Exhibit
10.1


 


CREDIT AGREEMENT


 


DATED AS OF SEPTEMBER 30, 2005


 


AMONG


 


PIH ACQUISITION CO.,


PANOLAM INDUSTRIES INTERNATIONAL, INC.,


 


PANOLAM HOLDINGS II CO.,


 


THE LENDERS LISTED HEREIN,


as Lenders,


 


 


CREDIT SUISSE, 

Cayman Islands Branch,

as Administrative Agent,


 


and


 


JEFFERIES & COMPANY, INC.,

as Syndication Agent.


 


 


CREDIT SUISSE

and

JEFFERIES BABSON FINANCE LLC

Joint Lead Arrangers

and

Joint Bookrunners


 





















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
   

  	
  DEFINITIONS

  	
  2

  
	
   

  	
  1.1

  	
   

  	
  Certain Defined Terms

  	
  2

  
	
   

  	
  1.2

  	
   

  	
  Accounting Terms; Utilization of GAAP for Purposes
  of Calculations Under Agreement

  	
  31

  
	
   

  	
  1.3

  	
   

  	
  Other Definitional Provisions and Rules of
  Construction

  	
  31

  
	
   

  	
  1.4

  	
   

  	
  Rounding

  	
  32

  
	
  SECTION 2.

  	
   

  	
  AMOUNTS AND TERMS OF COMMITMENTS AND LOANS

  	
  32

  
	
   

  	
  2.1

  	
   

  	
  Commitments; Making of Loans; the Register; Optional
  Notes

  	
  32

  
	
   

  	
  2.2

  	
   

  	
  Interest on the Loans

  	
  39

  
	
   

  	
  2.3

  	
   

  	
  Fees

  	
  43

  
	
   

  	
  2.4

  	
   

  	
  Repayments, Prepayments and Reductions of
  Commitments and Loans; General Provisions Regarding Payments; Application of
  Proceeds of Collateral and Payments Under Guaranties

  	
  44

  
	
   

  	
  2.5

  	
   

  	
  Use of Proceeds

  	
  52

  
	
   

  	
  2.6

  	
   

  	
  Special Provisions Governing Eurodollar Rate Loans

  	
  52

  
	
   

  	
  2.7

  	
   

  	
  Increased Costs; Taxes; Capital Adequacy

  	
  54

  
	
   

  	
  2.8

  	
   

  	
  Statement of Lenders; Obligation of Lenders and
  Issuing Lenders to Mitigate

  	
  59

  
	
   

  	
  2.9

  	
   

  	
  Defaulting Lenders

  	
  60

  
	
   

  	
  2.10

  	
   

  	
  Replacement of a Lender

  	
  61

  
	
  SECTION 3.

  	
   

  	
  LETTERS OF CREDIT

  	
  62

  
	
   

  	
  3.1

  	
   

  	
  Issuance of Letters of Credit and Lenders’ Purchase
  of Participations Therein

  	
  62

  
	
   

  	
  3.2

  	
   

  	
  Letter of Credit Fees

  	
  65

  
	
   

  	
  3.3

  	
   

  	
  Drawings and Reimbursement of Amounts Paid Under
  Letters of Credit

  	
  65

  
	
   

  	
  3.4

  	
   

  	
  Obligations Absolute

  	
  68

  
	
   

  	
  3.5

  	
   

  	
  Nature of Issuing Lenders’ Duties

  	
  69

  
	
  SECTION 4.

  	
   

  	
  CONDITIONS TO LOANS AND LETTERS OF CREDIT

  	
  70

  
	
   

  	
  4.1

  	
   

  	
  Conditions to Term Loans and Initial Revolving Loans
  and Swing Line Loans

  	
  70

  
	
   

  	
  4.2

  	
   

  	
  Conditions to All Loans

  	
  75

  
	
   

  	
  4.3

  	
   

  	
  Conditions to Letters of Credit

  	
  76

  



 


i





















 


	
   

  	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
   

  	
  COMPANY’S REPRESENTATIONS AND WARRANTIES

  	
  76

  
	
   

  	
  5.1

  	
   

  	
  Organization, Powers, Qualification, Good Standing,
  Business and Subsidiaries

  	
  76

  
	
   

  	
  5.2

  	
   

  	
  Authorization of Borrowing, etc.

  	
  77

  
	
   

  	
  5.3

  	
   

  	
  Financial Condition

  	
  78

  
	
   

  	
  5.4

  	
   

  	
  No Material Adverse Change

  	
  78

  
	
   

  	
  5.5

  	
   

  	
  Title to Properties; Liens; Real Property;
  Intellectual Property

  	
  78

  
	
   

  	
  5.6

  	
   

  	
  Litigation; Adverse Facts

  	
  79

  
	
   

  	
  5.7

  	
   

  	
  Payment of Taxes

  	
  79

  
	
   

  	
  5.8

  	
   

  	
  Governmental Regulation

  	
  79

  
	
   

  	
  5.9

  	
   

  	
  Securities Activities

  	
  79

  
	
   

  	
  5.10

  	
   

  	
  Employee Benefit Plans

  	
  80

  
	
   

  	
  5.11

  	
   

  	
  Certain Fees

  	
  80

  
	
   

  	
  5.12

  	
   

  	
  Environmental Protection

  	
  80

  
	
   

  	
  5.13

  	
   

  	
  Employee Matters

  	
  81

  
	
   

  	
  5.14

  	
   

  	
  Solvency

  	
  81

  
	
   

  	
  5.15

  	
   

  	
  Matters Relating to Collateral

  	
  81

  
	
   

  	
  5.16

  	
   

  	
  Disclosure

  	
  82

  
	
  SECTION 6.

  	
   

  	
  AFFIRMATIVE COVENANTS

  	
  82

  
	
   

  	
  6.1

  	
   

  	
  Financial Statements and Other Reports

  	
  82

  
	
   

  	
  6.2

  	
   

  	
  Existence, etc.

  	
  85

  
	
   

  	
  6.3

  	
   

  	
  Payment of Taxes and Claims; Tax

  	
  85

  
	
   

  	
  6.4

  	
   

  	
  Maintenance of Properties; Insurance

  	
  86

  
	
   

  	
  6.5

  	
   

  	
  Inspection Rights

  	
  86

  
	
   

  	
  6.6

  	
   

  	
  Compliance with Laws, etc.

  	
  87

  
	
   

  	
  6.7

  	
   

  	
  Environmental Matters

  	
  87

  
	
   

  	
  6.8

  	
   

  	
  Execution of Subsidiary Guaranty and Personal
  Property Collateral Documents After the Closing Date

  	
  89

  
	
   

  	
  6.9

  	
   

  	
  Matters Relating to Additional Real Property
  Collateral

  	
  90

  
	
   

  	
  6.10

  	
   

  	
  Interest Rate Protection

  	
  91

  
	
   

  	
  6.11

  	
   

  	
  Ratings

  	
  91

  
							



 


ii





















 


	
   

  	
   

  	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.12

  	
   

  	
  Post Closing Matters

  	
  91

  
	
   

  	
  6.13

  	
   

  	
  Further Assurances

  	
  91

  
	
  SECTION 7.

  	
   

  	
  NEGATIVE COVENANTS

  	
  91

  
	
   

  	
  7.1

  	
   

  	
  Indebtedness

  	
  91

  
	
   

  	
  7.2

  	
   

  	
  Liens and Related Matters

  	
  94

  
	
   

  	
  7.3

  	
   

  	
  Investments; Acquisitions

  	
  98

  
	
   

  	
  7.4

  	
   

  	
  Contingent Obligations

  	
  100

  
	
   

  	
  7.5

  	
   

  	
  Restricted Junior Payments

  	
  102

  
	
   

  	
  7.6

  	
   

  	
  Financial Covenants

  	
  104

  
	
   

  	
  7.7

  	
   

  	
  Restriction on Fundamental Changes; Asset Sales

  	
  105

  
	
   

  	
  7.8

  	
   

  	
  Consolidated Capital Expenditures

  	
  108

  
	
   

  	
  7.9

  	
   

  	
  Transactions with Shareholders and Affiliates

  	
  109

  
	
   

  	
  7.10

  	
   

  	
  Conduct of Business By Holdings

  	
  110

  
	
   

  	
  7.11

  	
   

  	
  Conduct of Business by Company

  	
  110

  
	
   

  	
  7.12

  	
   

  	
  Amendments or Waivers of Certain Agreements;
  Amendments of Documents Relating to Subordinated Indebtedness; Designation of
  Senior Indebtedness

  	
  110

  
	
   

  	
  7.13

  	
   

  	
  Fiscal Year

  	
  111

  
	
  SECTION 8. 

  	
   

  	
  EVENTS OF DEFAULT

  	
  111

  
	
   

  	
  8.1

  	
   

  	
  Failure to Make Payments When Due

  	
  111

  
	
   

  	
  8.2

  	
   

  	
  Default in Other Agreements

  	
  111

  
	
   

  	
  8.3

  	
   

  	
  Breach of Certain Covenants

  	
  112

  
	
   

  	
  8.4

  	
   

  	
  Breach of Warranty

  	
  112

  
	
   

  	
  8.5

  	
   

  	
  Other Defaults Under Loan Documents

  	
  113

  
	
   

  	
  8.6

  	
   

  	
  Involuntary Bankruptcy; Appointment of Receiver, etc.

  	
  113

  
	
   

  	
  8.7

  	
   

  	
  Voluntary Bankruptcy; Appointment of Receiver, etc.

  	
  113

  
	
   

  	
  8.8

  	
   

  	
  Judgments and Attachments

  	
  114

  
	
   

  	
  8.9

  	
   

  	
  Dissolution

  	
  114

  
	
   

  	
  8.10

  	
   

  	
  Employee Benefit Plans

  	
  114

  
	
   

  	
  8.11

  	
   

  	
  Change in Control

  	
  114

  



 


iii





















 


	
   

  	
   

  	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.12

  	
   

  	
  Invalidity of Loan Documents; Failure of Security;
  Repudiation of Obligations

  	
  114

  
	
   

  	
  8.13

  	
   

  	
  Failure to Consummate Acquisition

  	
  114

  
	
  SECTION 9.

  	
   

  	
  ADMINISTRATIVE AGENT

  	
  115

  
	
   

  	
  9.1

  	
   

  	
  Appointment

  	
  115

  
	
   

  	
  9.2

  	
   

  	
  Powers and Duties; General Immunity

  	
  116

  
	
   

  	
  9.3

  	
   

  	
  Independent Investigation by Lenders; No
  Responsibility For Appraisal of Creditworthiness

  	
  118

  
	
   

  	
  9.4

  	
   

  	
  Right to Indemnity

  	
  118

  
	
   

  	
  9.5

  	
   

  	
  Resignation of Administrative Agent; Successor
  Administrative Agent and Swing Line Lender

  	
  119

  
	
   

  	
  9.6

  	
   

  	
  Collateral Documents and Guaranties.

  	
  120

  
	
   

  	
  9.7

  	
   

  	
  Duties of Other Agents

  	
  121

  
	
   

  	
  9.8

  	
   

  	
  Administrative Agent May File Proofs of Claim

  	
  121

  
	
  SECTION 10.

  	
   

  	
  MISCELLANEOUS

  	
  121

  
	
   

  	
  10.1

  	
   

  	
  Successors and Permitted Assigns; Assignments and
  Participations in Loans and Letters of Credit

  	
  122

  
	
   

  	
  10.2

  	
   

  	
  Expenses

  	
  126

  
	
   

  	
  10.3

  	
   

  	
  Indemnity

  	
  126

  
	
   

  	
  10.4

  	
   

  	
  Set-Off

  	
  128

  
	
   

  	
  10.5

  	
   

  	
  Ratable Sharing

  	
  128

  
	
   

  	
  10.6

  	
   

  	
  Amendments and Waivers

  	
  129

  
	
   

  	
  10.7

  	
   

  	
  Notices; Effectiveness of Signatures

  	
  130

  
	
   

  	
  10.8

  	
   

  	
  Survival of Representations, Warranties and
  Agreements

  	
  131

  
	
   

  	
  10.9

  	
   

  	
  Failure or Indulgence Not Waiver; Remedies
  Cumulative

  	
  131

  
	
   

  	
  10.10

  	
   

  	
  Marshalling; Payments Set Aside

  	
  131

  
	
   

  	
  10.11

  	
   

  	
  Severability

  	
  132

  
	
   

  	
  10.12

  	
   

  	
  Obligations Several; Independent Nature of Lenders’
  Rights; Damage Waiver

  	
  132

  
	
   

  	
  10.13

  	
   

  	
  Release of Security Interest or Guaranty

  	
  132

  
	
   

  	
  10.14

  	
   

  	
  Applicable Law

  	
  133

  
	
   

  	
  10.15

  	
   

  	
  Construction of Agreement; Nature of Relationship

  	
  133

  



 


iv





















 


	
   

  	
   

  	
   

  	
   

  	
  Page No.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.16

  	
   

  	
  Consent to Jurisdiction and Service of Process

  	
  133

  
	
   

  	
  10.17

  	
   

  	
  Waiver of Jury Trial

  	
  134

  
	
   

  	
  10.18

  	
   

  	
  Confidentiality

  	
  135

  
	
   

  	
  10.19

  	
   

  	
  Counterparts; Effectiveness

  	
  136

  
	
   

  	
  10.20

  	
   

  	
  USA Patriot Act

  	
  136

  
	
  Signature pages

  	
  S-1

  



 


v

















 




	
  EXHIBITS

  
	
   

  	
   

  
	
  I

  	
  FORM OF NOTICE OF BORROWING

  
	
   

  	
   

  
	
  II

  	
  FORM OF NOTICE OF CONVERSION/CONTINUATION

  
	
   

  	
   

  
	
  III

  	
  FORM OF REQUEST FOR ISSUANCE

  
	
   

  	
   

  
	
  IV

  	
  FORM OF TERM NOTE

  
	
   

  	
   

  
	
  V

  	
  FORM OF REVOLVING NOTE

  
	
   

  	
   

  
	
  VI

  	
  FORM OF SWING LINE NOTE

  
	
   

  	
   

  
	
  VII

  	
  FORM OF COMPLIANCE CERTIFICATE

  
	
   

  	
   

  
	
  VIII

  	
  FORM OF OPINION OF COMPANY COUNSEL

  
	
   

  	
   

  
	
  IX

  	
  FORM OF ASSIGNMENT AGREEMENT

  
	
   

  	
   

  
	
  X

  	
  FORM OF SOLVENCY CERTIFICATE

  
	
   

  	
   

  
	
  XI

  	
  FORM OF SUBSIDIARY GUARANTY

  
	
   

  	
   

  
	
  XII

  	
  FORM OF SECURITY AGREEMENT

  
	
   

  	
   

  
	
  XIII

  	
  FORM OF HOLDINGS GUARANTY

  
	
   

  	
   

  
	
  XIV

  	
  FORM OF NOTICE OF PREPAYMENT

  






 


vi

















 




	
  SCHEDULES

  
	
   

  	
   

  
	
   

  	
   

  
	
  4.1H

  	
  CLOSING DATE MORTGAGED PROPERTIES

  
	
   

  	
   

  
	
  5.1

  	
  HOLDINGS AND ITS SUBSIDIARIES

  
	
   

  	
   

  
	
  5.5B

  	
  REAL PROPERTY

  
	
   

  	
   

  
	
  5.5C

  	
  INTELLECTUAL PROPERTY

  
	
   

  	
   

  
	
  5.6

  	
  LITIGATION

  
	
   

  	
   

  
	
  5.12

  	
  ENVIRONMENTAL MATTERS

  
	
   

  	
   

  
	
  7.1

  	
  CERTAIN EXISTING INDEBTEDNESS

  
	
   

  	
   

  
	
  7.2

  	
  CERTAIN EXISTING LIENS

  
	
   

  	
   

  
	
  7.3

  	
  CERTAIN EXISTING INVESTMENTS

  
	
   

  	
   

  
	
  7.4

  	
  CERTAIN EXISTING CONTINGENT OBLIGATIONS

  
	
   

  	
   

  
	
  7.9

  	
  PERMITTED AGREEMENTS WITH AFFILIATES

  






 


vii

















 


CREDIT AGREEMENT


 


This CREDIT AGREEMENT is dated as of September
30, 2005 and entered into by and among PIH
ACQUISITION CO., a Delaware corporation (“Merger Sub”; this and other capitalized terms used herein
without definition being used as defined in subsection 1.1), PANOLAM HOLDINGS II CO., a Delaware
corporation (“Holdings”), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HEREOF (each individually referred to herein as a “Lender” and collectively as “Lenders”),
JEFFERIES & COMPANY, INC., as syndication agent for Lenders (in
such capacity, “Syndication Agent”),
and CREDIT SUISSE, Cayman Islands
Branch (“Credit Suisse”), as
administrative agent for Lenders (in such capacity, “Administrative Agent”).


 


RECITALS


 


WHEREAS,
on the Closing Date, Holdings owns all of the outstanding
shares of capital stock of Merger Sub;


 


WHEREAS,
on the Closing Date, Panolam Holdings owns all of the outstanding shares of
capital stock of Holdings;


 


WHEREAS,
on or before the Closing Date, the Equity Investors will purchase all of the
outstanding Panolam Holdings Common Stock;


 


WHEREAS,
on or before the Closing Date, Company will issue and sell not less than
$150,000,000 in aggregate principal amount of Senior Subordinated Notes;


 


WHEREAS,
on the Closing Date, (i) Holdings will purchase all of the outstanding shares
of capital stock of Panolam Industries Holdings pursuant to the Acquisition
Agreement, and (ii) the Panolam Merger will be consummated;


 


WHEREAS,
Lenders, at the request of Company, have agreed to extend certain credit
facilities to Company, the proceeds of which will be used (i) together with the
proceeds of the issuance and sale of the Senior Subordinated Notes, to fund the
Acquisition Financing Requirements, and (ii) to provide financing for working
capital and other general corporate purposes of Company and its Subsidiaries;


 


WHEREAS,
Company desires to secure all of the Obligations hereunder and under the other
Loan Documents by granting to Administrative Agent, on behalf of Lenders, a
first priority Lien on substantially all of its real, personal and mixed
property, all of the Capital Stock of its Domestic Subsidiaries and 100% of the
non-voting Capital Stock (if any) and 65% of the Capital Stock of its
first-tier Foreign Subsidiaries; and


 


WHEREAS,
Holdings and Subsidiary Guarantors have agreed to guarantee the Obligations
hereunder and under the other Loan Documents and to secure their guaranties by
granting to Administrative Agent, on behalf of Lenders, a first priority Lien
on substantially all of their real, personal and mixed property, all of the
capital stock of their Domestic Subsidiaries


 





















 


and 100% of the
non-voting Capital Stock (if any) and 65% of the Capital Stock of their
respective first-tier Foreign Subsidiaries:


 


NOW, THEREFORE,
in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Holdings, Lenders,
Syndication Agent and Administrative Agent agree as follows:


 


Section
1.     DEFINITIONS


 


1.1      Certain Defined Terms.


 


The following terms used
in this Agreement shall have the following meanings:


 


“Acquisition”
means the transactions contemplated by the Acquisition
Agreement and the Panolam Industries Holdings Merger Agreement, including the
Panolam Merger.


 


“Acquisition
Agreement” means that certain Agreement and Plan of Merger by
and among TC Group, L.L.C., a Delaware limited liability company, as the
initial Holder Representative (as defined in the Acquisition Agreement),
Panolam Industries Holdings, Holdings and Merger Sub dated as of July 16, 2005,
as amended by that certain First Amendment to Agreement and Plan of Merger
dated as of September 30, 2005, in the form delivered to Administrative Agent
and Lenders prior to their execution of this Agreement.


 


“Acquisition
Consideration” means the Merger Consideration as such term is
defined in the Acquisition Agreement.


 


“Acquisition
Financing Requirements” means the aggregate of all amounts
necessary (i) to pay the Acquisition Consideration, (ii) to refinance all
Indebtedness outstanding under the Existing Credit Agreements, and (iii) to pay
Transaction Costs.


 


“Additional
Mortgaged Property” has the meaning set forth in subsection
6.9.


 


“Additional
Mortgages” has the meaning set forth in subsection 6.9.


 


“Administrative
Agent” has the meaning assigned to that term in the
introduction to this Agreement and also means and includes any successor
Administrative Agent appointed pursuant to subsection 9.5A.


 


“Affected
Lender” has the meaning assigned to that term in subsection
2.6C.


 


“Affected
Loans” has the meaning assigned to that term in subsection
2.6C.


 


“Affiliate”,
as applied to any Person, means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling”, “controlled by” and “under
common control with”), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the


 


2





















 


management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.


 


“Aggregate
Amounts Due” has the meaning set forth in subsection 10.5.


 


“Agreement”
means this Credit Agreement dated as of September 30, 2005.


 


“Approved
Fund” means a Fund that is administered or managed by (i) a
Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an
entity that administers or manages a Lender.


 


“Asset
Sale” means the sale by Company or any of its Subsidiaries to
any Person other than Company or any of its wholly owned Subsidiaries, in any
single transaction or a series of transactions, of (i) any of the Capital Stock
of any of Company’s Subsidiaries whether newly issued or outstanding, (ii)
substantially all of the assets of any division or line of business of Company
or any of its Subsidiaries, or (iii) any other property or assets (whether
tangible or intangible) of Company or any of its Subsidiaries.


 


“Assignment
Agreement” means an Assignment and Assumption in
substantially the form of Exhibit IX annexed hereto.


 


“Bankruptcy
Code” means Title 11 of the United States Code entitled
“Bankruptcy”, as now and hereafter in effect, or any successor statute.


 


“Base
Rate” means, at any time, the higher of (i) the Prime Rate or
(ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
Any change in the Base Rate due to a change in the Prime Rate or the Federal
Funds Effective Rate shall be effective on the effective date of such change.


 


“Base
Rate Loans” means Loans bearing interest at rates determined
by reference to the Base Rate as provided in subsection 2.2A.


 


“Base
Rate Margin” means the margin over the Base Rate used in determining
the rate of interest of Base Rate Loans pursuant to subsection 2.2A.


 


“Business
Day” means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in such state are authorized or required by
law or other governmental action to close.


 


“Canadian
Subsidiary” means Panolam Industries, Ltd. and any
wholly-owned Subsidiary of Panolam Industries, Ltd. incorporated or organized
in Canada or any province or territory thereof.


 


“Capital
Lease”, as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.


 


3





















 


“Capital
Stock” means the capital stock of or other equity interests
in a Person.


 


“Cash” means money, currency or a credit
balance in a Deposit Account.


 


“Cash  Equivalents”
means, as at any date of determination, (i) marketable securities (a) issued or
directly and unconditionally guaranteed as to interest and principal by the
United States or Canada or (b) issued by any agency or instrumentality of the
United States or Canada the obligations of which are backed by the full faith
and credit of the United States or Canada, respectively, in each case maturing
within one year after such date; (ii) marketable direct obligations issued by
any state, commonwealth or territory of the United States or any province of
Canada or any political subdivision of any such state, commonwealth, territory
or province, as applicable, or any public instrumentality thereof, in each case
maturing within one year after such date and having, at the time of the
acquisition thereof, one of the two highest ratings obtainable from either
S&P, Moody’s or DBRS, as applicable; (iii) commercial paper maturing no
more than one year from the date of creation thereof and having, at the time of
the acquisition thereof, a rating of at least A-1 from S&P, at least P-1
from Moody’s or at least R-l from DBRS, as may be applicable; (iv) certificates
of deposit or bankers’ acceptances maturing within one year after such date and
issued or accepted by any Lender or by any commercial bank organized under the
laws of the United States or any state thereof or the District of Columbia that
(a) is at least “adequately capitalized” (as defined in the regulations of its
primary Federal banking regulator) and (b) has Tier 1 capital (as defined in
such regulations) of not less than $100,000,000; (v) repurchase agreements
entered into by any Person with a bank or trust company (including any of the
Lenders) or recognized securities dealer having capital and surplus in excess
of $250,000,000 for direct obligations issued or fully guaranteed by the United
States; (vi) shares of any money market mutual fund that (a) has at least 95%
of its assets invested continuously in the types of investments referred to in
clauses (i), (ii), (iii), (iv) and (v) above, and (b) has capital of not less
than $500,000,000; and (vii) solely with respect to Foreign Subsidiaries,
non-Dollar denominated (a) certificates of deposit of, bankers acceptances of,
or time deposits with, any commercial bank which is organized and existing
under the laws of the country in which such Foreign Subsidiary maintains its
chief executive office and principal place of business, provided such country
is a member of the Organization for Economic Cooperation and Development, and
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof
(any such bank being an “Approved Foreign
Bank”) and maturing within one year of the date of acquisition and
(b) equivalents of demand deposit accounts which are maintained with an
Approved Foreign Bank.


 


“Certificates
of Merger” means the Merger Sub Certificate of Merger and the
Panolam Industries Holdings Certificate of Merger.


 


“Change
in Control” means any of the following: (i) at any time prior
to the consummation of a Qualifying IPO, the Equity Investors shall cease to
beneficially own and control, directly or indirectly, at least a majority of
the issued and outstanding shares of capital stock of Company entitled (without
regard to the occurrence of any contingency) to vote for the election of
members of the Governing Body of Company; (ii) at any time after the
consummation of a Qualifying IPO, (a) the Equity Investors shall cease to
beneficially own and control, directly or indirectly, at least 30% of the
capital stock of Company, (b) any “person” or “group” (as such terms are used
in sections 13(d) and 14(d) of the Exchange Act, but excluding


 


4





















 


any employee
benefit plan of such person and its subsidiaries, and any person or entity
acting in its capacity as trustee, agent or other fiduciary or administrator of
any such plan), excluding the Equity Investors, shall become the beneficial
owner, directly or indirectly, of a greater percentage of the then outstanding
voting stock of the Qualifying IPO Issuer than that owned beneficially by the
Equity Investors at such time, or (c) during any period of twelve (12)
consecutive months, the Governing Body of the Qualifying IPO Issuer shall not
consist of a majority of the Continuing Members; (iii) at any time prior to the
consummation of a Qualifying IPO of the capital stock of Company, the failure
at any time of Holdings to legally and beneficially own and control 100% of the
issued and outstanding shares of capital stock of Company or the failure at any
time of Holdings to have the ability to elect all of the Governing Body of
Company; or (iv) the occurrence of any “Change of Control” as defined in the
Senior Subordinated Indebtedness Indenture. As used herein, the term
“beneficially own” or “beneficial ownership” shall have the meaning set forth
in the Exchange Act and the rules and regulations promulgated thereunder.


 


“Change
in Law” means the occurrence, after the date of this
Agreement, of any of the following: (i) the adoption or taking effect of any
law, rule, regulation, treaty or order, (ii) any change in any law, rule,
regulation or treaty or in the administration, interpretation or application
thereof by any Government Authority, (iii) any determination of a court or
other Government Authority or (iv) the making or issuance of any request,
guideline or directive (whether or not having the force of law) by any
Government Authority.


 


“Closing
Date” means the date on which the initial Loans are made.


 


“Closing
Date Mortgaged Property” has the meaning set forth in
subsection 4.1H.


 


“Closing
Date Mortgage Policies” has the meaning set forth in
subsection 4.1H.


 


“Closing
Date Mortgages” has the meaning set forth in subsection 4.1H.


 


“Closing
Date Revolving Loans” has the meaning set forth in subsection
2.1A(ii).


 


“Collateral”
means, collectively, all of the property in which Liens are
purported to be granted pursuant to the Collateral Documents as security for
the Obligations.


 


“Collateral
Account” has the meaning assigned to that term in the
Security Agreement.


 


“Collateral
Documents” means the Security Agreement, the Mortgages and
all other instruments or documents delivered by any Loan Party pursuant to this
Agreement or any of the other Loan Documents in order to grant to
Administrative Agent, on behalf of Lenders, a Lien on any property of that Loan
Party as security for the Obligations.


 


“Commercial
Letter of Credit” means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the


 


5





















 


purchase of any
materials, goods or services by Company or any of its Subsidiaries in the
ordinary course of business of Company or such Subsidiary.


 


“Commitments”
means the commitments of Lenders to make Loans as set forth
in subsections 2.1A and 3.3.


 


“Company”
means (i) prior to the consummation of the Panolam Merger,
Merger Sub, and (ii) after the consummation of the Panolam Merger, Panolam as
the surviving corporation in such merger.


 


“Compliance
Certificate” means a certificate substantially in the form of
Exhibit VII annexed hereto.


 


“Confidential
Information Memorandum” means the Confidential Information
Memorandum dated September 2005 prepared by Credit Suisse relating to the
credit facilities evidenced by this Agreement.


 


“Consolidated
Capital Expenditures” means, for any period, the sum of the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
by Company and its Subsidiaries during that period that, in conformity with
GAAP, are included in “additions to property, plant or equipment” or comparable
items reflected in the consolidated statement of cash flows of Company and its
Subsidiaries. For purposes of this definition, the purchase price of any asset
that is purchased substantially simultaneously with the exchange of existing
assets or with Net Insurance/Condemnation Proceeds shall be included in
Consolidated Capital Expenditures only to the extent of the gross amount of
such purchase price less the credit granted by the seller for the assets being
exchanged at such time or the amount of such Net Insurance/Condemnation
Proceeds, as the case may be.


 


“Consolidated
Cash Interest Expense” means, for any period, Consolidated
Interest Expense for such period excluding, however, any interest
expense not payable in Cash (including amortization of discount and
amortization of debt issuance costs).


 


“Consolidated
Current Assets” means, as at any date of determination, the
total assets of Company and its Subsidiaries on a consolidated basis which may
properly be classified as current assets in conformity with GAAP, excluding
Cash and Cash Equivalents.


 


“Consolidated
Current Liabilities” means, as at any date of determination,
the total liabilities of Company and its Subsidiaries on a consolidated basis
which may properly be classified as current liabilities in conformity with
GAAP, excluding the current portions of long-term Indebtedness and
Capital Leases.


 


“Consolidated
EBITDA” means, for any period, the sum, without duplication,
of the amounts for such period of:


 


(i)        Consolidated Net Income,


 


6





















 


(ii)       Consolidated
Interest Expense,


 


(iii)      provisions for taxes based on income or profits and franchise
or similar taxes,


 


(iv)      total depreciation expense,


 


(v)        total amortization expense,


 


(vi)      fees and expenses incurred pursuant to the Management Agreement
(or the amount of any Restricted Junior Payment made for the payment thereof),


 


(vii)     Transaction Costs,


 


(viii)    customary fees, costs and expenses incurred
in connection with any equity or debt offering, Investment, recapitalization or
Indebtedness (in each case, as permitted by this Agreement) or in connection
with the consummation of Permitted Acquisitions,


 


(ix)       restructuring charges or reserves (including, without limitation,
non-cash retention, severance, systems establishment cost, excess pension
charges, contract termination costs including future lease commitments, and
costs to consolidate facilities and relocate employees),


 


(x)         net after-tax gains or losses (less all fees and
expenses or charges relating thereto) attributable to the early extinguishment
of Indebtedness,


 


(xi)       net gain or loss under any Hedge Agreement permitted by this
Agreement,


 


(xii)      other non-cash items (including, without limitation, any impairment
charges and the impact of purchase accounting including, without limitation,
the amortization of inventory step-up but excluding any such non-cash item to
the extent it represents an accrual of or reserve for cash expenditures in any
future period),


 


(xiii)     to the extent actually reimbursed (and to
the extent such reimbursement is not otherwise included in Consolidated Net
Income), expenses incurred to the extent covered by indemnification provisions
in any agreement in connection with a Permitted Acquisition,


 


(xiv)    to the extent covered by insurance (and to the extent the
proceeds of such insurance are not otherwise included in Consolidated Net
Income) under which the insurer has been properly notified and has not denied
or contested coverage, charges and expenses with respect to liability or
casualty events, business interruption or product recalls,


 


(xv)     letter of credit fees, and


 


7





















 


(xvi)    fees and
expenses in connection with the exchange of the Senior Subordinated Notes for
registered notes with identical terms as contemplated by the Senior
Subordinated Notes Indenture,


 


but only, in the
case of clauses (ii)-(xvi), to the extent deducted in the calculation of
Consolidated Net Income, less non-cash items added in the calculation of
Consolidated Net Income (other than any such non-cash item to the extent it
will result in the receipt of cash payments in any future period), all of the
foregoing as determined on a consolidated basis for Company and its
Subsidiaries in conformity with GAAP.


 


“Consolidated
Excess Cash Flow” means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for such
period of (a) Consolidated EBITDA and (b) the Consolidated Working Capital
Adjustment minus (ii) the sum, without duplication, of the amounts for
such period of (a) voluntary and scheduled repayments of Consolidated Total
Debt (excluding voluntary repayments of Term Loans and repayments of Revolving
Loans except to the extent the Revolving Loan Commitment Amount is permanently
reduced in connection with such repayments), (b) Consolidated Capital
Expenditures (net of any proceeds of any related financings classified as
long-term Indebtedness with respect to such expenditures), (c) Consolidated
Cash Interest Expense, (d) current taxes based on income or profits and
franchise or similar taxes of Company and its Subsidiaries and paid or payable
in cash with respect to such period, (e) Transaction Costs paid in cash with
respect to such period, (f) fees and expenses pursuant to the Management
Agreement paid in cash with respect to such period (or the payment of which was
made with a Restricted Junior Payment), (g) fees, costs and expenses paid in
cash in connection with any equity or debt offering, Investment,
recapitalization or Indebtedness permitted by this Agreement or in connection
with any Permitted Acquisition, to the extent added to Consolidated EBITDA
pursuant to clause (viii) of the definition thereof, (h) the portion of the
purchase price of Permitted Acquisitions funded with cash and not constituting
long-term Indebtedness, (i) restructuring charges or reserves paid in cash with
respect to such period and (j) amounts added to Consolidated EBITDA pursuant to
clauses (x), (xi), (xiii), (xiv), (xv) and (xvi) of the definition thereof.


 


‘‘Consolidated
Interest Expense” means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Company and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Company and
its Subsidiaries, net of interest income, including amortization of all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers’ acceptance financing, net payments under Interest Rate
Agreements and amounts referred to in subsection 2.3 payable to Administrative
Agent and Lenders that are considered interest expense in accordance with GAAP,
but excluding, however, any such amounts referred to in subsection 2.3 payable
on or before the Closing Date, fees and expenses associated with an Investment
permitted by subsection 7.3 and issuances of Capital Stock of Company or its
Subsidiaries.


 


“Consolidated
Leverage Ratio” means, as of the last day of any Fiscal
Quarter, the ratio of (i) Consolidated Total Debt as at such day to (ii)
Consolidated EBITDA for the consecutive four Fiscal Quarters ending on such
day, calculated on a Pro Forma Basis.


 


8





















 


“Consolidated
Net Income” means, for any period, the net income (or loss)
of Company and its Subsidiaries on a consolidated basis for such period taken
as a single accounting period determined in conformity with GAAP; provided
that there shall be excluded (i) the income (or loss) of any Person (other than
a Subsidiary of Company) in which any other Person (other than Company or any
of its Subsidiaries) has a joint interest, except to the extent of the amount
of dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) any after-tax gains or
losses attributable to asset sales, (iii) the net income (but not loss) of any
Subsidiary of the Company (other than a Loan Party) to the extent that the
declaration of dividends or similar distributions by that Subsidiary of that
income is not at the time permitted by a contract, operation of law or
otherwise, (iv) the income (or loss) attributable to discontinued operations (including,
without limitation, operations disposed of during such period, whether or not
such operations were classified as discontinued), (v) any gains realized on, or
because of, the purchase or other acquisition by Company or any of its
Subsidiaries of any securities of such Person or any of its Subsidiaries, (vi)
the amount equivalent to the cumulative effect of a change in accounting
principles of Company or any of its Subsidiaries, and (vii) (to the extent not
included in clauses (i) through (vi) above) any net extraordinary gains or net
extraordinary losses.


 


“Consolidated
Total Debt” means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, net
of unrestricted Cash and Cash Equivalents and Cash or Cash Equivalents
restricted only in favor of Administrative Agent, the Lenders or the other
“Secured Parties” pursuant to the Loan Documents.


 


“Consolidated
Working Capital” means, as at any date of determination, the
excess (or deficit) of Consolidated Current Assets over Consolidated Current
Liabilities.


 


“Consolidated
Working Capital Adjustment” means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.


