its election so to assume
the defense thereof, Pioneer, the Company and the Subsidiary Guarantors shall
not be liable to such Indemnified Person under such subsection for any legal or
other expense subsequently incurred by such Indemnified Person in connection
with the defense thereof other than reasonable costs of investigation. If,
however, (i) the Indemnifying Person has authorized the employment of counsel
for the Indemnified Person at the expense of Pioneer, the Company or the
Subsidiary Guarantors, or (ii) an Indemnified Person shall have reasonably
concluded that representation of such Indemnified Person and Pioneer, the
Company and the Subsidiary Guarantors by the same counsel would be
inappropriate under applicable standards of professional conduct due to actual
or potential differing interests between them and the Indemnified Person so
notifies the Indemnifying Person, such Indemnified Person shall have the right
to employ its own counsel in any such action and the fees and expenses of such
counsel shall be paid, as incurred, by the Company and the Subsidiary
Guarantors (regardless of whether it is ultimately determined that an
Indemnified Person is not entitled to indemnification hereunder); provided,
however, that such Indemnified Person undertakes to repay to the Company all
such fees and expenses in the event of a determination by a court of competent
jurisdiction which is no longer subject to appeal or further review that such
Indemnified Person was not entitled to have such payment made. The Company and
the Subsidiary Guarantors shall not, in connection with any one such action or
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proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more then one separate firm of attorneys (in addition to any local counsel) at
any time for the Indemnified Persons, which firm shall be designated by the
Holders of a Majority of the Series A Notes and the Series B Notes which are
the subject of such action or proceeding. The Company and the Subsidiary
Guarantors shall be liable for any settlement of any such action or proceeding
effected with the Company's prior written consent, which consent will not be
unreasonably withheld, and the Company and the Subsidiary Guarantors agree to
indemnify and hold harmless any Indemnified Person from and against any loss,
claim, damage, liability or expense by reason of any settlement of any action
effected with the written consent of the Company. Notwithstanding the
immediately preceding sentence, if at any time an Indemnified Person shall have
requested an indemnifying party to reimburse the Indemnified Person for fees
and expenses of counsel as contemplated by the second sentence of this
paragraph, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than twenty business days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. The Company and the Subsidiary
Guarantors shall not, without the prior written consent of an Indemnified
Person, settle or compromise or consent to the entry of judgment in or
otherwise seek to terminate any pending or threatened action, claim, litigation
or proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Person is a party thereto), unless
such settlement, compromise, consent or termination includes an unconditional
release of such Indemnified Person from all liability arising out of such
action, claim, litigation or proceeding.
(c) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company and the Subsidiary Guarantors, their
directors and officers and any person controlling (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company
or the Subsidiary Guarantors, to the same extent as the foregoing indemnity
from the Company and the Subsidiary Guarantors to each
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of the Indemnified Persons, but only with respect to claims and actions based
on information relating to such Holder furnished in writing by such Holder to
the Company and the Subsidiary Guarantors expressly for use in any Registration
Statement. In case any action or proceeding shall be brought against the
Company, any Subsidiary Guarantor or their directors or officers or any such
controlling person in respect of which indemnity may be sought against a
Holder, such Holder shall have the rights and duties given the Company and the
Subsidiary Guarantors, and the Company, such Subsidiary Guarantor, such
directors or officers or such controlling person shall have the rights and
duties given to each Holder by the immediately preceding paragraph. In no
event shall any Holder be liable or responsible for any amount in excess of the
amount by which the total received by such Holder with respect to its sale of
Registrable Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Registrable Securities and (ii) the amount
of any damages which such Holder has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities, judgments, actions or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other hand
from their sale of Registrable Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. The relative
fault of the Company and the Subsidiary Guarantors, on the one hand, and the
Indemnified Person, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
related to information supplied by the Company or any Subsidiary Guarantor, on
the one hand, and the Indemnified Person, on the other hand, and the parties'
relative intent, knowledge, access to
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information and opportunity to correct or prevent such statement or omission.
The indemnity set forth herein shall be in addition to any liability or
obligation the Company and the Subsidiary Guarantors may otherwise have to any
Indemnified Person.
The Company, the Subsidiary Guarantors and each Holder agree that
it would not be just and equitable if contribution to this Section 7(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no Holder
nor related Indemnified Persons shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Registrable Securities, exceeds the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Holders' obligations to contribute pursuant to this Section 7(d) are several in
proportion to the respective principal amount of Registrable Securities held by
each of them and not joint.
8. Rules 144 and 144A
The Registrants covenant that they will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder in a timely manner and, if at
any time the Registrants are not required to file such reports, they will, upon
the request of any Holder of Registrable Securities, make publicly available
other information so long as necessary to permit sales pursuant to Rule 144 and
Rule 144A. The Registrants further covenant that they will take such further
action as any Holder of Registrable Securities may reasonably request, all to
the extent required from time to time to enable such Holder to
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sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 and Rule 144A.
9. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering
will be selected by the Holders of a Majority of such Registrable Securities
included in such offering; provided that such investment bankers or managers
shall be reasonably acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
10. Miscellaneous
(a) No Inconsistent Agreements. The Registrants have not, as
of the date hereof, and the Registrants shall not, after the date of this
Agreement, enter into any agreement with respect to any of its securities that
is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Registrants have not entered or will not enter into any agreement with
respect to any of its securities which will grant to any Person piggy-back
rights with respect to a Registration Statement.
(b) Adjustments Affecting Registrable Securities. The
Registrants shall not, directly or indirectly, take any action with respect to
the Registrable Securities as a class that would adversely affect the ability
of the Holders of Registrable Securities to include such Registrable Securities
in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be
34
<PAGE> 35
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Registrants have obtained
the written consent of Holders of at least a Majority of the Registrable
Securities; provided that no amendment, modification or supplement or waiver or
consent to the departure from the provisions of Section 7 shall be effective as
against any Holder of Registrable Securities unless consented to in writing by
such Holder. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Securities, may be given by Holders of at least a Majority of the Registrable
Securities being sold by such Holders pursuant to such Registration Statement,
provided that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(d) Notices. All notices and other communications
(including without limitation any notices or other communications to the
trustee under the applicable indenture) provided for or permitted hereunder
shall be made in writing by hand delivery, registered first-class mail,
next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company or any Subsidiary Guarantor, at:
Pioneer Americas Acquisition Corp.
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 770002
Attn: General Counsel
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five Business Days
after being deposited and the postage prepaid, if mailed; one Business Day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
35
<PAGE> 36
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the trustee under the
applicable indenture at the address specified in such indenture.
(e) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities; provided that, with
respect to the indemnity and contribution agreements in Section 7, each Holder
of Registrable Securities subsequent to the Initial Purchasers shall be bound
by the terms thereof if (i) such Holder elects to include Registrable
Securities in a Shelf Registration and (ii) such Holder is advised expressly by
the Company of the provisions contained in Section 7 and that such Holder's
election to include Registrable Securities in a Shelf Registration shall be
deemed such Holder's agreement to be bound by such provisions.
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF
THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the
36
<PAGE> 37
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein and therein.
(k) Registrable Securities Held by the Registrants or Their
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by the Registrants or their Affiliates shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
[signature pages follow]
37
<PAGE> 38
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
PIONEER AMERICAS ACQUISITION CORP.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
PIONEER AMERICAS, INC.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
PIONEER CHLOR ALKALI COMPANY, INC.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
IMPERIAL WEST CHEMICAL CO.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
ALL-PURE CHEMICAL CO.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
38
<PAGE> 39
BLACK MOUNTAIN POWER COMPANY
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
ALL PURE CHEMICAL NORTHWEST, INC.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
PIONEER CHLOR ALKALI INTERNATIONAL,
LTD.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
G.O.W. CORPORATION
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
PIONEER (EAST), INC.
By: /s/ KENT R. STEPHENSON
--------------------------------
Name: Kent R. Stephenson
Title: President
39
<PAGE> 40
T.C. HOLDINGS, INC.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
T.C. PRODUCTS, INC.
By: /s/ PHILIP J. ABLOVE
--------------------------------
Name: Philip J. Ablove
Title: Vice President
Accepted as of the date hereof:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ PETER BACON
--------------------------------
Name: Peter Bacon
Title: Managing Director
40
<PAGE> 41
SCHEDULE 1
Subsidiary Guarantors
Pioneer Americas, Inc.
Pioneer Chlor Alkali Company, Inc.
Imperial West Chemical Co.
All-Pure Chemical Co.
Black Mountain Power Company
All Pure Chemical Northwest, Inc.
Pioneer Chlor Alkali International, Ltd.
G.O.W. Corporation
Pioneer (East), Inc.
T.C. Holdings, Inc.
T.C. Products, Inc.
<PAGE> 1
EXHIBIT 12.1
Statement Regarding Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------------------------------------
PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1995
--------------------------- THROUGH
1992 1993 1994 APRIL 20, 1995
------- ------- ------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges
Consolidated pretax income from continuing
operations....................................... $ 4,346 $ 542 $ 8,388 $11,621
Equity pickup of less than 50% owned affiliates.... (26) (1,149) (183) (204)
Interest........................................... 8,189 7,551 6,407 1,665
Interest portion of rental expense................. 2,467 2,753 2,814 692
Amortization of debt financing costs............... 920 933 944 453
------- ------- ------- -------
Earnings........................................... $15,896 $10,630 $18,370 $14,227
------- ------- ------- -------
Interest........................................... $ 8,189 $ 7,551 $ 6,407 $ 1,665
Interest portion of rental expense................. 2,467 2,753 2,814 692
Amortization of debt financing costs............... 920 933 944 453
------- ------- ------- -------
Fixed charges...................................... $11,576 $11,237 $10,165 $ 2,810
------- ------- ------- -------
Ratio of earnings to fixed charges................. 1.37 -- 1.81 5.1
------- ------- ------- -------
Deficiency......................................... $ (607)
</TABLE>
<TABLE>
<CAPTION>
PERIOD
FROM
INCEPTION
THROUGH YEAR ENDED THREE MONTHS
DECEMBER 31, DECEMBER 31, ENDED
1995 1996 MARCH 31, 1997
------------ ------------ --------------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C>
Ratio of earnings to fixed charges
Consolidated pretax income (loss) from continuing
operations ......................................... $12,629 $14,846 $(1,712)
Equity pickup of less than 50% owned affiliates....... -- (713) (270)
Interest.............................................. 12,905 17,290 4,458
Interest portion of rental expense.................... 1,572 3,694 777
Amortization of debt financing costs.................. 465 636 159
------- ------- -------
Earnings.............................................. $27,571 $35,753 $ 3,412
------- ------- -------
Interest.............................................. $12,905 $17,290 $ 4,458
Interest portion of rental expense.................... 1,572 3,694 777
Amortization of debt financing costs.................. 465 636 159
------- ------- -------
Fixed charges......................................... $14,942 $21,620 $ 5,394
------- ------- -------
Ratio of earnings to fixed charges.................... 1.8 1.7 0.6
------- ------- -------
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF PIONEER AMERICAS ACQUISITION CORP.:
Pioneer Americas, Inc.
