Exhibit 10.3


 


PANOLAM INDUSTRIES INTERNATIONAL, INC.


 


SECOND AMENDMENT TO CREDIT AGREEMENT


 


This SECOND AMENDMENT TO CREDIT
AGREEMENT (this “Amendment”)  is dated as of March 1, 2006 and entered
into by and among Panolam Industries International, Inc., a Delaware
corporation, as successor by merger to PIH Acquisition Co. (“Company”),
Panolam Holdings II Co., a Delaware corporation (“Holdings”), Credit Suisse, Cayman Islands Branch, as administrative
agent for Lenders (“Administrative Agent”), and, solely for purposes of Section 5
hereof, the Credit Support Parties (as defined in Section 5 hereof) listed on
the signature pages hereof, and is made with reference to that certain Credit
Agreement dated as of September 30, 2005 by and among Company, Holdings, Lenders,
Jefferies & Company, Inc., as syndication agent for Lenders and
Administrative Agent, as amended by that certain First Amendment to Credit
Agreement and Waiver dated February 27, 2006 (as so amended, the “Credit Agreement”). Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement.


 


RECITALS


 


WHEREAS, subsection
2.1 A(iv) of the Credit Agreement permits Company to increase the then
effective aggregate principal amount of the Term Loan Commitments in an
aggregate principal amount of up to $80,000,000, provided that certain terms
and conditions are met;


 


WHEREAS, Company
has elected to exercise its option under subsection 2.1A(iv) of the Credit
Agreement to increase the aggregate principal amount of the Term Loan
Commitments by an aggregate principal amount of $80,000,000 (the “Increased Term Loans”), subject to the terms and conditions of
subsection 2.1A(iv);


 


WHEREAS, certain
Lenders have agreed to make the Increased Term Loans to Company in an aggregate
amount of $80,000,000;


 


WHEREAS, pursuant
to subsection 2.1A(iv) of the Credit Agreement, Company and Administrative
Agent are authorized to amend the Credit Agreement without the consent of the
Lenders to the extent necessary to give effect to the Increased Term Loans;


 


NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants
herein contained, the parties hereto agree as follows:


 


Section 1.      AMENDMENTS TO THE CREDIT AGREEMENT


 


A.        Subsection
2.1A(i) of the Credit Agreement is hereby amended by deleting the phrase “and
the aggregate amount of the Term Loan Commitments is $135,000,000” therefrom in
its entirety and substituting the following therefor: “and the aggregate amount
of the Term Loan Commitments (after giving effect to the Second Amendment to
this Agreement, dated as of March 1, 2006, in connection with which Company
exercised its option under subsection 2.1A(iv) to increase the Term Loan
Commitments by $80,000,000) is $215,000,000.”


 


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B.        Subsection 2.4A of the Credit Agreement
is hereby amended by deleting the table contained therein in its entirety and
substituting the following therefor (it being agreed that scheduled repayments
of the Term Loans that were funded on the Closing Date are not reduced hereby):


 


	
  Date

  	
   

  	
  Scheduled Repayment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  $

  	
  337,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2006

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  538,001

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  538,001

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  September 30, 2008

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  538,001

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  538,001

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  September 30, 2010

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  December 31, 2010

  	
   

  	
  $

  	
  538,001

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2011

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  June 30, 2011

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  September 30, 2011

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  December 31, 2011

  	
   

  	
  $

  	
  538,001

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2012

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  June 30, 2012

  	
   

  	
  $

  	
  538,001

  	
   

  
	
  September 30, 2012

  	
   

  	
  $

  	
  200,674,474

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  215,000,000

  	
   

  



 


2

















 


Section 2.      CONDITIONS TO EFFECTIVENESS


 


The effectiveness of this Amendment is subject to the fulfillment, in a
manner satisfactory to Administrative Agent, of each of the following
conditions precedent (the date such conditions are fulfilled or waived by
Administrative Agent is hereafter referred to as the “Second Amendment Effective Date”):


 


A.        On or before the Second Amendment
Effective Date, Company shall deliver to Administrative Agent copies of this
Amendment, executed by Company and each Credit Support Party.