 


“Contingent Obligation”, as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any Indebtedness, lease, dividend or other payment obligation of
another if the primary purpose or intent thereof by the Person incurring the
Contingent Obligation is to provide assurance to the obligee of such obligation
of another that such obligation of another will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the account of
that Person or as to which that Person is otherwise liable for reimbursement of
drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include
(a) the direct or indirect guaranty or endorsement (other than for collection
or deposit in the ordinary course of business) by such Person of the payment
obligation of another, (b) the obligation to make take-or-pay or similar
payments if required regardless of non-performance by any other party or
parties to an agreement, and (c) any liability of such Person for the
obligation of another through any agreement (contingent or otherwise) (1) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or


 


9





















 


discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise) or (2) to maintain the solvency or any balance
sheet item, level of income or financial condition of another if, in the case
of any agreement described under subclauses (1) or (2) of this sentence, the
primary purpose or intent thereof is as described in clause (i) of the preceding
sentence. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if less, the amount
to which such Contingent Obligation is specifically limited.


 


“Continuing
Member” means, as of any date of determination any member of
the Governing Body of the Qualifying IPO Issuer who (i) was a member of such
Governing Body on the Closing Date or (ii) was nominated for election or
elected to such Governing Body with the affirmative vote of a majority of the
members who were either members of such Governing Body on the Closing Date or
whose nomination or election was previously so approved or received the vote of
the Equity Investors in his or her election by the stockholders of the
Qualifying IPO Issuer.


 


“Contractual
Obligation”, as
applied to any Person, means any provision of any Security issued by that
Person or of any material indenture, mortgage, deed of trust, contract,
undertaking, agreement or other instrument to which that Person is a party or
by which it or any of its properties is bound or to which it or any of its
properties is subject.


 


“Credit
Suisse” has the
meaning assigned to that term in the introduction to this Agreement.


 


“DBRS” means
Dominion Bond Rating Service.


 


“Default
Excess” has the
meaning assigned to that term in subsection 2.9.


 


“Default
Period” has the meaning assigned to that term in subsection
2.9.


 


“Defaulted
Loan” has the meaning assigned to that term in subsection
2.9.


 


“Defaulting
Lender” has the meaning assigned to that term in subsection
2.9.


 


“Deposit
Account” means a demand, time, savings, passbook or similar
account maintained with a Person engaged in the business of banking, including
a savings bank, savings and loan association, credit union or trust company.


 


“Dollars”
and the sign “$”
mean the lawful money of the United States of America.


 


“Domestic
Subsidiary” means any Subsidiary of Company that is
incorporated or organized under the laws of the United States of America, any
state thereof or in the District of Columbia.


 


“Eligible
Assignee” means (i) any
Lender, any Affiliate of any Lender or any Approved Fund of any Lender, and
(ii) (a) a commercial bank organized under the laws of the United States or any
state thereof; (b) a savings and loan association or savings bank organized


 


10





















 


under the laws of the
United States or any state thereof; (c) a commercial bank organized under the
laws of any other country or a political subdivision thereof; provided
that (1) such bank is acting through a branch or agency located in the United
States or (2) such bank is organized under the laws of a country that is a
member of the Organization for Economic Cooperation and Development or a
political subdivision of such country; and (d) any other entity that is an
“accredited investor” (as defined in Regulation D under the Securities Act)
that extends credit or buys loans in the ordinary course of business including
insurance companies, mutual funds and lease financing companies; provided
that neither Company nor any Affiliate of Company shall be an Eligible
Assignee.


 


“Employee
Benefit Plan” means any “employee benefit plan” as defined in
Section 3(3) of ERISA (i) which is currently maintained or contributed to by
Company, its Subsidiaries or any of their ERISA Affiliates, (ii) which was at
any time during the last six years maintained, contributed to or terminated by
Company, its Subsidiaries or any of their ERISA Affiliates, including any
Person which was at such time an ERISA Affiliate of Company, or (iii) with
respect to which there is any potential or outstanding liability of Company.


 


“Environmental
Claim” means any investigation, notice, notice of violation,
claim, action, suit, proceeding, demand, abatement order or other order or
directive (conditional or otherwise), by any Government Authority or any other
Person, arising (i) pursuant to or in connection with any actual or alleged
violation of any Environmental Law, (ii) in connection with any Hazardous
Materials or any Hazardous Materials Activity, or (iii) in connection with any
actual or alleged damage, injury, threat or harm to natural resources or the
environment.


 


“Environmental
Laws” means any and all current or future applicable
statutes, ordinances, orders, rules, regulations, judgments, Governmental
Authorizations, or any other requirements of any Government Authority relating
to (i) environmental matters, including those relating to any Hazardous
Materials Activity or (ii) the generation, use, storage, transportation or
disposal of Hazardous Materials in any manner applicable to Company or any of
its Subsidiaries or any Facility.


 


“Equity
Investors” means, collectively, Genstar and Sterling and/or
their respective Affiliates (including, as applicable, related funds, general
partners thereof and limited partners thereof) and, except for purposes of the
definition of “Change in Control”, the Management Shareholders.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, and any successor thereto.


 


“ERISA
Affiliate”, as applied to any Person, means (i) any
corporation that is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of which that Person is
a member; (ii) any trade or business (whether or not incorporated) that is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person is
a member; and (iii) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is a member.


 


11





















 


“ERISA
Event” means (i) a “reportable event” within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to
any Pension Plan (whether or not waived in accordance with Section 412(d) of
the Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA; (iv)
the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Section
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on Company, any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its
Subsidiaries or any of their respective ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or the
receipt by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or
has terminated under Section 4041A or 4042 of ERISA; (viii) the assertion of a
material claim (other than routine claims for benefits) against any Employee
Benefit Plan other than a Multiemployer Plan or the assets thereof, or against
Company, any of its Subsidiaries or any of their respective ERISA Affiliates in
connection with any Employee Benefit Plan; (ix) receipt from the Internal
Revenue Service of notice of the failure of any Pension Plan (or any other
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue
Code, or the failure of any trust forming part of any Pension Plan to qualify
for exemption from taxation under Section 501(a) of the Internal Revenue Code;
or (x) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.


 


“Eurodollar
Rate” means, for any Interest Rate Determination Date with
respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum
obtained by dividing (i) (A) the rate per annum determined by the
Administrative Agent at approximately 11:00 a.m. (London time) on such Interest
Rate Determination Date by reference to the British Bankers’ Association
Interest Settlement Rates for deposits in Dollars (as set forth by the Bloomberg
Information Service or any successor thereto or any other service selected by
the Administrative Agent which has been nominated by the British Bankers’
Association as an authorized information vendor for the purpose of displaying
such rates) for a period equivalent to such Interest Period or (B) to the
extent that an interest rate is not ascertainable pursuant to the foregoing
provisions of this definition, the interest rate per annum determined by the
Administrative Agent to be the average of the rates per annum at which deposits
in Dollars are offered for such relevant Interest Period to major banks in the
London interbank market in


 


12





















 


London, England at
approximately 11:00 a.m. (London time) on such Interest Rate Determination Date
by (ii) a percentage equal to 100% minus the stated maximum rate of all
statutory reserve requirements (including any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of “Eurocurrency liabilities” as defined in Regulation D (or any successor
category of liabilities under Regulation D).


 


“Eurodollar
Rate Loans” means Loans bearing interest at rates determined
by reference to the Eurodollar Rate as provided in subsection 2.2A.


 


“Eurodollar
Rate Margin” means the margin over the Eurodollar Rate used
in determining the rate of interest of Eurodollar Rate Loans pursuant to
subsection 2.2A.


 


“Event
of Default” means each of the events set forth in Section 8.


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.


 


“Exchange
Rate” means, on any date when an amount expressed in a
currency other than Dollars is to be determined with respect to any Letter of
Credit, the nominal rate of exchange of Administrative Agent in the New York
foreign exchange market for the sale of such currency in exchange for Dollars
at 12:00 noon (New York City time) one Business Day prior to such date,
expressed as a number of units of such currency per one Dollar.


 


“Excluded
Taxes” means, with respect to Administrative Agent, any
Lender, or any other recipient of any payment to be made by or on account of
any obligation of Company hereunder (i) taxes that are imposed on the overall
net income or gross receipts (however denominated) and franchise taxes imposed
in lieu thereof (a) by the United States, (b) by any other Government Authority
under the laws of which such Lender is organized or has its principal office or
maintains its applicable lending office, or (c) by any Government Authority
solely as a result of a present or former connection between such recipient and
the jurisdiction of such Government Authority (other than any such connection
arising solely from such recipient having executed, delivered or performed its
obligations or received a payment under, or enforced, any of the Loan
Documents), (ii) any branch profits taxes imposed by the United States or any
similar tax imposed by any other jurisdiction in which Company is located,
(iii) in the case of a Foreign Lender (other than an assignee pursuant to a
request of Company under subsection 2.10), any withholding tax that (x) is
imposed on amounts payable to such Foreign Lender at the time it becomes a
party hereto (or designates a new lending office), (y) is attributable to such
Foreign Lender’s failure or inability (other than as a result of a Change in
Law) to comply with its obligations under subsection 2.7B(iv), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from Company with respect to such withholding tax pursuant
to subsection 2.7B, or (z) is
required to be deducted under applicable law from any payment hereunder on the
basis of the information provided by such Foreign Lender pursuant to clause (d)
of subsection 2.7B(iv), and (iv) all liabilities, penalties and interest with
respect to any of the foregoing excluded taxes.


 


13





















 


“Existing
Credit Agreements” means (i) that certain Credit Agreement
dated as of December 3, 2004 among Panolam Industries Holdings, Panolam Group,
Inc., a Delaware corporation, PII Second, Inc., a Delaware corporation,
Panolam, various institutions party thereto as lenders and Deutsche Bank Trust
Company Americas as administrative agent and (ii) that certain Second-Lien
Credit Agreement dated as of December 3, 2004 among Panolam Industries
Holdings, Panolam Group, Inc., a Delaware corporation, PII Second, Inc., a
Delaware corporation, Panolam, various institutions party thereto as lenders
and Deutsche Bank Trust Company Americas as administrative agent.


 


“Facilities”
means any and all real property (including all buildings,
fixtures or other improvements located thereon) owned, leased, operated or used
by Company or any of its Subsidiaries.


 


“Federal
Funds Effective Rate” means, for any period, a fluctuating
interest rate 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 Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.


 


“Financial
Officer” means an Officer who is the chief executive officer,
chief financial officer or a vice president of finance, or any other Officer
who serves in a similar capacity to any of the foregoing.


 


“Financial
Plan” has the meaning assigned to that term in subsection
6.1(x).


 


“First
Priority” means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that such Lien
is perfected and has priority over any other Lien on such Collateral (other
than Liens permitted pursuant to clauses (i)-(xvi), (xviii)-(xx) or (xxii) of
subsection 7.2A).


 


“Fiscal
Quarter” means a fiscal quarter of any Fiscal Year.


 


“Fiscal
Year” means the fiscal year of Company and its Subsidiaries
ending on December 31 of each calendar year. For purposes of this Agreement,
any particular Fiscal Year shall be designated by reference to the calendar
year in which such Fiscal Year ends.


 


“Flood
Hazard Property” means a Closing Date Mortgaged Property or
an Additional Mortgaged Property located in an area designated by the Federal
Emergency Management Agency as having special flood or mud slide hazards.


 


“Foreign
Lender” means any Lender that is organized under the laws of
a jurisdiction other than that in which Company is resident for tax purposes.
For purposes of this definition, the United States, each state thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.


 


14





















 


“Foreign
Plan” means any employee benefit plan maintained by Company
or any of its Subsidiaries that is mandated or governed by any law, rule or
regulation of any Government Authority other than the United States, any state
thereof or any other political subdivision thereof.


 


“Foreign
Subsidiary” means any Subsidiary of Company that is not a
Domestic Subsidiary.


 


“Fund” means
any Person (other than a natural Person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in the ordinary course of business.


 


“Funding
and Payment Account” means the account specified in the
payment instructions appearing below Administrative Agent’s signature herein or
at the account designated as such in any other written notice delivered by
Administrative Agent to Company and each Lender.


 


“Funding
and Payment Office” means the office of Administrative Agent
located at Eleven Madison Avenue, New York, New York 10010 or such other office
of Administrative Agent as may from time to time hereafter be designated as
such in a written notice delivered by Administrative Agent to Company and each
Lender.


 


“Funding
Date” means the date of funding of a Loan.


 


“Funding
Default” has the meaning assigned to that term in subsection
2.9.


 


“GAAP”
means generally accepted accounting principles set forth in 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
may be approved by a significant segment of the accounting profession, in each
case as the same are applicable to the circumstances as of the date of
determination, subject to subsection 1.2.


 


“Genstar”
means Genstar Capital, L.P., a Delaware limited partnership.


 


“Governing
Body” means the board of directors or other body having the
power to direct or cause the direction of the management and policies of a
Person that is a corporation, partnership, trust or limited liability company.


 


“Government
Authority” means the government of the United States or any
other nation, or any state, regional or local political subdivision or
department thereof, and any other governmental or regulatory agency, authority,
body, commission, central bank, board, bureau, court, instrumentality or other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government, in each case
whether federal, state, local or foreign (including supra-national bodies such
as the European Union or the European Central Bank).


 


15





















 


“Governmental
Authorization” means any permit, license, registration or
other authorization of or from, or notice to, any Government Authority.


 


“Granting
Lender” has the meaning assigned to that term in subsection
10.1B(iii).


 


“Guaranties”
means the Holdings Guaranty and the Subsidiary Guaranty.


 


“Hazardous
Materials” means (i) any chemical, material or substance at
any time defined as or included in the definition of “hazardous substances”,
“hazardous wastes”, “hazardous materials”, “extremely hazardous waste”, “acutely
hazardous waste”, “radioactive waste”, “biohazardous waste”, “pollutant”,
“toxic pollutant”, “contaminant”, “restricted hazardous waste”, “infectious
waste”, “toxic substances”, or any other term or expression intended to define,
list or classify substances by reason of properties harmful to the environment
(including harmful properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, “TCLP toxicity” or “EP
toxicity” or words of similar import under any applicable Environmental Laws);
(ii) any oil, petroleum, petroleum fraction or petroleum derived substance;
(iii) any drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (iv) any flammable substances or explosives; (v) any radioactive
materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam
insulation; (viii) electrical equipment which contains any oil or dielectric
fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any Government Authority having jurisdiction over the foregoing.


 


“Hazardous
Materials Activity” means any activity, event or occurrence
involving any Hazardous Materials, including the use, manufacture, possession,
storage, holding, presence, existence, location, Release, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposition or handling of any Hazardous Materials, and
any corrective action or response action with respect to any of the foregoing.


 


“Hedge
Agreement” means an Interest Rate Agreement or any exchange
contract, swap agreement, futures contract, option contract, synthetic cap or
collar or other similar agreement or arrangement to which Company or any of its
Subsidiaries is a party.


 


“Holdings”
means Panolam Holdings II Co., a Delaware corporation.


 


“Holdings
Guaranty” means the Holdings Guaranty executed and delivered
by Holdings on the Closing Date, substantially in the form of Exhibit XIII
annexed hereto.


 


“Increasing
Lenders” has the meaning assigned to that term in subsection
2.1A(iv).


 


“Indebtedness”,  as applied to any Person, means, without
duplication, (i) all indebtedness for borrowed money, (ii) that portion of
obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet in conformity with GAAP, (iii) notes


 


16





















 


payable and
similar instruments representing extensions of credit whether or not
representing obligations for borrowed money, (iv) any obligation owed for all
or any part of the deferred purchase price of property or services, which
purchase price is (a) due more than six months from the date of incurrence of
the obligation in respect thereof or (b) evidenced by a note or similar written
instrument excluding, in each case (x) any such obligations incurred under
ERISA, (y) trade payables in the ordinary course of business and (z) any earn
out obligation until such obligation appears in the liability section of the
balance sheet of such Person, and (v) all indebtedness secured by any Lien on
any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.


 


“Indemnified
Liabilities” has the meaning assigned to that term in
subsection 10.3.


 


“Indemnified
Taxes” means Taxes other than Excluded Taxes.


 


“Indemnitee”
has the meaning assigned to that term in subsection 10.3.


 


“Intellectual
Property” means all patents, trademarks, tradenames,
copyrights, technology, software, know-how and processes used in or necessary
for the conduct of the business of Company and its Subsidiaries.


 


“Interest
Payment Date” means (i) with respect to any Base Rate Loan,
the last Business Day of each March, June, September and December of each year,
commencing on December 31, 2005, and (ii) with respect to any Eurodollar Rate
Loan, the last day of each Interest Period applicable to such Loan; provided
that in the case of each Interest Period of longer than three months, “Interest
Payment Date” shall also include each date that is three months, or a multiple
thereof, after the commencement of such Interest Period.


 


“Interest
Period” has the meaning assigned to that term in subsection
2.2B.


 


“Interest
Rate Agreement” means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which Company or any of its Subsidiaries is a
party.


 


“Interest
Rate Determination Date”, with respect to any Interest
Period, means the second Business Day prior to the first day of such Interest
Period.


 


“Internal
Revenue Code” means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any successor
statute.


 


“Investment”
means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of
Company) or any acquisition, by purchase or otherwise, of all or substantially
all the business, property or fixed assets of any Person, or any division or
line of business of any Person, (ii) any direct or indirect redemption,
retirement, purchase or other acquisition for value, by any Subsidiary of
Company from any Person other than Company or any of its Subsidiaries, of any
equity Securities of such Subsidiary or (iii) any direct or indirect


 


17





















 


loan, advance
(other than advances to employees for moving, entertainment and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by Company or any of its Subsidiaries to any
other Person, including all indebtedness and accounts receivable from that
other Person that are not current assets or did not arise from sales to that
other Person in the ordinary course of business. The amount of any Investment
shall be the original cost of such Investment plus the cost of all
additions thereto, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment (other
than adjustments for the repayment of, or the refund of capital with respect
to, the original principal amount of any such Investment).


 


“IP
Collateral” means, collectively, the Intellectual Property
that constitutes Collateral under the Security Agreement.


 


“IP
Filing Office” means the United States Patent and Trademark
Office, the United States Copyright Office or any successor or substitute
office in which filings are necessary or, in the reasonable discretion of
Administrative Agent, desirable in order to create or perfect Liens on, or
evidence the interest of Administrative Agent and Lenders in, any IP
Collateral.


 


“Issuing
Lender”, with respect to any Letter of Credit, means the
Revolving Lender that agrees or is otherwise obligated to issue such Letter of
Credit, determined as provided in subsection 3.1B(ii).


 


“Joint
Venture” means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form.


 


“Leasehold
Property” means any material leasehold interest of any Loan
Party (other than a Foreign Subsidiary) as lessee under any lease of real
property used for manufacturing, other than any such leasehold interest
designated from time to time by Administrative Agent in its reasonable
discretion as not being required to be included in the Collateral, which
designation may be made based upon a determination by Administrative Agent in
its reasonable discretion that the costs of obtaining a security interest in
such leasehold interest are unreasonably excessive in relation to the benefit
to Lenders of the security afforded thereby.


 


“Lender”
and “Lenders” means
the Persons identified as “Lenders” and listed on the signature pages of this
Agreement, and any Person that becomes a “New Lender” pursuant to subsection
2.1 A (iv), in each case, together with their successors and permitted assigns
pursuant to subsection 10.1, and the term “Lenders” shall include Swing Line
Lender unless the context otherwise requires; provided that the term
“Lenders”, when used in the context of a particular Commitment, shall mean
Lenders having that Commitment.


 


“Letter
of Credit” or “Letters of
Credit” means Commercial Letters of Credit and Standby Letters of
Credit issued by Issuing Lenders for the account of Company pursuant to
subsection 3.1.


 


“Letter
of Credit Usage” means, as at any date of determination, the
sum of (i) the maximum aggregate undrawn amount under all Letters of Credit
then outstanding plus (ii) the aggregate amount of all drawings under
Letters of Credit honored by Issuing Lenders and not


 


18





















 


theretofore
reimbursed out of the proceeds of Revolving Loans pursuant to subsection 3.3B
or otherwise reimbursed by Company. For purposes of this definition, any amount
described in clause (i) or (ii) of the preceding sentence which is denominated
in a currency other than Dollars shall be valued based on the applicable
Exchange Rate for such currency as of the applicable date of determination.


 


“Lien” means
any lien, mortgage, pledge, assignment, security interest, charge or
encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any option, trust or other preferential arrangement
in the nature of security.


 


“Loan” or
“Loans” means one or more of the
loans made by Lenders to Company pursuant to subsection 2.1A.


 


“Loan
Documents” means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other
documents or certificates executed by Company in favor of an Issuing Lender
relating to, the Letters of Credit (collectively, a “Letter of Credit Application”)),  the Guaranties and the Collateral Documents. In the event
that any Letter of Credit Application includes representations and warranties,
covenants and/or events of default that do not contain the materiality
qualifiers, exceptions or thresholds that are applicable to the analogous
provisions of this Agreement or other Loan Documents, or are otherwise more
restrictive, the relevant qualifiers, exceptions and thresholds contained
herein shall be incorporated therein or, to the extent more restrictive, shall
be deemed for purposes of such Letter of Credit Application to be the same as
the analogous provisions herein.


 


“Loan
Party” means each of Holdings, Company and any of Company’s
Domestic Subsidiaries from time to time executing a Loan Document, and “Loan Parties” means all such Persons,
collectively.


 


“Management
Agreement” means that certain Advisory Services Agreement
dated as of the Closing Date by and between Panolam Holdings, Genstar Capital
LLC and Sterling.


 


“Management
Shareholders” means Robert J. Muller, Jr. and other members
of management of Company and its Subsidiaries, who are equity investors in
Panolam Holdings on the Closing Date.


 


“Margin
Stock” has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.


 


“Material
Adverse Effect” means a material adverse effect upon (i) the
business, results of operations or condition (financial or otherwise) of
Holdings, Company and its Subsidiaries taken as a whole or (ii) the impairment
of the ability of (a) Company or the Loan Parties (taken as a whole) to perform
their respective obligations under the Loan Documents to which they are a
party, or (b) Administrative Agent or Lenders to enforce their rights and
remedies in respect of the Obligations.


 


19





















 


“Maximum
Consolidated Capital Expenditures Amount” has the meaning
assigned to that term in subsection 7.8.


 


“Merger
Sub” has the meaning assigned to that term in the
introduction to this Agreement.


 


“Merger
Sub Certificate of Merger” means the Certificate of Merger
dated as of September 30, 2005 by Panolam Industries Holdings, in the form
delivered to Administrative Agent prior to its execution of this Agreement,
evidencing the merger of Merger Sub with and into Panolam Industries Holdings.


 


“Moody’s”
means Moody’s Investors Service, Inc.


 


“Mortgage”
means (i) a security instrument (whether designated as a deed of trust or a
mortgage or by any similar title) executed and delivered by any Loan Party, in
such form as may be approved by Administrative Agent in its reasonable
discretion, in each case with such changes thereto as may be recommended by
Administrative Agent’s local counsel based on local laws or customary local
mortgage or deed of trust practices, or (ii) at Administrative Agent’s option,
in the case of an Additional Mortgaged Property, an amendment to an existing
Mortgage, in form reasonably satisfactory to Administrative Agent, adding such
Additional Mortgaged Property to the Real Property Assets encumbered by such
existing Mortgage. “Mortgages”
means all such instruments, including the Closing Date Mortgages and any
Additional Mortgages, collectively.


 


“Multiemployer
Plan” means any Employee Benefit Plan that is a “multiemployer
plan” as defined in Section 3(37) of ERISA.


 


“Net
Asset Sale Proceeds”, with respect to any Asset Sale pursuant
to subsections 7.7B(vi), (xiii) or (xvii) means Cash payments (including any
Cash received by way of deferred payment pursuant to, or by monetization of, a
note receivable or otherwise, but only as and when so received) received from
such Asset Sale, net of any bona fide direct costs incurred in connection with
such Asset Sale, including (i) income taxes reasonably estimated to be actually
payable as a result of any gain recognized in connection with such Asset Sale,
(ii) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is secured by
a Lien on the stock or assets in question and that is repaid under the terms
thereof as a result of such Asset Sale, (iii) the out-of-pocket expenses
(including, without limitation, attorneys’ fees, investment banking fees,
survey costs, title insurance premiums, and related search and recording
charges, transfer taxes, deed or mortgage recording taxes, other customary
expenses and brokerage, consultant and other customary fees) incurred in
connection with such Asset Sale, and (iv) for so long as such reserve is
maintained, any reserve for adjustment in respect of (a) the sale price of such
asset or assets established in accordance with GAAP and (b) any liabilities
associated with such asset or assets and retained after such sale or other
disposition thereof, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with such
transaction; provided, however, that Net Asset Sale Proceeds shall not
include any cash payments received from any Asset Sale by a Foreign Subsidiary
unless such proceeds may be repatriated (by reason of a repayment of an


 


20





















 


intercompany note
or otherwise) to the United States without (in the reasonable judgment of
Company) resulting in a material Tax liability to Company.


 


“Net
Insurance/Condemnation Proceeds” means any Cash payments or
proceeds received by Company or any of its Domestic Subsidiaries (i) under any
casualty insurance policy in respect of a covered loss thereunder or (ii) as a
result of the taking of any assets of Company or any of its Subsidiaries by any
Person pursuant to the power of eminent domain, condemnation or otherwise, or
pursuant to a sale of any such assets to a purchaser with such power under
threat of such a taking, in each case, net of any actual and reasonable
documented costs incurred by Company or any of its Subsidiaries in connection
with the adjustment or settlement of any claims of Company or such Subsidiary
in respect thereof including, without limitation, (i) income taxes reasonably
estimated to be actually payable as a result of any gain recognized in
connection with such event, (ii) payment of the outstanding principal amount
of, premium or penalty, if any, and interest on any Indebtedness (other than
the Loans) that is secured by a Lien on the stock or assets in question and
that is repaid under the terms thereof as a result of such event, (iii) the
out-of-pocket expenses (including, without limitation, attorneys’ fees,
investment banking fees, survey costs, title insurance premiums, and related
search and recording charges, transfer taxes, deed or mortgage recording taxes,
other customary expenses and brokerage, consultant and other customary fees) incurred
in connection with such event, and (iv) for so long as such reserve is
maintained, any reserve for adjustment in respect of (a) the sale price of such
asset or assets established in accordance with GAAP and (b) any liabilities
associated with such asset or assets and retained after such sale or other
disposition thereof, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with such
transaction; provided, however, that Net Insurance/Condemnation Proceeds
shall not include any cash payments received by a Foreign Subsidiary unless
such proceeds may be repatriated (by reason of a repayment of an intercompany
note or otherwise) to the United States without (in the reasonable judgment of
Company) resulting in a material Tax liability to Company.


 


“Net
Securities Proceeds” means the cash proceeds (net of (i)
underwriting discounts and commissions and other reasonable costs and expenses
associated therewith, including reasonable attorneys fees, investment banking
fees, other customary expenses and brokerage, consultant and other customary
fees, and (ii) taxes) from the issuance of Capital Stock of or incurrence of
Indebtedness by Holdings or any of its Subsidiaries.


 


“New
Lender” has the meaning assigned
to that term in subsection 2.lA(iv).


 


“Non-Consenting
Lender” has the meaning assigned to that term in subsection
2.10.


 


“Notes”
means one or more of the Term Notes, Revolving Notes or Swing Line Note or any
combination thereof.


 


“Notice
of Borrowing” means a notice substantially in the form of Exhibit
I annexed hereto.


 


21





















 


“Notice of  Conversion/Continuation”
means a notice substantially in the form of Exhibit II
annexed hereto.


 


“Notice
of Prepayment” means a notice substantially in the form of Exhibit
XIV annexed hereto.


 


“Obligations”
means all obligations of every nature of each Loan Party from
time to time owed to Administrative Agent, Lenders or any of them under the
Loan Documents, whether for principal, interest, reimbursement of amounts drawn
under Letters of Credit, fees, expenses, indemnification or otherwise.


 


“Officer”
means the president, chief executive officer, any vice
president, chief financial officer, treasurer, general partner (if an
individual), managing member (if an individual) or other individual appointed
by the Governing Body or the Organizational Documents of a corporation,
partnership, trust or limited liability company to serve in a similar capacity
as the foregoing.


 


“Officer’s Certificate”, as applied to any
Person that is a corporation, partnership, trust or limited liability company,
means a certificate executed on
behalf of such Person by one or more Officers of such Person or one or more
Officers of a general partner or a managing member if such general partner or
managing member is a corporation, partnership, trust or limited liability
company.


 


“Operating
Lease”, as applied to any Person, means any lease (including
leases that may be terminated by the lessee at any time) of any property
(whether real, personal or mixed) that is not a Capital Lease other than any
such lease under which that Person is the lessor.


 


“Organizational
Documents” means the documents (including bylaws, if
applicable) pursuant to which a Person that is a corporation, partnership,
trust or limited liability company is organized.


 


“Other
Taxes” means all present or future stamp or documentary taxes
or any other excise or property taxes, charges, fees, expenses or similar
levies arising from any payment made hereunder or under any other Loan Document
or from the execution, delivery or enforcement of, or otherwise with respect
to, this Agreement or any other Loan Document.


 


“Panolam”
means Panolam Industries International, Inc., a Delaware
corporation.


 


“Panolam
Holdings” means Panolam Holdings Co., a Delaware corporation.


 


“Panolam
Holdings Common Stock” means the common stock of Panolam
Holdings, par value $0.001 per share.


 


“Panolam
Industries Holdings” means Panolam Industries Holdings, Inc.,
a Delaware corporation.


 


22





















 


“Panolam
Industries Holdings Certificate of Merger” means the
Certificate of Merger dated as of September 30, 2005 by Panolam, in the form
delivered to Administrative Agent prior to its execution of this Agreement,
evidencing the merger of Panolam Industries Holdings with and into Panolam.


 


“Panolam
Industries Holdings Merger Agreement” means that certain
Agreement and Plan of Merger by and between Holdings, Panolam Industries
Holdings, Panolam Group, Inc., PII Second, Inc. and Panolam dated as of
September 30, 2005, in the form delivered to Administrative Agent prior to
execution of this Agreement.


 


“Panolam
Merger” means, collectively, (i) the merger of Merger Sub
with and into Panolam Industries Holdings, with Panolam Industries Holdings
being the surviving corporation in such merger, and (ii) the subsequent merger
of Panolam Industries Holdings with and into Panolam, with Panolam being the
surviving corporation in such merger.


 


“Participant”
means a purchaser of a participation in the rights and
obligations under this Agreement pursuant to subsection 10.1C.


 


“Patriot
Act” means the Uniting And Strengthening America By Providing
Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot
Act) Act of 2001.


 


“PBGC” means
the Pension Benefit Guaranty Corporation or any successor thereto.


 


“Pension
Plan” means any Employee Benefit Plan, other than a Multiemployer
Plan, that is subject to Section 412 of the Internal Revenue Code or Section
302 of ERISA, and for purposes of subsection 8.10, any Foreign Plan.


 


“Permitted
Acquisition” means the acquisition of all or substantially
all of a business, its assets, or the Capital Stock of any Person, which
acquisition is permitted pursuant to clause (xv) of subsection 7.3.


 


“Permitted
Cure Issuance” has the meaning assigned to that term in
subsection 8.3.


 


“Permitted
Holders” means (i) the Equity Investors or (ii) any of the
Permitted Transferees of any Person in clause (i) hereof.


 


“Permitted Refinancing” means, with respect
to any Person, any modification, refinancing, refunding, renewal or extension
of any Indebtedness of such Person; provided that (a) the principal amount (or
accreted value, if applicable) thereof does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so modified, refinanced,
refunded, renewed or extended (the “Refinanced
Indebtedness”) except by an amount equal to unpaid accrued interest
and premium thereon plus other reasonable amounts paid, and fees and expenses
reasonably incurred, in connection with such modification, refinancing,
refunding, renewal or extension and by any amount equal to any existing commitments
unutilized thereunder or as otherwise permitted pursuant to subsection 7.1, (b)
such modification, refinancing, refunding,


 


23





















 


renewal or
extension has a final maturity date equal to or later than the final maturity
date of the Refinanced Indebtedness, (c) if the Refinanced Indebtedness is
subordinated in right of payment to the Obligations, such modification,
refinancing, refunding, renewal or extension 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 Refinanced Indebtedness,
taken as a whole, (d) any Lien provided in connection with such modification,
refinancing, refunding, renewal or extension does not extend to any additional
property beyond the property subject to a Lien in favor of the Refinanced
Indebtedness, other than (1) after-acquired property that is affixed or
incorporated into the property covered by such Lien or financed by Indebtedness
permitted under subsection 7.1, (2) proceeds and products thereof and (3)
property serving as collateral for a financing which is cross-collateralized to
the financing secured by such Lien provided by the same Person or its
Affiliate, (e) the direct or any contingent obligor with respect to the
Refinanced Indebtedness is not changed in any respect, and (f) at the time
thereof, no Event of Default shall have occurred and be continuing.


 


“Permitted
Transferees” means, with respect to any Person, (i) any Affiliate
of such Person, (ii) the heirs, executors, administrators, testamentary
trustees, legatees or beneficiaries of any such Person or (iii) a trust, the
beneficiaries of which, or a corporation or partnership, the stockholders, or
general and limited partners, of which, or a limited liability company, the
members of which, include only such Person or his or her spouse or lineal
descendants, in each case to whom such Person has transferred the beneficial
ownership of any Securities of Holdings.


 


“Person”
means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or
other organizations, whether or not legal entities, and Government Authorities.


 


“Pioneer
Plastics Maine Guaranty” means that certain guaranty dated
June 15, 2005 by Panolam Industries Holdings and Pioneer Plastics Corporation
for the benefit of the Superintendent of the Bureau of Insurance of Maine.


 


“Potential
Event of Default” means a condition or event that, after
notice or lapse of time or both, would constitute an Event of Default.


 


“Prime
Rate” means the rate that Credit Suisse announces from time
to time as its prime lending rate, as in effect from time to time. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. Credit Suisse or any other Lender may
make commercial loans or other loans at rates of interest at, above or below
the Prime Rate.


 


“Proceedings”
means any action, suit, proceeding (whether administrative,
judicial or otherwise) or arbitration.


 


“Pro
Forma  Basis” means,
with respect to compliance with any test or covenant hereunder, compliance with
such test or covenant after giving effect to (i) the Acquisition, (ii) any
Permitted Acquisition, (iii) any Asset Sale of a Subsidiary or operating entity
or (iv) any


 


24





















 


incurrence of
Indebtedness being given pro forma effect
or any incurrence of Indebtedness in connection with any Permitted Acquisition
being given pro forma effect
(including (a) pro forma adjustments arising out of events which are directly
attributable to the Acquisition, the proposed Permitted Acquisition, Asset Sale
or incurrence of Indebtedness, are factually supportable and are expected to
have a continuing impact, in each case as determined on a basis consistent with
Article 11 of Regulation S-X of the Securities Act, as interpreted by the Staff
of the Securities and Exchange Commission, (b) pro forma adjustments reasonably
acceptable to Administrative Agent arising out of operating expense reductions
attributable to such transaction being given pro
forma effect that (1) have been realized or (2) will be implemented
following such transaction and are supportable and quantifiable and, in each
case, including, but not limited to, (A) reduction in personnel expenses, (B)
reduction of costs related to administrative functions, (C) reductions of costs
related to leased or owned properties and (D) reductions from the consolidation
of operations and streamlining of corporate overhead and (c) such other
adjustments as are reasonably satisfactory to Administrative Agent, in each
case as certified by a Financial Officer of Company) using, for purposes of
determining such compliance, the historical financial statements of all
entities or assets so acquired or sold and the consolidated financial
statements of Company and its Subsidiaries, which shall be reformulated as if
such Permitted Acquisition or Asset Sale, and all other Permitted Acquisitions
or Asset Sales that have been consummated during the period, and any
Indebtedness or other liabilities repaid in connection therewith had been
consummated and incurred or repaid at the beginning of such period (and
assuming that such Indebtedness to be incurred bears interest during any
portion of the applicable measurement period prior to the relevant acquisition
at the interest rate which is or would be in effect with respect to such
Indebtedness as at the relevant date of determination).


 


“Pro Forma
Compliance” means, at any
date of determination, that Company shall be in pro forma compliance with any
or all of the covenants set forth in subsections 7.6A and 7.6B, as applicable,
as of the date of such determination or the last day of the most recently
completed Fiscal Quarter, as the case may be (computed on the basis of (i)
balance sheet amounts as of such date and (ii) income statement amounts for the
most recently completed period of four consecutive Fiscal Quarters for which
financial statements shall have been delivered to Administrative Agent and
calculated on a Pro Forma Basis in respect of the event giving rise to such
determination).