Pioneer Chlor Alkali Company, Inc.
Imperial West Chemical Co.
All-Pure Chemical Co.
Black Mountain Power Company
All-Pure Chemical Northwest, Inc.
Pioneer Chlor Alkali International, Inc.
G.O.W. Corporation
Pioneer (East), Inc.
T.C. Holdings, Inc.
T.C. Products, Inc.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 7, 1997 in the Registration Statement (Form
S-4) and related Prospectus of Pioneer Americas Acquisition Corp. for the
registration of $200,000,000 9 1/4% Series B Senior Secured Notes due 2007.
Deloitte & Touche LLP
Houston, Texas
July 2, 1997
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the captions "Selected
Historical Financial Data," "Experts" and "Change in Independent Public
Auditors" and to the use of our report dated June 26, 1995 in the Registration
Statement (Form S-4) and related Prospectus of Pioneer Americas Acquisition
Corp. for the registration of $200,000,000 9 1/4% Series B Senior Secured Notes
due 2007.
Ernst & Young LLP
Houston, Texas
July 1, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 30, 1995 on the combined financial
statements of Basic Investments, Inc. and affiliates in the Registration
Statement (Form S-4) and related Prospectus of Pioneer Americas Acquisition
Corp. for the registration of $200,000,000 9 1/4% Series B Senior Secured Notes
due 2007.
PIERCY, BOWLER, TAYLOR & KERN
CERTIFIED PUBLIC ACCOUNTANTS AND
BUSINESS ADVISORS
A PROFESSIONAL CORPORATION
Las Vegas, Nevada
June 26, 1997
<PAGE> 1
EXHIBIT 23.4
INDEPENDENT PUBLIC ACCOUNTANTS' CONSENT
As independent public accountants, we hereby consent to the use of our
report (and to all references to our firm) dated February 28, 1997 on the
financial statements of the Tacoma Plant in the Registration Statement (Form
S-4) and related Prospectus of Pioneer Americas Acquisition Corp. for the
registration of $200,000,000 9 1/4% Series B Senior Secured Notes due 2007.
Arthur Andersen LLP
Dallas, Texas
June 27, 1997
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
-------
------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 West 47th Street 10036
New York, New York (Zip Code)
(Address of principal
executive offices)
------------------------------
PIONEER AMERICAS ACQUISITION CORP.
(Exact name of OBLIGOR as specified in its charter)
Delaware 06-1420850
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
4200 NationsBank Center 77002
700 Louisiana Street (Zip code)
Houston, Texas
(Address of principal executive offices)
------------------------------
PIONEER AMERICAS, INC.
(Exact name of REGISTRANT as specified in its charter)
Delaware 76-0280373
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
<PAGE> 2
- 2 -
------------------------------
PIONEER CHLOR ALKALI COMPANY, INC.
(Exact name of REGISTRANT as specified in its charter)
Delaware 51-0302028
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
IMPERIAL WEST CHEMICAL CO.
(Exact name of REGISTRANT as specified in its charter)
Nevada 95-2375683
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
ALL-PURE CHEMICAL CO.
(Exact name of REGISTRANT as specified in its charter)
California 94-2314942
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
BLACK MOUNTAIN POWER COMPANY
(Exact name of REGISTRANT as specified in its charter)
Texas 76-0291143
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
ALL-PURE CHEMICAL NORTHWEST, INC.
(Exact name of REGISTRANT as specified in its charter)
Washington 94-2714064
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
<PAGE> 3
- 3-
------------------------------
PIONEER CHLOR ALKALI INTERNATIONAL, INC.
(Exact name of REGISTRANT as specified in its charter)
Barbados 98-0118164
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
G.O.W. CORPORATION
(Exact name of REGISTRANT as specified in its charter)
Nevada 88-0336831
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
PIONEER (EAST), INC.
(Exact name of REGISTRANT as specified in its charter)
Delaware 51-0375981
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
T.C. HOLDINGS, INC.
(Exact name of REGISTRANT as specified in its charter)
New Mexico 86-0311265
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
T.C. PRODUCTS, INC.