 


B.        On or before the Second Amendment
Effective Date, Administrative Agent shall have executed copies of this
Amendment.


 


C.        On or before the Second Amendment
Effective Date, new or existing Lenders shall have made, and Administrative
Agent and Company shall have accepted, additional Term Loan Commitments in an
aggregate amount of $80,000,000.


 


D.        Administrative Agent shall be satisfied
that all terms and conditions set forth in subsection 2.1A(iv) of the Credit
Agreement shall have been complied with.


 


Section 3.      EXPENSES


 


Without limiting any obligation of Company to reimburse the expenses
pursuant to the terms of the Loan Documents, Company hereby agrees that on or
before the Second Amendment Effective Date, Company shall reimburse
Administrative Agent for any and all reasonable out of pocket expenses
(including reasonable attorneys’ fees) incurred by Administrative Agent in
connection with this Amendment and the matters related hereto.


 


Section 4.      COMPANY’S AND HOLDINGS’ REPRESENTATIONS AND WARRANTIES


 


In order to induce Administrative Agent to enter into this Amendment
and to amend the Credit Agreement in the manner provided herein, Company and
Holdings represent and warrant to Administrative Agent and each Lender the
following:


 


A.        Corporate
Power and Authority. Company and Holdings have all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform their obligations under, the Credit
Agreement as amended by this Amendment (the “Amended Agreement”).


 


B.        Authorization
of Agreements. The execution and delivery of this Amendment
and the performance of the Amended Agreement have been duly authorized by all
necessary corporate action on the part of Company and Holdings.


 


C.        No
Conflict. The execution and delivery by Company and Holdings
of this Amendment do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to Company or any other Loan
Party, the Organizational Documents


 


3

















 


of Company or any
other Loan Party or any order, judgment or decree of any court or other agency
of government binding on Company or any other Loan Party, (ii) conflict with,
result in a breach of or constitute (with due notice or lapse of time or both)
a default under any Contractual Obligation of Company or any other Loan Party,
(iii) result in or require the creation or imposition of any Lien upon any of
the properties or assets of Company or any other Loan Party (other than Liens
created under any of the Loan Documents in favor of Administrative Agent on
behalf of Lenders), or (iv) require any approval of stockholders or any
approval or consent of any Person under any Contractual Obligation of Company
or any other Loan Party, except for such approvals or consents which will be
obtained on or before each of the Second Amendment Effective Date and except,
in each case, to the extent such violation, conflict, Lien or failure to obtain
such approval or consent could not reasonably be expected to have a Material
Adverse Effect.


 


D.        Governmental
Consents.  The
execution and delivery by Company and Holdings and the performance by Company
and Holdings of the Amended Agreement do not and will not require any
Governmental Authorization.


 


E.         Binding
Obligation.  This
Amendment has been duly executed and delivered by Company and Holdings and this
Amendment and the Amended Agreement are the legally valid and binding
obligations of Company and Holdings, enforceable against Company and Holdings
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or similar
laws relating to or limiting creditors’ rights generally or by equitable principles
relating to enforceability.


 


F.         Incorporation
of Representations and Warranties From Credit Agreement.  The representations and warranties
contained in Section 5 of the Credit Agreement are and will be true, correct
and complete in all material respects on and as of each of the Second Amendment
Effective Date to the same extent as though made on and as of each such date,
except to the extent such representations and warranties specifically relate to
an earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.


 


G.        Absence
of Default.  No event
has occurred and is continuing or will result from the consummation of the
transactions contemplated by this Amendment that would constitute an Event of
Default or a Potential Event of Default, except as shall be waived hereby.


 


H.        Senior
Debt; Subordination.  The
Increased Term Loans and the other Obligations constitute “Senior Debt” under
the Senior Subordinated Note Indenture. The incurrence of the Increased Term
Loans will not cause any portion of the Obligations (including the Increased
Term Loans) to lose the benefit of subordination provisions, if any, existing
for the benefit of the Obligations immediately prior to the issuance of the
Increased Term Loans.