 


“Pro
Rata Share” means (i) with respect to all payments,
computations and other matters relating to the Term Loan Commitment or the Term
Loan of any Lender, the percentage obtained by dividing (a) the Term
Loan Exposure of that Lender by (b) the aggregate Term Loan Exposure of
all Lenders, (ii) with respect to all payments, computations and other matters
relating to the Revolving Loan Commitment or the Revolving Loans of any Lender
or any Letters of Credit issued or participations therein deemed purchased by
any Lender or any assignments of any Swing Line Loans deemed purchased by any
Lender, the percentage obtained by dividing (a) the Revolving Loan
Exposure of that Lender by (b) the aggregate Revolving Loan Exposure of
all Lenders, and (iii) for all other purposes with respect to each Lender, the
percentage obtained by dividing (a) the sum of the Term Loan Exposure of
that Lender plus the Revolving Loan Exposure of that Lender by (b) the
sum of the aggregate Term Loan Exposure of all Lenders plus the aggregate
Revolving Loan Exposure of all Lenders, in any such case as the applicable
percentage may be adjusted by assignments permitted pursuant to subsection
10.1.


 


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“Qualifying
IPO” means the issuance by the Qualifying IPO Issuer of its
common Capital Stock in an underwritten primary public offering (other than a
public offering pursuant to a registration statement on Form S-8) pursuant to
an effective registration statement filed with the Securities and Exchange
Commission in accordance with the Securities Act of 1933 (whether alone or in
connection with a secondary public offering).


 


“Qualifying
IPO Issuer” means Holdings, Company or a corporation or other
legal entity which owns, directly or indirectly, one hundred percent (100%) of
the outstanding equity interests of Holdings.


 


“Real
Property Asset” means,
at any time of determination, any interest then owned by any Loan Party (other
than any Foreign Subsidiary) in any real property.


 


“Recorded
Leasehold Interest” means a
Leasehold Property with respect to which a Record Document (as
hereinafter defined) has been recorded in all places necessary or desirable, in
Administrative Agent’s reasonable judgment, to give constructive notice of such
Leasehold Property to third-party purchasers and encumbrancers of the affected
real property. For purposes of this definition, the term “Record Document” means, with respect to
any Leasehold Property, (a) the lease evidencing such Leasehold Property or a
memorandum thereof, executed and acknowledged by the owner of the affected real
property, as lessor, or (b) if such Leasehold Property was acquired or
subleased from the holder of a Recorded Leasehold Interest, the applicable assignment
or sublease document, executed and acknowledged by such holder.


 


“Refunded
Swing Line Loans” has the meaning assigned to that term in
subsection 2.1A(iii)(b).


 


“Register”
has the meaning assigned to that term in subsection 2.1D.


 


“Regulation
D” means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.


 


“Reimbursement
Date” has the meaning assigned to that term in subsection
3.3B.


 


“Related
Agreements” means, collectively, the Acquisition Agreement,
the Panolam Industries Holdings Merger Agreement, the Certificates of Merger,
and the Senior Subordinated Note Indenture.


 


‘‘Release”
means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the environment, including
the movement of any Hazardous Materials through the air, soil, surface water or
groundwater.


 


“Request
for Issuance” means a request
substantially in the form of Exhibit III annexed hereto.


 


“Requisite
Lenders” means Lenders having or holding more than 50% of the
sum of (i) the aggregate Term Loan Exposure of all Lenders plus (ii) the
aggregate Revolving


 


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Loan Exposure of
all Lenders; provided that, in accordance with subsection 2.9, the Term Loan
Exposure and Revolving Loan Exposure of any Defaulting Lender shall not be
included and such Defaulting Lender shall not be deemed a “Lender” for purposes
of calculating Requisite Lenders.


 


“Restricted
Junior Payment” means (i) any
dividend or other distribution, direct or indirect, on account of any shares of
any class of Capital Stock of Company now or hereafter outstanding, except a
dividend payable solely in Capital Stock, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of Capital Stock of Company now
or hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Capital Stock of Company now or hereafter outstanding,
and (iv) any payment or prepayment of principal of, premium, if any, or
interest on, or redemption, purchase, retirement, defeasance (including
in-substance or legal defeasance), sinking fund or similar payment with respect
to, any Subordinated Indebtedness.


 


“Revolving
Lender” means a Lender that has a Revolving Loan Commitment
and/or that has an outstanding Revolving Loan.


 


‘‘Revolving
Loan Commitment” means the commitment of a Revolving Lender
to make Revolving Loans to Company pursuant to subsection 2.1A(ii), and “Revolving Loan Commitments” means such
commitments of all Revolving Lenders in the aggregate.


 


“Revolving
Loan Commitment Amount” means, at any date, the aggregate
amount of the Revolving Loan Commitments of all Revolving Lenders.


 


“Revolving
Loan Commitment Termination Date” means September 30, 2010.


 


“Revolving
Loan Exposure”, with respect to any Revolving Lender, means,
as of any date of determination (i) prior to the termination of the Revolving
Loan Commitments, the amount of that Lender’s Revolving Loan Commitment, and
(ii) after the termination of the Revolving Loan Commitments, the sum of (a)
the aggregate outstanding principal amount of the Revolving Loans of that
Lender plus (b) in the event that Lender is an Issuing Lender, the
aggregate Letter of Credit Usage in respect of all Letters of Credit issued by
that Lender (in each case net of any participations purchased by other Lenders
in such Letters of Credit or in any unreimbursed drawings thereunder) plus
(c) the aggregate amount of all participations purchased by that Lender in any
outstanding Letters of Credit or any unreimbursed drawings under any Letters of
Credit plus (d) in the case of Swing Line Lender, the aggregate
outstanding principal amount of all Swing Line Loans (net of any assignments
thereof deemed purchased by other Revolving Lenders) plus (e) the
aggregate amount of all assignments deemed purchased by that Lender in any
outstanding Swing Line Loans.


 


“Revolving
Loans” means the Loans made by Revolving Lenders to Company
pursuant to subsection 2.1A(ii).


 


“Revolving
Notes” means any promissory notes of Company issued pursuant
to subsection 2.1E to evidence the Revolving Loans of any Revolving Lenders,
substantially in the form of Exhibit V annexed hereto.


 


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“S&P”
means Standard & Poor’s Ratings Group.


 


“Securities”
means any stock, shares, partnership interests, voting trust
certificates, certificates of interest or participation in any profit-sharing
agreement or arrangement, options, warrants, bonds, debentures, notes, or other
evidences of indebtedness, secured or unsecured, convertible, subordinated,
certificated or uncertificated, or otherwise, or in general any instruments
commonly known as “securities.”


 


“Securities
Act” means the Securities Act of 1933, as amended from time
to time, and any successor statute.


 


“Security
Agreement” means the Security Agreement executed and
delivered on the Closing Date, substantially in the form of Exhibit XII
annexed hereto.


 


“Senior
Subordinated Note Indenture” means the indenture pursuant to
which the Senior Subordinated Notes are issued.


 


“Senior
Subordinated Notes” means the $151,000,000 in aggregate
principal amount of 10.75% Senior Subordinated Notes due 2013 of Company issued
pursuant to the Senior Subordinated Note Indenture.


 


“Solvent”,
with respect to any Person, means that as of the date of
determination (i) the then fair saleable value of the property of such Person
is (a) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (b) not less than the amount that will be required
to pay the probable liabilities on such Person’s then existing debts as they
become absolute and due considering all financing alternatives and potential
asset sales reasonably available to such Person; (ii) such Person’s capital is
not unreasonably small in relation to its business or any contemplated or
undertaken transaction; and (iii) such Person does not intend to incur, or
believe (nor should it reasonably believe) that it will incur, debts beyond its
ability to pay such debts as they become due. For purposes of this definition,
the amount of any contingent liability at any time shall be computed as the
amount that, in light of all of the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an actual
or matured liability.


 


“SPC”
has the meaning assigned to that term in subsection 10.l B(iii).


 


“Standby
Letter of Credit” means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness of
Company or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings, (ii) workers compensation liabilities of
Company or any of its Subsidiaries, (iii) the obligations of third party
insurers of Company or any of its Subsidiaries arising by virtue of the laws of
any jurisdiction requiring third party insurers, (iv) obligations with respect
to Capital Leases or Operating Leases of Company or any of its Subsidiaries,
(v) performance, payment, deposit or surety obligations of Company or any of
its Subsidiaries, in any case if required by law or governmental rule or
regulation or in accordance with custom and practice in the industry and (vi)
other lawful corporate purposes of Company or any of its Subsidiaries.


 


“Sterling”
means The Sterling Group, L.P., a Texas limited partnership.


 


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“Subject
Lender” has the meaning assigned to that term in subsection
2.10.


 


“Subordinated
Indebtedness” means (i) the Senior Subordinated Notes, and
(ii) any Indebtedness of Company incurred from time to time and subordinated in
right of payment to the Obligations.


 


“Subsidiary”,
with respect to any Person, means any corporation, partnership, trust, limited
liability company, association, Joint Venture or other business entity of which
more than 50% of the total ordinary voting power of shares of stock or other
ownership interests entitled (without regard to the occurrence of any
contingency) to vote in the election of the members of the Governing Body is at
the time owned or controlled, directly or indirectly, by that Person or one or
more of the other Subsidiaries of that Person or a combination thereof.


 


“Subsidiary
Guarantor” means any Domestic Subsidiary of Company that
executes and delivers a counterpart of the Subsidiary Guaranty on the Closing
Date or from time to time thereafter pursuant to subsection 6.8.


 


“Subsidiary
Guaranty” means the Subsidiary Guaranty executed and
delivered by existing Domestic Subsidiaries of Company on the Closing Date and
to be executed and delivered by additional Domestic Subsidiaries of Company
from time to time thereafter in accordance with subsection 6.8, substantially
in the form of Exhibit XI annexed hereto.


 


“Supplemental
Collateral Agent” has the meaning assigned to that term in
subsection 9.1B.


 


“Swap
Counterparty” means a Lender or an Affiliate of a Lender that
has entered into a Hedge Agreement with Company or one of its Subsidiaries, the
obligations under which are secured pursuant to the Collateral Documents and
guarantied pursuant to the Guaranties.


 


“Swing
Line Funding and Payment Office” means the office of Swing
Line Lender located at Eleven Madison Avenue, New York, New York 10010 or such
other offices of Swing Line Lender as may from time to time be hereafter designated
as such in a written notice delivered by Swing Line Lender to Company and each
other Lender.


 


“Swing
Line Lender” means Credit Suisse, or any Person serving as a
successor Administrative Agent hereunder, in its capacity as Swing line Lender
hereunder.


 


“Swing
Line Loan Commitment” means the commitment of Swing Line
Lender to make Swing Line Loans to Company pursuant to subsection 2.1A(iii).


 


“Swing
Line Loans” means the Loans made by Swing Line Lender to
Company pursuant to subsection 2.1A(iii).


 


“Swing
Line Note” means any promissory note of Company issued
pursuant to subsection 2. 1E to evidence the Swing Line Loans of Swing Line
Lender, substantially in the form of Exhibit VI  annexed hereto.


 


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“Syndication
Agent” has the meaning assigned to that term in the
introduction to this Agreement.


 


“Tax” or
“Taxes” means any tax, levy,
impost, duty, fee, assessment, deduction, withholding or other similar charge
imposed by a Government Authority, including interest, penalties, additions to
tax and any similar liabilities with respect thereto.


 


“Term
Loan Commitment” means the commitment of a Lender to make a
Term Loan to Company pursuant to subsection 2.1A(i), as such commitment may be
increased pursuant to subsection 2.1  A(iv), and “Term Loan Commitments” means such
commitments of all Lenders in the aggregate.


 


“Term
Loan Exposure”, with respect to any Lender, means, as of any
date of determination (i) prior to the funding of the Term Loans, the amount of
that Lender’s Term Loan Commitment and (ii) after the funding of the Term
Loans, the outstanding principal amount of the Term Loan of that Lender.


 


“Term
Loans” means the Loans made by Lenders to Company pursuant to
subsections 2.1 A(i) and 2.1A(iv).


 


“Term
Notes” means any promissory notes of Company issued pursuant
to subsection 2. 1E to evidence the Term Loans of any Lenders, substantially in
the form of Exhibit IV annexed hereto.


 


“Title
Company” means one or more title insurance companies
reasonably satisfactory to Administrative Agent.


 


“Total
Utilization of Revolving Loan Commitments” means, as at any
date of determination, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans plus (ii) the aggregate principal amount of
all outstanding Swing Line Loans plus (iii) the Letter of Credit Usage.


 


“Transaction
Costs” means the fees, costs and expenses payable by Company
on or before the Closing Date in connection with the transactions contemplated
by the Loan Documents and the Related Agreements (including, without
limitation, costs and expenses incurred in connection with the Acquisition).


 


“UCC”
means the Uniform Commercial Code as in effect in any applicable jurisdiction.


 


“Unasserted
Obligations” means, at any time, Obligations for taxes,
costs, indemnifications, reimbursements, damages and other liabilities (except
for (i) the principal of and interest on, and fees relating to, the
Indebtedness evidenced by this Agreement and (ii) contingent reimbursement
obligations in respect of amounts that may be drawn under Letters of Credit) in
respect of which no claim or demand for payment has been made (or, in the case
of Obligations for indemnification, no notice for indemnification has been
issued by the Indemnitee) at such time.


 


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“United
States” means the United States of America.


 


“Yield
Differential” has the meaning set forth in subsection
2.1A(iv).


 


1.2      Accounting
Terms: Utilization of GAAP for Purposes of Calculations Under Agreement.


 


A.        Except
as otherwise expressly provided in this Agreement, all accounting terms not
otherwise defined herein shall have the meanings assigned to them in conformity
with GAAP. Financial statements and other information required to be delivered
by Company to Lenders pursuant to this Agreement and calculations in connection
with the definitions, covenants and other provisions of this Agreement shall be
prepared in accordance with GAAP as in effect at the time of such preparation.
If at any time any change in GAAP would affect the computation of any financial
ratio set forth in any Loan Document, and Company or Requisite Lenders shall so
request, Administrative Agent and Company shall negotiate in good faith to
amend such ratio or requirement to preserve the original intent thereof in
light of such change in GAAP (subject to the approval of Requisite Lenders),
provided that, until so amended, such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and Company shall
provide to Administrative Agent and Lenders reconciliation statements provided
for in subsection 6.1(v).


 


B.        Notwithstanding anything to the contrary
contained herein, financial ratios and other financial calculations pursuant to
this Agreement (other than pursuant to subsection 7.8) shall, following the
Acquisition, any Permitted Acquisition or any Asset Sale of a Subsidiary or
operating entity, be calculated on a Pro Forma Basis until the completion of
four full Fiscal Quarters following such transaction.


 


1.3      Other
Definitional Provisions and Rules of Construction.


 


A.        Any
of the terms defined herein may, unless the context otherwise requires, be used
in the singular or the plural, depending on the reference.


 


B.        References to “Sections” and “subsections”
shall be to Sections and subsections of, and the words “herein,” “hereof,”
“hereto” and “hereunder” and words of similar import, respectively, shall be
references to, this Agreement unless otherwise specifically provided. Section
and subsection headings in any Loan Document are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.


 


C.        The use in any of the Loan Documents of
the word “include” or “including”, when following any general statement, term
or matter, shall not be construed to limit such statement, term or matter to
the specific items or matters set forth immediately following such word or to
similar items or matters, whether or not nonlimiting language (such as “without
limitation” or “but not limited to” or words of similar import) is used with
reference thereto, but rather shall be deemed to refer to all other items or
matters that fall within the broadest possible scope of such general statement,
term or matter.


 


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D.        Unless otherwise expressly provided herein, (a) references to
Organizational Documents, agreements (including the Loan Documents) and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements, extensions, supplements and other modifications thereto; and (b)
references to any law shall include all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting such law.


 


1.4      Rounding.


 


Any financial ratios required to be
maintained pursuant to this Agreement (or required to be satisfied in order for
a specific action to be permitted under this Agreement) shall be calculated by
dividing the appropriate component by the other component, carrying the result
to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).


 


Section
2.     AMOUNTS AND TERMS OF COMMITMENTS
AND LOANS


 


2.1      Commitments; Making of Loans; the
Register; Optional Notes.


 


A.        Commitments. Subject to the terms and conditions of this Agreement and in reliance
upon the representations and warranties of Company herein set forth, each
Lender hereby severally agrees to make the Loans as described in subsections
2.1A(i) and 2.1 A(ii) and Swing Line Lender hereby agrees to make the Swing
line Loans as described in subsection 2.1A(iii).


 


(i)        Term Loans. Each Lender that has a Term Loan
Commitment severally agrees to lend to Company on the Closing Date an amount
not exceeding its Pro Rata Share of the aggregate amount of the Term Loan
Commitments to be used for the purposes identified in subsection 2.5A. The
amount of each Lender’s Term Loan Commitment will be set forth in an allocation
letter delivered to such Lender by Administrative Agent and the aggregate
amount of the Term Loan Commitments is $ 135,000,000; provided that the
amount of the Term Loan Commitment of each Lender shall be adjusted to give
effect to any assignment of such Term Loan Commitment pursuant to subsection
10.1B. Company may make only one borrowing under the Term Loan Commitments
except as additional borrowings may be permitted pursuant to subsection 2.1
A(iv). Amounts borrowed under this subsection 2.1 A(i) and subsequently repaid
or prepaid may not be reborrowed.


 


(ii)       Revolving
Loans. Each Revolving Lender severally agrees, subject to the limitations
set forth below with respect to the maximum amount of Revolving Loans permitted
to be outstanding from time to time, to lend to Company from time to time
during the period from the Closing Date to but excluding the Revolving Loan
Commitment Termination Date an aggregate amount not exceeding its Pro Rata
Share of the aggregate amount of the Revolving Loan Commitments to be used for
the purposes identified in subsection 2.5B; provided that not more than
$3,000,000 of the Revolving Loans may be made on the Closing Date (the “Closing Date Revolving


 


32





















 


Loans”).
The original amount of each Revolving Lender’s Revolving Loan Commitment will
be set forth in an allocation letter delivered to such Lender by Administrative
Agent and the original Revolving Loan Commitment Amount is $20,000,000; provided
that the amount of the Revolving Loan Commitment of each Revolving Lender shall
be adjusted to give effect to any assignment of such Revolving Loan Commitment
pursuant to subsection 10.1B and shall be reduced from time to time by the
amount of any reductions thereto made pursuant to subsection 2.4. Each
Revolving Lender’s Revolving Loan Commitment shall expire on the Revolving Loan
Commitment Termination Date and all Revolving Loans and all other amounts owed
hereunder with respect to the Revolving Loans and the Revolving Loan
Commitments shall be paid in full no later than that date. Amounts borrowed
under this subsection 2.1A(ii) may be repaid and reborrowed to but excluding
the Revolving Loan Commitment Termination Date.


 


Anything contained in this Agreement to the contrary
notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall
be subject to the limitation that in no event shall the Total Utilization of
Revolving Loan Commitments at any time exceed the Revolving Loan Commitment
Amount then in effect.


 


(iii)      Swing Line Loans.


 


(a)       General
Provisions. Swing Line Lender hereby agrees, subject to the limitations set
forth in the last paragraph of subsection 2.1 A(ii) and set forth below with
respect to the maximum amount of Swing Line Loans permitted to be outstanding
from time to time, to make a portion of the Revolving Loan Commitments
available to Company from time to time during the period from the Closing Date
to but excluding the Revolving Loan Commitment Termination Date by making Swing
Line Loans to Company in an aggregate amount not exceeding the amount of the
Swing Line Loan Commitment to be used for the purposes identified in subsection
2.5B, notwithstanding the fact that such Swing Line Loans, when aggregated with
Swing Line Lender’s outstanding Revolving Loans and Swing Line Lender’s Pro
Rata Share of the Letter of Credit Usage then in effect, may exceed Swing Line
Lender’s Revolving Loan Commitment. The original amount of the Swing line Loan
Commitment is $3,000,000; provided that any reduction of the Revolving
Loan Commitment Amount made pursuant to subsection 2.4B that reduces the
Revolving Loan Commitment Amount to an amount less than the then current amount
of the Swing Line Loan Commitment shall result in an automatic corresponding
reduction of the amount of the Swing Line Loan Commitment to the amount of the
Revolving Loan Commitment Amount, as so reduced, without any further action on
the part of Company, Administrative Agent or Swing line Lender. The Swing Line
Loan Commitment shall expire on the Revolving Loan Commitment Termination Date
and all Swing Line Loans and all other amounts owed hereunder with respect to
the Swing Line Loans shall be paid in full no later than that date. Amounts
borrowed under this subsection 2.1A(iii) may be repaid and reborrowed to but
excluding the Revolving Loan Commitment Termination Date.


 


33





















 


(b)         Swing
Line Loan Prepayment with Proceeds of Revolving Loans. With respect to any
Swing Line Loans that have not been voluntarily prepaid by Company pursuant to
subsection 2.4B(i), Swing Line Lender may, at any time in its sole and absolute
discretion, deliver to Administrative Agent (with a copy to Company), no later
than 10:00 A.M. (New York City time) on the first Business Day in advance of
the proposed Funding Date, a notice requesting Revolving Lenders to make
Revolving Loans that are Base Rate Loans on such Funding Date in an amount
equal to the amount of such Swing Line Loans (the “Refunded Swing Line Loans”) outstanding on the date such
notice is given. Company hereby authorizes the giving of any such notice and
the making of any such Revolving Loans. Anything contained in this Agreement to
the contrary notwithstanding, (1) the proceeds of such Revolving Loans made by
Revolving Lenders other than Swing Line Lender shall be immediately delivered
by Administrative Agent to Swing Line Lender (and not to Company) and applied
to repay a corresponding portion of the Refunded Swing Line Loans and (2) on
the day such Revolving Loans are made, Swing Line Lender’s Pro Rata Share of
the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a
Revolving Loan made by Swing Line Lender, and such portion of the Swing Line
Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans
and shall no longer be due under the Swing Line Note, if any, of Swing Line
Lender but shall instead constitute part of Swing Line Lender’s outstanding
Revolving Loans and shall be due under the Revolving Note, if any, of Swing
Line Lender.


 


(c)       Swine Line Loan Assignments. On the Funding Date of
each Swing Line Loan, each Revolving Lender shall be deemed to, and hereby
agrees to, purchase an assignment of such Swing line Loan in an amount equal to
its Pro Rata Share. If for any reason (1) Revolving Loans are not made upon the request of Swing Line
Lender as provided in the immediately preceding paragraph in an amount
sufficient to repay any amounts owed to Swing Line Lender in respect of such
Swing Line Loan or (2) the Revolving Loan Commitments are terminated at a time
when such Swing Line Loan is outstanding, upon notice from Swing Line Lender as
provided below, each Revolving Lender shall fund the purchase of such
assignment in an amount equal to its Pro Rata Share (calculated, in the case of
the foregoing clause (2), immediately prior to such termination of the
Revolving Loan Commitments) of the unpaid amount of such Swing Line Loan
together with accrued interest thereon. Upon one Business Day’s notice from
Swing line Lender to Administrative Agent who shall promptly notify the
Revolving Lenders, each Revolving Lender shall deliver to Administrative Agent
for the benefit of Swing Line Lender such amount in same day funds at the
Funding and Payment Office. Without limiting the effect of the deemed
assignment described in this paragraph, in order to further evidence such
assignment (and without prejudice to the effectiveness of the assignment
provisions set forth above), each Revolving Lender agrees to enter into an
Assignment Agreement at the request of Swing Line Lender in form and substance
reasonably satisfactory to Swing Line Lender. In the event any Revolving Lender
fails to make available to Swing Line Lender any amount as provided in this
paragraph, Swing Line Lender shall be


 


34





















 


entitled to
recover such amount on demand from such Revolving Lender together with interest
thereon at the rate customarily used by Swing Line Lender for the correction of
errors among banks for three Business Days and thereafter at the Base Rate. In
the event Swing Line Lender receives a payment of any amount with respect to
which other Revolving Lenders have funded the purchase of assignments as
provided in this paragraph, Swing Line Lender shall promptly remit such payment
to Administrative Agent for distribution to each such other Revolving Lender
its Pro Rata Share of such payment.


 


(d)       Revolving Lenders’ Obligations. Anything contained
herein to the contrary notwithstanding, each Revolving Lender’s obligation to
make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans
pursuant to subsection 2.1 A(iii)(b) and each Revolving Lender’s obligation to
purchase an assignment of any unpaid Swing Line Loans pursuant to the
immediately preceding subsection shall be absolute and unconditional and shall
not be affected by any circumstance, including (1) any set-off, counterclaim,
recoupment, defense or other right which such Revolving Lender may have against
Swing Line Lender, Company or any other Person for any reason whatsoever; (2)
the occurrence or continuation of an Event of Default or a Potential Event of
Default; (3) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any of
its Subsidiaries; (4) any breach of this Agreement or any other Loan Document
by any party thereto; or (5) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing; provided
that such obligations of each Revolving Lender are subject to the condition
that (x) Swing Line Lender believed in good faith that all conditions under
Section 4 to the making of the applicable Swing Line Loans were satisfied at
the time such Swing Line Loans were made or (y) the satisfaction of any such
condition not satisfied had been waived in accordance with subsection 10.6
prior to or at the time such Swing line Loans were made.


 


(iv)      Increases of the Term Loan Commitments. Company may, not
more than two times after the Closing Date, increase, at Company’s request, the
then effective aggregate principal amount of the Term Loan Commitments;
provided that (1) the aggregate principal amount of the increases in the Term
Loan Commitments pursuant to this subsection 2.1A(iv) shall not exceed
$75,000,000, (2) such increases shall be for the purpose of funding Permitted
Acquisitions, (3) Company shall execute and deliver such documents and
instruments and take such other actions as may be reasonably requested by
Administrative Agent in connection with such increases and at the time of any
such proposed increase, (4) no Potential Event of Default or Event of Default
shall have occurred and be continuing or would occur after giving effect to
such increase, (5) Company and its Subsidiaries shall be in compliance, on a
Pro Forma Basis, with each of the financial covenants specified in subsection
7.6, as of the last day of the most recently ended Fiscal Quarter after giving
effect to such increases; (6) the Term Loans made under this subsection 2.1
A(iv) shall have a maturity date no earlier than September 30, 2012 and shall
have a weighted average life to maturity no shorter than the Term Loans made
under subsection 2,1 A(i), (7) if the weighted average interest rates
applicable to the Term Loans made pursuant to this subsection 2JA(iv) exceed
the


 


35





















 


rates set forth in
subsection 2.2 by more than 25 basis points (such difference, the “Yield Differential”), then the interest
rates set forth in subsection 2.2 shall increase by the Yield Differential; (8)
all other terms and conditions with respect to the Term Loans made pursuant to
this subsection 2.1A(iv) shall be satisfactory to Administrative Agent; and (9)
the Term Loans made pursuant to this subsection 2.1A(iv) shall be permitted
indebtedness under the Senior Subordinated Note Indenture and shall constitute
“Senior Debt” (as defined in the Senior Subordinated Note Indenture) for
purposes of the Senior Subordinated Note Indenture. Any request under this
subsection 21A(iv) shall be submitted by Company to Administrative Agent (which
shall promptly forward copies to Lenders). Company may also specify any fees
offered to those Lenders (the “Increasing
Lenders”) which agree to increase the principal amount of their Term
Loan Commitments, which fees may be variable based upon the amount by which any
such Lender is willing to increase the principal amount of its Term Loan
Commitment. No Lender shall have any obligation, express or implied, to offer
to increase the aggregate principal amount of its Term Loan Commitment. Only
the consent of each Increasing Lender shall be required for an increase in the
aggregate principal amount of the Term Loan Commitments pursuant to this
subsection 2.1 A(iv). No Lender which declines to increase the principal amount
of its Term Loan Commitment may be replaced in respect to its existing Term
Loan Commitment as a result thereof without such Lender’s consent.


 


Each Increasing Lender shall as soon as practicable
specify the amount of the proposed increase that it is willing to assume.
Company may accept some or all of the offered amounts or designate new lenders
that qualify as Eligible Assignees and that are reasonably acceptable to
Administrative Agent as additional Lenders hereunder in accordance with this
subsection 2.1A(iv) (each such new lender being a “New Lender”), which New Lenders may assume all or a portion
of the increase in the aggregate principal amount of the applicable Term Loan
Commitments. Company and Administrative Agent shall have discretion jointly to
adjust the allocation of the increased aggregate principal amount of the Term
Loan Commitments among Increasing Lenders and New Lenders.


 


Subject to the foregoing, any increase requested by
Company shall be effective upon delivery to Administrative Agent of each of the
following documents: (i) an originally executed copy of an instrument of
joinder signed by a duly authorized officer of each New Lender, in form and
substance reasonably acceptable to Administrative Agent; (ii) a notice to the
Increasing Lenders and New Lenders, in form and substance reasonably acceptable
to Administrative Agent, signed by a duly authorized officer of Company; (iii)
an Officer’s Certificate of Company, in form and substance reasonably
acceptable to Administrative Agent; (iv) to the extent requested by any New
Lender or Increasing Lender, executed Term Notes issued by Company in
accordance with subsection 2.1 E hereof; and (v) any other certificates or
documents that Administrative Agent shall reasonably request, in form and
substance reasonably satisfactory to Administrative Agent. Any such increase
shall be in a principal amount equal to (A) the principal amount that
Increasing Lenders are willing to assume as increases to the principal amount
of their Term Loan Commitments plus (B) the principal amount offered by
New Lenders with respect to the Term Loan Commitments, in either case as
adjusted by Company and Administrative Agent pursuant to this subsection
2.1A(iv). Upon


 


36





















 


effectiveness of
any such increase, the Commitments and Pro Rata Share of each Lender will be
adjusted to give effect to the increase in the Term Loan Commitments.
Notwithstanding anything to the contrary in subsection 10.6, Administrative
Agent is expressly permitted to amend the Loan Documents to the extent
necessary to give effect to any increases pursuant to this subsection 2.1  A(iv).


 


B.       
Borrowing Mechanics. Term Loans or Revolving Loans made as
Base Rate Loans on any Funding Date (other than Swing Line Loans, Revolving
Loans made pursuant to a request by Swing Line Lender pursuant to subsection
2.1 A(iii) or Revolving Loans made pursuant to subsection 3.3B) shall be in an
aggregate minimum amount of $1,000,000 and multiples of $100,000 in excess of
that amount. Term Loans or Revolving Loans made as Eurodollar Rate Loans with a
particular Interest Period shall be in an aggregate minimum amount of
$1,000,000 and multiples of $100,000 in excess of that amount. Swing Line Loans
made on any Funding Date shall be in an aggregate minimum amount of $200,000
and multiples of $100,000 in excess of that amount. Whenever Company desires
that Lenders make Term Loans or Revolving Loans it shall deliver to
Administrative Agent a duly executed Notice of Borrowing no later than 1:00
P.M. (New York City time) at least three Business Days in advance of the
proposed Funding Date (in the case of a Eurodollar Rate Loan) or at least one
Business Day in advance of the proposed Funding Date (in the case of a Base
Rate Loan). Whenever Company desires that Swing Line Lender make a Swing Line
Loan, it shall deliver to Swing Line Lender and Administrative Agent at the Swing
Line Funding and Payment Office a duly executed Notice of Borrowing no later
than 1:00 P.M. (New York City time) on the proposed Funding Date. Term Loans
and Revolving Loans may be continued as or converted into Base Rate Loans and
Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of
delivering a Notice of Borrowing, Company may give Administrative Agent (or in
the case of Swing line Loans, Swing Line Lender and Administrative Agent), as
applicable, telephonic notice by the required time of any proposed borrowing
under this subsection 2.1 B; provided that such notice shall be promptly
confirmed in writing by delivery of a duly executed Notice of Borrowing to
Administrative Agent (or Swing Line Lender and Administrative Agent in the case
of Swing Line Loans) on or before the applicable Funding Date.


 


Neither Administrative Agent nor any Lender (including Swing Line
Lender) shall incur any liability to Company in acting upon any telephonic
notice referred to above that Administrative Agent (or Swing Line Lender, as
applicable) believes in good faith to have been given by an Officer or other
person authorized to borrow on behalf of Company.


 


Company shall notify Administrative Agent (or, in the case of Swing
Line Loans, Swing Line Lender and Administrative Agent) prior to the funding of
any Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing is no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds
of any Loans shall constitute a re-certification by Company, as of the
applicable Funding Date, as to the matters to which Company is required to
certify in the applicable Notice of Borrowing.


 


Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable and Company shall be bound to make a borrowing in
accordance therewith.


 


37





















 


C.        Disbursement
of Funds. All Term Loans and Revolving Loans under this
Agreement shall be made by Lenders simultaneously and proportionately to their
respective Pro Rata Shares, it being understood that neither Administrative
Agent nor any Lender shall be responsible for any other Lender’s default in its
obligation to make a Loan requested hereunder nor shall the amount of the
Commitment of any Lender to make the particular type of Loan requested or Pro
Rata Share of any Lender be increased or decreased as a result of such other
Lender’s default in its obligation to make a Loan requested hereunder.


 


Promptly after receipt by Administrative Agent of a Notice of Borrowing
pursuant to subsection 2.1B (or telephonic notice in lieu thereof), Administrative
Agent shall notify each Lender for that type of Loan (other than Swing Line
Lender, in the case of a Swing Line Loan). Each such Lender shall make the
amount of its Loan available to Administrative Agent at the Funding and Payment
Office not later than 1:00 P.M. (New York City time) on the applicable Funding
Date, in same day funds in Dollars. Swing Line Lender, in the case of a Swing
Line Loan, shall make the amount of its Loan available directly to Company as
provided below. Except as provided in subsection 2.1 A(iii) or subsection 3.3B
with respect to Revolving Loans used to repay Refunded Swing Line Loans or to
reimburse any Issuing Lender for the amount of a drawing under a Letter of
Credit issued by it, upon satisfaction or waiver of the conditions precedent
specified in subsections 4.1 (in the case of Loans made on the Closing Date)
and 4.2 (in the case of all Loans), Administrative Agent or Swing Line Lender,
as the case may be, shall make the proceeds of such Loans available to Company
on the applicable Funding Date by causing an amount of same day funds in
Dollars equal to the proceeds of all such Loans received by Administrative
Agent from Lenders or to be disbursed by Swing Line Lender, as applicable, to
be credited to the account designated by Company in the applicable Notice of
Borrowing.


 


Unless Administrative Agent shall have been notified by any Lender
prior to a Funding Date that such Lender does not intend to make available to
Administrative Agent such Lender’s Pro Rata Share of the Loan requested on such
Funding Date, Administrative Agent may assume that such Lender has made such
amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated
to, make available to Company a corresponding amount on such Funding Date. If
such corresponding amount is not in fact made available to Administrative Agent
by such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent’s demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
rate payable under this Agreement for the applicable Loan. Nothing in this
subsection 2.1C shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Company may
have against any Lender as a result of any default by such Lender hereunder.


 


38





















 


D.        The
Register. Administrative Agent, acting for these purposes
solely as an agent of Company (it being acknowledged that Administrative Agent,
in such capacity, and its officers, directors, employees, agent and affiliates
shall constitute Indemnitees under subsection 10.3), shall maintain (and make
available for inspection by Company upon reasonable prior notice) at its
address referred to in subsection 10.7 a register for the recordation of, and
shall record, the names and addresses of Lenders and the respective amounts of
the Term Loan Commitment, Revolving Loan Commitment, Swing Line Loan
Commitment, Term Loans, Revolving Loans and Swing Line Loans of each Lender
from time to time (the “Register”). Company,
Administrative Agent and Lenders shall, absent manifest error, deem and treat
the Persons listed as Lenders in the Register as the holders and owners of the
corresponding Commitments and Loans listed therein for all purposes hereof; all
amounts owed with respect to any Commitment or Loan shall be owed to the Lender
listed in the Register as the owner thereof; and any request, authority or
consent of any Person who, at the time of making such request or giving such
authority or consent, is listed in the Register as a Lender shall be conclusive
and binding on any subsequent holder, assignee or transferee of the
corresponding Commitments or Loans. Each Lender shall record on its internal
records the amount of its Loans and Commitments and each payment in respect
hereof, and any such recordation shall be conclusive and binding on Company,
absent manifest error, subject to the entries in the Register, which shall,
absent manifest error, govern in the event of any inconsistency with any
Lender’s records. Failure to make any recordation in the Register or in any
Lender’s records, or any error in such recordation, shall not affect any Loans
or Commitments or any Obligations in respect of any Loans.