(Exact name of REGISTRANT as specified in its charter)
Washington 91-1536884
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
------------------------------
9 1/4% Series B Senior Secured Notes due 2007
(Title of the indenture securities)
<PAGE> 4
- 4 -
GENERAL
1. General Information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D. C. New York
State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
Pioneer Americas Acquisition Corp., Pioneer Americas, Inc., Pioneer Chlor
Alkali Company, Inc., Imperial West Chemical Co., All-Pure Chemical Co.,
Black Mountain Power Company, All-Pure Chemical Northwest, Inc., Pioneer
Chlor Alkali International, Inc., G.O.W. Corporation, Pioneer (East), Inc.,
T.C. Holdings, Inc., T.C. Products, Inc. is currently not in default under
any of its outstanding securities for which United States Trust Company of
New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9,
10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General
Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the State of
New York Banking Department to transact business as a Trust
Company, is incorporated by reference to Exhibit T-1.1 to Form
T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
<PAGE> 5
- 5 -
16. List of Exhibits
(cont'd)
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form
T-1 filed on September 15, 1995 with the Commission pursuant
to the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
As of June 24, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U. S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and will
rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
-------------------------
<PAGE> 6
- 6 -
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation organized
and existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 24th day of June, 1997.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By:
------------------------------
/S/Gerard F. Ganey
Senior Vice President
<PAGE> 7
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By:
-----------------------
/S/Gerard F. Ganey
Senior Vice President
<PAGE> 8
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
- ------
Cash and Due from Banks $ 59,856
Short-Term Investments 213,333
Securities, Available for Sale 968,413
Loans 1,370,272
Less: Allowance for Credit Losses 13,614
-------------
Net Loans 1,356,658
Premises and Equipment 61,183
Other Assets 125,938
-------------
TOTAL ASSETS $ 2,785,381
=============
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 480,539
Interest Bearing 1,738,130
-------------
Total Deposits 2,218,669
Short-Term Credit Facilities 271,567
Accounts Payable and Accrued Liabilities 131,642
-------------
TOTAL LIABILITIES $ 2,621,878
=============
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 42,541
Retained Earnings 101,577
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (2,610)
-------------
TOTAL STOCKHOLDER'S EQUITY 163,503
-------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 2,785,381
=============
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
June 22, 1997
<PAGE> 1
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON _______,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
PIONEER AMERICAS ACQUISITION CORPORATION
4200 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
LETTER OF TRANSMITTAL
For 9 1/4% Series A Senior Secured Notes due 2007
EXCHANGE AGENT:
UNITED STATES TRUST COMPANY OF NEW YORK
By Facsimile:
(212) 420-6152
Attention: Customer Service
Confirm by telephone:
(800) 548-6565
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 844 Cooper Station
New York, New York 10276
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Corporate Trust Operations
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attention: Corporate Trust Operations
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated _______ ,
1997 (the "Prospectus") of Pioneer Americas Acquisition Corp., a Delaware
corporation (the "Company"), and all of the subsidiaries of the Company
(together with the Company, the "Issuers") and this Letter of Transmittal for
9 1/4% Series A Senior Secured Notes due 2007 which may be amended from time to
time (this "Letter"), which together constitute the Issuers' offer (the
"Exchange Offer") to exchange, for each $1,000 in principal amount of its
outstanding 9 1/4% Series A Senior Secured Notes due 2007 issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Original Notes"), $1,000 in principal amount of 9 1/4% Series B
Senior Secured Notes due 2007 (the "Exchange Notes").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Original Notes who wish to tender their Original Notes
must, prior to the Expiration Date: (1) complete, sign, date and mail or
otherwise deliver this Letter to the Exchange Agent, in person or to the
address set forth above; and (2) tender his or her Original Notes or, if a
tender of Original Notes is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility"), confirm such book-entry transfer (a
"Book-Entry Confirmation"), in each case in accordance with the procedures for
tendering described in the Instructions to this Letter. Holders of Original
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or Book-Entry Confirmation and all other documents
required by this Letter to be delivered to the Exchange Agent on or prior to
the Expiration Date, must tender their Original Notes
<PAGE> 2
according to the guaranteed delivery procedures set forth under the caption
"The Exchange Offer -- How to Tender" in the Prospectus. (See Instruction 1).
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or Kent R. Stephenson, Esq., General Counsel and Secretary of the
Company, at (713) 225-3831, 4200 NationsBank Center, 700 Louisiana Street,
Houston, TX 77002.
2
<PAGE> 3
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Original Notes of which you are the holder. If
the space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Original Notes on a separate SIGNED schedule and affix that
schedule to this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL
HOLDER(S) NUMBER(S)(1) OF ORIGINAL NOTES AMOUNT OF
(PLEASE FILL IN IF BLANK) ORIGINAL NOTES
TENDERED(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
TOTALS:
- ----------------------------------------------------------------------------------------------------------
(1) Need not be completed if Original Notes are being tendered by book-entry transfer.