 


Section 5.      ACKNOWLEDGEMENT AND CONSENT


 


Holdings, each Guarantor (as defined in the Guaranties) and each
Grantor (as defined in the Security Agreement) (such Guarantors and Grantors
together with Holdings, the “Credit Support
Parties”) each hereby acknowledges and agrees that the Guaranties
and


 


4

















 


Collateral
Documents (each, a “Credit Support Document”)  to which it is a party or otherwise bound
shall continue in full force and effect and that all of its obligations
thereunder shall be valid and enforceable and shall not be impaired or limited
by the execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the Second Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.


 


Each Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Credit Support Party is not required by the terms of the Credit Agreement
or any other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment and (ii) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to require the
consent of such Credit Support Party to any future amendments to the Credit
Agreement.


 


Section 6.      MISCELLANEOUS


 


A.        Reference
to and Effect on the Credit Agreement and the Other Loan Documents.


 


(i)        On and
after each of the Second Amendment Effective Date, each reference in the Credit
Agreement to “this Agreement”, “hereunder”, “hereof, “herein” or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like
import referring to the Credit Agreement shall mean and be a reference to the
Credit Agreement, as amended hereby as of such date.


 


(ii)       Except
as specifically amended by this Amendment, the Credit Agreement and the other
Loan Documents shall remain in full force and effect and are hereby ratified
and confirmed.


 


(iii)      The
execution, delivery and performance of this Amendment shall not, except as
expressly provided herein, constitute a waiver of any provision of, or operate
as a waiver of any right, power or remedy of Administrative Agent or any Lender
under, the Credit Agreement or any of the other Loan Documents.


 


B.        Fees
and Expenses.  Company
acknowledges that all costs, fees and expenses as described in subsection 10.2
of the Credit Agreement incurred by Administrative Agent and its counsel with
respect to this Amendment and the documents and transactions contemplated
hereby shall be for the account of Company.


 


C.        Headings.  Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.


 


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D.        Applicable
Law. THIS AMENDMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THAT WOULD REQUIRE APPLICATION OF ANOTHER LAW.


 


E.         Counterparts;
Effectiveness. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document. This Amendment (other than (i) the provisions of
Sections 1 and 2 hereof, the effectiveness of which is governed by Section 3
hereof, and (ii) the provisions of Section 5 hereof, which shall become
effective upon execution of a counterpart hereof by each of the Credit Support
Parties) shall become effective upon the execution of a counterpart hereof by
Company, Holdings and Administrative Agent and receipt by Company and
Administrative Agent of written or telephonic notification of such execution
and authorization of delivery thereof.


 


[Remainder of page intentionally left blank]


 


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IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed and delivered by
their respective officers thereunto duly authorized as of the date first written
above.


 


	
   

  	
  PANOLAM
  INDUSTRIES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J. Muller,
  Jr.

  	
   

  
	
   

  	
  Name:

  	
  Robert J. Muller

  	
   

  
	
   

  	
  Title:

  	
  Chairman, President
  & CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PANOLAM
  HOLDINGS II CO.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J. Muller,
  Jr.

  	
   

  
	
   

  	
  Name:

  	
  Robert J. Muller

  	
   

  
	
   

  	
  Title:

  	
  Chairman, President
  & CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  For purposes of Section
  5 only, as a Credit Support Party:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PANOLAM
  INDUSTRIES, INC.

  PIONEER PLASTICS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J. Muller,
  Jr.

  	
   

  
	
   

  	
  Name:

  	
  Robert J. Muller

  	
   

  
	
   

  	
  Title:

  	
  Chairman, President
  & CEO

  	
   

  
							



 


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  CREDIT
  SUISSE, Cayman Islands Branch,

  as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William O’Daly

  	
   

  
	
   

  	
  Name:

  	
  William O’Daly

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Director

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rianka Mohan

  	
   

  
	
   

  	
  Name:

  	
  Rianka Mohan

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Associate

  	
   

  	
   

  
										



 


S-2