 


E.         Optional
Notes. If so requested by any Lender by written notice to
Company (with a copy to Administrative Agent) at least two Business Days prior
to the Closing Date or at any time thereafter, Company shall execute and
deliver to such Lender (and/or, if applicable and if so specified in such
notice, to any Person who is an assignee of such Lender pursuant to subsection
10.1) on the Closing Date (or, if such notice is delivered after the Closing
Date, promptly after Company’s receipt of such notice) a promissory note or
promissory notes to evidence such Lender’s Term Loans, Revolving Loans or Swing
Line Loans, substantially in the form of Exhibit IV, Exhibit V or
Exhibit VI annexed hereto, respectively, with appropriate insertions.


 


2.2      Interest on the Loans.


 


A.        Rate
of Interest. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate
or the Eurodollar Rate. Subject to the provisions of subsection 2.7, each Swing
Line Loan shall bear interest on the unpaid principal amount thereof from the
date made through maturity (whether by acceleration or otherwise) at a rate
determined by reference to the Base Rate. The applicable basis for determining
the rate of interest with respect to any Term Loan or any Revolving Loan shall
be selected by Company initially at the time a Notice of Borrowing is given
with respect to such Loan pursuant to subsection 2. 1B, and the basis for
determining the interest rate with respect to any Term Loan or any Revolving
Loan may be changed from time to time pursuant to subsection 2.2D. If on any
day a Term Loan or Revolving Loan is outstanding with respect to which notice
has not been delivered to


 


39





















 


Administrative
Agent in accordance with the terms of this Agreement specifying the applicable
basis for determining the rate of interest, then for that day that Loan shall
bear interest determined by reference to the Base Rate.


 


(i)        Term
Loans. Subject to the provisions of subsections 2.2E, 2.2G and 2.7, the
Term Loans shall bear interest through maturity as follows: (a) if a Base Rate
Loan, then at the sum of the Base Rate plus 1.75%; or (b) if a Eurodollar Rate
Loan, then at the sum of the Eurodollar Rate plus 2.75%.


 


(ii)       Revolving
Loans. Subject to the proviso at the end of this clause (ii) and the
provisions of subsections 2.2E, 2.2G and 2.7, the Revolving Loans shall bear
interest through maturity as follows:


 


(a)       if a
Base Rate Loan, then at the sum of the Base Rate plus the Base Rate Margin set
forth in the table below opposite the applicable Consolidated Leverage Ratio
for the four-Fiscal Quarter period for which the applicable Compliance
Certificate has been delivered pursuant to subsection 6.1(iv); or


 


(b)       if a
Eurodollar Rate Loan, then at the sum of the Eurodollar Rate plus the
Eurodollar Rate Margin set forth in the table below opposite the applicable
Consolidated Leverage Ratio for the four-Fiscal Quarter period for which the applicable
Compliance Certificate has been delivered pursuant to subsection 6.1 (iv):


 


	
   

  	
   

  	
  Consolidated Leverage Ratio

  	
   

  	
  Eurodollar Rate Margin

  	
   

  	
  Base

  Rate Margin

  	
   

  
	
  Greater than or equal to

  	
   

  	
  4.75:1.00

  	
   

  	
  2.25

  	
  %

  	
  1.25

  	
  %

  
	
  Greater than or equal to 

  

  but less than

  	
   

  	
  4.00:1.00

  

  4.75:1.00

  	
   

  	
  2.00

  	
  %

  	
  1.00

  	
  %

  
	
  Less than

  	
   

  	
  4.00:1.00

  	
   

  	
  1.875

  	
  %

  	
  0.875

  	
  %

  



 


provided
that, for the period from and including the Closing Date to and including the
date on which Company delivers financial statements for Fiscal Year 2005 in
accordance with subsection 6. l(iii), (a) the applicable margin for Eurodollar
Rate Loans shall be 2.25%, and (b) the applicable margin for Base Rate Loans
shall be 1.25%.


 


(iii)      Upon
delivery of the Compliance Certificate by Company to Administrative Agent
pursuant to subsection 6.1(iv), the Base Rate Margin and the Eurodollar Rate
Margin for Revolving Loans shall automatically be adjusted in accordance with
such Compliance Certificate, such adjustment to become effective on


 


40





















 


the next
succeeding Business Day following the receipt by Administrative Agent of such
Compliance Certificate (subject to the provisions of the foregoing clause
(ii)); provided that, if at any time a Compliance Certificate is not
delivered at the time required pursuant to subsection 6.1(iv), from the time
such Compliance Certificate was required to be delivered until the Business Day
next succeeding delivery of such Compliance Certificate, the applicable margins
shall be the maximum percentage amount for the relevant Loan set forth above.


 


(iv)        Swing
line Loans. Subject to the provisions of subsections 2.2E, 2.2G and 2.7,
the Swing Line Loans shall bear interest through maturity at the sum of the
Base Rate plus the applicable Base Rate Margin for Revolving Loans.


 


B.        Interest
Periods. In connection with each Eurodollar Rate Loan, Company may,
pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
“Interest Period”) to be
applicable to such Loan, which Interest Period shall be, at Company’s option,
either a one, two, three or six month period or, if deposits in the interbank
Eurodollar market are generally available for such period (as determined by
Administrative Agent), a nine or twelve month period; provided that:


 


(i)        the
initial Interest Period for any Eurodollar Rate Loan shall commence on the
Funding Date in respect of such Loan, in the case of a Loan initially made as a
Eurodollar Rate Loan, or on the date specified in the applicable Notice of
Conversion/Continuation, in the case of a Loan converted to a Eurodollar Rate
Loan;


 


(ii)       in the
case of immediately successive Interest Periods applicable to a Eurodollar Rate
Loan continued as such pursuant to a Notice of Conversion/Continuation, each
successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;


 


(iii)      if an
Interest Period would otherwise expire on a day that is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day; provided
that, if any Interest Period would otherwise expire on a day that is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next preceding
Business Day;


 


(iv)      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, subject to clause (v) of this
subsection 2.2B, end on the last Business Day of a calendar month;


 


(v)        no
Interest Period with respect to any portion of the Term Loans shall extend
beyond September 30, 2012, and no Interest Period with respect to any portion
of the Revolving Loans shall extend beyond the Revolving Loan Commitment
Termination Date;


 


(vi)      no
Interest Period with respect to any Term Loan shall extend beyond a date on
which Company is required to make a scheduled payment of principal of such


 


41





















 


Term Loan, unless
the sum of (a) the aggregate principal amount of such Term Loan that is a Base
Rate Loan plus (b) the aggregate principal amount of such Term Loan that
is a Eurodollar Rate Loan with Interest Periods expiring on or before such date
equals or exceeds the principal amount required to be paid on such Term Loan on
such date;


 


(vii)     there
shall be no more than ten Interest Periods outstanding at any time; and


 


(viii)    in the
event Company fails to specify an Interest Period for any Eurodollar Rate Loan
in the applicable Notice of Borrowing or Notice of Conversion/Continuation,
Company shall be deemed to have selected an Interest Period of one month.


 


C.        Interest
Payments. Subject to the provisions of subsection 2.2E, interest on
each Loan shall be payable in arrears on and to each Interest Payment Date
applicable to that Loan, upon any prepayment of that Loan (to the extent
accrued on the amount being prepaid) and at maturity (including final
maturity); provided that, in the event any Swing Line Loans or any
Revolving Loans that are Base Rate Loans are prepaid pursuant to subsection
2.4B(i), interest accrued on such Loans through the date of such prepayment
shall be payable on the next succeeding Interest Payment Date applicable to
Base Rate Loans (or, if earlier, at final maturity).


 


D.        Conversion
or Continuation. Subject to the provisions of subsection 2.6,
Company shall have the option (i) to convert at any time all or any part
of its outstanding Term Loans or Revolving Loans equal to $1,000,000 and
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the
expiration of any Interest Period applicable to a Eurodollar Rate Loan, to
continue the entire amount of such Loan remaining outstanding at such time, or
to continue any portion of such Loan equal to $1,000,000 and multiples of
$100,000 in excess of that amount, as a Eurodollar Rate Loan; provided, however,
that a Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.


 


Company shall deliver a duly executed Notice of Conversion/Continuation
to Administrative Agent no later than 1:00 P.M. (New York City time) at least
one Business Day in advance of the proposed conversion date in the case of a
conversion to a Base Rate Loan and at least three Business Days in advance of the
proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). In lieu of delivering a Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic
notice by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed
in writing by delivery of a duly executed Notice of Conversion/Continuation to
Administrative Agent on or before the proposed conversion/continuation date.
Administrative Agent shall notify each Lender of any Loan subject to a Notice
of Conversion/Continuation.


 


Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or


 


42





















 


telephonic notice
in lieu thereof) shall be irrevocable and Company shall be bound to effect a
conversion or continuation in accordance therewith.


 


E.         Default
Rate. Upon the occurrence and during the continuation of any Event
of Default resulting from the failure to pay when due, whether at stated
maturity, by notice of prepayment, by acceleration or otherwise, any principal
payments on the Loans, any interest payments thereon or any fees and other
amounts due and payable hereunder, such unpaid principal amount of the Loans
and, to the extent permitted by applicable law, such interest payments and fees
and other amounts shall thereafter bear interest (including post-petition
interest in any proceeding under the Bankruptcy Code or other applicable
bankruptcy laws) payable upon demand by Administrative Agent at a rate that is 2% per annum in excess of the interest
rate otherwise payable under this Agreement with respect to the applicable
Loans (or, in the case of any such fees and other amounts, at a rate which is
2% per annum in excess of the interest rate otherwise payable under this
Agreement for Base Rate Loans); provided that, in the case of Eurodollar
Rate Loans, upon the expiration of the Interest Period in effect at the time
any such increase in interest rate is effective such Eurodollar Rate Loans
shall thereupon become Base Rate Loans and shall thereafter bear interest
payable upon demand by Administrative Agent at a rate which is 2% per annum in
excess of the interest rate otherwise payable under this Agreement for Base
Rate Loans. Payment or acceptance of the increased rates of interest provided
for in this subsection 2.2E is not a permitted alternative to timely payment
and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Administrative Agent or any
Lender.


 


F.         Computation
of Interest. Interest on the Loans shall be computed (i) in
the case of Base Rate Loans, on the basis of a 365-day or 366-day year, as the
case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a
360-day year, in each case for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar
Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base
Rate Loan, as the case may be, shall be included, and the date of payment of
such Loan or the expiration date of an Interest Period applicable to such Loan
or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan,
the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as
the case may be, shall be excluded; provided that if a Loan is repaid on
the same day on which it is made, one day’s interest shall be paid on that
Loan.


 


G.        Maximum
Rate. Notwithstanding the foregoing provisions of this subsection
2.2, in no event shall the rate of interest payable by Company with respect to
any Loan exceed the maximum rate of interest permitted to be charged under
applicable law.


 


2.3      Fees.


 


A.        Facility
Fees. Company agrees to pay to Administrative Agent, for
distribution to each Revolving Lender in proportion to that Lender’s Pro Rata
Share, facility fees for the period from and including the Closing Date to and
excluding the Revolving Loan Commitment Termination Date equal to the Revolving
Loan Commitment Amount multiplied by the percentage set forth in the table
below opposite the Consolidated Leverage Ratio for the four


 


43





















 


Fiscal Quarter
period for which the applicable Compliance Certificate has been delivered
pursuant to subsection 6.1(iv):


 




	
  Consolidated

  Leverage Ratio

  	
   

  	
  Facility

  Fee Percentage

  	
   

  
	
  4.00:1.00 or greater

  	
   

  	
  0.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  less than 4.00:1.00

  	
   

  	
  0.375

  	
  %

  






 


such facility fees
to be calculated on the basis of a 360-day year and the actual number of days
elapsed and to be payable quarterly in arrears on the last Business Day of each
March, June, September and December of each year, commencing on the first such
date to occur after the Closing Date, and on the Revolving Loan Commitment
Termination Date.


 


B.        Other
Fees. Company agrees to pay to Administrative Agent such fees
in the amounts and at the times separately agreed upon between Company and
Administrative Agent.


 


2.4      Repayments, Prepayments and Reductions
of Commitments and Loans; General Provisions Regarding Payments; Application of
Proceeds of Collateral and Payments Under Guaranties.


 


A.        Scheduled
Payments of Term Loans. Company shall make principal payments
on the Term Loans in installments on the dates and in the amounts set forth
below:


 




	
  Date

  	
   

  	
  Scheduled Repayment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  March 31, 2006

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  337,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  337,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  September 30, 2008

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  337,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  337,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  September 30, 2010

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  December 31, 2010

  	
   

  	
  $

  	
  337,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2011

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  June 30, 2011

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  September 30, 2011

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  December 31, 2011

  	
   

  	
  $

  	
  337,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2012

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  June 30, 2012

  	
   

  	
  $

  	
  337,500

  	
   

  
	
  September 30, 2012

  	
   

  	
  $

  	
  125,887,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  135,000,000

  	
   

  






 


 


44





















 


 


; provided
that the scheduled installments of principal of the Term Loans set forth above
shall be reduced in connection with any voluntary or mandatory prepayments of
the Term Loans in accordance with subsection 2.4B(iv); and provided, further
that the Term Loans and all other amounts owed hereunder with respect to the
Term Loans shall be paid in full no later than September 30, 2012, and the
final installment payable by Company in respect of the Term Loans on such date
shall be in an amount, if such amount is different from that specified above,
sufficient to repay all amounts owing by Company under this Agreement with
respect to the Term Loans.


 


B.        Prepayments
and Reductions in Revolving Loan Commitment Amount and Loans.


 


(i)        Voluntary
Prepayments. Company may, upon written or telephonic notice to
Administrative Agent on or prior to 1:00 P.M. (New York City time) on the date
of prepayment, which notice, if telephonic, shall be promptly confirmed in
writing, at any time and from time to time prepay any Swing Line Loan on any
Business Day in whole or in part in an aggregate minimum amount of $100,000 and
multiples of $100,000 in excess of that amount. Company may, upon not less than
one Business Day’s prior written or telephonic notice, in the case of Base Rate
Loans, and three Business Days’ prior written or telephonic notice, in the case
of Eurodollar Rate Loans, in each case given to Administrative Agent by 1:00
P.M. (New York City time) on the date required and, if given by telephone,
promptly confirmed in writing to Administrative Agent, who will promptly notify
each Lender whose loans  are to be
prepaid of such prepayment, at any time and from time to time prepay, without
premium or penalty but subject to subsection 2.6D, any Term Loans or Revolving
Loans on any Business Day in whole or in part in an aggregate minimum amount of
$1,000,000 and


 


45





















 


multiples of $
100,000 in excess of that amount. All written notices delivered pursuant to
this subsection 2.4B(i) shall be in the form of a Notice of Prepayment and all
notices whether written or telephonic delivered pursuant to this subsection
2.4B(i) shall be irrevocable, and once given as aforesaid, the principal amount
of the Loans specified in such notice shall become due and payable on the
prepayment date specified therein; provided, however, that
notwithstanding anything to the contrary contained in this Agreement, Company
may rescind a Notice of Prepayment under this subsection 2.4B(i) and/or
2.4B(ii) if such prepayment would have resulted from a refinancing of the
Commitments and Loans outstanding hereunder, which refinancing shall not be
consummated or shall otherwise be delayed. Any such voluntary prepayment shall
be applied as specified in subsection 2.4B(iv).


 


(ii)       Voluntary
Reductions of Revolving Loan Commitments. Company may, upon not less than
three Business Days’ prior written or telephonic notice confirmed in writing to
Administrative Agent, or upon such lesser number of days’ prior written or
telephonic notice, as determined by Administrative Agent in its sole
discretion, at any time and from time to time, terminate in whole or
permanently reduce in part, without premium or penalty, the Revolving Loan
Commitment Amount in an amount up to the amount by which the Revolving Loan
Commitment Amount exceeds the Total Utilization of Revolving Loan Commitments
at the time of such proposed termination or reduction; provided that any
such partial reduction of the Revolving Loan Commitment Amount shall be in an
aggregate minimum amount of $1,000,000 and multiples of $100,000 in excess of
that amount. The Notice of Prepayment shall designate the date (which shall be
a Business Day) of such termination or reduction and the amount of any partial
reduction, and such termination or reduction shall be effective on the date
specified in Company’s notice and shall reduce the amount of the Revolving Loan
Commitment of each Revolving Lender proportionately to its Pro Rata Share.
Administrative Agent will promptly notify each Revolving Lender of such notice.
Any such voluntary reduction of the Revolving Loan Commitment Amount shall be
applied as specified in subsection 2.4B(iv). All written notices delivered
pursuant to this subsection 2.4B(ii) shall be in the form of a Notice of
Prepayment, all notices, whether written or telephonic, delivered pursuant to
this subsection 2.4B(ii) shall be, subject to the proviso set forth in
subsection 2.4B(i), irrevocable and Company shall be bound to the termination or
reduction of the Revolving Loan Commitments referenced in such notice.


 


(iii)      Mandatory
Prepayments. The Loans shall be prepaid in the amounts and under the
circumstances (including the giving of the Notice of Prepayment and Officer’s
Certificate required by subsection 2.4B(iii)(f)), set forth below, all such
prepayments to be applied as set forth below or as more specifically provided
in subsection 2.4B(iv) and subsection 2.4D:


 


(a)       Prepayments
From Net Asset Sale Proceeds. No later than the date which is ten (10)
Business Days after the date of receipt by Company or any Subsidiary Guarantor
of any Net Asset Sale Proceeds, Company shall either (1) prepay the Loans in an
aggregate amount equal to such Net Asset Sale Proceeds or (2), so long as no
Event of Default shall have occurred and be continuing,


 


46





















 


deliver to
Administrative Agent an Officer’s Certificate setting forth (x) that portion of
such Net Asset Sale Proceeds that Holdings, Company or such Subsidiary intends
to reinvest or cause to be reinvested in the business of Company or a
Subsidiary Guarantor within 360 days of such date of receipt and (y) such other
information with respect to such reinvestment as Administrative Agent may
reasonably request. Company shall, no later than 360 days after receipt of such
Net Asset Sale Proceeds that have not theretofore been applied to the
Obligations or that have not been so reinvested as provided above, make a
prepayment of the Loans in the full amount of all such Net Asset Sale Proceeds.


 


(b)       Prepayments
from Net Insurance/Condemnation Proceeds. No later than the date which is
ten (10) Business Days after the date of receipt by Company or any Subsidiary
Guarantor of any Net Insurance/Condemnation Proceeds, Company shall either (1)
prepay the Loans in an aggregate amount equal to such Net
Insurance/Condemnation Proceeds or (2), so long as no Event of Default shall
have occurred and be continuing, deliver to Administrative Agent an Officer’s
Certificate setting forth (x) that portion of such Net Insurance/Condemnation
Proceeds that Holdings, Company or such Subsidiary intends to reinvest or cause
to be reinvested in the business of Company or a Subsidiary Guarantor within
360 days of such date of receipt and (y) such other information with respect to
such reinvestment as Administrative Agent may reasonably request. Company
shall, no later than 360 days after receipt of such Net Insurance/Condemnation
Proceeds that have not theretofore been applied to the Obligations or that have
not been so reinvested as provided above, make a prepayment of the Loans in the
full amount of all such Net Insurance/Condemnation Proceeds.


 


(c)       Prepayments
Due to Issuance of Equity Securities. No later than the date which is five
(5) Business Days after the date of receipt of the Net Securities Proceeds from
the issuance of any Capital Stock of Holdings (but excluding (1) the Net
Securities Proceeds of any issuance of Capital Stock of Holdings to the Equity
Investors, other Permitted Holders or their Affiliates or to any other Person
co-investing with the Equity Investors, Permitted Holders or Affiliates in such
issuance, (2) Capital Stock, the proceeds of which are used to make any
Investment permitted by subsection 7.3 or the proceeds of which are used in
respect of any “Equity Clawback” under any Subordinated Indebtedness, or (3)
issuances of Capital Stock of Company to Holdings), Company shall prepay the
Loans in an aggregate amount equal to 50% of such Net Securities Proceeds; provided,
however, that if the Consolidated Leverage Ratio is less than or equal to (1)
2.75:1.00 as of the last day of the most recently ended fiscal Quarter, then
Company shall instead prepay the Loans in an aggregate amount equal to 25% of
such Net Securities Proceeds, and (2) 1.75:1.00 as of the last day of the most
recently ended Fiscal Quarter, then Company shall instead prepay the Loans in
an aggregate amount equal to 0% of such Net Securities Proceeds.


 


(d)       Prepayments
Due to Issuance of Indebtedness. No later than the date which is five (5)
Business Days after the date of receipt of (1) the Net


 


47





















 


Securities
Proceeds from the issuance of any Indebtedness of Company, Holdings or any of
its Domestic Subsidiaries after the Closing Date, other than Indebtedness not
prohibited pursuant to subsection 7.1, or (2) the Net Securities Proceeds from
the issuance of any Indebtedness of a Canadian Subsidiary pursuant to
subsection 7.1(xvii), Company shall prepay the Loans in an aggregate amount
equal to such Net Securities Proceeds.


 


(e)       Prepayments
from Consolidated Excess Cash Flow. In the event that there shall be
Consolidated Excess Cash Flow for any Fiscal Year (commencing with Fiscal Year
2006), Company shall, no later than the date which is five (5) Business Days
after the financial statements have been delivered pursuant to subsection 6.
l(iii), prepay the Loans in an aggregate amount equal to 50% of such
Consolidated Excess Cash Flow; provided, however, that if the Consolidated
Leverage Ratio is less than or equal to (1) 2.75:1.00 as of the last day of the
most recently ended Fiscal Quarter, then Company shall instead prepay the Loans
in an aggregate amount equal to 25% of such Consolidated Excess Cash Flow, and
(2) 1.75:1.00 as of the last day of the most recently ended Fiscal Quarter,
then Company shall instead prepay the Loans in an aggregate amount equal to 0%
of such Consolidated Excess Cash Flow; provided, further, that
the amount payable under this subsection 2.4B(iii)(e) with respect to any
Fiscal Year shall be reduced on a dollar-for-dollar basis by the amount of
voluntary prepayments of the Term Loans and voluntary reductions of the
Revolving Loan Commitments made during such Fiscal Year.


 


(f)        Calculations
of Net Proceeds Amounts; Additional Prepayments Based on Subsequent
Calculations. Company shall provide Administrative Agent with not less than
one Business Day’s prior written notice by delivery of a Notice of Prepayment
or prior telephonic notice promptly confirmed in writing by the delivery of a
Notice of Prepayment, of any prepayment of the Loans pursuant to subsections
2.4B(iii)(a)-(e). Such written or telephonic notice shall be irrevocable and
Company shall be bound to make the mandatory prepayment referenced in such
notice on the date indicated in such notice. Administrative Agent shall
promptly notify each Lender of such prepayment and of the amount of the
prepayment proposed to be applied to such Lender’s Loans. Concurrently with any
prepayment of the Loans, Company shall deliver to Administrative Agent an
Officer’s Certificate demonstrating the calculation of the amount of the
applicable Net Asset Sale Proceeds, Net Insurance/Condemnation Proceeds, Net
Securities Proceeds, or Consolidated Excess Cash Flow, as the case may be, that
gave rise to such prepayment. In the event that Company shall subsequently
determine that the actual amount was greater than the amount set forth in such
Officer’s Certificate, Company shall promptly make an additional prepayment of
the Loans in an amount equal to the amount of such excess, and Company shall
concurrently therewith deliver to Administrative Agent an Officer’s Certificate
demonstrating the derivation of the additional amount resulting in such excess.


 


(g)       Prepayments
Due to Reductions of Revolving Loan Commitment Amount. Company shall from
time to time prepay first the Swing Line Loans and


 


48





















 


second
the Revolving Loans (and, after prepaying all Revolving Loans, Cash
collateralize any outstanding Letters of Credit by depositing the requisite
amount in the Collateral Account) to the extent necessary so that the Total
Utilization of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitment Amount then in effect. At such time as the Total
Utilization of Revolving Loan Commitments shall be equal to or less than the
Revolving Loan Commitment Amount, if no Event of Default has occurred and is
continuing, to the extent any Cash collateral was provided by Company and has
not been applied to any Obligations as provided in the Security Agreement, such
amount shall automatically be released to Company.


 


(iv)      Application of Prepayments and
Reductions of Commitments and Loans.


 


(a)       Application
of Voluntary Prepayments by Type of Loans and Order of Maturity. Any
voluntary prepayments pursuant to subsection 2.4B(i) shall be applied as
specified by Company in the applicable Notice of Prepayment; provided
that in the event Company fails to specify the Loans to which any such
prepayment shall be applied, such prepayment shall be applied first to
repay outstanding Swing Line Loans to the full extent thereof, second to
repay outstanding Revolving Loans to the full extent thereof, and third
to repay outstanding Term Loans to the full extent thereof on a pro  rata
basis (in accordance with the respective outstanding principal amounts thereof)
by application of such prepayment in direct chronological order to any unpaid
installments of principal of the Term Loans.


 


(b)       Application
of Mandatory Prepayments by Type of Loans. Except as provided in subsection
2.4D, any amount required to be applied as a mandatory prepayment of the Loans
shall be applied first to prepay the Term Loans to the full extent
thereof, second, to the extent of any remaining portion of such amount,
to prepay the Swing Line Loans to the full extent thereof, and third, to
the extent of any remaining portion of such amount, to prepay the Revolving
Loans to the full extent thereof (and, after prepaying all Revolving Loans,
Cash collateralize any outstanding Letters of Credit by depositing the
requisite amount in the Collateral Account). Any mandatory reduction of the
Revolving Loan Commitment Amount pursuant to this subsection 2.4B shall be in
proportion to each Revolving Lender’s Pro Rata Share.


 


(c)       Application
of Mandatory Prepayments of Term Loans and the Scheduled Installments of
Principal Thereof. Except as provided in subsection 2.4D, any mandatory
prepayments of the Term Loans pursuant to subsection 2.4B(iii) shall be applied
first, to reduce in direct chronological order any unpaid installments
of principal of the Term Loans scheduled to be made within the first twelve
months from the date of such prepayment and, second, to reduce the
remaining scheduled installments of principal of the Term Loans on a pro rata
basis (in accordance with the respective outstanding principal amounts
thereof).


 


49





















 


(d)       Application
of Prepayments to Base Rate Loans and Eurodollar Rate Loans. Considering
Term Loans and Revolving Loans being prepaid separately, any prepayment thereof
shall be applied first to Base Rate Loans to the full extent thereof before
application to Eurodollar Rate Loans, in each case in a manner that minimizes
the amount of any payments required to be made by Company pursuant to
subsection 2.6D; provided, however, that Company may elect that
the remainder of such prepayments not applied to prepay Base Rate Loans be
deposited in the Collateral Account and applied thereafter to prepay the
Eurodollar Rate Loan or Loans with Interest Periods expiring on a date or dates
nearest the date of deposit in accordance with this subsection 2.4B(iv), upon
expiration of such Interest Periods.


 


C.        General Provisions Regarding Payments.


 


(i)        Manner
and Time of Payment. All payments by Company of principal, interest, fees
and other Obligations shall be made in Dollars in same day funds, without
defense, setoff or counterclaim, free of any restriction or condition, and delivered
to Administrative Agent not later than 3:00 P.M. (New York City time) on the
date due at the Funding and Payment Account for the account of Lenders; funds
received by Administrative Agent after that time on such due date shall be
deemed to have been paid by Company on the next succeeding Business Day.
Notwithstanding the foregoing, payments of amounts deposited in the Collateral
Account pursuant to the proviso to subsection 2.4B(iv)(d) shall be deemed to
have been paid by Company on the applicable date or dates such amounts are
applied to prepay Eurodollar Rate Loans and Company hereby authorizes
Administrative Agent to charge the Collateral Account in order to cause timely
payment to be made to Administrative Agent of such Eurodollar Rate Loans.


 


(ii)       Application
of Payments to Principal and Interest. Except as provided in subsection
2.2C, all payments in respect of the principal amount of any Loan shall include
payment of accrued interest on the principal amount being repaid or prepaid,
and all such payments shall be applied to the payment of interest before
application to principal.


 


(iii)      Apportionment
of Payments. Aggregate principal and interest payments in respect of Term
Loans and Revolving Loans shall be apportioned among all outstanding Loans to
which such payments relate, in each case proportionately to Lenders’ respective
Pro Rata Shares; provided, that all payments in respect of Revolving
Loans shall first be applied in the following priority to repay any amounts
owing to (i) first, Swing Line Lender due to the failure of any
Revolving Lender to (A) fund a Revolving Loan for the purpose of repaying any
Refunded Swing Line Loan pursuant to subsection 2.1A(iii)(b) or (B) purchase an
assignment of an unpaid Swing Line Loan pursuant to subsection 2.lA(iii)(c),
and (ii) second, Issuing Lenders due to the failure of any Revolving
Lender to (A) fund a Revolving Loan for the purpose of repaying any
unreimbursed amounts of a drawing under a Letter of Credit pursuant to
subsection 3.3B or (B) fund a participation in any such unreimbursed Letter of
Credit drawing pursuant to subsection 3.3C. Administrative Agent shall promptly
distribute to


 


50


















 


each Lender, at
the account specified in the payment instructions delivered to Administrative
Agent by such Lender, its Pro Rata Share of all such payments received by
Administrative Agent and the facility fees and letter of credit fees of such
Lender, if any, when received by Administrative Agent pursuant to subsections
2.3 and 3.2. Notwithstanding the foregoing provisions of this subsection
2.4C(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of
Conversion/Continuation is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Shane of any
Eurodollar Rate Loans, Administrative Agent shall give effect thereto in
apportioning interest payments received thereafter.


 


(iv)      Payments
and Performance on Business Days. Whenever any payment or performance to be
made hereunder shall be stated to be due on a day that is not a Business Day,
subject to the provisions of subsection 2.2B with respect to payments of
interest on Eurodollar Rate Loans, such payment or performance shall be made on
the next succeeding Business Day.


 


(v)       Notation
of Payment. Each Lender agrees that before disposing of any Note held by
it, or any part thereof (other than by granting participations therein), that
Lender will make a notation thereon of all Loans evidenced by that Note and all
principal payments previously made thereon and of the date to which interest
thereon has been paid; provided that the failure to make (or any error in the
making of) a notation of any Loan made under such Note shall not limit or
otherwise affect the obligations of Company hereunder or under such Note with
respect to any Loan or any payments of principal or interest on such Note.


 


D.        Application
of Proceeds of Collateral and Payments after Event of  Default. Upon the occurrence and during the
continuation of an Event of Default, if requested by Requisite Lenders, or upon
acceleration of the Obligations pursuant to Section 8, (a) all payments
received by Administrative Agent, whether from Company, Holdings or any
Subsidiary Guarantor or otherwise, and (b) all proceeds received by
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral under any Collateral
Document may, in the discretion of Administrative Agent, be held by
Administrative Agent as Collateral for, and/or (then or at any time thereafter)
applied in full or in part by Administrative Agent, in each case in the
following order of priority:


 


(i)        to the
payment of all costs and expenses of such sale, collection or other
realization, all other expenses, liabilities and advances made or incurred by
Administrative Agent in connection therewith, and all amounts for which
Administrative Agent is entitled to compensation (including the fees described
in subsection 2.3), reimbursement and indemnification under any Loan Document
and all advances made by Administrative Agent thereunder for the account of the
applicable Loan Party, and to the payment of all costs and expenses paid or
incurred by Administrative Agent in connection with the Loan Documents, all in
accordance with subsections 9.4,10.2 and 10.3 and the other terms of this
Agreement and the Loan Documents;


 


51





















 


(ii)       thereafter,
to the payment of all other Obligations and obligations of Loan Parties under
any Hedge Agreement between a Loan Party and a Swap Counterparty for the
ratable benefit of the holders thereof (subject to the provisions of subsection
2.4C(ii) hereof); and


 


(iii)      thereafter,
to the payment to or upon the order of such Loan Party or to whosoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct.


 


2.5      Use  of Proceeds.


 


A.        Term
Loans. The proceeds of the Term Loans, together with the
Closing Date Revolving Loans and the proceeds of the debt and equity
capitalization of Company described in subsection 4.1L, shall be applied by
Company to fund the Acquisition Financing Requirements.


 


B.        Revolving
Loans; Swing Line Loans. The proceeds of any other Revolving
Loans and any Swing Line Loans shall be applied by Company for working capital
and other general corporate purposes, which may include the making of
intercompany loans to any of Company’s Domestic Subsidiaries, in accordance
with subsection 7.1(iv), for their own general corporate purposes and
Investments permitted by subsection 7.3.


 


C.        Margin
Regulations. No portion of the proceeds of any borrowing under this
Agreement shall be used by Company or any of its Subsidiaries in any manner
that would cause the borrowing or the application of such proceeds to violate
Regulation U, Regulation T or Regulation X of the Board of Governors of the
Federal Reserve System or any other regulation of such Board or to violate the Exchange
Act, in each case as in effect on the date or dates of such borrowing and such
use of proceeds.


 


2.6      Special
Provisions Governing Eurodollar Rate Loans.


 


Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:


 


A.        Determination
of Applicable Interest Rate. On each Interest Rate
Determination Date, Administrative Agent shall determine in accordance with the
terms of this Agreement (which determination shall, absent manifest error, be
conclusive and binding upon all parties) the interest rate that shall apply to
the Eurodollar Rate Loans for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to Company and each applicable
Lender.


 


B.        Inability
to Determine Applicable Interest Rate. In  the event that Administrative Agent shall
have determined (which determination shall be conclusive and binding upon all
parties hereto), on any Interest Rate Determination Date that by reason of
circumstances affecting the interbank Eurodollar market adequate and reasonable
means do not exist for ascertaining the interest rate applicable to such Loans
on the basis provided for in the definition of Eurodollar Rate, Administrative
Agent shall on such date give notice (by


 


52





















 


telefacsimile or
by telephone confirmed in writing) to Company and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans until such time as Administrative Agent notifies Company
and Lenders that the circumstances giving rise to such notice no longer exist
and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by
Company with respect to the Loans in respect of which such determination was
made shall be deemed to be for a Base Rate Loan.


 


C.        Illegality of Eurodollar Rate Loans. In  the
event that on any date any Lender shall have determined (which determination
shall be conclusive and binding upon all parties hereto but shall be made only
after consultation with Company and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans has become unlawful as
a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order, then, and in any such event,
such Lender shall be an “Affected Lender” and
it shall on that day give notice (by telefacsimile or by telephone confirmed in
writing) to Company and Administrative Agent of such determination.
Administrative Agent shall promptly notify each other Lender of the receipt of
such notice. Thereafter (a) the obligation of the Affected Lender to make Loans
as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such
notice shall be withdrawn by the Affected Lender, (b) to the extent such
determination by the Affected Lender relates to a Eurodollar Rate Loan then
being requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, the Affected Lender shall make such Loan as (or
convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected
Lender’s obligation to maintain its outstanding Eurodollar Rate Loans (the “Affected Loans”) shall be terminated at the earlier to
occur of the expiration of the Interest Period then in effect with respect to
the Affected Loans or when required by law, and (d) the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being
requested by Company pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or
by telephone confirmed in writing) to Administrative Agent of such rescission
on the date on which the Affected Lender gives notice of its determination as
described above. Administrative Agent shall promptly notify each other Lender of
the receipt of such notice. Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to
convert Loans to, Eurodollar Rate Loans in accordance with the terms of this
Agreement.


 


D.        Compensation
For Breakage or Non-Commencement of Interest Periods. Company
shall compensate each Lender, upon written request by that Lender pursuant to
subsection 2.8, for all reasonable losses, expenses and liabilities (including
any interest paid by that Lender to lenders of funds borrowed by it to make or
carry its Eurodollar Rate Loans and any loss, expense or liability sustained by
that Lender in connection with the liquidation or reemployment of such funds)
which that Lender may sustain: (i) if for any reason (other than a default by
that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request therefor, or
a conversion to or continuation of any Eurodollar Rate Loan does not occur on a
date specified therefor in a Notice


 


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of
Conversion/Continuation or a telephonic request therefor, (ii) if any
prepayment or other principal payment or any conversion of any of its
Eurodollar Rate Loans (including any prepayment or conversion occasioned by the
circumstances described in subsection 2.6C) occurs on a date prior to the last
day of an Interest Period applicable to that Loan, (iii) if any prepayment of
any of its Eurodollar Rate Loans is not made on any date specified in a Notice
of Prepayment given by Company, or (iv) as a consequence of any other default
by Company in the repayment of its Eurodollar Rate Loans when required by the
terms of this Agreement.