(2) Unless otherwise indicated, the entire principal amount of Original Notes represented by a
certificate or Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have
been tendered.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuers the principal amount of Original Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Original Notes tendered with this Letter, the undersigned exchanges,
assigns and transfers to, or upon the order of, the Issuers all right, title
and interest in and to the Original Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuers) with respect to the tendered Original Notes,
with full power of substitution, to: (a) deliver certificates for such Original
Notes; (b) deliver Original Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuers upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Issuers of the Original
Notes tendered under the Exchange Offer; and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of the Original Notes,
all in accordance with the terms of the Exchange Offer. The power of attorney
granted in this paragraph shall be deemed irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Original Notes
tendered hereby and that the Issuers will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Issuers to be
necessary or desirable to complete the assignment and transfer of the Original
Notes tendered.
The undersigned agrees that acceptance of any tendered Original Notes by
the Issuers and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Issuers of their obligations under the
Registration Rights Agreement (as defined in the Prospectus) and that, upon the
issuance of the Exchange Notes, the Issuers will have no further obligations or
liabilities thereunder (except in certain limited circumstances). By tendering
Original Notes, the undersigned certifies (a) that it is not an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act, that it is
not a broker-dealer that owns Original Notes acquired directly from the Issuers
or an affiliate of the Issuers, that it is acquiring the Exchange Notes in the
ordinary course of the undersigned's business and that the undersigned has no
arrangement with any person to participate in the distribution of the Exchange
Notes or (b) that it is an "affiliate" (as so defined) of the Issuers or of the
initial purchasers in the original offering of the Original Notes, and that it
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable to it.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuers may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
4
<PAGE> 5
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Original Notes not tendered but represented by a certificate also
encompassing Original Notes which are tendered) to the undersigned at the
address set forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict between
the terms of the Prospectus and this Letter, the Prospectus shall prevail.
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
Account Number:
Transaction Code Number:
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):__________________________________
Date of Execution of Notice of Guaranteed Delivery:
Window Ticket Number (if available):
Name of Institution which Guaranteed Delivery:
5
<PAGE> 6
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
WHETHER OR NOT ORIGINAL NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X _________________________________________ ____________
X _________________________________________ ____________
SIGNATURE(S) OF OWNER(S) DATE
OR AUTHORIZED SIGNATORY
Area Code and Telephone Number: ____________________________________
This box must be signed by registered holder(s) of Original Notes as their
name(s) appear(s) on certificate(s) for Original Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title
below. (See Instruction 3)
Name(s)_______________________________________________________________________
______________________________________________________________________________
(PLEASE PRINT)
Capacity______________________________________________________________________
Address_______________________________________________________________________
______________________________________________________________________________
(INCLUDE ZIP CODE)
Signature(s) Guaranteed ______________________________________________________
by an Eligible Institution: (AUTHORIZED SIGNATURE)
(If required by ______________________________________________________
Instruction 3) (TITLE)
______________________________________________________
(NAME OF FIRM)
- --------------------------------------------------------------------------------
6
<PAGE> 7
<TABLE>
<S> <C> <C>
BOX 3
- -------------------------------------------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING HOLDERS
- -------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
- -------------------------------------------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX
AT RIGHT AND CERTIFY BY SIGNING AND DATING -------------------------------------
BELOW. SOCIAL SECURITY NUMBER
OR EMPLOYER IDENTIFICATION NUMBER
- -------------------------------------------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9 PART 2--CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACK-UP WITHHOLDING UNDER THE
DEPARTMENT OF THE PROVISIONS OF SECTION 2406(a)(1)(C) OF THE INTERNAL REVENUE CODE BECAUSE (1) YOU
TREASURY INTERNAL HAVE NOT BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACK-UP WITHHOLDING AS A RESULT
REVENUE SERVICE OF FAILURE TO REPORT ALL INTEREST OR DIVIDENDS OR (2) THE INTERNAL REVENUE SERVICE
HAS NOTIFIED YOU THAT YOU ARE NO LONGER SUBJECT TO BACK-UP WITHHOLDING._[ ]
PAYOR'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER (TIN)
-------------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT PART 3
THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND CHECK IF
COMPLETE. AWAITING TIN
[ ]
SIGNATURE DATE
------------------------- ----------------------
- -------------------------------------------------------------------------------------------------------------------
--------------------------------------------------- ---------------------------------------------------
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 and 4)
To be completed ONLY if certificates for Original To be completed ONLY if certificates for Original
Notes in a principal amount not exchanged, or Notes in a principal amount not exchanged, or
Exchange Notes, are to be issued in the name of Exchange Notes, are to be sent to someone other
someone other than the person whose signature than the person whose signature appears in Box 2 or
appears in Box 2, or if Original Notes delivered by to an address other than that shown in Box 1.
book-entry transfer which are not accepted for
exchange are to be returned by credit to an account Deliver:
maintained at the Book-Entry Transfer Facility
other than the account indicated above. (check appropriate boxes)
[ ] Original Notes not tendered
Issue and deliver:
[ ] Exchange Notes, to:
(check appropriate boxes)
Name
[ ] Original Notes not tendered ------------------------------------------------
(PLEASE PRINT)
[ ] Exchange Notes, to:
Address
Name --------------------------------------------
-----------------------------------------------
(PLEASE PRINT) ----------------------------------------------------
Address
Please complete the Substitute Form W-9 at Box 3
Tax I.D. or Social Security Number:
---------------
--------------------------------------------------- ---------------------------------------------------
</TABLE>
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Original
Notes or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents
required by this Letter, must be received by the Exchange Agent at one of its
addresses set forth herein on or before the Expiration Date. The method of
delivery of this Letter, certificates for Original Notes or a Book-Entry
Confirmation, as the case may be, and any other required documents is at the
election and risk of the tendering holder, but except as otherwise provided
below, the delivery will be deemed made when actually received by the Exchange
Agent. If delivery is by mail, the use of registered mail with return receipt
requested, properly insured, is suggested.