 


E.         Booking
of Eurodollar Rate Loans. Any Lender may make, carry or transfer
Eurodollar Rate Loans at, to, or for the account of any of its branch offices
or the office of an Affiliate of that Lender.


 


F.         Assumptions
Concerning Funding of Eurodollar Rate Loans. Calculation of all
amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A
shall be made as though that Lender had funded each of its Eurodollar Rate
Loans through the purchase of a Eurodollar deposit bearing interest at the rate
obtained pursuant to clause (i) of the definition of Eurodollar Rate in an
amount equal to the amount of such Eurodollar Rate Loan and having a maturity
equivalent to the relevant Interest Period, whether or not its Eurodollar Rate
Loans had been funded in such manner.


 


G.        Eurodollar
Rate Loans After Default. After the occurrence of and during the
continuation of an Event of Default, (i) Company may not elect to have a Loan
be made or maintained as, or converted to, a Eurodollar Rate Loan after the
expiration of any Interest Period then in effect for that Loan and (ii) subject
to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to a requested borrowing
or conversion/continuation that has not yet occurred shall be deemed to be for
a Base Rate Loan or, if the conditions to making a Loan set forth in subsection
4.2 cannot then be satisfied, to be rescinded by Company.


 


2.7      Increased
Costs; Taxes: Capital
Adequacy.


 


A.        Compensation
for Increased Costs. Subject to the provisions of subsection
2.7B (which shall be controlling with respect to the matters covered thereby),
in the event that any Lender (including any Issuing Lender) shall reasonably
determine (which determination shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) that any Change in Law:


 


(i)        subjects
such Lender to any additional tax of any kind whatsoever with respect to this
Agreement or any of its obligations hereunder (including with respect to
issuing or maintaining any Letters of Credit or purchasing or maintaining any
participations therein or maintaining any Commitment hereunder) or any payments
to such Lender of principal, interest, fees or any other amount payable
hereunder (except for the imposition of, or any change in the rate of, any
Excluded Tax payable by such Lender);


 


(ii)       imposes,
modifies or holds applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets held by, or


 


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deposits or other
liabilities in or for the account of, or advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of such Lender
(other than any such reserve or other requirements with respect to Eurodollar
Rate Loans that are reflected in the definition of Eurodollar Rate); or


 


(iii)      imposes
any other condition (other than with respect to Taxes) on or affecting such
Lender or its obligations hereunder or the interbank Eurodollar market;


 


and the result of
any of the foregoing is to increase the cost to such Lender of agreeing to
make; making or maintaining its Loans or Commitments or agreeing to issue,
issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing
or maintaining any participation therein or to reduce any amount received or
receivable by such Lender with respect thereto; then, in any such case, Company
shall promptly pay to such Lender, upon receipt of the statement referred to in
subsection 2.8A, such additional amount or amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Lender shall reasonably determine) as may be necessary to compensate such
Lender for any such increased cost or reduction in amounts received or
receivable hereunder. Company shall not be required to compensate a Lender
pursuant to this subsection 2.7A for any increased cost or reduction in respect
of a period occurring more than ninety (90) days prior to the date on which
such Lender notifies Company of such Change in Law and such Lender’s intention
to claim compensation therefor, except, if the Change in Law giving rise to
such increased cost or reduction is retroactive, no such time limitation shall
apply to such retroactive period so long as such Lender requests compensation
within ninety (90) days from the date on which the applicable Government
Authority informed such Lender of such Change in Law.


 


B.        Taxes.


 


(i)        Payments
to Be Free and Clear. Any and all payments by or on account of any
obligation of Company under this Agreement and the other Loan Documents shall
be made free and clear of, and without any deduction or withholding on account
of, any Indemnified Taxes or Other Taxes.


 


(ii)       Grossing-up
of Payments. If Company or any other Person is required by law to make any
deduction or withholding on account of any Tax from any sum paid or payable by
Company to Administrative Agent or any Lender under any of the Loan Documents:


 


(a)       Company
shall notify Administrative Agent of any such requirement or any change in any
such requirement as soon as Company becomes aware of it;


 


(b)       Company
shall timely pay any such Tax to the relevant Government Authority when such
Tax is due, in accordance with applicable law;


 


(c)       unless
such Tax is an Excluded Tax, the sum payable by Company shall be increased to
the extent necessary to ensure that, after making the required deductions
(including deductions applicable to additional sums payable under this
subsection 2.7B(ii)), Administrative Agent or such Lender, as the case may be,


 


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receives on the
due date a net sum equal to the sum it would have received had no such deduction
been required or made; and


 


(d)       within
30 days after paying any sum from which it is required by law to make any such
deduction, and within 30 days after the due date of payment of any Tax which it
is required by clause (b) above to pay, Company shall deliver to Administrative
Agent the original or a certified copy of an official receipt or other document
reasonably satisfactory to the other affected parties to evidence the payment
and its remittance to the relevant Government Authority.


 


(iii)      Indemnification
by Company. Company shall indemnify Administrative Agent and each Lender,
within 30 days after demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes (including for the full amount of any Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under
this subsection 2.7B(iii)) paid by Administrative Agent or such Lender, as the
case may be, and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Government Authority. A certificate as to the amount of such payment or
liability delivered to Company by a Lender (with a copy to Administrative Agent),
or by Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.


 


(iv)      Tax
Status of Lenders. Unless not legally entitled to do so:


 


(a)       any
Lender, if requested by Company or Administrative Agent, shall deliver such
forms or other documentation prescribed by applicable law or reasonably
requested by Company or Administrative Agent as will enable Company or
Administrative Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements;


 


(b)       any
Foreign Lender that is entitled to an exemption from or reduction of any Tax
with respect to payments hereunder or under any other Loan Document shall
deliver to Company and Administrative Agent, on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to
time thereafter, as may be necessary in the determination of Company or
Administrative Agent, each in the reasonable exercise of its discretion), such
properly completed and duly executed forms or other documentation prescribed by
applicable law as will permit such payments to be made without withholding or
at a reduced rate of withholding;


 


(c)       without
limiting the generality of the foregoing, in the event that Company is resident
for tax purposes in the United States, any Foreign Lender shall deliver to
Company and Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter,
as may be necessary in the determination of Company or Administrative Agent,


 


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each in the
reasonable exercise of its discretion), whichever of the following is
applicable:


 


(1)        properly
completed and duly executed copies of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the United
States is a party,


 


(2)        properly
completed and duly executed copies of Internal Revenue Service Form W-8ECI,


 


(3)        in the
case of a Foreign Lender claiming the benefits of the exemption “portfolio
interest” under Section 881(c) of the Internal Revenue Code, (A) a duly
executed certificate to the effect that such Foreign Lender is not (i) a “bank”
within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (ii) a
ten-percent shareholder (within the meaning of Section 881(c)(3)(B) of the
Internal Revenue Code) of Company or Holdings or (iii) a controlled foreign
corporation described in Section 881(c)(3)(C) of the Internal Revenue Code and
(B) properly completed and duly executed copies of Internal Revenue Service
Form W-8BEN,


 


(4)        properly
completed and duly executed copies of any other form prescribed by applicable
law as a basis for claiming exemption from or a reduction in any Tax,


 


in each case
together with such supplementary documentation as may be prescribed by
applicable law to permit Company and Administrative Agent to determine the
withholding or deduction required to be made, if any;


 


(d)       without
limiting the generality of the foregoing, in the event that Company is resident
for tax purposes in the United States, any Foreign Lender that does not act or
ceases to act for its own account with respect to any portion of any sums paid
or payable to such Lender under any of the Loan Documents (for example, in the
case of a typical participation by such Lender) shall deliver to Administrative
Agent and Company (in such number of copies as shall be requested by the
recipient), on or prior to the date such Foreign Lender becomes a Lender, or on
such later date when such Foreign Lender ceases to act for its own account with
respect to any portion of any such sums paid or payable, and from time to time
thereafter, as may be necessary in the determination of Company or
Administrative Agent (each in the reasonable exercise of its discretion):


 


(1)        duly
executed and properly completed copies of the forms and statements required to
be provided by such Foreign Lender under clause (c) of subsection 2.7B(iv), to
establish the portion of any such sums paid or payable with respect to which
such Lender acts for its own account and may be entitled to an exemption from
or a reduction of the applicable Tax, and


 


57





















 


(2)        duly
executed and properly completed copies of Internal Revenue Service Form W-8IMY
(or any successor forms) properly completed and duly executed by such Foreign
Lender, together with any information, if any, such Foreign Lender chooses to
transmit with such form, and any other certificate or statement of exemption
required under the Internal Revenue Code or the regulations thereunder, to
establish that such Foreign Lender is not acting for its own account with respect
to a portion of any such sums payable to such Foreign Lender;


 


(e)       without
limiting the generality of the foregoing, in the event that Company is resident
for tax purposes in the United States, any Lender that is not a Foreign Lender
and has not otherwise established to the reasonable satisfaction of Company and
Administrative Agent that it is an exempt recipient (as defined in section
6049(b)(4) of the Internal Revenue Code and the United States Treasury
Regulations thereunder) shall deliver to Company and Administrative Agent (in
such number of copies as shall be requested by the recipient) on or prior to
the date on which such Lender becomes a Lender under this Agreement (and from
time to time thereafter as prescribed by applicable law or upon the request of
Company or Administrative Agent), duly executed and properly completed copies
of Internal Revenue Service Form W-9;


 


(f)        without
limiting the generality of the foregoing, each Lender hereby agrees, from time
to time after the initial delivery by such Lender of such forms, whenever a
lapse in time or change in circumstances renders such forms, certificates or
other evidence so delivered obsolete or inaccurate in any material respect,
that such Lender shall promptly (1) deliver to Administrative Agent and Company
two original copies of renewals, amendments or additional or successor forms,
properly completed and duly executed by such Lender, together with any other
certificate or statement of exemption required in order to confirm or establish
that such Lender is entitled to an exemption from or reduction of any Tax with
respect to payments to such Lender under the Loan Documents and, if applicable,
that such Lender does not act for its own account with respect to any portion
of such payment, or (2) notify Administrative Agent and Company of its
inability to deliver any such forms, certificates or other evidence;


 


(g)       If
Administrative Agent or a Lender has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by Company or with respect to which
Company has paid additional amounts pursuant to this subsection 2.7, it shall
pay over such refund to Company (but only to the extent of indemnity payments
made, or additional amounts paid by Company under this subsection 2.7 with respect
to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Government Authority
with respect to such refund); provided that Company, upon the request of
Administrative Agent or such Lender, agrees to repay the amount paid over to
Company (plus any penalties, interest or other charges imposed by the relevant
Government Authority) to Administrative Agent or such Lender in the event


 


58





















 


Administrative
Agent or such Lender is required to repay such refund to such Government
Authority. This subsection shall not be construed to require Administrative
Agent or Lender to make available its tax returns (or any other information
relating to its taxes which it deems confidential) to Company or any other
Person; and


 


(h)       Notwithstanding
any provision contained herein to the contrary, any indemnity with respect to
Taxes or any liabilities with respect thereto, shall be governed solely and
exclusively by this subsection 2.7.


 


C.        Capital Adequacy Adjustment. If  any Lender shall have determined that any
Change in Law regarding capital adequacy has or would have the effect of
reducing the rate of return on the capital of such Lender or any corporation
controlling such Lender as a consequence of, or with reference to, such
Lender’s Loans or Commitments or Letters of Credit or participations therein or
other obligations hereunder with respect to the Loans or the Letters of Credit
(in each case other than any such reserve or other requirements with respect to
Eurodollar Rate Loans that are reflected in the definition of Eurodollar Rate)
to a  level
below that which such Lender or such controlling corporation could have
achieved but for such Change in Law (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within 30 Business Days after receipt by Company from
such Lender of the statement referred to in subsection 2.8A, Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such controlling corporation for such reduction, increased to the extent
necessary to take into account any tax incurred or payable by such Lender as a  result
of the obligation of Company to pay such additional amounts. Company shall not
be required to compensate a Lender pursuant to this subsection 2.7C for any
reduction in respect of a period occurring more than ninety (90) days prior to
the date on which such Lender notifies Company of such Change in Law and such
Lender’s intention to claim compensation therefor, except, if the Change in Law
giving rise to such reduction is retroactive, no such time limitation shall
apply to such retroactive period so long as such Lender requests compensation
within ninety (90) days from the date on which the applicable Government
Authority informed such Lender of such Change in Law.


 


2.8      Statement of Lenders; Obligation of
Lenders and Issuing Lenders to Mitigate.


 


A.        Statements.
Each Lender claiming compensation or reimbursement pursuant to
subsection 2.6D, 2.7 or 2.8B shall deliver to Company (with a copy to
Administrative Agent) a written statement, setting forth in reasonable detail
the basis of the calculation of such compensation or reimbursement, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.


 


B.        Mitigation.
Each Lender and Issuing Lender agrees that, as promptly as practicable after the officer of
such Lender or Issuing Lender responsible for administering the Loans or
Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes
aware of the occurrence of an event or the existence of a condition that would
cause such Lender to become an Affected Lender or that would entitle such
Lender or Issuing Lender to receive payments under subsection 2.7, it will use
reasonable efforts to make, issue, fund or maintain the


 


59





















 


Commitments of
such Lender or the Loans or Letters of Credit of such Lender or Issuing Lender
through another lending or letter of credit office of such Lender or Issuing
Lender, if (i) as a result thereof the circumstances which would cause such
Lender to be an Affected Lender would cease to exist or the additional amounts
which would otherwise be required to be paid to such Lender or Issuing Lender
pursuant to subsection 2.7 would be materially reduced and (ii) as determined by
such Lender or Issuing Lender in its sole discretion, such action would not
otherwise be materially disadvantageous to such Lender or Issuing Lender; provided
that such Lender or Issuing Lender will not be obligated to utilize such other
lending or letter of credit office pursuant to this subsection 2.8B unless
Company agrees to pay all incremental expenses incurred by such Lender or
Issuing Lender as a result of utilizing such other lending or letter of credit
office as described above.


 


2.9      Defaulting
Lenders.


 


Anything contained herein to the contrary notwithstanding, in the event
that any Lender (a “Defaulting Lender”) defaults
(a “Funding Default”) in its
obligation to fund any Loan (a “Defaulted
Loan”) in accordance with subsection 2.1 or to fund its participation
in a Letter of Credit pursuant to subsection 3.3, then (i) during any Default
Period (as defined below) with respect to such Defaulting Lender, such
Defaulting Lender shall be deemed not to be a “Lender”, and the amount of such
Defaulting Lender’s Commitments and Loans shall be excluded for purposes of
voting, and the calculation of voting, on any matters (including the granting
of any consents or waivers) with respect to any of the Loan Documents, (ii) to
the extent permitted by applicable law, until such time as the Default Excess
(as defined below) with respect to such Defaulting Lender shall have been
reduced to zero, (a) any voluntary prepayment of such Loans pursuant to
subsection 2.4B(i) shall, if Company so directs at the time of making such
voluntary prepayment, be applied to the Loans of other Lenders as if such
Defaulting Lender had no such Loans outstanding and the Revolving Loan Exposure
or the Term Loan Exposure, as applicable, of such Defaulting Lender were zero,
and (b) any mandatory prepayment of the Loans pursuant to subsection 2.4B(iii)
shall, if Company so directs at the time of making such mandatory prepayment,
be applied to the Loans of other Lenders (but not to the Loans of such
Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Loans
of such Defaulting Lender, it being understood and agreed that Company shall be
entitled to retain any portion of any mandatory prepayment of the Loans that is
not paid to such Defaulting Lender solely as a result of the operation of the
provisions of this clause (b), (iii) the unfunded portion of such Defaulting
Lender’s Revolving Loan Commitment shall be excluded for purposes of
calculating the facility fee payable to Revolving Lenders pursuant to
subsection 2.3A in respect of any day during any Default Period with respect to
such Defaulting Lender, and such Defaulting Lender shall not be entitled to
receive any facility fee pursuant to subsection 2.3A with respect to the
unfunded portion of such Defaulting Lender’s Revolving Loan Commitment in
respect of any Default Period with respect to such Defaulting Lender, and (iv)
the Total Utilization of Revolving Loan Commitments as at any date of
determination shall be calculated as if such Defaulting Lender had funded all
Defaulted Loans that are Revolving Loans of such Defaulting Lender.


 


For purposes of this Agreement, (I) “Default
Period” means, with respect to any Defaulting Lender, the period
commencing on the date of the applicable Funding Default and ending on the
earliest of the following dates: (A) the date on which all Revolving Loan


 


60





















 


Commitments are
cancelled or terminated and/or the Obligations are declared or become
immediately due and payable, (B) the date on which (1) the Default Excess with
respect to such Defaulting Lender shall have been reduced to zero (whether by
the funding by such Defaulting Lender of any Defaulted Loans of such Defaulting
Lender or by the non-pro rata application of any voluntary or mandatory
prepayments of the Revolving Loans in accordance with the terms hereof or any
combination thereof), and (2) such Defaulting Lender shall have delivered to
Company and Administrative Agent a written reaffirmation of its intention to
honor its obligations under this Agreement with respect to its Loans and
Commitments, and (C) the date on which Company, Administrative Agent and
Requisite Lenders waive all Funding Defaults of such Defaulting Lender in
writing, and (II) “Default Excess” means, with respect to any Defaulting Lender, the
excess, if any, of such Defaulting Lender’s Pro Rata Share of the aggregate
outstanding principal amount of Loans of all Lenders (calculated as if all
Defaulting Lenders (including such Defaulting Lender) had funded all of their respective
Defaulted Loans) over the aggregate outstanding principal amount of Loans of
such Defaulting Lender.


 


No amount of the Commitment of any Lender shall be increased or
otherwise affected, and, except as otherwise expressly provided in this
subsection 2.9, performance by Company of its obligations under this Agreement
and the other Loan Documents shall not be excused or otherwise modified, as a
result of any Funding Default or the operation of this subsection 2.9. The
rights and remedies against a Defaulting Lender under this subsection 2.9 are
in addition to other rights and remedies that Company may have against such
Defaulting Lender with respect to any Funding Default and that Administrative
Agent or any Lender may have against such Defaulting Lender with respect to any
Funding Default


 


2.10    Replacement
of a Lender.


 


If Company receives a statement of amounts due pursuant to subsection
2.8A from a Lender, a Lender is a Defaulting Lender, a Lender becomes an
Affected Lender, Company is required to pay any additional amounts under
subsection 2.7 or a Lender (a “Non-Consenting Lender”) refuses to consent to an
amendment, modification or waiver of this Agreement that, pursuant to
subsection 10.6, either (i) requires consent of 100% of the Lenders or 100% of
the Lenders with Obligations directly affected or (ii) requires consent of
Requisite Lenders, (any such Lender, a “Subject
Lender”),  so long as
(1) Company has obtained a commitment from another Lender or an Eligible
Assignee to purchase at par the Subject Lender’s Loans and assume the Subject
Lender’s Commitments and all other obligations of the Subject Lender hereunder,
(2) such Lender is not an Issuing Lender with respect to any Letters of Credit
outstanding (unless all such Letters of Credit are terminated or arrangements
acceptable to such Issuing Lender (such as a “back-to-back” letter of credit)
are made) and (3), if applicable, the Subject Lender is unwilling or unable to
withdraw the notice delivered to Company pursuant to subsection 2.8, Company
may require the Subject Lender to assign all of its Loans and Commitments to
such other Lender, Lenders, Eligible Assignee or Eligible Assignees pursuant to
the provisions of subsection 10.1B; provided that, prior to or
concurrently with such replacement, (A) Company has paid to the Lender giving
such notice all amounts under subsections 2.6D, 2.7 and/or 2.8B (if applicable)
through such date of replacement, (B) the processing fee required to be paid by
subsection 10.1B(i) shall have been paid to Administrative Agent, (C) all of
the requirements for such assignment contained in subsection 10.1B, including,
without limitation, the consent of Administrative Agent (if required) and the
receipt by


 


61





















 


Administrative
Agent of an executed Assignment Agreement (Administrative Agent being hereby
authorized to execute any Assignment Agreement on behalf of a Subject Lender
relating to the assignment of Loans and/or Commitments of such Subject Lender)
and other supporting documents, have been fulfilled, and (D) in the event such
Subject Lender is a Non-Consenting Lender, each assignee shall consent, at the
time of such assignment, to each matter in respect of which such Subject Lender
was a Non-Consenting Lender and Company requires each other Subject Lender that
is a Non-Consenting Lender to assign its Loans and Commitments.


 


For the avoidance of doubt, if a Lender is a Non-Consenting Lender
solely because it refused to consent to an amendment, modification or waiver that
required the consent of 100% of Lenders with Obligations directly affected
thereby (which amendment, modification or waiver did not accordingly require
the consent of 100% of all Lenders) the Loans and Commitments of such
Non-Consenting Lender that are subject to the assignments required by this
subsection 2.10 shall include only those Loans and Commitments that constitute
the Obligations directly affected by the amendment, modification or waiver to
which such Non-Consenting Lender refused to provide its consent.


 


Section
3.     LETTERS OF CREDIT


 


3.1      Issuance
of Letters of Credit and Lenders’ Purchase of Participations Therein.


 


A.        Letters
of Credit. Company may request, in accordance with the
provisions of this subsection 3.1, from time to time during the period from the
Closing Date to but excluding the tenth Business Day prior to the Revolving
Loan Commitment Termination Date, that Administrative Agent or one or more
Revolving Lenders issue Letters of Credit payable on a sight basis for the
account of Company for the purposes specified in the definitions of Commercial
Letters of Credit and Standby Letters of Credit. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties of Company herein set forth, any one or more Revolving Lenders may,
but (except as provided in subsection 3.1B(ii)) shall not be obligated to,
issue such Letters of Credit in accordance with the provisions of this
subsection 3.1; provided that Company shall not request that any
Revolving Lender issue (and no Revolving Lender shall issue):


 


(i)        any
Letter of Credit if, after giving effect to such issuance, the Total
Utilization of Revolving Loan Commitments would exceed the Revolving Loan
Commitment Amount then in effect;


 


(ii)       any
Letter of Credit if, after giving effect to such issuance, the Letter of Credit
Usage would exceed $7,000,000;


 


(iii)      any
Standby Letter of Credit having an expiration date later than the earlier of
(a) five Business Days prior to the Revolving Loan Commitment Termination Date
and (b) the date which is one year from the date of issuance of such Standby
Letter of Credit; provided that the immediately preceding clause (b)
shall not prevent any Issuing Lender from agreeing that a Standby Letter of
Credit will automatically be extended for one or more successive periods not to
exceed one year each, which in no


 


62





















 


event may extend
beyond the period specified in the preceding clause (a), unless such Issuing
Lender elects not to extend for any such additional period; and provided,
further that such Issuing Lender shall elect not to extend such Standby
Letter of Credit if it has knowledge that an Event of Default has occurred and
is continuing (and has not been waived in accordance with subsection 10.6) at
the time such Issuing Lender must elect whether or not to allow such extension;


 


(iv)      any
Standby Letter of Credit issued for the purpose of supporting (a) trade
payables or (b) any Indebtedness constituting “antecedent debt” (as that term
is used in Section 547 of the Bankruptcy Code);


 


(v)       any
Commercial Letter of Credit having an expiration date (a) later than the
earlier of (1) the date which is five Business Days prior to the Revolving Loan
Commitment Termination Date and (2) the date which is one year from the date of
issuance of such Commercial Letter of Credit; provided that the
immediately preceding clause (2) shall not prevent any Issuing Lender from
agreeing that a Commercial Letter of Credit will automatically be extended for
one or more successive periods not to exceed one year each, which in no event
may extend beyond the period specified in the preceding clause (1), unless such
Issuing Lender elects not to extend for any such additional period; and provided,
further that such Issuing Lender shall elect not to extend such
Commercial Letter of Credit if it has knowledge that an Event of Default has
occurred and is continuing (and has not been waived in accordance with
subsection 10.6) at the time such Issuing Lender must elect whether or not to
allow such extension or (b) that is otherwise unacceptable to the applicable
Issuing Lender in its reasonable discretion; or


 


(vi)      any
Letter of Credit denominated in a currency that in the reasonable judgment of
Administrative Agent or the applicable Issuing Lender is not readily and freely
available.


 


B.        Mechanics of Issuance.


 


(i)        Request
for Issuance. Whenever Company desires the issuance of a Letter of Credit,
it shall deliver to Administrative Agent a Request for Issuance no later than
1:00 P.M (New York City time) at least three Business Days, or such shorter
period as may be agreed to by the Issuing Lender in any particular instance, in
advance of the proposed date of issuance. The Issuing Lender, in its reasonable
discretion, may require changes in the text of the proposed Letter of Credit or
any documents described in or attached to the Request for Issuance. In
furtherance of the provisions of subsection 10.7, and not in limitation
thereof, Company may submit Requests for Issuance by telefacsimile and
Administrative Agent and Issuing Lenders may rely and act upon any such Request
for Issuance without receiving an original signed copy thereof. No Letter of
Credit shall require payment against a conforming demand for payment to be made
thereunder on the same business day (under the laws of the jurisdiction in
which the office of the Issuing Lender to which such demand for payment is
required to be presented is located) that such demand for payment is presented
if such presentation is


 


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made after 1:00
P.M. (in the time zone of such office of the Issuing Lender) on such business
day.


 


Company shall notify the applicable Issuing Lender
(and Administrative Agent, if Administrative Agent is not such Issuing Lender)
prior to the issuance of any Letter of Credit in the event that any of the
matters to which Company is required to certify in the applicable Request for
Issuance is no longer true and correct as of the proposed date of issuance of
such Letter of Credit, and upon the issuance of any Letter of Credit Company
shall be deemed to have re-certified, as of the date of such issuance, as to
the matters to which Company is required to certify in the applicable Request
for Issuance.


 


(ii)       Determination
of Issuing Lender. Upon receipt of a Request for Issuance pursuant to
subsection 3.1B(i) requesting the issuance of a Letter of Credit by
Administrative Agent or another Revolving Lender acceptable to Company and
Administrative Agent, Administrative Agent or the Revolving Lender so requested
to issue such Letter of Credit shall promptly notify Company (and
Administrative Agent, if Administrative Agent is not the requested issuer)
whether or not, in its sole discretion, it has elected to issue such Letter of
Credit, and Administrative Agent or such Revolving Lender that so elects to
issue such Letter of Credit shall be the Issuing Lender with respect thereto.
With respect to Standby Letters of Credit only, in the event that all other Revolving
Lenders shall have declined to issue such Standby Letter of Credit,
notwithstanding the prior election of Administrative Agent not to issue such
Standby Letter of Credit, Administrative Agent shall be obligated to issue such
Standby Letter of Credit and shall be the Issuing Lender with respect thereto,
notwithstanding the fact that the Letter of Credit Usage with respect to such
Standby Letter of Credit and with respect to all other Letters of Credit issued
by Administrative Agent, when aggregated with Administrative Agent’s
outstanding Revolving Loans and Swing Line Loans, may exceed the amount of
Administrative Agent’s Revolving Loan Commitment then in effect.


 


(iii)      Issuance
of Letter of Credit. Upon satisfaction or waiver (in accordance with subsection
10.6) of the conditions set forth in subsection 4.3, the Issuing Lender shall
issue the requested Letter of Credit in accordance with the Issuing Lender’s
standard operating procedures.


 


(iv)      Notification
to Revolving Lenders. Upon the issuance of or amendment to any Letter of
Credit the applicable Issuing Lender shall promptly notify Administrative Agent
and Company of such issuance or amendment in writing. Upon receipt of such
notice (or, if Administrative Agent is the Issuing Lender, together with such
notice), Administrative Agent shall notify each Revolving Lender in writing of
such issuance or amendment and the amount of such Revolving Lender’s respective
participation in such Letter of Credit or amendment, and, if so requested by a
Revolving Lender, Administrative Agent shall provide such Lender with a copy of
such Letter of Credit or amendment. In the case of Commercial Letters of
Credit, in the event that Issuing Lender is other than Administrative Agent,
such Issuing Lender will send by facsimile transmission to Administrative
Agent, promptly upon the first Business Day of each week, a report of its daily
aggregate maximum amount available


 


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for drawing under
Commercial Letters of Credit for the previous week. Administrative Agent shall
notify each Revolving Lender in writing on a quarterly basis of the contents
thereof.


 


C.        Revolving Lenders’ Purchase of Participations
in Letters of Credit. Immediately upon the issuance of each
Letter of Credit, each Revolving Lender shall be deemed to, and hereby agrees
to, have irrevocably purchased from the Issuing Lender a participation in such
Letter of Credit and any drawings honored thereunder in an amount equal to such
Revolving Lender’s Pro Rata Share of the maximum amount that is or at any time
may become available to be drawn thereunder.


 


3.2      Letter of Credit Fees.


 


Company agrees to
pay the following amounts with respect to Letters of Credit issued hereunder:


 


(i)        with
respect to each Letter of Credit, (a) a fronting fee, payable directly to the
applicable Issuing Lender for its own account, equal to 0.125% per annum of the
daily amount available to be drawn under such Letter of Credit and (b) a letter
of credit fee, payable to Administrative Agent for the account of Revolving
Lenders, equal to the applicable Eurodollar Rate Margin for Revolving Loans plus,
upon the application of increased rates of interest pursuant to subsection
2.2E, 2% per annum, multiplied by the daily amount available to be drawn under
such Letter of Credit, each such fronting fee or letter of credit fee to be
payable quarterly in arrears on and to (but excluding) the last Business Day of
each March, June, September and December of each year, and on the Revolving
Loan Commitment Termination Date, and computed on the basis of a 360-day year
for the actual number of days elapsed; and


 


(ii)       with
respect to the issuance, amendment or transfer of each Letter of Credit and
each payment of a drawing made thereunder (without duplication of the fees
payable under clause (i) above), documentary and processing charges payable
directly to the applicable Issuing Lender for its own account in accordance
with such Issuing Lender’s standard schedule for such charges in effect at the
time of such issuance, amendment, transfer or payment, as the case may be.


 


For purposes of
calculating any fees payable under clauses (i) and (ii) of this subsection 3.2,
(1) the daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of business on any date of determination and (2) any
amount described in such clauses which is denominated in a currency other than
Dollars shall be valued based on the applicable Exchange Rate for such currency
as of the applicable date of determination (such date to be determined at the
discretion of Administrative Agent). Promptly upon receipt by Administrative
Agent of any amount described in clause (i)(b) of this subsection 3.2,
Administrative Agent shall distribute to each Revolving Lender its Pro Rata
Share of such amount


 


3.3      Drawings and Reimbursement of Amounts Paid Under Letters of Credit.


 


A.        Responsibility
of Issuing Lender With Respect to Drawings. In determining
whether to honor any drawing under any Letter of Credit by the beneficiary thereof,


 


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the Issuing Lender
shall be responsible only to examine the documents delivered under such Letter
of Credit with reasonable care so as to ascertain whether they appear on their
face to be in accordance with the terms and conditions of such Letter of
Credit.


 


B.        Reimbursement
by Company of Amounts Paid Under Letters of Credit. In the
event an Issuing Lender has determined to honor a drawing under a Letter of
Credit issued by it, such Issuing Lender shall immediately notify Company and
Administrative Agent, and Company shall reimburse such Issuing Lender on or
before the Business Day immediately following the date on which such drawing is
honored (the “Reimbursement Date”) in an amount in Dollars (which
amount, in the case of a payment under a Letter of Credit which is denominated
in a currency other than Dollars, shall be calculated by reference to the
applicable Exchange Rate) or, at the option of such Issuing Lender, in the case
of a Letter of Credit denominated in a currency other than Dollars, in such
other currency and in same day funds equal to the amount of such payment; provided
that, anything contained in this Agreement to the contrary notwithstanding, (i)
unless Company shall have notified Administrative Agent and such Issuing Lender
prior to 1:00 P.M. (New York City time) on the date such drawing is honored
that Company intends to reimburse such Issuing Lender for the amount of such
payment with funds other than the proceeds of Revolving Loans, Company shall be
deemed, to have given a timely Notice of Borrowing to Administrative Agent
requesting Revolving Lenders to make Revolving Loans that are Base Rate Loans
on the Reimbursement Date in an amount in Dollars (which amount, in the case of
a payment under a Letter of Credit which is denominated in a currency other
than Dollars, shall be calculated by reference to the applicable Exchange Rate)
equal to the amount of such payment and (ii) subject to satisfaction or waiver
of the conditions specified in subsection 4.2B, Revolving Lenders shall, on the
Reimbursement Date, make Revolving Loans that are Base Rate Loans in the amount
of such payment, the proceeds of which shall be applied directly by
Administrative Agent to reimburse such Issuing Lender for the amount of such
payment; and provided, further that if for any reason proceeds of
Revolving Loans are not received by such Issuing Lender on the Reimbursement
Date in an amount equal to the amount of such payment. Company shall reimburse
such Issuing Lender, on demand, in an amount in same day funds equal to the
excess of the amount of such payment over the aggregate amount of such
Revolving Loans, if any, which are so received. Nothing in this subsection 3.3B
shall be deemed to relieve any Revolving Lender from its obligation to make
Revolving Loans on the terms and conditions set forth in this Agreement, and
Company shall retain any and all rights it may have against any Revolving
Lender resulting from the failure of such Revolving Lender to make such
Revolving Loans under this subsection 3.3B.


 


C.        Payment by Lenders of Unreimbursed Amounts
Paid Under Letters of Credit.


 


(i)        Payment
by Revolving Lenders. In the event that Company shall fail for any reason
to reimburse any Issuing Lender as provided in subsection 3.3B in an amount
(calculated, in the case of a payment under a Letter of Credit denominated in a
currency other than Dollars, by reference to the applicable Exchange Rate)
equal to the amount of any payment by such Issuing Lender under a Letter of
Credit issued by it, such Issuing Lender shall promptly notify Administrative
Agent, who shall notify each other Revolving Lender of the unreimbursed amount
of such honored drawing and of such other Revolving Lender’s respective
participation therein based on such Revolving


 


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Lender’s Pro Rata
Share. Each Revolving Lender (other than such Issuing Lender) shall make
available to Administrative Agent an amount equal to its respective
participation, in Dollars and in same day funds, at the Funding and Payment
Account, not later than 12:00 Noon (New York City time) on the first Business
Day after the date notified by Administrative Agent and Administrative Agent
shall make available to such Issuing Lender in Dollars in same day funds, at
the office of such Issuing Lender on such Business Day, the aggregate amount of
the participation payments so received by Administrative Agent. In the event
that any Revolving Lender fails to make available to Administrative Agent on
such Business Day the amount of such Revolving Lender’s participation in such
Letter of Credit as provided in this subsection 3.3C, such Issuing Lender shall
be entitled to recover such amount on demand from such Revolving Lender
together with interest thereon at the Federal Funds Effective Rate. Nothing in
this subsection 3.3C shall be deemed to prejudice the right of Administrative
Agent to recover, for the benefit of Revolving Lenders, from any Issuing Lender
any amounts made available to such Issuing Lender pursuant to this subsection
3.3C in the event that it is determined by the final judgment of a court of
competent jurisdiction that the payment with respect to a Letter of Credit by
such Issuing Lender in respect of which such participation payments were made
by Revolving Lenders constituted gross negligence or willful misconduct on the
part of such Issuing Lender.


 


(ii)       Distribution
to Lenders of Reimbursements Received From Company. In the event any
Issuing Lender shall have been reimbursed by other Revolving Lenders pursuant
to subsection 3.3C(i) for all or any portion of any payment by such Issuing
Lender under a Letter of Credit issued by it, and Administrative Agent or such
Issuing Lender thereafter receives any payments from Company in reimbursement
of such payment under the Letter of Credit, to the extent any such payment is
received by such Issuing Lender, it shall distribute such payment to
Administrative Agent, and Administrative Agent shall distribute to each other
Revolving Lender that has paid all amounts payable by it under subsection
3.3C(i) with respect to such payment such Revolving Lender’s Pro Rata Share of
all payments subsequently received by Administrative Agent or by such Issuing
Lender from Company. Any such distribution shall be made to a Revolving Lender
at the account specified in subsection 2.4C(iii).


 


D.        Interest on Amounts Paid Under Letters
of Credit.


 


(i)        Payment
of Interest by Company. Company agrees to pay to Administrative Agent, with
respect to payments under any Letters of Credit issued by any Issuing Lender,
interest on the amount paid by such Issuing Lender in respect of each such
payment from the date a drawing is honored to but excluding the date such
amount is reimbursed by Company (including any such reimbursement out of the
proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to,
(a) for the period from the date such drawing is honored to but excluding the
Reimbursement Date, the rate then in effect under this Agreement with respect
to Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which is
2% per annum in excess of the rate of interest otherwise payable under this
Agreement with respect to Revolving Loans that are Base Rate Loans. Interest
payable pursuant to this subsection 3.3D(i) shall be computed on the basis of a
365-day or 366-day year for the actual number of days


 


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elapsed in the
period during which it accrues and shall be payable on demand or, if no demand
is made, on the date on which the related drawing under a Letter of Credit is
reimbursed in full.


 


(ii)       Distribution
of Interest Payments by Administrative Agent. Promptly upon receipt by
Administrative Agent of any payment of interest pursuant to subsection 3.3D(i)
with respect to a payment under a Letter of Credit, (a) Administrative Agent
shall distribute to (x) each Revolving Lender (including the Revolving Lender
that paid such drawing), out of the interest received by Administrative Agent
in respect of the period from the date such drawing is honored to but excluding
the date on which the applicable Issuing Lender is reimbursed for the amount of
such payment (including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B), the amount that such Revolving Lender would
have been entitled to receive in respect of the letter of credit fee that would
have been payable in respect of such Letter of Credit for such period pursuant
to subsection 3.2 if no drawing had been honored under such Letter of Credit
and (y) such Issuing Lender the amount, if any, remaining after payment of the
amounts applied pursuant to the immediately preceding clause (x), and (b) in
the event such Issuing Lender shall have been reimbursed by other Revolving
Lenders pursuant to subsection 3.3C(i) for all or any portion of such payment,
Administrative Agent shall distribute to each Revolving Lender (including such
Issuing Lender) that has paid all amounts payable by it under subsection
3.3C(i) with respect to such payment such Revolving Lender’s Pro Rata Share of
any interest received by Administrative Agent in respect of that portion of
such payment so made by Revolving Lenders for the period from the date on which
such Issuing Lender was so reimbursed to but excluding the date on which such
portion of such payment is reimbursed by Company. Any such distribution shall
be made to a Revolving Lender at the account specified in subsection 2.4C(iii).


 


E.         Cash
Collateralization. If Administrative Agent notifies Company
at any time that, due to a fluctuation in the applicable Exchange Rate or
otherwise, the Letter of Credit Usage at such time exceeds 105% of the sublimit
for Letters of Credit specified in subsection 3.1A(ii), then, within two
Business Days after receipt of such notice, Company shall deposit in the
Collateral Account established pursuant to the Security Agreement an amount
equal to the amount by which the Letter of Credit Usage exceeds such sublimit,
which amount shall constitute Collateral and be subject to the provisions of
the Security Agreement. At such time as the Letter of Credit Usage shall be
equal to or less than such sublimit, if no Event of Default has occurred and is
continuing, such amount shall be released to Company.


 


3.4      Obligations Absolute.


 


The obligation of Company to reimburse each Issuing Lender for payments
under the Letters of Credit issued by it and to repay any Revolving Loans made
by Revolving Lenders pursuant to subsection 33B and the obligations of
Revolving Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including any of the following circumstances:


 


(i)        any lack of validity or enforceability of
any Letter of Credit;


 


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(ii)       the
existence of any claim, set-off, defense or other right which Company or any
Lender may have at any time against a beneficiary or any transferee of any
Letter of Credit (or any Persons for whom any such transferee may be acting),
any Issuing Lender or other Revolving Lender or any other Person or, in the
case of a Revolving Lender, against Company, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction
(including any underlying transaction between Company or one of its
Subsidiaries and the beneficiary for which any Letter of Credit was procured);


 


(iii)      any
draft or other document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;


 


(iv)      payment
by the applicable Issuing Lender under any Letter of Credit against
presentation of a draft or other document which does not substantially comply
with the terms of such Letter of Credit;


 


(v)       any
adverse change in the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Company or any of its Subsidiaries;


 


(vi)      any breach
of this Agreement or any other Loan Document by any party thereto;


 


(vii)     any
other circumstance or happening whatsoever, whether or not similar to any of
the foregoing; or


 


(viii)    the
fact that an Event of Default or a Potential Event of Default shall have
occurred and be continuing;


 


provided,
in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).


 


3.5      Nature of Issuing Lenders’ Duties.


 


As between Company and any Issuing Lender, Company assumes all risks of
the acts and omissions of, or misuse of the Letters of Credit issued by such
Issuing Lender by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, such Issuing Lender shall
not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with the
application for and issuance of any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter
of Credit or the rights or benefits thereunder or. proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any reason; (iii)
failure of the beneficiary of any such Letter of Credit to comply fully with
any conditions required in order to draw upon such Letter of Credit; (iv)
errors, omissions, interruptions or delays in transmission or delivery of any


 


69

















 


messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of such Issuing Lender, including any act or
omission by a Government Authority, and none of the above shall affect or
impair, or prevent the vesting of, any of such Issuing Lender’s rights or powers
hereunder.


 


In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Company.


 


Notwithstanding anything to the contrary contained in this subsection
3.5, Company shall retain any and all rights it may have against any Issuing
Lender for any liability arising solely out of the gross negligence or willful
misconduct of such Issuing Lender, as determined by a final judgment of a court
of competent jurisdiction.


 


Section
4.     CONDITIONS TO LOANS AND LETTERS OF
CREDIT


 


The obligations of Lenders to make Loans and the issuance of Letters of
Credit hereunder are subject to the satisfaction of the following conditions.


 


4.1                 Conditions to
Term Loans and Initial Revolving Loans and Swing Line Loans.


 


The obligations of Lenders to make the Term Loans and any Revolving
Loans and Swing Line Loans to be made on the Closing Date are, in addition to
the conditions precedent specified in subsection 4.2, subject to prior or
substantially concurrent satisfaction of the following conditions:


 


A.        Loan
Party Documents. On or before the Closing Date, Company
shall, and shall cause each other Loan Party to, deliver to Administrative
Agent with sufficient originally executed copies, where appropriate, for each
Lender the following with respect to Company or such Loan Party, as the case
may be, each, unless otherwise noted, dated the Closing Date:


 


(i)        Copies
of the Organizational Documents of such Person, certified by the Secretary of
State of its jurisdiction of organization or, if such document is of a type
that may not be so certified, certified by the secretary or similar officer of
the applicable Loan Party, together with a good standing certificate from the
Secretary of State of its jurisdiction of organization and, to the extent
generally available, a certificate or other evidence of good standing as to
payment of any applicable franchise or similar taxes of such jurisdiction of
organization, each dated a recent date prior to the Closing Date;


 


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(ii)       Resolutions
of the Governing Body of such Person approving and authorizing the execution,
delivery and performance of the Loan Documents to which it is a party,
certified as of the Closing Date by the secretary or similar officer of such
Person as being in full force and effect without modification or amendment;


 


(iii)      Signature
and incumbency certificates of the officers of such Person executing the Loan
Documents to which it is a party;


 


(iv)      Executed
originals of the Loan Documents to which such Person is a party; and


 


(v)       Such
other documents as Administrative Agent may reasonably request.


 


B.        Fees.
Company shall have paid to Administrative Agent, for distribution (as
appropriate) to Administrative Agent and Lenders, the fees payable on the
Closing Date referred to in subsection 2.3.


 


C.        Financial
Statements; Pro Forma Financial Statements. On or before the
Closing Date, Lenders shall have received from Company (i) audited financial
statements of Panolam Industries Holdings and its Subsidiaries for Fiscal Years
2002, 2003 and 2004, (ii) unaudited financial statements of Panolam Industries
Holdings and its Subsidiaries for the six months ended June 30, 2005 and (iii)
a pro forma balance sheet of Merger Sub and its Subsidiaries as at June 30,
2005 for the six month period then ended, prepared in accordance with GAAP
(except as otherwise described therein) and reflecting the consummation of the
Acquisition, the related financings and the other transactions contemplated by
the Loan Documents and the Related Agreements.


 


D.        Opinions
of Counsel to Loan Parties. Lenders shall have received
originally executed copies of one or more written opinions of Weil, Gotshal
& Manges LLP,  counsel for Loan
Parties, in form reasonably satisfactory to Administrative Agent and its
counsel, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in Exhibit VIII annexed hereto and as
to such other matters as Administrative Agent acting on behalf of Lenders may
reasonably request (this Agreement constituting a written request by Company to
such counsel to deliver such opinions to Lenders).


 


E.         Evidence
of Insurance. Administrative Agent shall have received a
certificate from Company’s insurance broker or other evidence satisfactory to
it that all insurance required to be maintained pursuant to subsection 6.4 is
in full force and effect and that Administrative Agent on behalf of Lenders has
been named as additional insured and/or loss payee thereunder to the extent
required under subsection 6.4.


 


F.         Necessary
Governmental Authorizations and Consents;
Expiration of Waiting Periods, Etc. Company shall have obtained all
Governmental Authorizations and all consents of other material Persons, in each
case that are necessary in connection with the transactions contemplated by the
Loan Documents. All applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
restrain, prevent or otherwise impose adverse conditions on the Acquisition or
the transactions


 


71

















 


contemplated by
the Loan Documents. No action, request for stay, petition for review or
rehearing, reconsideration, or appeal with respect to any of the foregoing
shall be pending.


 


G.        Security
Interests in Personal and Mixed Property. To the extent not
otherwise satisfied pursuant to subsection 4.1H, Administrative Agent shall
have received evidence satisfactory to it that Holdings, Company and Subsidiary
Guarantors shall have taken or caused to be taken all such actions, executed
and delivered or caused to be executed and delivered all such agreements,
documents and instruments, in the reasonable opinion of Administrative Agent,
desirable in order to create in favor of Administrative Agent, for the benefit
of Lenders, a valid and (upon such filing and recording) perfected First
Priority security interest in the entire personal and mixed property
Collateral. Such actions shall include the following:


 


(i)        Stock
Certificates and Instruments. Delivery to Administrative Agent of (a)
certificates (which certificates shall be accompanied by irrevocable undated
stock powers, duly endorsed in blank and otherwise satisfactory in form and
substance to Administrative Agent) representing all Capital Stock pledged
pursuant to the Security Agreement and (b) all promissory notes or other
instruments (duly endorsed, where appropriate, in a manner satisfactory to
Administrative Agent) evidencing any Collateral;


 


(ii)       Lien
Searches and UCC Termination Statements. Delivery to Administrative Agent
of (a) the results of a recent search of all effective UCC financing statements
and fixture filings which may have been made with respect to any personal or
mixed property of any Loan Party, together with copies of all such filings
disclosed by such search, and (b) duly completed UCC termination statements,
and authorization of the filing thereof from the applicable secured party, as
may be necessary to terminate any effective UCC financing statements or fixture
filings disclosed in such search (other than any such financing statements or
fixture filings in respect of Liens permitted to remain outstanding pursuant to
the terms of this Agreement);


 


(iii)      UCC
Financing Statements and Fixture Filings. Delivery to Administrative Agent
of duly completed UCC financing statements and, where appropriate, fixture
filings, with respect to all personal and mixed property Collateral of such
Loan Party, for filing in all jurisdictions as may be necessary or, in the
reasonable opinion of Administrative Agent, desirable to perfect the security
interests created in such Collateral pursuant to the Collateral Documents; and


 


(iv)      IP
Filings. Delivery to Administrative Agent of releases duly executed (if
necessary) of security interests by all applicable Persons for filing in all  applicable jurisdictions as may be
necessary to terminate any effective filings in any IP Filing Office in respect
of any IP Collateral (other than any such filings in respect of Liens permitted
to remain outstanding pursuant to the terms of this Agreement).


 


H.        Closing
Date Mortgages; Closing Date Mortgage Policies; Etc. Administrative
Agent shall have received from Company and each applicable Subsidiary
Guarantor:


 


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(i)        Closing
Date Mortgages. Fully executed and notarized Mortgages (each a “Closing
Date Mortgage” and, collectively, the “Closing Date Mortgages”), in proper form
for recording in all appropriate places in all applicable jurisdictions,
encumbering each Real Property Asset listed on Schedule 4.1H annexed
hereto (each a “Closing Date Mortgaged
Property” and, collectively, the “Closing
Date Mortgaged  Properties”);


 


(ii)       Opinions
of Local Counsel. An opinion of counsel (which counsel shall be reasonably
satisfactory to Administrative Agent) in each state in which a Closing Date
Mortgaged Property is located with respect to the enforceability of the form(s)
of Closing Date Mortgages to be recorded in such state and such other matters
as Administrative Agent may reasonably request, in each case in form reasonably
satisfactory to Administrative Agent;


 


(iii)      Title
Insurance. (a) ALTA mortgagee title insurance policies or unconditional
commitments therefor (the “Closing Date
Mortgage Policies”) issued by the Title Company with respect to the
Closing Date Mortgaged Properties listed in Schedule 4.1H annexed
hereto, in amounts insuring fee simple title to each such Closing Date
Mortgaged Property owned in fee vested in such Loan Party and assuring
Administrative Agent that the applicable Closing Date Mortgages create valid
and enforceable First Priority mortgage Liens on the respective Closing Date
Mortgaged Properties encumbered thereby, subject only to a standard survey
exception; and (b) evidence satisfactory to Administrative Agent that such Loan
Party has (i) delivered to the Title Company all certificates and affidavits
required by the Title Company in connection with the issuance of the Closing Date
Mortgage Policies and (ii) paid to the Title Company or to the appropriate
Government Authorities all expenses and premiums of the Title Company in
connection with the issuance of the Closing Date Mortgage Policies and all
recording and stamp taxes (including mortgage recording and intangible taxes)
payable in connection with recording the Closing Date Mortgages in the
appropriate real estate records;


 


(iv)      Title
Reports. With respect to each Closing Date Mortgaged Property listed in Schedule
4.1H annexed hereto, a title report issued by the Title Company with
respect thereto, satisfactory in form and substance to Administrative Agent;


 


(v)       Copies
of Documents Relating to Title Exceptions. Copies of all recorded documents
listed as exceptions to title or otherwise referred to in the Closing Date
Mortgage Policies or in the title reports delivered pursuant to subsection 4.
lH(iv); and


 


(vi)      Matters
Relating to Flood Hazard Properties. (a) Evidence, which may be in the form
of a letter from an insurance broker or a municipal engineer, as to whether (1)
any Closing Date Mortgaged Property is a Flood Hazard Property and (2) the
community in which any such Flood Hazard Property is located is participating
in the National Flood Insurance Program, (b) if there are any such Flood Hazard
Properties, such Loan Party’s written acknowledgement of receipt of written
notification from Administrative Agent (1) as to the existence of each such
Flood Hazard Property


 


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and (2) as to
whether the community in which each such Flood Hazard Property is located is
participating in the National Flood Insurance Program, and (c) in the event any
such Flood Hazard Property is located in a community that participates in the
National Flood Insurance Program, evidence that Company has obtained flood
insurance in respect of such Flood Hazard Property to the extent required under
the applicable regulations of the Board of Governors of the Federal Reserve
System.


 


I.          Matters
Relating to Existing Indebtedness. On the Closing Date,
Panolam and its Subsidiaries shall have (a) repaid in full all Indebtedness
outstanding under the Existing Credit Agreements, (b) terminated any
commitments to lend or make other extensions of credit thereunder, (c) delivered
to Administrative Agent all documents or instruments necessary to release all
Liens securing Indebtedness or other obligations of Panolam and its
Subsidiaries thereunder, and (d) made arrangements reasonably satisfactory to
Administrative Agent with respect to any letters of credit outstanding
thereunder.


 


J.         Solvency
Assurances. On the Closing Date, Administrative Agent and Lenders
shall have received an Officer’s Certificate of Company and its Subsidiaries,
certified by a Financial Officer of Company, dated the Closing Date,
substantially in the form of Exhibit X annexed hereto, certifying that,
after giving effect to the consummation of the transactions contemplated by the
Loan Documents and Related Agreements, Company and its Subsidiaries on a consolidated
basis will be Solvent.


 


K.        Patriot
Act  Compliance. Administrative
Agent shall have received, at least five Business Days prior to the Closing
Date, all documentation and other information required by bank regulatory
authorities under the applicable “know your customer” and anti-money laundering
rules and regulations, including without limitation the Patriot Act.


 


L.        Process
of Debt and Equity Capitalization of Panolam Holdings, Holdings and Company.


 


(i)        Equity
Capitalization of Panolam Holdings. On or before the Closing Date, the
Equity Investors shall have purchased all of the outstanding Panolam Holdings
Common Stock.


 


(ii)       Debt
and Equity Capitalization of Holdings and Company. On or before the Closing
Date, (a) Panolam Holdings shall have contributed to Holdings, as common
equity, all of the Cash consideration received by Panolam Holdings from the
sale of Panolam Holdings Common Stock consisting of not less than $78,000,000,
(b) Holdings shall have used the funds received pursuant to clause (a) of this
subsection to pay the Acquisition Consideration, and (c) Company shall have
issued and sold not less than $151,000,000 in aggregate principal amount of
Senior Subordinated Notes having an interest rate not in excess of 10.75%.


 


M.       Related
Agreements.


 


(i)        Form
of Senior Subordinated Note Indenture. The Senior Subordinated Note
indenture shall be reasonably satisfactory in form and substance to
Administrative Agent.


 


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(ii)       Officer’s
Certificate. Administrative Agent shall have received an Officer’s
Certificate to the effect that the Acquisition Agreement and all Related
Agreements attached thereto are in full force and effect and are true and
correct copies of the executed versions of such agreements.


 


N.        Consummation of Acquisition and Panolam
Merger.


 


(i)        The
Acquisition shall have been consummated in accordance with the terms of the
Acquisition Agreement (without giving effect to any waiver, amendment or
modification which is materially adverse to the Lenders without the prior
written consent of Administrative Agent).


 


(ii)       The
Panolam Merger shall have become effective in accordance with the terms of the
Acquisition Agreement, Panolam Industries Holdings Merger Agreement, the
Certificates of Merger and the laws of the State of Delaware.


 


O.        Consolidated
Leverage Ratio. The Consolidated Leverage Ratio of Company
and its Subsidiaries, calculated on a Pro Forma Basis as of the Closing Date,
shall not exceed 5.50:1.00, and Administrative Agent and Lenders shall have
received an Officer’s Certificate executed by a Financial Officer of Company
setting forth such ratio and calculation thereof.


 


P.        No
Material Adverse Effect. On and prior to the Closing Date,
there shall have been (a) no material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise) or operating results of Panolam Industries
Holdings and its Subsidiaries, taken as a whole or (b) no condition or event or
series of events that has resulted in, or could reasonably be expected to
result in, any losses, liabilities, obligations, damages, costs and expenses of
any kind to such Person of $15,000,000 or more; provided, however,
that any such effect shall not include an effect resulting from (i) a change in
applicable laws, (ii) a change in economic, business or financial market
conditions generally, so long as such conditions do not disproportionately
affect Merger Sub and its Subsidiaries, (iii) the announcement or performance
of the Acquisition Agreement or (iv) any act of war.


 


4.2        Conditions
to All Loans.


 


The obligation of each Lender to make its Loans on each Funding Date
are subject to the following further conditions precedent:


 


A.        Administrative Agent shall have received
before that Funding Date, in accordance with the provisions of subsection 2.
IB, a duly executed Notice of Borrowing, in each case signed by a duly
authorized Officer of Company.


 


B.        As of that Funding Date:


 


(i)         The
representations and warranties contained herein and in the other Loan Documents
shall be true, correct and complete in all material respects on and as of that
Funding 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


 


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which case Such
representations and warranties shall have been true, correct and complete in
all material respects on and as of such earlier date; and


 


(ii)       No
event shall have occurred and be continuing or would result from the
consummation of the borrowing contemplated by such Notice of Borrowing that
would constitute an Event of Default or a Potential Event of Default.


 


4.3      Conditions to Letters of Credit.


 


The issuance of any Letter of Credit hereunder is subject to the
following conditions precedent:


 


A.        On or before the date of issuance of
such Letter of Credit, Administrative Agent shall have received, in accordance
with the provisions of subsection 3.1B(i), an originally executed Request for
issuance (or a facsimile copy thereof) in each case signed by a duly authorized
Officer of Company, together with all other information specified in subsection
3.1B(i) and such other documents or information as the applicable Issuing
Lender may reasonably require in connection with the issuance of such Letter of
Credit.


 


B.        On the date of issuance of such Letter
of Credit, all conditions precedent described in subsection 4.2B shall be
satisfied to the same extent as if the issuance of such Letter of Credit were
the making of a Loan and the date of issuance of such Letter of Credit were a
Funding Date.


 


Section
5.     COMPANY’S REPRESENTATIONS AND
WARRANTIES


 


In order to induce Lenders to enter into this Agreement and to make the
Loans, to induce Issuing Lenders to issue Letters of Credit and to induce
Revolving Lenders to purchase participations therein, Company represents and
warrants to each Lender:


 


5.1                 Organization,
Powers, Qualification, Good Standing, Business and Subsidiaries.


 


A.        Organization
and Powers. Each of Holdings and Company is a corporation duly
organized or formed, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization as specified in Schedule
5.1 annexed hereto. Each of Holdings and Company has all requisite power
and authority to own, lease and operate its assets, to carry on its business,
except, in each of the foregoing cases, where the failure to have such power
and authority could not reasonably be expected to have a Material Adverse Effect,
and to enter into the Loan Documents and the Related Agreements to which it is
a party and to carry out the transactions contemplated thereby.


 


B.        Qualification
and Good Standing. Each of Holdings and Company is qualified
to do business and in good standing in every jurisdiction where ownership,
lease or operation of its assets or conduct of its business and operations
require such qualification, except in jurisdictions where the failure to be so
qualified or in good standing could not reasonably be expected to result in a
Material Adverse Effect.


 


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C.        Subsidiaries.
As of the Closing Date, all of the Subsidiaries of Holdings, their
jurisdictions of organization and the ownership interest of Holdings and each
of its Subsidiaries in each of the Subsidiaries of Holdings are identified in Schedule
5.1 annexed hereto. The Capital Stock of each of the Subsidiaries of
Holdings identified in Schedule 5.1 annexed hereto is duly authorized,
validly issued, fully paid and nonassessable. Each of the Subsidiaries of
Holdings identified in Schedule 5.1 annexed hereto is a corporation,
partnership, trust or limited liability company duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation or organization set forth therein, has all requisite power and
authority to own, lease and operate its assets and to carry on its business,
and is qualified to do business and in good standing in every jurisdiction
where ownership, lease or operation of its assets or conduct of its business
and operations require such qualification, in each case except where failure to
be so qualified or in good standing or a lack of such power and authority could
not reasonably be expected to result in a Material Adverse Effect.


 


5.2      Authorization of Borrowing, etc.


 


A.        Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents have been duly authorized by all necessary action on the
part of each Loan Party that is a party thereto.


 


B.        No Conflict. The execution, delivery and performance by
Loan Parties of the Loan Documents to which they are parties and the
consummation of the transactions contemplated by the Loan Documents do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Holdings or any of its Subsidiaries, the
Organizational Documents of Holdings or any of its Subsidiaries or any order,
judgment or decree of any court or other Government Authority binding on
Holdings or any of its Subsidiaries, (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 Holdings or any of its Subsidiaries, (iii) result in
or require the creation or imposition of any Lien upon any of the properties or
assets of Holdings or any of its Subsidiaries (other than any Liens permitted
by subsection 7.2), or (iv) require any approval of stockholders or any
approval or consent of any Person under any Contractual Obligation of Holdings
or any of its Subsidiaries, except for such approvals or consents which will be
obtained on or before the Closing 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 result in a Material Adverse Effect.


 


C.        Governmental Consents. The execution, delivery and performance by
Loan Parties of the Loan Documents to which they are parties and the
consummation of the transactions contemplated by the Loan Documents do not and
will not require any Governmental Authorization, except (i) Governmental
Authorizations that have been obtained, (ii) filings necessary to perfect the
Liens on the Collateral granted by the Loan Parties in favor of Administrative
Agent on behalf of Lenders and (iii) Governmental Authorizations the failure of
which to obtain or make could not reasonably be expected to have a Material
Adverse Effect.


 


D.        Binding Obligation. Each of the Loan Documents has been duly
executed and delivered by each Loan Party that is a party thereto and is the
legally valid and binding obligation of such Person, enforceable against such
Person in accordance with its


 


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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.


 


5.3      Financial Condition.


 


Company has heretofore delivered to Lenders, at Lenders’ request, the
financial statements for the periods ended December 31, 2002, December 31,
2003, December 31, 2004 and June 30, 2005. All such statements other than pro
forma financial statements were prepared in conformity with GAAP (except as
otherwise expressly noted therein) and fairly present, in all material
respects, the financial position (on a consolidated basis) of the entities
described in such financial statements as at the respective dates thereof and
the results of operations and cash flows (on a consolidated basis) of the
entities described therein for each of the periods then ended, subject, in the
case of any such unaudited financial statements, to changes resulting from
audit and normal year-end adjustments.


 


5.4      No Material Adverse Change.


 


Since December 31, 2004, no event or change has occurred that has
resulted in or evidences, either in any case or in the aggregate, a Material
Adverse Effect.


 


5.5      Title to Properties; Liens; Real
Property; Intellectual Property.


 


A.        Title
to Properties; Liens. Company and its Subsidiaries have (i) good
and legal title to (in the case of fee interests in real property), (ii) valid
leasehold interests in (in the case of leasehold interests in real or personal
property), or (iii) good title to (in the case of all other personal property),
all of their respective properties and assets necessary in the ordinary conduct
of its business, and all such properties and assets are free and clear of
Liens, except for (a) Liens permitted by this Agreement, (b) minor defects on
title that do not materially interfere with Company’s or its Subsidiaries’
ability to conduct its business or to utilize such assets for their intended
purposes and (c) where the failure to have such title or other property
interests described above could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.


 


B.        Real
Property. As of the Closing Date, Schedule 5.5B
annexed hereto contains a true, accurate and complete list of (i) all fee
interests in any Real Property Assets and (ii) all leases, subleases or
assignments of leases (together with all amendments, modifications,
supplements, renewals or extensions of any thereof) affecting each Real
Property Asset, regardless of whether a Loan Party is the landlord or tenant
(whether directly or as an assignee or successor in interest) under such lease,
sublease or assignment.


 


C.        Intellectual
Property. As of the Closing Date, Company and its
Subsidiaries own or have the right to use, all Intellectual Property necessary
for the conduct of their business, except where the failure to own or have such
right to use in the aggregate could not reasonably be expected to result in a
Material Adverse Effect. No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does
Company know of any valid basis for any such claim, except for such claims that
in the aggregate could


 


78

















 


not reasonably be
expected to result in a Material Adverse Effect. The use of such Intellectual
Property by Company and its Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect. All material
federal, state and foreign registrations of and applications for Intellectual
Property that are owned or licensed by Company or any of its Subsidiaries on
the Closing Date are described on Schedule 5.5C annexed hereto.


 


5.6      Litigation; Adverse Facts.


 


Except as disclosed on Schedule 5.6, there are no Proceedings
(whether or not purportedly on behalf of Company or any of its Subsidiaries) at
law or in equity, before or by any court or other Government Authority
(including any Environmental Claims) that are pending or, to the knowledge of
Company, threatened in writing against Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries and that, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any
applicable laws (including Environmental Laws) or (ii) is subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any court or other Government Authority, except for such
violations or defaults (a) that are being contested in good faith by
appropriate proceedings or (b) that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.


 


5.7      Payment of Taxes.


 


Except to the extent permitted by subsection 6.3, all tax returns and
reports of Holdings and its Subsidiaries required to be filed by any of them
have been timely filed, and all taxes shown on such tax returns to be due and
payable and all assessments, fees and other governmental charges upon Holdings
and its Subsidiaries and upon their respective properties, assets, income,
businesses and franchises that are due and payable have been paid when due and
payable except those (i) which are not overdue by more than thirty (30) days,
(ii) which are being contested in good faith by appropriate proceedings
diligently conducted and for which adequate reserves have been provided in
accordance with GAAP or (iii) with respect to which the failure to make such
filing or payment could not reasonably be expected to have a Material Adverse
Effect.


 


5.8      Governmental Regulation.


 


Neither Company nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935 or the Investment Company
Act of 1940.


 


5.9      Securities Activities.


 


A.        Neither Company nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
Margin Stock.


 


B.        Following application of the proceeds of
each Loan, not more than 25% of the value of the assets (either of Company only
or of Company and its Subsidiaries on a


 


79

















 


consolidated
basis) subject to the provisions of subsection 7.2 or 7.7 or subject to any
restriction contained in any agreement or instrument, between Company and any
Lender or any Affiliate of any Lender, relating to Indebtedness and within the
scope of subsection 8.2, will be Margin Stock.


 


5.10    Employee Benefit Plans.


 


A.        Company,
each of its Subsidiaries and each of their respective ERISA Affiliates are in
compliance in all material respects with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder with respect to each Employee Benefit Plan, and have performed in
all material respects all their obligations under each Employee Benefit Plan,
except to the extent that the failure to comply therewith could not reasonably
be expected to have a Material Adverse Effect. Each Employee Benefit Plan that
is intended to qualify under Section 401(a) of the Internal Revenue Code is so
qualified.


 


B.        No ERISA Event has occurred or is
reasonably expected to occur that could reasonably be expected to have a
Material Adverse Effect.


 


C.        As of the most recent valuation date for
any Pension Plan, the amount of unfunded benefit liabilities (as defined in
Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension
Plans (excluding for purposes of such computation any Pension Plans with
respect to which assets exceed benefit liabilities), could not reasonably be
expected to have a Material Adverse Effect.


 


D.        As of the most recent valuation date for
each Multiemployer Plan for which the actuarial report is available, the
potential liability of Company, its Subsidiaries and their respective ERISA
Affiliates for a complete withdrawal from such Multiemployer Plan (within the
meaning of Section 4203 of ERISA), when aggregated with such potential
liability for a complete withdrawal from all Multiemployer Plans, based on
information available pursuant to Section 4221(e) of ERISA, could not reasonably
be expected to have a Material Adverse Effect


 


E.         As of the date hereof, Company and its
Subsidiaries have made full payment when due of all required contributions to
any Foreign Plan, except to the extent the failure to make such contributions
could not reasonably be expected to have a Material Adverse Effect.


 


5.11    Certain Fees.


 


No broker’s or finder’s fee or commission will be payable with respect
to this Agreement.


 


5.12    Environmental Protection.


 


Except as set forth in Schedule 5.12 annexed hereto:


 


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(i)        neither
Company nor any of its Subsidiaries nor any of their respective Facilities or
operations are subject to any outstanding written order, consent decree or
settlement agreement with any Person relating to (a) any Environmental Law, (b)
any Environmental Claim, or (c) any Hazardous Materials Activity that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect;


 


(ii)       there are and, to Company’s knowledge, have been no
conditions, occurrences, or Hazardous Materials Activities that, as of the date
of this Agreement, could reasonably be expected to form the basis of an
Environmental Claim against Company or any of its Subsidiaries that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect; and


 


(iii)      Company and its Subsidiaries are in compliance with all
Environmental Laws, except for such non-compliance as would not, individually
or in the aggregate, be reasonably expected to result in a Material Adverse
Effect.


 


5.13    Employee Matters.


 


There is no strike or work stoppage in
existence or threatened involving Company or any of its Subsidiaries that could
reasonably be expected to result in a Material Adverse Effect.


 


5.14    Solvency.


 


On the Closing Date and on each Funding Date,
after giving effect to the Acquisition, the Loan Parties, on a consolidated
basis, are Solvent.


 


5.15    Matters Relating to
Collateral.


 


A.        Governmental Authorizations. No authorization, approval or other action
by, and no notice to or filing with, any Government Authority is required for
either (i) the pledge or grant by any Loan Party of the Liens purported to be
created in favor of Administrative Agent pursuant to any of the Collateral
Documents or (ii) the exercise by Administrative Agent of any rights or
remedies in respect of any Collateral (whether specifically granted or created
pursuant to any of the Collateral Documents or created or provided for by
applicable law), except (a) for filings or recordings contemplated by the
Collateral Documents, (b) authorizations, approvals, actions, notices or
filings which have been obtained, (c) authorizations, approvals, actions,
notices or filings the failure of which to obtain or make could not reasonably
be expected to have a Material Adverse Effect and (d) as may be required, in
connection with the disposition of any Collateral, by laws generally affecting
the offering and sale of securities.


 


B.        Margin Regulations. The pledge of the Collateral pursuant to the Collateral Documents does
not violate Regulation T, U or X of the Board of Governors of the Federal
Reserve System.


 


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5.16    Disclosure.


 


To the knowledge of Company, no representation or warranty of Holdings
or any of its Subsidiaries contained in the Confidential Information
Memorandum, in any Loan Document, or in any other document, certificate or
written statement furnished to Lenders by Merger Sub or its agents or
representatives or, after the Closing Date, on behalf of Holdings or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not materially misleading in light of the circumstances in which the
same were made. Any projections, pro forma financial information and other
forward-looking information contained in such materials are based upon good
faith estimates and assumptions believed by Company to be reasonable at the
time made, it being recognized by Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results and that such differences may be material. No representation is made
with respect to information of a general economic or general industry nature.


 


Section
6.     AFFIRMATIVE COVENANTS


 


Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations (other than Unasserted Obligations) and the cancellation
or expiration or the provision for cash collateral or other support in a manner
reasonably satisfactory to the Issuing Lender of all Letters of Credit, unless
Requisite Lenders shall otherwise give prior written consent, Company shall
perform, and shall cause each of its Subsidiaries to perform, all covenants in
this Section 6.