Holders whose Original Notes are not immediately available or who cannot
deliver their Original Notes or a Book- Entry Confirmation, as the case may be,
and all other required documents to the Exchange Agent on or before the
Expiration Date may tender their Original Notes pursuant to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedure:
(i) tender must be made by or through an Eligible Institution (as defined in
the Prospectus under the caption "The Exchange Offer"); (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by telegram, telex, facsimile transmission, mail or hand delivery)
(x) setting forth the name and address of the holder, the description of the
Original Notes and the principal amount of Original Notes tendered, (y) stating
that the tender is being made thereby and (z) guaranteeing that, within five
New York Stock Exchange trading days after the date of execution of such Notice
of Guaranteed Delivery, this Letter together with the certificates representing
the Original Notes or a Book-Entry Confirmation, as the case may be, and any
other documents required by this Letter will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) the certificates for all
tendered Original Notes or a Book-Entry Confirmation, as the case may be, as
well as all other documents required by this Letter, must be received by the
Exchange Agent within five New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in the
Prospectus under the caption "The Exchange Offer -- How to Tender."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Issuers, whose determination will be final and binding. The
Issuers reserve the absolute right to reject any or all tenders that are not in
proper form or the acceptance of which, in the opinion of the Issuers' counsel,
would be unlawful. The Issuers also reserve the right to waive any
irregularities or conditions of tender as to particular Original Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Original Notes.
Neither the Issuers, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount
of any Senior Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal
amount tendered in the fourth column of Box 1 above. All of the Original Notes
represented by a certificate or by a Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
A certificate for Original Notes not tendered will be sent to the holder,
unless otherwise provided in Box 5, as soon as practicable after the Expiration
Date, in the event that less than the entire principal amount of Original Notes
represented by a submitted certificate is
8
<PAGE> 9
tendered (or, in the case of Original Notes tendered by book-entry transfer,
such non-exchanged Original Notes will be credited to an account maintained by
the holder with the Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Original Notes, a notice of withdrawal must: (i) be received by the
Exchange Agent before the Company notifies the Exchange Agent that it has
accepted the tender of Original Notes pursuant to the Exchange Offer; (ii)
specify the name of the person who tendered the Original Notes; (iii) contain a
description of the Original Notes to be withdrawn, the certificate numbers
shown on the particular certificates evidencing such Original Notes and the
principal amount of Original Notes represented by such certificates; and (iv)
be signed by the holder in the same manner as the original signature on this
Letter (including any required signature guarantee).
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this
Letter is signed by the holder(s) of Original Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Original Notes, without alteration, enlargement or any
change whatsoever.
If any of the Original Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Original Notes are
held in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Original Notes are tendered; and/or (ii)
untendered Original Notes, if any, are to be issued to the holder of record,
then the holder of record need not endorse any certificates for tendered
Original Notes, nor provide a separate bond power. If any other case, the
holder of record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuers.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Original Notes are tendered: (i) by a holder who has not completed the
Box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on this Letter; or (ii) for the account of an Eligible Institution. In the
event that the signatures in this Letter or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP) (collectively,
"Eligible Institutions"). If Original Notes are registered in the name of a
person other than the signer of this Letter, the Original Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Issuers, in their sole discretion, duly executed by the registered holder with
the signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Original Notes not exchanged are to be
issued or sent, if different from the name and address of the person signing
this Letter. In the case of issuance in a different name, the tax
identification number of the person named must also be indicated. Holders
tendering Original Notes by book-entry transfer may request that Original Notes
not exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such holder may designate.
9
<PAGE> 10
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose tendered Original Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification
number ("TIN"), which, in the case of a holder who is an individual, is his or
her social security number. If the Exchange Agent is not provided with the
correct TIN, the holder may be subject to a $50 penalty imposed by the Internal
Revenue Service. In addition, delivery to the holder of the Exchange Notes
pursuant to the Exchange Offer may be subject to back-up withholding. (If
withholding results in overpayment of taxes, a refund may be obtained.) Exempt
holders (including, among others, all corporations and certain foreign
individuals) are not subject to these back-up withholding and reporting
requirements. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Issuers on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; or (ii) the Internal Revenue Service has notified the holder that he
or she is no longer subject to back-up withholding; or (iii) certify in
accordance with the Guidelines that such holder is exempt from back-up
withholding. If the Original Notes are in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for information on
which TIN to report.