 


6.1      Financial Statements and Other Reports.


 


Company will
deliver to Administrative Agent and Lenders:


 


(i)        Events
of Default, etc.: promptly upon any Officer of Holdings or Company
obtaining knowledge (a) of any condition or event that constitutes an Event of
Default or Potential Event of Default, or (b) of the occurrence of any event or
change that has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officer’s Certificate specifying the nature and
period of existence of such condition, event or change, or specifying the
notice given or action taken by any such Person and the nature of such claimed
Event of Default, Potential Event of Default, event or condition, and what
action Company has taken, is taking and proposes to take with respect thereto;


 


(ii)       Quarterly
Financials: as soon as available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, the
consolidated balance sheets of Company and its Subsidiaries as at the end of
such Fiscal Quarter and the related consolidated statements of income and cash
flows of Company and its Subsidiaries for such Fiscal Quarter and for the
period from the beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, setting forth in each case in


 


82

















 


comparative form
the corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the Financial Plan for the current
Fiscal Year, to the extent prepared for such fiscal period, all in reasonable
detail and certified by a Financial Officer of Company that they fairly
present, in all material respects, the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes resulting from
audit and normal year-end adjustments and the absence of footnotes;


 


(iii)      Year-End
Financials: as soon as available and in any event within 120 days after the
end of Fiscal Year 2005 and within 90 days after the end of each other Fiscal
Year, (a) the consolidated balance sheet of Company and its Subsidiaries as at
the end of such Fiscal Year and the related consolidated statements of income,
stockholders’ equity and cash flows of Company and its Subsidiaries for such
Fiscal Year, setting forth in each case in comparative form the corresponding
figures for the previous Fiscal Year and the corresponding figures from the
Financial Plan for the Fiscal Year covered by such financial statements, all in
reasonable detail and certified by a Financial Officer of Company that they
fairly present, in all material respects, the financial condition of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated and (b) in the case
of such consolidated financial statements, a report thereon of Deloitte &
Touche LLP or other independent certified public accountants of recognized
national standing selected by Company and reasonably satisfactory to
Administrative Agent, which report shall not be subject to any “going concern”
or like qualification or exception, and shall state that such consolidated
financial statements fairly present, in all material respects, the consolidated
financial position of Company and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except as otherwise disclosed in such financial statements) and that the
examination by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards;


 


(iv)      Compliance
Certificates: not later than five (5) days after delivery of financial
statements pursuant to clauses (ii) and (iii) above, (a) an Officer’s
Certificate of Company stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their supervision, a review
in reasonable detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by such financial statements
and that such review has not disclosed the existence during or at the end of
such accounting period, and that the signers do not have knowledge of the
existence as at the date of such Officer’s Certificate, of any condition or
event that constitutes an Event of Default or Potential Event of Default, or,
if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; and (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the restrictions contained in subsection
7.6, in each case to the extent compliance with such restrictions is required
to be tested at the end of the applicable accounting period;


 


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(v)       Reconciliation
Statements: if, as a result of any change in accounting principles and
policies from those used in the preparation of the audited financial statements
referred to in subsection 5.3, the
consolidated financial statements of Holdings and its Subsidiaries delivered
pursuant to clauses (ii) or (iii) of this subsection 6.1 will differ in any
material respect from the consolidated financial statements that would have
been delivered pursuant to such clauses had no such change in accounting
principles and policies been made, then not later than five (5) days after the
first delivery of financial statements pursuant to clauses (ii) or (iii) of
this subsection 6.1 following such change, pursuant to subsection 1.2, a
written statement of a Financial Officer of Company setting forth the
differences (including any differences that would affect any calculations
relating to the financial covenants set forth in subsection 7.6) which would
have resulted if such financial statements had been prepared without giving
effect to such change;


 


(vi)      Accountants’
Certification: not later than five (5) days after each delivery of
consolidated financial statements pursuant to clause (iii) above, a written
statement by the independent certified public accountants giving the report
thereon (a) stating that their audit examination has included a review of the
terms of this Agreement and the other Loan Documents as they relate to
subsection 7.6 and (b) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of Default or
Potential Event of Default under subsection 7.6 has come to their attention and,
if such a condition or event has come to their attention, specifying the nature
and period of existence thereof; provided that such accountants shall
not be liable by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default that would not be disclosed in the course
of their audit examination;


 


(vii)     SEC
Filings and Press Releases: promptly upon their becoming available, copies
of all regular and periodic reports and all registration statements (other than
on Form S-8 or a similar form) and prospectuses, if any, filed by Company or
any of its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority;


 


(viii)    Litigation
or Other Proceedings: promptly upon any Officer of Company obtaining
knowledge of (a) the institution of, or non-frivolous threat of, any Proceeding
against or affecting Company or any of its Subsidiaries not previously
disclosed in writing by Company to Lenders or (b) any material development in
any such Proceeding that, in any such case has a reasonable possibility after
giving effect to the coverage and policy limits of insurance policies issued to
Company and its Subsidiaries of giving rise to a Material Adverse Effect,
written notice thereof together with such other information as may be
reasonably requested by Lenders and their counsel to evaluate such matters;


 


(ix)       ERISA
Events: promptly upon becoming aware of the occurrence of or forthcoming
occurrence of any ERISA Event which could reasonably be expected to have a
Material Adverse Effect, a written notice specifying the nature thereof, what
action Company, any of its Subsidiaries or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with respect thereto and,
when known, any action


 


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taken or
threatened by the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto;


 


(x)        Financial
Plans: as soon as practicable and in any event no later than 60 days after
the beginning of each Fiscal Year, a consolidated plan and financial forecast
for such Fiscal Year (the “Financial Plan”
for such Fiscal Year), including (a) forecasted consolidated balance sheets and
forecasted consolidated statements of income and cash flows of Holdings and its
Subsidiaries for each Fiscal Quarter of such Fiscal Year, and (b) such other
information and projections as Administrative Agent may reasonably request;


 


(xi)       Notices
from Holders of Subordinated Indebtedness: promptly, upon receipt, copies
of all notices of events of default from holders of Subordinated Indebtedness
or a trustee, agent or other representative of such a holder;


 


(xii)      Other
Information: with reasonable promptness, such other information and data
with respect to Company or any of its Subsidiaries as from time to time may be
reasonably requested by Administrative Agent; and


 


(xiii)     Patriot
Act: with reasonable promptness, information to confirm compliance with the
Patriot Act.


 


6.2      Existence, etc.


 


Except as permitted under subsection 7.7, Company will, and will cause
each of its Subsidiaries to, at all times preserve and keep in full force and
effect its existence in its jurisdiction of organization or formation and all
rights and franchises necessary or desirable to its business, except to the
extent the failure to do so could not reasonably be expected to have a Material
Adverse Effect.


 


6.3      Payment of Taxes and Claims; Tax.


 


A.        Holdings
will, and will cause each of its Subsidiaries to, pay all taxes, assessments
and other governmental charges imposed upon it or any of its properties or
assets or in respect of any of its income, businesses or franchises, and all
claims (including claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets; provided that no such tax, assessment,
charge or claim need be paid if (i) it is being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, so long
as (a) such reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor and (b) in the
case of a tax, assessment, charge or claim which has or may become a Lien
against any of the Collateral, such proceedings operate to stay the sale of any
portion of the Collateral to satisfy such charge or claim, or (ii) the failure
to make payment thereof could not reasonably be expected to have a Material
Adverse Effect.


 


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6.4      Maintenance of Properties; Insurance.


 


A.        Maintenance
of Properties. Except if the failure to do so could not
reasonably be expected to have a Material Adverse Effect, Company will, and
will cause each of its Subsidiaries to, maintain or cause to be maintained in
good repair, working order and condition, ordinary wear and tear, casualty and
condemnation excepted, all material properties used or useful in the business of
Company and its Subsidiaries (including all Intellectual Property) and from
time to time will make or cause to be made all appropriate repairs, renewals
and replacements thereof in accordance with prudent industry practice.


 


B.        Insurance.
Company will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to liabilities, losses or damage in
respect of the assets, properties and businesses of Company and its
Subsidiaries as may customarily be carried or maintained under similar
circumstances by organizations of established reputation engaged in similar
businesses, in each case in such amounts (giving effect to self- insurance),
with such deductibles, covering such risks and otherwise on such terms and conditions
as shall be customary for organizations similarly situated in the industry. Not
later than 30 days after the Closing Date (or such later date as Administrative
Agent may agree) Company shall deliver evidence that each such policy of
insurance shall (a) name Administrative Agent for the benefit of Lenders as an
additional insured thereunder as its interests may appear and (b) in the case
of each casualty insurance policy, contain a loss payable clause or
endorsement, reasonably satisfactory in form and substance to Administrative
Agent, that names Administrative Agent for the benefit of Lenders as the loss
payee thereunder for any covered loss and provides for at least 30 days prior
written notice to Administrative Agent of any material reduction or cancellation
of such policy; provided that such insurance may be cancelable for non- payment
upon no less than 10 days’ prior written notice.


 


6.5      Inspection Rights.


 


Company shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by Administrative Agent and any Lender to
visit and inspect any of the properties of Company or of any of its
Subsidiaries, to inspect, copy and take extracts from its and their financial
and accounting records, and to discuss its and their affairs, finances and
accounts with its and their officers and independent public accountants
(provided that Company may, if it so chooses, be present at or participate in
any such discussion), all upon reasonable prior written notice to Company and at
such reasonable times during normal business hours and as often as may
reasonably be requested or at any time or from time to time following the
occurrence and during the continuation of an Event of Default, provided that,
excluding any such visits and inspections during the continuation of an Event
of Default, only Administrative Agent on behalf of the Lenders may exercise
rights under this subsection 6.5 and the Administrative Agent shall not
exercise such rights more often than two (2) times during any calendar year
absent the existence of an Event of Default and only one (1) such time shall be
at Company’s expense.


 


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6.6      Compliance
with Laws, etc.


 


Company shall comply, and shall cause each of its Subsidiaries to
comply, with the requirements of all applicable laws, rules, regulations and
orders of any Government Authority (including all Environmental Laws),
noncompliance with which could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect.


 


6.7      Environmental Matters.


 


A.        Environmental
Disclosure. Company will deliver to Administrative Agent and
Lenders:


 


(i)        Environmental
Audits and Reports. As soon as practicable following receipt thereof,
copies of all non-privileged environmental audits, investigations, analyses and
reports of any kind or character, whether prepared by personnel of Company or
any of its Subsidiaries or by independent consultants, Government Authorities
or any other Persons, with respect to significant environmental matters at any
Facility that, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect or with respect to any Environmental
Claims that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.


 


(ii)       Notice
of Certain Releases, Remedial Actions, Etc. Promptly, upon the occurrence
thereof, written notice describing in reasonable detail (a) any Release
required to be reported to any Government Authority under any applicable
Environmental Laws, (b) any remedial action taken by Company or any other
Person in response to (1) any Hazardous Materials Activities the existence of
which could reasonably be expected to result in one or more Environmental Claims
having, individually or in the aggregate, a Material Adverse Effect, or (2) any
Environmental Claims that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect, and (c) Company’s discovery
of any occurrence or condition on any real property adjoining or in the
vicinity of any Facility that could reasonably be expected to cause such
Facility or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability or use thereof under any Environmental
Laws which could reasonably be expected to result in a Material Adverse Effect.


 


(iii)      Written
Communications Regarding Environmental Claims, Releases, Etc. As soon as
practicable following the sending or receipt thereof by Company or any of its
Subsidiaries, a copy of any and all written non-privileged communications with
respect to (a) any Environmental Claims that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect, (b) any
Release required to be reported to any Government Authority, and (c) any
request for information from any Government Authority that suggests such
Government Authority is investigating whether Company or any of its
Subsidiaries may be potentially responsible for any Hazardous Materials
Activity which could reasonably be expected to result in a Material Adverse
Effect.


 


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(iv)      Notice
of Certain Proposed Actions Having Environmental Impact. Prompt written
notice describing in reasonable detail (a) any proposed acquisition of stock,
assets, or property by Company or any of its Subsidiaries that could reasonably
be expected to (1) expose Company or any of its Subsidiaries to, or result in,
Environmental Claims that could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect or (2) affect the
ability of Company or any of its Subsidiaries to maintain in full force and
effect all material Governmental Authorizations required under any
Environmental Laws for their respective operations and (b) any proposed action
to be taken by Company or any of its Subsidiaries to modify current operations
in a manner that could reasonably be expected to subject Company or any of its
Subsidiaries to any additional obligations or requirements under any
Environmental Laws that could reasonably be expected to result in, individually
or in the aggregate, a Material Adverse Effect.


 


B.        Company’s
Actions Regarding Hazardous Materials Activities, Environmental Claims and
Violations of Environmental Laws.


 


(i)        Remedial
Actions Relating to Hazardous Materials Activities. Company shall, in
compliance with all applicable Environmental Laws, promptly undertake, and
shall cause each of its Subsidiaries promptly to undertake, any and all
investigations, studies, sampling, testing, abatement, cleanup, removal,
remediation or other response actions necessary to remove, remediate, clean up
or abate any Hazardous Materials Activity on, under or about any Facility that
is a violation of any Environmental Laws or that presents a risk of giving rise
to an Environmental Claim which violation or risk, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.


 


(ii)       Actions
with Respect to Environmental Claims and Violations of Environmental Laws.
Company shall promptly take, and shall cause each of its Subsidiaries promptly
to take, any and all actions necessary to (i) cure any violation of applicable
Environmental Laws by Company or its Subsidiaries that could reasonably be
expected to result in, individually or in the aggregate, a Material Adverse
Effect and (ii) make an appropriate response to any Environmental Claim against
Company or any of its Subsidiaries and discharge any obligations it may have to
any Person thereunder where failure to do so could reasonably be expected to
result in, individually or in the aggregate, a Material Adverse Effect.


 


C.        Environmental
Review and Investigation. Company agrees that Administrative Agent may, from time to time
and in its reasonable discretion, retain, at Company’s expense, an independent
professional consultant to review any non-privileged environmental audits,
investigations, analyses and reports relating to Hazardous Materials prepared
by or for Company in the event (a) Administrative Agent reasonably believes
that Company has breached any representation, warranty or covenant contained in
subsection 5.6, 5.12, 6.6 or 6.7 as a result of a violation of Environmental
Laws at any Facility then owned, leased or operated by Company or its
Subsidiaries, or by Company or any of its Subsidiaries at any other location or
(b) an Event of Default has occurred and is continuing, and conduct its own
investigation of any Facility then owned, leased or operated by Company or its
Subsidiaries. For


 


88

















 


purposes of
conducting such a review and/or investigation, Company hereby grants to
Administrative Agent and its agents, employees, consultants and contractors the
right to enter into or onto any such Facilities and to perform such tests on
such property (including taking samples of soil, groundwater and suspected
asbestos-containing materials) as are reasonably necessary in connection
therewith, subject to any restrictions in applicable leases. Any such
investigation of any Facility shall be conducted, unless otherwise agreed to by
Company and Administrative Agent, during normal business hours and, to the
extent reasonably practicable, shall be conducted so as not to interfere with
the ongoing operations at such Facility or to cause any damage or loss to any
property at such Facility and shall be conducted by a qualified environmental
professional possessing reasonable levels of insurance. Company and
Administrative Agent hereby acknowledge and agree that any report of any
investigation conducted at the request of Administrative Agent pursuant to this
subsection 6.7C will be obtained and shall be used by Administrative Agent and
Lenders for the purposes of Lenders, internal credit decisions, to monitor
compliance with and to protect Lenders’ security interests, if any, created by
the Loan Documents. Administrative Agent agrees to deliver a copy of any such
report to Company with the understanding that Company acknowledges and agrees
that (x) it will indemnify and hold harmless Administrative Agent and each
Lender from any costs, losses or liabilities relating to Company’s use of or
reliance on such report, (y) neither Administrative Agent nor any Lender makes
any representation or warranty with respect to such report, and (z)  by delivering such report to Company,
neither Administrative Agent nor any Lender is requiring or recommending the
implementation of any suggestions or recommendations contained in such report.


 


6.8                 Execution of
Subsidiary Guaranty and Personal Property Collateral Documents After the
Closing Date.


 


A.        Execution
of Subsidiary Guaranty and Personal Property Collateral Documents. In the event that any Person becomes
a Subsidiary of Company after the date hereof, Company will promptly notify
Administrative Agent of that fact and cause any such Subsidiary that is
required to become a guarantor hereunder to execute and deliver to
Administrative Agent a counterpart of the Subsidiary Guaranty and Security Agreement
and to take all such further actions and execute all such further documents and
instruments (including actions, documents and instruments comparable to those
described in subsection 4.1G) as may be necessary or, in the reasonable opinion
of Administrative Agent, desirable to create in favor of Administrative Agent,
for the benefit of Lenders, a valid and perfected First Priority Lien on all of
the personal and mixed property assets of such Subsidiary described in the
applicable forms of Collateral Documents. In addition, as provided in the
Security Agreement, Company shall, or shall cause the Subsidiary that owns the
Capital Stock of such Person to, execute and deliver to Administrative Agent a
supplement to the Security Agreement and to deliver to Administrative Agent all
certificates representing such Capital Stock of such Person (accompanied by
irrevocable undated stock powers, duly endorsed in blank). Anything contained
herein to the contrary notwithstanding, the Collateral shall exclude those assets
as to which Administrative Agent shall reasonably determine that the costs of
obtaining a security interest are unreasonably excessive in relation to the
benefit to the Lenders of the security afforded thereby.


 


B.        Foreign
Subsidiaries.
Notwithstanding anything to the contrary in any Loan Document, (i) no Foreign
Subsidiary shall be required to guaranty the Obligations, (ii) no


 


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more than 65% of
the voting stock of any first-tier Foreign Subsidiary (and such stock shall not
represent more than 65% of the total combined voting power of all classes of
stock of such Subsidiary entitled to vote) shall be pledged to as security for
the Obligations, (iii) no Foreign Subsidiary shall be required to pledge as security
for the Obligations the stock of any other Foreign Subsidiary, and (iv) no
assets of any Foreign Subsidiary shall be pledged as security for the
Obligations.


 


C.        Subsidiary
Organizational Documents, Legal Opinions, Etc. Company shall within thirty (30) days
after the reasonable request therefor by Administrative Agent deliver to
Administrative Agent, together with such Loan Documents, (i) certified copies
of such Subsidiary’s Organizational Documents, together with, if such
Subsidiary is a Domestic Subsidiary, a good standing certificate from the
Secretary of State of the jurisdiction of its organization, (ii) a certificate
executed by the secretary or similar officer of such Subsidiary as to (a) the
fact that the attached resolutions of the Governing Body of such Subsidiary
approving and authorizing the execution, delivery and performance of such Loan
Documents are in full force and effect and have not been modified or amended
and (b) the incumbency and signatures of the officers of such Subsidiary executing
such Loan Documents, and (iii) if requested by Administrative Agent, an opinion
of counsel to such Subsidiary as to (a) the due organization and good standing
of such Subsidiary, (b) the due authorization, execution and delivery by such
Subsidiary of such Loan Documents, (c) the enforceability of such Loan
Documents against such Subsidiary and (d) such other matters (including matters
relating to the creation and perfection of Liens in any Collateral pursuant to
such Loan Documents) as Administrative Agent may reasonably request, all of the
foregoing to be reasonably satisfactory in form and substance to Administrative
Agent and its counsel.


 


6.9      Matters Relating to Additional Real
Property Collateral.


 


From and after the Closing Date, in the event that (i) Company or any
Subsidiary Guarantor acquires any fee interest in real property or any
Leasehold Property or (ii) at the time any Person becomes a Subsidiary
Guarantor, such Person owns or holds any fee interest in real property or any
Leasehold Property, excluding any such Real Property Asset the encumbrancing of
which requires the consent of any applicable lessor or then-existing senior
lien holder, where Company and its Subsidiaries have attempted in good faith,
but are unable, to obtain such lessor’s or senior lien holder’s consent (any
such non-excluded Real Property Asset described in the foregoing clause (i) or
(ii) being an “Additional Mortgaged Property”), Company or such Subsidiary
Guarantor shall deliver to Administrative Agent, as soon as practicable after
such Person acquires such Additional Mortgaged Property or becomes a Subsidiary
Guarantor, as the case may be, a fully executed and notarized Mortgage (an “Additional Mortgage”), in
proper form for recording in all appropriate places in all applicable
jurisdictions, encumbering the interest of such Loan Party in such Additional
Mortgaged Property; and such opinions, appraisals, documents, title insurance,
and environmental reports that would have been delivered on the Closing Date if
such Additional Mortgaged Property were a Closing Date Mortgaged Property or
that may be reasonably required by Administrative Agent.


 


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6.10    Interest Rate Protection.


 


On or before the date that is 90 days after the Closing Date, Company
shall enter into one or more Interest Rate Agreements with respect to the Term
Loans to the extent necessary to cause the portion of the principal amount of
the sum of the Senior Subordinated Notes and the Term Loans which is subject to
floating interest rate risk to equal 50% or less. Each such Interest Rate
Agreement shall be for a term of at least three years and in form and substance
reasonably satisfactory to Administrative Agent. Company shall maintain in
effect each such Interest Rate Agreement during its term.


 


6.11    Ratings.


 


Holdings shall use commercially reasonable efforts to maintain ratings
of the Loans by Moody’s and S&P.


 


6.12    Post Closing Matters.


 


To the extent not delivered on or prior to the Closing Date, Company
shall, and shall cause each of its Subsidiaries to, use commercially reasonable
efforts to deliver within 90 days after the Closing Date, for each Closing Date
Mortgaged Property consisting of a Leasehold Property, evidence that such
Leasehold Property is a Recorded Leasehold Interest.


 


6.13    Further Assurances.


 


Company and Holdings agree that from time to time, at Administrative
Agent’s reasonable request, Company and Holdings shall, and shall cause their
Subsidiaries to, at their expense, promptly execute and deliver, or cause to be
executed and delivered, all further agreements, documents and instruments, and
do or cause to be done all further acts as may be necessary or desirable, in
order to effectuate the Liens and security interests purported to be granted
pursuant to this Agreement and the other Loan Documents.


 


Section
7.     NEGATIVE COVENANTS


 


Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations (other than Unasserted Obligations) and the cancellation
or expiration of, or the provision for cash collateral or other support in a
manner reasonably satisfactory to the Issuing Lender in respect of, all Letters
of Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to, perform all
covenants in this Section 7.


 


7.1      Indebtedness.


 


Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur or assume, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:


 


(i)        the Obligations;


 


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(ii)       Contingent
Obligations permitted by subsection 7.4;


 


(iii)      Indebtedness
in respect of Capital Leases and purchase money obligations within the
limitations of subsection 7.2A(xii) aggregating not in excess of $15,000,000 at
any time outstanding;


 


(iv)      Indebtedness
of Company or any Subsidiary owing to Company or any Subsidiary in respect of
an Investment permitted by subsection 7.3(ii); provided that if such
intercompany Indebtedness is evidenced by a promissory note or other
instrument, such promissory note or instrument shall have been pledged to
Administrative Agent pursuant to the Security Agreement;


 


(v)       Indebtedness
described in Schedule 7.1 annexed hereto and any Permitted Refinancing
thereof;


 


(vi)      Indebtedness
evidenced by the Senior Subordinated Notes in an aggregate principal amount not
to exceed $151,000,000 and any Permitted Refinancing thereof; provided that the
terms of any such Permitted Refinancing shall be reasonably satisfactory to
Administrative Agent;


 


(vii)     Indebtedness
assumed in connection with a Permitted Acquisition and of a Person that becomes
a direct or indirect Subsidiary of Company as a result of a Permitted
Acquisition; provided that such Indebtedness is not created in anticipation of
such acquisition, and any Permitted Refinancing thereof;


 


(viii)    Indebtedness
of Foreign Subsidiaries in an aggregate principal amount at any time
outstanding for all such Persons taken together not exceeding $5,000,000;


 


(ix)       Indebtedness
(other than for borrowed money or with respect to Capital Leases or purchase
money obligations) subject to Liens permitted under subsection 7.2;


 


(x)        Indebtedness
representing deferred compensation to employees of Company or any of its
Subsidiaries incurred in the ordinary course of business or in connection with
the Acquisition or any Permitted Acquisitions;


 


(xi)       Indebtedness
consisting of promissory notes issued to future, present or former directors,
officers, members of management, employees or consultants of Holdings or any of
its Subsidiaries or their respective estates, heirs, family members, spouses or
former spouses to finance the purchase or redemption of Capital Stock of
Holdings or any of its direct or indirect parent companies;


 


(xii)      Cash
management obligations and other Indebtedness in respect of netting services,
overdraft protections and similar arrangements in each case in connection with
cash management and deposit accounts;


 


(xiii)     Indebtedness
consisting of the financing of insurance premiums, so long as the aggregate
amount payable pursuant to such Indebtedness does not materially exceed the
amount of the premium for such insurance;


 


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(xiv)    Subordinated
Indebtedness owed to the seller of any property acquired in a Permitted
Acquisition on an unsecured basis, which subordination shall be on terms
reasonably satisfactory to the Administrative Agent, so long as both
immediately prior and after giving effect thereto (1) no Event of Default shall
exist or result therefrom, (2) Company shall be in Pro Forma Compliance with
the covenants set forth in subsection 7.6 after giving effect to the issuance
of such Indebtedness; provided that the Consolidated Leverage Ratio, calculated
on a Pro Forma Basis, shall be lower by at least 0.25:1.00 than the
Consolidated Leverage Ratio then required pursuant to subsection 7.6B, and (3)
such Indebtedness does not amortize and matures no earlier than 180 days after
the later of the Revolving Loan Commitment Termination Date and the final
maturity date of any Term Loans;


 


(xv)     Subordinated
Indebtedness in an aggregate amount not to exceed $100,000,000, which
subordination shall be on terms reasonably satisfactory to the Administrative
Agent, provided that the Net Securities Proceeds of such Indebtedness are
utilized within 120 days of the incurrence thereof to finance a Permitted
Acquisition; provided that (1) the terms thereof are reasonably satisfactory to
the Administrative Agent, (2) no Event of Default shall exist or result
therefrom, (3) Company shall be in Pro Forma Compliance with the covenants set forth
in subsection 7.6A after giving effect to the issuance of such Indebtedness,
and any Permitted Refinancing thereof, and (4) such Indebtedness matures no
earlier than 180 days after the later of the Revolving Loan Commitment
Termination Date and the final maturity date of any Term Loans;


 


(xvi)    Subordinated
Indebtedness, which subordination shall be on terms reasonably satisfactory to
the Administrative Agent, provided that the Net Securities Proceeds of such
Indebtedness are utilized to make a voluntary prepayment of Term Loans;
provided, (1) the terms thereof are reasonably satisfactory to the
Administrative Agent, (2) no Event of Default shall exist or result therefrom,
and (3) such Indebtedness matures no earlier than 180 days after the later of
the Revolving Loan Commitment Termination Date and the final maturity date of
any Term Loans;


 


(xvii)   Indebtedness
of Canadian Subsidiaries in an aggregate principal amount not to exceed
$15,000,000 (or the Canadian dollar equivalent thereof) at any time outstanding,
which Indebtedness may be secured only by the assets of such Canadian
Subsidiaries; provided that (i) no Event of Default shall have occurred or be
continuing or shall result therefrom, (ii) such Indebtedness shall not be
guaranteed by Company or any Subsidiary Guarantor, (iii) Company shall make a
mandatory prepayment of the Term Loans pursuant to subsection 2.4B(iii)(d) in
an amount equal to the Net Securities Proceeds of such Indebtedness, and (iv)
such Indebtedness shall not reasonably be expected to have a Material Adverse
Effect on Company or any of its Subsidiaries;


 


(xviii) 
Indebtedness pursuant to the Pioneer Plastics Maine Guaranty;


 


(xix)     Other
Indebtedness in an aggregate principal amount not to exceed $7,500,000 at any
time outstanding; and


 


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(xx)      all
premiums (if any), interest (including post-petition interest), fees, expenses,
charges and additional or contingent interest on obligations described in
clauses (i) through (xvii).


 


7.2      Liens
and Related Matters.


 


A.        Prohibition
on Liens. Company
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume or permit to exist any Lien on or with
respect to any property or asset of any kind, whether now owned or hereafter
acquired, except:


 


(i)        Liens
for taxes, assessments or governmental charges or claims the payment of which
is not, at the time, required by subsection 6.3;


 


(ii)       statutory
Liens of landlords, Liens of collecting banks under the UCC on items in the
course of collection, statutory Liens and other Liens arising as a matter of
law (including rights of set-off of banks, statutory Liens of carriers,
warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens
imposed by law), in each case incurred in the ordinary course of business (a)
for amounts not overdue by more than 30 days or if more than 30 days overdue
that are being contested in good faith by appropriate proceedings, so long as
(1) such adequate reserves with respect thereto are maintained in accordance
with GAAP, and (2) in the case of a Lien with respect to any portion of the
Collateral, such contest proceedings operate to stay the sale of any portion of
the Collateral on account of such Lien or (b) with respect to which the failure
to make payment could not reasonably be expected to have a Material Adverse
Effect;


 


(iii)      pledges
or deposits made in the ordinary course of business in connection with (a)
workers’ compensation, unemployment insurance and other types of social
security, (b) to secure the performance of statutory obligations, bids, leases,
government contracts, trade contracts, and other similar obligations (exclusive
of obligations for the payment of borrowed money), (c) securing insurance
premiums or reimbursement obligations under insurance policies, (d) surety,
stay, customs and appeal bonds, performance bonds, performance and completion
guarantee and other obligations of a similar nature, and (e) obligations in
respect of Letters of Credit or bank guarantees that have been posted to
support payment of the items in clauses (a), (b), (c) and (d) of this
subsection 7.2A(iii);


 


(iv)      any
attachment or judgment Lien not constituting an Event of Default under
subsection 8.8;


 


(v)       (a)
licenses, sublicenses, leases or subleases granted to other Persons not
interfering in any material respect with the ordinary conduct of the business
of Company or any of its material Subsidiaries or (b) the rights reserved or
vested in any Person by the terms of any lease, license, franchise, grant or
permit held by Company or any of its Subsidiaries or by a statutory provision,
to terminate any such lease, license, franchise, grant or permit, or to require
annual or periodic payments as a condition to the continuance thereof;


 


94

















 


(vi)      easements,
rights-of-way, restrictions, encroachments, and other minor defects or
irregularities in title, in each case which do not interfere in any material
adverse respect with the ordinary conduct of the business of Company or any of
its Subsidiaries;


 


(vii)     any (a)
interest or title of a lessor or sublessor under any lease not prohibited by
this Agreement, (b) Lien or restriction that the interest or title of such
lessor or sublessor may be subject to, or (c) subordination of the interest of
the lessee or sublessee under such lease to any Lien or restriction referred to
in the preceding clause (b), so long as the holder of such Lien or restriction
agrees to recognize the rights of such lessee or sublessee under such lease;


 


(viii)    Liens
arising from filing UCC financing statements relating solely to leases not
prohibited by this Agreement;


 


(ix)       Liens
in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;


 


(x)        any
zoning or similar law or right reserved to or vested in any Government
Authority to control or regulate the use of any real property;


 


(xi)       Liens
securing obligations (other than obligations representing Indebtedness for
borrowed money) under operating, reciprocal easement or similar agreements
entered into in the ordinary course of business of Company and its
Subsidiaries;


 


(xii)      Liens
on any asset existing at the time of acquisition of such asset, or Liens to
secure the payment of all or any part of the purchase price of an asset upon
the acquisition of such asset by Company or a Subsidiary or to secure any
Indebtedness permitted hereby incurred at the time of or within 270 days after
the acquisition, construction or improvement of such asset, which Indebtedness
is incurred for the purpose of financing all or any part of the purchase price
or cost thereof; provided, however, that the Lien shall apply only to the asset
so acquired and proceeds and products thereof, and after-acquired property
subjected to a Lien pursuant to terms existing at the time of such acquisition;
provided further that individual financings provided by one Person may be
cross-collateralized to other financings provided by such Person or its
Affiliate, and any modifications, replacements, renewals or extensions thereof;
provided that (a) the Lien does not extend to any additional property other
than (1) after-acquired property that is affixed or incorporated into the
property covered by such Lien or financed by Indebtedness permitted under
subsection 7.1, (2) proceeds and products thereof, and (3) property serving as
collateral for a financing which is cross-collateralized to the financing
secured by such Lien provided by the same Person or its Affiliate, and (b) the
modification, replacement, renewal, extension or refinancing of the obligations
secured or benefited by such Liens (if such obligations constitute
Indebtedness) is permitted by subsection 7. 1 or subsection 7.4;


 


95

















 


(xiii)     Liens
assumed in connection with a Permitted Acquisition and Liens on assets of a
Person that becomes a direct or indirect Subsidiary of Company after the date
of this Agreement in a Permitted Acquisition, provided, however, that such
Liens exist at the time such Person becomes a Subsidiary and are not created in
anticipation of such acquisition and any modifications, replacements, renewals
or extensions thereof; provided that (a) the Lien does not extend to any
additional property other than (1) after-acquired property that is affixed or
incorporated into the property covered by such Lien or financed by Indebtedness
permitted under subsection 7.1, (2) proceeds and products thereof, and (3)
property serving as collateral for a financing which is cross-collateralized to
the financing secured by such Lien provided by the same Person or its
Affiliate, and (b) the modification, replacement, renewal, extension or
refinancing of the obligations secured or benefited by such Liens (if such
obligations constitute Indebtedness) is permitted by subsection 7.1 or
subsection 7.4;


 


(xiv)    Liens
described in Schedule 7.2 annexed hereto and any modifications,
replacements, renewals or extension thereof; provided that (a) the Lien does
not extend to any additional property other than (1) after-acquired property
that is affixed or incorporated into the property covered by such Lien or
financed by Indebtedness permitted under subsection 7.1, (2) proceeds and
products thereof, and (3) property serving as collateral for a financing which
is cross-collateralized to the financing secured by such Lien provided by the
same Person or its Affiliate, and (b) the modification, replacement, renewal,
extension or refinancing of the obligations secured or benefited by such Liens
(if such obligations constitute Indebtedness) is permitted by subsection 7.1 or
subsection 7.4;


 


(xv)     Liens
(a)(1) on advances of Cash or Cash Equivalents in favor of the seller of any
property to be acquired in an Investment permitted pursuant to subsection 7.3
to be applied against the purchase price for such Investment and (2) consisting
of an agreement to dispose of any property in a disposition of assets permitted
under subsection 7.7, in each case under this clause (a), solely to the extent
such Investment or disposition, as the case may be, would have been permitted
on the date of the creation of such Lien and (b) on earnest money deposits of
Cash or Cash Equivalents made by Company or any of the Subsidiaries in
connection with any letter of intent or purchase agreement permitted hereunder;


 


(xvi)    Liens on
property of any Foreign Subsidiary securing Indebtedness of such Foreign
Subsidiary permitted under subsection 7.1;


 


(xvii)   Liens in
favor of Company or any of its Domestic Subsidiaries securing Indebtedness of a
Foreign Subsidiary permitted under subsection 7. l(iv);


 


(xviii)  Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for sale of goods entered into by Company or any of the
Subsidiaries in the ordinary course of business and not prohibited by this
Agreement;


 


(xix)     Liens
that are contractual rights of set-off (a) relating to the establishment of
depository relations with banks not given in connection with the


 


96

















 


issuance of
Indebtedness (other than as described in clause (v) of the definition thereof),
(b) relating to pooled deposit or sweep accounts of Company or any Subsidiary
to permit satisfaction of overdraft or similar obligations incurred in the
ordinary course of business of Company and its Subsidiaries or (c) relating to
purchase orders and other agreements entered into with customers of Company or
any Subsidiary in the ordinary course of business;


 


(xx)      Liens
encumbering reasonable customary initial deposits and margin deposits and
similar Liens attaching to commodity trading accounts or other brokerage
accounts incurred in the ordinary course of business and not for speculative
purposes.


 


(xxi)     Liens
pursuant to the Loan Documents; and


 


(xxii)    Other
Liens securing Indebtedness in an aggregate amount not to exceed $2,500,000 at
any time outstanding.


 


Notwithstanding the foregoing, Company and its Domestic Subsidiaries
shall not enter into, or suffer to exist, any tri-patty agreement which grants
“control” as contemplated by the UCC except with respect to restricted accounts
established for the purposes of granting Liens otherwise permitted hereby.


 


B.        No
Further Negative Pledges. Neither Company nor any of its
Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired, to secure Indebtedness under this Agreement, other than
(i) the Senior Subordinated Note Indenture or any agreement prohibiting only
the creation of Liens securing Subordinated Indebtedness, (ii) any agreement
evidencing Indebtedness secured by Liens permitted by subsection 7.2A, as to
the assets securing such Indebtedness, (iii) any agreement evidencing an asset
sale, as to the assets being sold, (iv) (a) any agreements which exist on the
date hereof and (to the extent not otherwise permitted by this subsection 7.2B
are listed on Schedule 7.2 hereto) and (b) to the extent agreements permitted
by clause (a) are set forth in an agreement evidencing Indebtedness, are set
forth in any agreement evidencing any permitted modification, replacement,
renewal or extension thereof so long as such modification, replacement, renewal
or extension does not expand the scope of the restrictions; (v) any agreement
binding on a Subsidiary at the time such Subsidiary first becomes a Subsidiary
of Company, so long as such agreement was not entered into in contemplation of
such Person becoming a Subsidiary of Company; (vi) any agreement representing
Indebtedness of a Subsidiary which is not a Loan Party which is permitted by
subsection 7.1; (vii) customary provisions in Joint Venture agreements and
other similar agreements applicable to Joint Ventures permitted under
subsection 7.3 and applicable solely to such Joint Venture; (viii) negative
pledges and restrictions on Liens in favor of any holder of Indebtedness
permitted under subsection 7.1 but solely to the extent any negative pledge
relates to the property financed by or the subject of such Indebtedness or that
expressly permits Liens for the benefit of Administrative Agent and the Lenders
with respect to the credit facilities established hereunder and the Obligations
under the Loan Documents on a senior basis without the requirement that such
holders of such Indebtedness be secured by such Liens on an equal and ratable,
or junior, basis; (ix) customary restrictions in leases, subleases, licenses or
asset sale agreements otherwise permitted hereby so long as such restrictions
relate to the assets subject


 


97

















 


thereto; (x)
customary provisions restricting subletting or assignment of any lease
governing a leasehold interest; or (xi) customary provisions restricting
assignment or transfer of any agreement entered into in the ordinary course of
business.