6. TRANSFER TAXES. The Issuers will pay all transfer taxes, if any,
applicable to the transfer of Original Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Original
Notes not exchanged are to be delivered to, or are to be issued in the name of,
any person other than the record holder, or if tendered certificates are
recorded in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed by any reason other than the transfer of
Original Notes to the Company or its order pursuant to the Exchange Offer, then
the amount of such transfer taxes (whether imposed on the record holder or any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of taxes or exemption from taxes is not submitted with this Letter,
the amount of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to amend or
waive any of the specified conditions in the Exchange Offer in the case of any
Original Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Original Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: This Letter (together with certificates representing tendered
Original Notes or a Book-Entry Confirmation and all other required documents)
must be received by the Exchange Agent on or before the Expiration Date (as
defined in the Prospectus).
10
<PAGE> 1
EXHIBIT 99.2
PIONEER AMERICAS ACQUISITION CORPORATION
EXCHANGE OFFER
TO HOLDERS OF ITS
9 1/4% SERIES A SENIOR SECURED NOTES DUE 2007
NOTICE OF GUARANTEED DELIVERY
As set forth in the Prospectus dated ________ , 1997 (the
"Prospectus") of Pioneer Americas Acquisition Corporation ("Company") and all
of the subsidiaries of the Company (together with the Company, the "Issuers")
under "The Exchange Offer -- How to Tender" and in the Letter of Transmittal
(the "Letter of Transmittal") relating to the offer (the "Exchange Offer") by
the Issuers to exchange up to $200,000,000 in principal amount of its 9 1/4%
Series A Senior Secured Notes due 2007 issued and sold in a transaction exempt
from registration under the Securities Act of 1933, as amended (the "Original
Notes"), for $200,000,000 in principal amount of its 9 1/4% Series B Senior
Secured Notes due 2007 (the "Exchange Notes"), this form or one substantially
equivalent hereto must be used to accept the Exchange Offer of the Issuers if:
(i) certificates for the Original Notes are not immediately available; or (ii)
time will not permit all required documents to reach the Exchange Agent (as
defined below) on or prior to the Expiration Date (as defined in the
Prospectus) of the Exchange Offer. Such form may be delivered by hand or
transmitted by telegram, telex, facsimile transmission or letter to the
Exchange Agent.
TO: UNITED STATES TRUST COMPANY OF NEW YORK (the "Exchange Agent")
By Facsimile:
(212) 420-6152
Attention: Customer Service
Confirm by telephone:
(800) 548-6565
By Registered or Certified Mail:
United States Trust Company of New York
P.O. Box 844 Cooper Station
New York, New York 10276
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Corporate Trust Operations
By Overnight Courier:
United States Trust Company of New York
770 Broadway
New York, New York 10003
Attention: Corporate Trust Operations
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMITTAL OF THIS INSTRUMENT TO
A FACSIMILE OR TELEX NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and conditions
set forth in the Prospectus and the Letter of Transmittal (which together
constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the
principal amount of Original Notes set forth below pursuant to the guaranteed
delivery procedure described in the Prospectus and the Letter of Transmittal.
- ------------------------------------------------------------------------------
Sign Here
Principal Amount of Original Notes
Tendered Signature(s)
------------------------- ----------------------------
----------------------------------------
Certificate Nos. Please Print the Following Information
(if available)
------------------- Name(s)
---------------------------------
----------------------------------------
Total Principal Amount Address
Represented by Original Notes --------------------------------
Certificate(s)
----------------- ----------------------------------------
Area Code and Tel. No(s).
---------------
----------------------------------------
Account Number
------------------
Dated: , 1997
----------------
- ------------------------------------------------------------------------------
<PAGE> 3
GUARANTEE
The undersigned, a member of a recognized signature guarantee medallion program
within the meaning of Rule 17A(d)-15 under the Securities Exchange Act of 1934,
as amended, hereby guarantees that delivery to the Exchange Agent of
certificates tendered hereby, in proper form for transfer, or delivery of such
certificates pursuant to the procedure for book-entry transfer, in either case
with delivery of a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other required documents, is being made within
five trading days after the date of execution of a Notice of Guaranteed
Delivery of the above-named person.
Name of Firm
Authorized Signature
Number and Street or P.O. Box
City State Zip Code
Area Code and Tel. No.
Dated: _____________, 1997
<PAGE> 1
EXHIBIT 99.3
PIONEER AMERICAS ACQUISITION CORPORATION
OFFER TO EXCHANGE
UP TO $200,000,000 IN PRINCIPAL AMOUNT OF
9 1/4% SERIES A SENIOR SECURED NOTES DUE 2007 ISSUED AND
SOLD IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED
FOR
$200,000,000 IN PRINCIPAL AMOUNT OF
9 1/4% SERIES B SENIOR SECURED NOTES DUE 2007
To Our Clients:
Enclosed for your consideration is a Prospectus dated ________ , 1997
(as the same may be amended or supplemented from time to time, the
"Prospectus") and a form of Letter of Transmittal (the "Letter of Transmittal")
relating to the offer (the "Exchange Offer") by Pioneer Americas Acquisition
Corporation (the "Company") and all of the subsidiaries of the Company
(together with the Company, the "Issuers") to exchange up to $200,000,000 in
principal amount of its 9 1/4% Series A Senior Secured Notes due 2007 issued
and sold in a transaction exempt from registration under the Securities Act of
1933, as amended (the "Original Notes"), for $200,000,000 in principal amount
of its 9 1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes").
The material is being forwarded to you as the beneficial owner of
Original Notes carried by us for your account or benefit but not registered in
your name. A tender of any Original Notes may be made only by us as the
registered holder and pursuant to your instructions. Therefore, the Issuers
urge beneficial owners of Original Notes registered in the name of a broker,
dealer, commercial bank, trust company or other nominee to contact such
registered holder promptly if they wish to tender Original Notes in the
Exchange Offer.
Accordingly, we request instructions as to whether you wish us to
tender any or all Original Notes, pursuant to the terms and conditions set
forth in the Prospectus and Letter of Transmittal. We urge you to read
carefully the Prospectus and Letter of Transmittal before instructing us to
tender your Original Notes.
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN
ORDER TO PERMIT US TO TENDER ORIGINAL NOTES ON YOUR BEHALF IN ACCORDANCE WITH
THE PROVISIONS OF THE EXCHANGE OFFER. The Exchange Offer will expire at 5:00
p.m., Eastern Standard Time, on _______, ________ __, 1997, unless extended
(the "Expiration Date"). Original Notes tendered pursuant to the Exchange Offer
may be withdrawn, subject to the procedures described in the Prospectus, at any
time prior to the Expiration Date.
If you wish to have us tender any or all of your Original Notes held
by us for your account or benefit, please so instruct us by completing,
executing and returning to us the instruction form that appears below. The
accompanying Letter of Transmittal is furnished to you for informational
purposes only and may not be used by you to tender Original Notes held by us
and registered in our name for your account or benefit.
<PAGE> 2
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Pioneer Americas
Acquisition Corp.
THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF ORIGINAL
NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE
UNDERSIGNED, PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
Box 1 |_| Please tender my Original Notes held by you for my account or
benefit. I have identified on a signed schedule attached hereto
the principal mount of Original Notes to be tendered if I wish
to tender less than all of my Original Notes.
Box 2 |_| Please do not tender any Original Notes held by you for my
account or benefit.
Date: , 1997
----------------------------------------
----------------------------------------
Signature(s)
----------------------------------------
----------------------------------------
Please print name(s) here
Unless a specific contrary instruction is given in a signed Schedule attached
hereto, your signature(s) hereon shall constitute an instruction to us to
tender all of your Original Notes.
<PAGE> 1
EXHIBIT 99.4
PIONEER AMERICAS ACQUISITION CORPORATION
OFFER TO EXCHANGE
UP TO $200,000,000 IN PRINCIPAL AMOUNT OF
9 1/4% SERIES A SENIOR SECURED NOTES DUE 2007 ISSUED
AND SOLD IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED
FOR
$200,000,000 IN PRINCIPAL AMOUNT OF
9 1/4% SERIES B SENIOR SECURED NOTES DUE 2007
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated _______ , 1997
(as the same may be amended or supplemented from time to time, the
"Prospectus") and a form of Letter of Transmittal (the "Letter of Transmittal")
relating to the offer (the "Exchange Offer") by Pioneer Americas Acquisition
Corporation (the "Company") and all of the subsidiaries of the Company
(together with the Company, the "Issuers") to exchange up to $200,000,000 in
principal amount of its 9 1/4% Series A Senior Secured Notes due 2007 issued
and sold in a transaction exempt from registration under the Securities Act of
1933, as amended (the "Original Notes"), for $200,000,000 in principal amount
of its 9 1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes").
We are asking you to contact your clients for whom you hold Original
Notes registered in your name or in the name of your nominee. In addition, we
ask you to contact your clients who, to your knowledge, hold Original Notes
registered in their own name. The Issuers will not pay any fees or commissions
to any broker, dealer or other person in connection with the solicitation of
tenders pursuant to the Exchange Offer. You will, however, be reimbursed by the
Issuers for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Issuers will pay
all transfer taxes, if any, applicable to the tender of Original Notes to it or
its order, except as otherwise provided in the Prospectus and the Letter of
Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the
tender of Original Notes and for the Information of your
clients;
3. A form of letter that may be sent to your clients for whose
accounts you hold Original Notes registered in your name or the
name of your nominee, with space provided for obtaining the
clients' instructions with regard to the Exchange Offer;
4. A form of Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at
5:00 p.m., Eastern Standard Time, on _________, ________ __, 1997, unless
extended (the "Expiration Date"). Original Notes tendered pursuant to the
Exchange Offer may be withdrawn, subject to the procedures described in the
Prospectus, at any time prior to the Expiration Date.
To tender Original Notes, certificates for Original Notes or a
Book-Entry Confirmation, a duly executed and properly completed Letter of
Transmittal or a facsimile thereof, and any other required documents, must be
received by the Exchange Agent as provided in the Prospectus and the Letter of
Transmittal.
<PAGE> 2
Additional copies of the enclosed material may be obtained from United
States Trust Company of New York, the Exchange Agent, by calling (800)
548-6565.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF THE ISSUERS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU
OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH
RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE
PROSPECTUS AND THE LETTER OF TRANSMITTAL.