 


C.        No
Restrictions on Subsidiary Distributions to Company or Other Subsidiaries. Company
will not, and will not permit any of its Subsidiaries to, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary to (i) pay dividends
or make any other distributions on any of such Subsidiary’s Capital Stock owned
by Company or any other Subsidiary of Company, (ii) repay or prepay any
Indebtedness owed by such Subsidiary to Company or any other Domestic
Subsidiary of Company, (iii) make loans or advances to Company or any other
Domestic Subsidiary of Company, or (iv) transfer any of its property or assets
to Company or any other Domestic Subsidiary of Company, except (a) as provided
in this Agreement, .(b) as may be provided in an agreement with respect to a
sale of such assets or such Subsidiary, (c) as provided in any agreement evidencing
Indebtedness secured by Liens permitted by subsection 7.2A, as to the assets
securing such Indebtedness, and (d) as provided in (1) (a) any agreements which
exist on the date hereof and (to the extent not otherwise permitted by this
subsection 7.2C are listed on Schedule 7.2 hereto) and (b) to the extent
agreements permitted by clause (a) are set forth in an agreement evidencing
Indebtedness, are set forth in any agreement evidencing any permitted
modification, replacement, renewal or extension thereof so long as such
modification, replacement, renewal or extension does not expand the scope of
the restrictions; (2) any agreement binding on a Subsidiary at the time such
Subsidiary first becomes a Subsidiary of Company, so long as such agreement was
not entered into in contemplation of such Person becoming a Subsidiary of
Company; (3) any agreement representing Indebtedness of a Subsidiary which is
not a Loan Party which is permitted by subsection 7.1; (4) customary provisions
in Joint Venture agreements and other similar agreements applicable to Joint
Ventures permitted under subsection 7.3 and applicable solely to such Joint
Venture; (5) negative pledges and restrictions on Liens in favor of any holder
of Indebtedness permitted under subsection 7.1 but solely to the extent any
negative pledge relates to the property financed by or the subject of such
Indebtedness or that expressly permits Liens for the benefit of Administrative
Agent and the Lenders with respect to the credit facilities established hereunder
and the Obligations under the Loan Documents on a senior basis without the
requirement that such holders of such Indebtedness be secured by such Liens on
an equal and ratable, or junior, basis; (6) customary restrictions in leases,
subleases, licenses or asset sale agreements otherwise permitted hereby so long
as such restrictions relate to the assets subject thereto; (7) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest; or (8) customary provisions restricting assignment or
transfer of any agreement entered into in the ordinary course of business.


 


7.3        Investments;
Acquisitions.


 


Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person except:


 


(i)        Investments in Cash and
Cash Equivalents;


 


98

















 


(ii)       Investments
(a) by any Loan Party in any other Loan Party, (b) by any Subsidiary that is
not a Loan Party in any Loan Party or in any other Subsidiary that is also not
a Loan Party or (c) by any Loan Party in any Subsidiary that is not a Loan
Party in an aggregate amount not to exceed $7,500,000 at any time outstanding;


 


(iii)      loans
or advances to officers, directors, members of management, and employees of
Holdings, Company or any of its Subsidiaries (a) for relocation and analogous
ordinary business purposes, or (b) in connection with such Person’s purchase of
Capital Stock of Holdings or its direct or indirect parent (or after the occurrence
of a Qualifying IPO, of the Qualifying IPO Issuer) in an aggregate amount not
to exceed $1,000,000 at any time outstanding;


 


(iv)      Investments
consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course
of business, and Investments received in satisfaction or partial satisfaction
thereof from account debtors and other credits to suppliers in the ordinary
course of business;


 


(v)       Investments
consisting of Indebtedness, Liens, Contingent Obligations, Restricted Junior
Payments, fundamental changes and dispositions of assets permitted by
subsections 7.1, 7.2, 7.4, 7.5 and 7.7, respectively;


 


(vi)      Investments
in Hedge Agreements required under subsection 6.10 or otherwise entered into in
the ordinary course of business for the purpose of hedging against any Loan
Party’s risk related to fluctuations in interest rates, currency values or
commodity prices and not for speculative purposes;


 


(vii)     Investments
in the ordinary course of business consisting of (a) endorsements for
collection or deposit or (b) customary trade arrangements with customers;


 


(viii)    loans
and advances to Holdings in lieu of, and not in excess of the amount of (after
giving effect to any other loans, advances or Restricted Junior Payments in
respect thereof), Restricted Junior Payments permitted to be made to Holdings
in accordance with subsection 7.5;


 


(ix)       advances
of payroll payments to employees in the ordinary course of business;


 


(x)        Investments
to the extent the consideration paid therefor consists solely of Capital Stock
of Holdings;


 


(xi)       Investments
consisting of promissory notes issued to any Loan Party by future, present or
former officers, directors and employees, members of management, or consultants
of Holdings or any of its Subsidiaries or their respective estates, heirs,
family members, spouses or former spouses to finance the purchase or redemption
of Capital Stock of Holdings or its direct or indirect parent (or, after the
occurrence of a


 


99

















 


Qualifying IPO, of
the Qualifying IPO Issuer), to the extent the applicable Restricted Junior
Payment is permitted by subsection 7.5;


 


(xii)      consummation
of the Acquisition in accordance with the terms and conditions of the
Acquisition Agreement and the Panolam Industries Holdings Merger Agreement;


 


(xiii)     Consolidated
Capital Expenditures permitted by subsection 7.8;


 


(xiv)    Investments
owned on the Closing Date and described in Schedule 7.3 annexed hereto
and any modification, replacement, renewal or extension thereof; provided that
the amount of the original Investment is not increased except by the terms of
such Investment or as otherwise permitted by this subsection 7.3;


 


(xv)     acquisition
of assets (including Capital Stock and including Capital Stock of Subsidiaries
formed in connection with any such acquisition) having a fair market value not
in excess of $125,000,000 in the aggregate; provided that (a) no
Potential Event of Default or Event of Default shall have occurred and be
continuing at the time such acquisition occurs or after giving effect thereto,
(b) Company shall, and shall cause its Subsidiaries to, comply with the
requirements of subsections 6.8 and 6.9 with respect to such acquisition if it
results in a Person becoming a Subsidiary, (c) Company shall have demonstrated
that, after giving effect to such acquisition and any Indebtedness to be
incurred in connection therewith, (1) it shall be in Pro Forma Compliance with
the financial covenants set forth in subsection 7.6 and (2) its Consolidated
Leverage Ratio will not be in excess of 5.75:1.00, (d) after giving effect to
such acquisition, Company shall be in compliance with the terms of subsection
7.11, and (e) as a result of such acquisition, Company shall not assume or
become liable for Contingent Obligations that could reasonably be expected to
have a Material Adverse Effect;


 


(xvi)    Company
and its Domestic Subsidiaries may make and own other Investments in an
aggregate amount not to exceed at any time $5,000,000;


 


(xvii)   receipt
and possession of promissory notes and other non-cash consideration received in
connection with any Asset Sale permitted by subsection 7.7; and


 


(xviii) 
acquisition of Securities in connection with the satisfaction or enforcement of
Indebtedness or claims due or owing to Company or any of its Subsidiaries or as
security for any such Indebtedness or claim.


 


7.4      Contingent Obligations.


 


Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:


 


(i)        Contingent
Obligations under Hedge Agreements required under subsection 6.10 or otherwise
entered into in the ordinary course of business for the


 


100

















 


purpose of hedging
against any Loan Party’s risk related to fluctuations in interest rates,
currency values or commodity prices and not for speculative purposes;


 


(ii)       Contingent
Obligations in respect of customary indemnification and purchase price
adjustment obligations incurred in connection with Asset Sales or other sales
of assets and Permitted Acquisitions;


 


(iii)      Contingent
Obligations under guarantees in the ordinary course of business;


 


(iv)      Contingent
Obligations in respect of any Indebtedness of Company or any of its
Subsidiaries permitted by subsection 7.1;


 


(v)       Contingent
Obligations described in Schedule 7.4 annexed hereto and any Permitted
Refinancing thereof;


 


(vi)      Contingent
Obligations arising under the subordinated guaranties of the Senior
Subordinated Notes and Subordinated Indebtedness permitted under subsection
7.1;


 


(vii)     Contingent
Obligations consisting of take or pay obligations contained in supply
agreements, in each case incurred in the ordinary course of business;


 


(viii)    obligations
in respect of performance, stay, customs, appeal and surety bonds and
performance and completion guarantees provided by Company or its Subsidiaries;


 


(ix)       Contingent
Obligations constituting reimbursement obligations with respect to letters of
credit issued in the ordinary course in respect of workers’ compensation,
unemployment insurance and other types of social security, to secure the
performance of statutory obligations, bids, leases, government contracts, trade
contracts and other similar obligations, securing insurance premiums or
reimbursement obligations, surety, stay, customs and appeal bonds, performance
bonds, performance and completion guarantees and other obligations of a similar
nature; provided that upon the drawing of such letters of credit or the
incurrence of such Indebtedness, such obligations are reimbursed within 30 days
following such drawing or incurrence;


 


(x)        Contingent
Obligations constituting Indebtedness permitted by subsection 7.1;


 


(xi)       Guarantees
by Company or its Subsidiaries of leases or of other obligations of Loan
Parties that do not constitute Indebtedness, in each case entered into in the
ordinary course of business; and


 


(xii)      Company
and its Domestic Subsidiaries may become and remain liable with respect to
other Contingent Obligations; provided that the maximum aggregate liability,
contingent or otherwise, of Company and its Subsidiaries in respect of all such


 


101














 


Contingent
Obligations, when added to the aggregate principal amount of Indebtedness
permitted under subsection 7.1(xix), shall at no time exceed $7,500,000.


 


7.5      Restricted Junior Payments.


 


Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that:


 


(i)        Company
may make scheduled payments of principal in respect of the Senior Subordinated
Notes in accordance with the terms of, but only to the extent required by, and
subject to the subordination provisions contained in, the Senior Subordinated
Note Indenture;


 


(ii)       Company
may make regularly scheduled payments of interest in respect of any
Subordinated Indebtedness in accordance with the terms of, and only to the
extent required by, and subject to the subordination provisions contained in,
the indenture or other agreement pursuant to which such Subordinated
Indebtedness was issued;


 


(iii)      Company
may refinance any Subordinated Indebtedness with Net Securities Proceeds (a) to
the extent not required to prepay any Loans pursuant to subsection 2.4B(iii)(c)
and (b) any Permitted Refinancing thereof incurred in accordance with
subsection 7.1;


 


(iv)      Company
may convert any Subordinated Indebtedness to Capital Stock;


 


(v)       Company
may make Restricted Junior Payments to Holdings (a) so long as no Event of
Default or Potential Event of Default shall have occurred and be continuing or
shall be caused thereby, in an aggregate amount not to exceed $1,000,000 in any
Fiscal Year, to the extent necessary to permit Holdings to pay overhead and
general administrative costs and expenses (including, without limitation,
customary salary, bonus and other benefits payable to directors, officers and
employees of Holdings), (b) so long as no Event of Default or Potential Event
of Default shall have occurred and be continuing or shall be caused thereby, in
an aggregate amount not to exceed $2,000,000 in any Fiscal Year, to the extent
necessary to permit Holdings to repurchase (or to make a Restricted Junior
Payment to Holdings’ direct or indirect parent to repurchase) shares of Capital
Stock (or options or warrants to acquire Capital Stock) from any future,
present or former director, officer, member of management, employee or
consultant of Holdings or any of its Subsidiaries (or the estate, heirs, family
members, spouse or former spouse of any of the foregoing); provided that the
aggregate unused amounts in any Fiscal Year may be carried over to the next succeeding
Fiscal Year so long as the total aggregate amount permitted in any Fiscal Year,
after giving effect to such carryover, does not exceed $4,000,000; (c) to the
extent necessary to permit Holdings to discharge the consolidated tax
liabilities of Holdings and its Subsidiaries, in each case so long as Holdings
applies the amount of any such Restricted Junior Payment for such purpose (or
to make a Restricted Junior Payment to its direct or


 


102

















 


indirect parent to
enable it to make such payment so long as the amount is applied for such
purpose), (d) to the extent permitted pursuant to clauses (ii), (iii), (iv) or
(x) of subsection 7.9, (e) the proceeds of which shall be used by Holdings to
pay customary indemnification claims made by directors, officers, members of
management, employees or consultants of Holdings attributable to the ownership
or operations of Company and its Subsidiaries; (f) the proceeds of which shall
be used by Holdings to pay franchise or similar taxes and other similar fees,
taxes and expenses required to maintain Holdings’ corporate existence (or to
make a Restricted Junior Payment to its direct or indirect parent to enable it
to make such payment so long as the amount is applied for such purpose); (g) to
finance any Investment permitted to be made pursuant to subsection 7.3;
provided that (A) such Restricted Junior Payment shall be made substantially
concurrently with the closing of such Investment and (B) Holdings shall,
immediately following the closing thereof, cause (1) all property acquired
(whether assets or Capital Stock) to be contributed to Company or one of its
Subsidiaries or (2) the merger (to the extent permitted in subsection 7.7) of
the Person formed or acquired into Company or one or more of its Subsidiaries
in order to consummate such Investment; (h) the proceeds of which shall be used
by Holdings to pay fees and expenses related to any unsuccessful equity or debt
offering permitted by this Agreement; and (i) the proceeds of which shall be
used to (or to make Restricted Junior Payments to Holdings’ direct or indirect
parent to enable it to) make cash payments in lieu of issuing fractional shares
in connection with the exercise of warrants, options or other securities convertible
into or exchangeable for Capital Stock of Holdings (or such parent) or its
Subsidiaries;


 


(vi)      each
Subsidiary may make Restricted Junior Payments to Company and to any other
Subsidiary (and, in the case of a Restricted Junior Payment by a non-wholly
owned Subsidiary, to (a) Company or another Subsidiary and (b) each other owner
of Capital Stock of such Restricted Subsidiary based on their relative
ownership interests);


 


(vii)     to the
extent constituting Restricted Junior Payments, Company and its Subsidiaries
may enter into transactions expressly permitted by subsection 7.7 or 7.9;


 


(viii)    Company
or its Subsidiaries may make repurchases of Capital Stock deemed to occur upon
exercise of stock options or warrants if such Capital Stock represents a portion
of the exercise price of such options or warrants;


 


(ix)       from
and after a Qualifying IPO of Company, Company may make the Restricted Junior
Payments permitted to be made by Holdings under this subsection 7.5;


 


(x)        Company
and its Subsidiaries may declare and make dividend payments or other
distributions payable solely in the Capital Stock of such Person; and


 


(xi)       Company
may make Restricted Junior Payments in an aggregate amount not exceeding at any
time the portion of the aggregate Consolidated Excess Cash Flow for all Fiscal
Years after Fiscal Year 2005 that is not required to prepay any Loans pursuant
to subsection 2.4B(iii)(e); provided that Company shall have demonstrated that,
after giving effect to such Restricted Junior Payment and any Indebtedness to
be


 


103

















 


incurred in
connection therewith, its Consolidated Leverage Ratio as of the most recently
ended Fiscal Quarter would not be in excess of 3.75:1.00.


 


7.6      Financial Covenants.


 


A.        Minimum
Interest Coverage  Ratio.
Company shall not permit the ratio of (i) Consolidated EBITDA to (ii)
Consolidated Cash Interest Expense for any four-Fiscal Quarter period ending as
of the last day of any Fiscal Quarter set forth below, to be less than the
correlative ratio indicated:


 


	
  Period

  	
   

  	
  Minimum Interest

  Coverage Ratio

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2005

  	
   

  	
  1.70:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2006

  	
   

  	
  1.75:1.00

  	
   

  
	
  2nd Fiscal Quarter of Fiscal Year 2006

  	
   

  	
  1.75:1.00

  	
   

  
	
  3rd Fiscal Quarter of Fiscal Year 2006

  	
   

  	
  1.75:1.00

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2006

  	
   

  	
  1.75:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  1.90:1.00

  	
   

  
	
  2nd Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  1.90:1.00

  	
   

  
	
  3rd Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  1.90:1.00

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  1.90:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2008

  	
   

  	
  2.00:1.00

  	
   

  
	
  2nd Fiscal Quarter of Fiscal Year 2008

  	
   

  	
  2.00:1.00

  	
   

  
	
  3rd Fiscal Quarter of Fiscal Year 2008

  	
   

  	
  2.00:1.00

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2008

  	
   

  	
  2.00:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2009

  	
   

  	
  2.25:1.00

  	
   

  
	
  2nd Fiscal Quarter of Fiscal Year 2009

  	
   

  	
  2.25:1.00

  	
   

  
	
  3rd Fiscal Quarter of Fiscal Year 2009

  	
   

  	
  2.25:1.00

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2009

  	
   

  	
  2.25:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2010
  and each Fiscal Quarter thereafter

  	
   

  	
  2.50:1.00

  	
   

  



 


B.        Maximum
Leverage Ratio. Company shall not permit the Consolidated
Leverage Ratio as of the last day of any Fiscal Quarter set forth below to
exceed the correlative ratio indicated:


 


104

















 


	
  Period

  	
   

  	
  Maximum Leverage Ratio

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2005

  	
   

  	
  6.00:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2006

  	
   

  	
  6.00:1.00

  	
   

  
	
  2nd Fiscal Quarter of Fiscal Year 2006

  	
   

  	
  6.00:1.00

  	
   

  
	
  3rd Fiscal Quarter of Fiscal Year 2006

  	
   

  	
  6.00:1.00

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2006

  	
   

  	
  6.00:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  5.50:1.00

  	
   

  
	
  2nd Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  5.50:1.00

  	
   

  
	
  3rd Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  5.50:1.00

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2007

  	
   

  	
  5.50:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2008

  	
   

  	
  5.00:1.00

  	
   

  
	
  2nd Fiscal Quarter of Fiscal Year 2008

  	
   

  	
  5.00:1.00

  	
   

  
	
  3rd Fiscal Quarter of Fiscal Year 2008

  	
   

  	
  5.00:1.00

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2008

  	
   

  	
  5.00:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2009

  	
   

  	
  4.50:1.00

  	
   

  
	
  2nd Fiscal Quarter of Fiscal Year 2009

  	
   

  	
  4.50:1.00

  	
   

  
	
  3rd Fiscal Quarter of Fiscal Year 2009

  	
   

  	
  4.50:1.00

  	
   

  
	
  4th Fiscal Quarter of Fiscal Year 2009

  	
   

  	
  4.50:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1st Fiscal Quarter of Fiscal Year 2010
  and each Fiscal Quarter thereafter

  	
   

  	
  4.00:1.00

  	
   

  



 


7.7      Restriction on Fundamental Changes;
Asset Sales.


 


A.        Fundamental
Changes. Company shall not, and shall not permit any of its
Subsidiaries to, enter into any transaction of merger or consolidation, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), except:


 


(i)        any
Subsidiary may merge or consolidate with or liquidate into (a) Company
(including a merger, the purpose of which is to reorganize Company into a new
jurisdiction); provided that Company shall be the continuing or surviving
Person, or the continuing or surviving Person shall expressly assume the
obligations of the Company under the Loan Documents in a manner reasonably
acceptable to Administrative Agent, or (b) any one or more other Subsidiaries;
provided that when any such Subsidiary that is a Loan Party is merging with
another Subsidiary, (1) a Loan Party shall be the continuing or surviving
Person or (2) to the extent constituting an Investment, such Investment must be
an Investment permitted by subsection 7.3;


 


(ii)       so
long as no Event of Default exists or would result therefrom, Company or any
Subsidiary may merge with any other Person in order to effect an Investment
permitted pursuant to subsection 7.3; provided that (a) if the continuing or
surviving Person is a Subsidiary, such Subsidiary shall have complied with the
requirements of subsections 6.8 and 6.9, (b) to the extent constituting an
Investment, such Investment must be permitted under subsection 7.3  and (c) if Company is a party thereto,
Company shall be the continuing or surviving Person or the continuing or


 


105

















 


surviving Person
shall expressly assume the obligations of the Company under the Loan Documents
in a manner reasonably acceptable to Administrative Agent;


 


(iii)      any
Subsidiary of Company may consummate a merger, dissolution, liquidation,
consolidation or winding up, the purpose of which is to effect an Asset Sale
permitted pursuant to subsection 7.7B; and


 


(iv)      Company
may merge with one of its Subsidiaries for the purpose of effecting an
Investment permitted pursuant to subsection 7.3; provided that Company shall be
the continuing or surviving Person or the continuing or surviving Person shall
expressly assume the obligations of the Company under the Loan Documents in a
manner reasonably acceptable to Administrative Agent.


 


B.        Asset
Sales. Company shall not, and shall not permit any of its
Subsidiaries to, make any Asset Sale, except:


 


(i)        sales
of inventory in the ordinary course of business;


 


(ii)       sales
or other dispositions of Cash Equivalents;


 


(iii)      sales,
assignments, transfers or dispositions of accounts in the ordinary course of
business for purposes of collection;


 


(iv)      sales
of assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $1,000,000 or
less; provided that the consideration received for such assets is in an amount
at least equal to the fair market value thereof;


 


(v)       dispositions
of obsolete, worn out or surplus property or property no longer useful in the
business of Company and its Subsidiaries in the ordinary course of business;


 


(vi)      Asset
Sales having a fair market value not in excess of $5,000,000 in any Fiscal
Year; provided that (a) the consideration received for such assets shall be in
an amount at least equal to the fair market value thereof; (b) at least 80% of
the consideration received shall be Cash or Cash Equivalents; (c) no Potential
Event of Default or Event of Default shall have occurred or be continuing after
giving effect thereto; and (d) the proceeds of such Asset Sales shall be
applied as required by subsection 2.4B(iii)(a) or subsection 2.4D;


 


(vii)     in
order to resolve disputes that occur in the ordinary course of business,
Company and its Subsidiaries may discount or otherwise compromise for less than
the face value thereof, notes or accounts receivable;


 


(viii)    Company
or a Subsidiary may sell or dispose of shares of Capital Stock of any of its
Subsidiaries in order to qualify members of the Governing Body of the
Subsidiary if required by applicable law.


 


106

















 


(ix)       the
Acquisition may occur in accordance with the terms and conditions of the
Acquisition Agreement and the Panolam Industries Holdings Merger Agreement;


 


(x)        any
Foreign Subsidiary may from time to time sell U.S. Dollar-denominated accounts
receivable to Company or a Domestic Subsidiary so long as (1) such accounts
receivable are, in the good faith judgment of the management of Company,
collectable in accordance with their terms and sold for a purchase price not
exceeding the face amount thereof (without giving effect to any write down or
write off thereof) and (2) the aggregate uncollected face amount of such
accounts receivable purchased by Company or a Subsidiary Guarantor does not
exceed $6,000,000 at any time outstanding;


 


(xi)       Assets
Sales of tangible property to the extent that (i) such property is exchanged
for credit against the purchase price of similar replacement property or (ii)
the proceeds of such Assets Sale are promptly applied to the purchase price of
such replacement property;


 


(xii)      Asset Sales by Company or any Subsidiary to Company or any
Subsidiary (including any Asset Sale effected pursuant to a merger,
consolidation, liquidation or dissolution); provided that if the transferor of
such property is a Loan Party (a) the transferee thereof must either be a Loan
Party or (b) to the extent such transaction constitutes an Investment, such
transaction is permitted under subsection 7.3;


 


(xiii)     Asset
Sales by Company or its Subsidiaries of property pursuant to sale-leaseback
transactions; provided that (a) the fair market value of all property so
disposed of shall not exceed $5,000,000 from and after the Closing Date and (b)
the purchase price for such property shall be paid to Company or its
Subsidiaries for not less than 75% cash consideration;


 


(xiv)     leases, subleases, licenses or sublicenses of property in the
ordinary course of business and which do not materially interfere with the
business of Company and its Subsidiaries;


 


(xv)      transfers of property subject to any casualty or condemnation
or eminent domain (or deed in lieu thereof) upon receipt of the Net
Insurance/Condemnation Proceeds of such event;


 


(xvi)    Asset Sales in the ordinary course of business consisting of the
abandonment of intellectual property rights which, in the reasonable good faith
determination of Company, are not material to the conduct of the business of
Company and its Subsidiaries;


 


(xvii)   Asset Sales of Investments in Joint Ventures
to the extent required by, or made pursuant to buy/sell arrangements between
the joint venture parties set forth in, joint venture arrangements and similar
binding arrangements;


 


107

















 


(xviii)   Asset
Sales by any Subsidiary of all or substantially all of its assets (upon
voluntary liquidation or otherwise) to Company or to another Subsidiary;
provided that (i) if the transferor in such a transaction is a Guarantor, then
the transferee must either be Company or a Guarantor or (ii) to the extent
constituting an Investment, such Investment must be an Investment permitted by
subsection 7.3;


 


(xix)     voluntary
terminations of Hedge Agreements; and


 


(xx)      Asset
Sales to the extent constituting an Investment permitted by subsection 7.3, a
fundamental change permitted by subsection 7.7A (so long as any Asset Sale
pursuant to a liquidation permitted pursuant to subsection 7.7A shall be done
on a pro rata basis among the equity holders of the applicable Subsidiary), a
Restricted Junior Payment permitted by subsection 7.5 or a Lien permitted by
subsection 7.2.


 


7.8                 Consolidated
Capital Expenditures.


 


Company shall not, and shall not permit its Subsidiaries to, make or
incur Consolidated Capital Expenditures, in any Fiscal Year indicated below, in
an aggregate amount in excess of the corresponding amount (the “Maximum Consolidated Capital Expenditures Amount”) set
forth below opposite such Fiscal Year; provided that the Maximum
Consolidated Capital Expenditures Amount for any Fiscal Year shall be increased
by an amount equal to the excess, if any, of the Maximum Consolidated Capital
Expenditures Amount for the previous Fiscal Year (without giving effect to any
adjustment in accordance with this proviso) over the actual amount of
Consolidated Capital Expenditures for such previous Fiscal Year:


 


	
  

  Fiscal Year

  	
   

  	
  Maximum Consolidated

  Capital Expenditures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  $

  	
  6,000,000

  	
   

  
	
  2006

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  2007

  	
   

  	
  $

  	
  9,000,000

  	
   

  
	
  2008 and

  each Fiscal Year thereafter

  	
   

  	
  $

  	
  8,000,000

  	
   

  



 


; provided
that (i) after any Permitted Acquisition, the Maximum Consolidated Capital
Expenditures Amount otherwise permitted in any Fiscal Year shall be increased
by an amount equal to the lesser of (1) .05 times an amount equal to one-third
of the aggregate revenue of the business acquired in such Permitted Acquisition
for the 36-month period most recently ended immediately prior to the closing of
the Permitted Acquisition and (2) one-third of the aggregate capital
expenditures of the business acquired in such Permitted Acquisition for the
36-month period most recently ended immediately prior to the closing of the
Permitted Acquisition; all such calculations being made on a Pro Forma Basis,
giving effect to any acquisitions or dispositions affecting such business
during such period in a manner reasonably acceptable to Administrative Agent,
such calculations to be set forth on the Compliance Certificate delivered with
respect to the first Fiscal Quarter ending after the consummation of such
Permitted


 


108

















 


Acquisition, and
(ii) any Consolidated Capital Expenditures constituting a Permitted Acquisition
shall not be included in the foregoing limitations.


 


7.9                 Transactions
with Shareholders and Affiliates.


 


Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of Company or any such holder, on
terms that are less favorable to Company or that Subsidiary, as the case may
be, than those that might be obtained at the time from Persons who are not an
Affiliate; provided that the foregoing restriction shall not apply to:


 


(i)        any
transaction between Holdings and any of its Subsidiaries not prohibited by this
Agreement;


 


(ii)       reasonable
and customary fees paid to members of the Governing Bodies of Holdings and its
Subsidiaries (or after a Qualifying IPO of Company, of Company), and
reimbursement of reasonable out-of-pocket costs and expenses of such Persons;


 


(iii)       the
payment of fees and expenses in connection with the consummation of the
Acquisition;


 


(iv)      (a) so
long as no Event of Default under subsection 8.1, 8.6 or 8.7 shall have
occurred and be continuing or shall be caused thereby, payments of fees in
accordance with the fee provisions of the Management Agreement as such fee
provisions exist on the Closing Date, it being understood that any such amounts
not permitted to be paid hereunder due to the existence of an Event of Default
under subsection 8.1 shall continue to accrue, and may be paid in the event such
Event of Default is subsequently waived or cured (and no other Event of Default
then exists), and (b) indemnification and reimbursement of expenses in
accordance with the Management Agreement;


 


(v)       equity
issuances permitted under this Agreement;


 


(vi)      employment
and severance arrangements between Company and any of its Subsidiaries and
their officers and employees in the ordinary course of business;


 


(vii)     payments
by Company and its Subsidiaries pursuant to the tax sharing agreements among
Holdings and its Subsidiaries on customary terms;


 


(viii)    transactions
pursuant to permitted agreements in existence on the Closing Date and set forth
on Schedule 7.9 or any amendment thereto to the extent such an amendment
is not adverse to the Lenders in any material respect;


 


(ix)       Restricted
Junior Payments permitted under subsection 7.5;


 


(x)        so
long as no Event of Default under subsection 8.1, 8.6 or 8.7 shall have
occurred and be continuing or shall be caused thereby, payments by Company and
its


 


109

















 


Subsidiaries to
Genstar or Sterling or any of their respective Affiliates made for any
customary financial advisory, financing, underwriting or placement services or
in respect of other investment banking activities, including in connection with
acquisitions or divestitures, which payments are approved by the majority of
the board of directors of Holdings in good faith, it being understood that any
such amounts not permitted to be paid hereunder due to the existence of an
Event of Default under subsection 8.1 shall continue to accrue, and may be paid
in the event such Event of Default is subsequently waived or cured (and no
other Event of Default then exists); and


 


(xi)       indemnification
payments to officers or directors of Holdings and its Subsidiaries.


 


7.10          Conduct of Business
By Holdings.


 


Prior to a Qualifying IPO of the Company, Holdings shall not (i) engage
in any business other than in connection with or incidental to (a) purchasing
and owning the Capital Stock of Company, (b) issuing and selling its Capital
Stock or options or warrants in respect thereof, (c) entering into and
performing its obligations under and in accordance with the Loan Documents and
Related Agreements to which it is a party and (d) other activities contemplated
by this subsection 7.10 or (ii) own any assets other than (a) the Capital Stock
of Company, (b) Cash and Cash Equivalents for the purpose of paying general
operating expenses of Holdings and (c) pursuant to a purchase or acquisition of
all or substantially all of the property and assets or business or a division
of a Person, or all of the Capital Stock in a Person, provided that
immediately upon such purchase or acquisition the same is contributed to
Company or (iii) have any Indebtedness or other liability other than its
obligations under the Holdings Guaranty or other unsecured Indebtedness of
Holdings which (x) does not require any cash payment until the earlier of the
Revolving Loan Commitment Termination Date and the final maturity date of any
Term Loans and (y) does not mature earlier than 180 days after the later of the
Revolving Loan Commitment Termination Date and the final maturity date of any
Term Loans, and (z) is otherwise on terms reasonably satisfactory to the
Administrative Agent, provided that the amount thereof, when taken
together with Indebtedness incurred or maintained pursuant to subsection
7.1(xv), does not exceed the maximum principal amount of Indebtedness permitted
under subsection 7. l(xv), and provided  further that the proceeds
thereof are contributed to Company as common equity.


 


7.11          Conduct of Business
by Company.


 


From and after the Closing Date, Company shall not, and shall not
permit any of its Subsidiaries to, engage in any material business other than
the businesses engaged in by Company and its Subsidiaries on the Closing Date
and similar, related or ancillary businesses.


 


7.12          Amendments or Waivers
of Certain Agreements; Amendments of Documents Relating to Subordinated
Indebtedness; Designation of Senior Indebtedness.


 


A.        Amendments
or Waivers of Certain Agreements. Holdings shall not agree to
any material amendment to, or otherwise change any material terms of, its


 


110

















 


Organizational
Documents, in a manner materially adverse to Holdings or any of its
Subsidiaries or to Lenders without the prior written consent of Administrative
Agent and Requisite Lenders.


 


B.        Amendments
of Documents Relating to Subordinated Indebtedness. Company
shall not, and shall not permit any of its Subsidiaries to, amend or otherwise
change the terms of any Subordinated Indebtedness if the effect of such
amendment or change is to increase the interest rate on such Subordinated
Indebtedness, accelerate any dates upon which payments of principal or interest
are due thereon, change any event of default in a manner materially adverse to
Company or Lenders, change the redemption, mandatory prepayment or defeasance
provisions thereof in a manner materially adverse to Company or Lenders, change
the subordination provisions thereof (or of any guaranty thereof), or change
any collateral therefor (other than to release such collateral), or if the
effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any material additional rights on the holders of such
Subordinated Indebtedness (or a trustee or other representative on their
behalf) which would be materially adverse to Company or Lenders.


 


C.        Designation
of “Designated Senior Indebtedness.” Company shall not, and shall
not permit any of its Subsidiaries to, designate any Indebtedness as
“Designated Senior Indebtedness” (as defined in the Senior Subordinated Note
Indenture) for purposes of the Senior Subordinated Note Indenture without the
prior written consent of Requisite Lenders.


 


7.13          Fiscal Year.


 


Company shall not change its Fiscal Year-end from December 31.


 


Section
8.                EVENTS
OF DEFAULT


 


If any of the following conditions or events (“Events of Default”) shall occur:


 


8.1                 Failure to
Make Payments When Due.


 


Failure by Company to pay (i) any installment of principal of any Loan
when due, whether at stated maturity, by acceleration, by mandatory prepayment
or otherwise; (ii) within five Business Days after the date due any amount
payable to an Issuing Lender in reimbursement of any drawing under a Letter of
Credit; or (iii) any interest on any Loan, any fee or any other amount due
under this Agreement within five Business Days after the date due; or


 


8.2                 Default in
Other Agreements.


 


(i)        Failure
of Holdings, Company or any of its Subsidiaries to pay when due any principal
of or interest on or any other amount payable in respect of one or more items
of Indebtedness (other than Indebtedness referred to in subsection 8.1) or
Contingent Obligations in an individual principal amount of $7,500,000 or more
or with an aggregate principal amount of $7,500,000 or more, in each case
beyond the end of any grace period provided therefor; or


 


111

















 


(ii)       breach
or default by Holdings, Company or any of its Subsidiaries with respect to any
other material term of (a) one or more items of Indebtedness or Contingent
Obligations in the individual or aggregate principal amounts referred to in
clause (i) above or (b) any loan agreement, mortgage, indenture or other
agreement relating to such item(s) of Indebtedness or Contingent Obligation
(s), if the effect of such breach or default is to cause, or to permit the holder
or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on
behalf of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may
be (upon the giving or receiving of notice, lapse of time, both, or otherwise);
provided that this subsection 8.2(ii) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness, if such sale or transfer is permitted
hereunder and under the documents providing for such Indebtedness and such
Indebtedness is paid in full upon the consummation of such sale; or


 


8.3      Breach
of Certain Covenants.


 


Failure of Company to perform or comply with any term or condition
contained in subsection 2.5 or Section 7 of this Agreement; provided, however,
that Company shall have the right to cure an Event of Default under the
financial covenants set forth in subsection 7.6 by applying, as an addition to
Consolidated EBITDA, the Net Securities Proceeds of any issuance of Capital
Stock of Holdings to the Permitted Holders, their Affiliates and any other
Person making a co-investment with the Permitted Holders and/or their
Affiliates, solely to the extent that such Net Securities Proceeds (A) are
actually received by Holdings no later than fifteen (15) Business Days after
Company delivers a written notice to Administrative Agent of its intent to cure
such Event of Default, such notice to be delivered together with the Compliance
Certificate required pursuant to subsection 6.1(iv)(b) with respect to the
relevant Fiscal Quarter, and (B) do not exceed the aggregate amount necessary
to cure such Event of Default under subsection 7.6 for any applicable period
(each, a “Permitted Cure Issuance”),  it being understood that this proviso may
not be relied on for purposes of calculating any financial ratios other than as
applicable to subsection 7.6; provided that (1) no more than two
Permitted Cure Issuances may be made in any four Fiscal Quarter period and (2)
in each eight Fiscal Quarter period there shall be a period of at least four
consecutive Fiscal Quarters during which no Permitted Cure Issuance is made; provided,
further that to the extent the receipt of any Net Securities Proceeds of
any Permitted Cure Issuance is an effective addition to Consolidated EBITDA as
contemplated by, and in accordance with, the foregoing and, as a result
thereof, any Event of Default of the covenants set forth in subsection 7.6
shall have been cured for any applicable period, such cure shall be deemed to
be effective as of the last day of such applicable period and such addition to
Consolidated EBITDA shall apply to any period of four consecutive Fiscal
Quarters that includes the Fiscal Quarter in respect of which such addition was
made; or


 


8.4                 Breach of
Warranty.


 


Any representation, warranty, certification or other statement of fact
made by Company or any of its Subsidiaries in any Loan Document or in any
certificate at any time delivered by Company or any of its Subsidiaries in
writing pursuant hereto or thereto or in


 


112

















 


connection
herewith or therewith shall be false in any material respect on the date as of
which made; or


 


8.5                 Other Defaults
Under Loan Documents.


 


Any Loan Party shall default in the performance of or compliance with
any covenant or agreement contained in this Agreement or any of the other Loan
Documents, other than any such term referred to in any other subsection of this
Section 8, and such default shall not have been remedied or waived within 30
days after the receipt by Company and such Loan Party of notice from
Administrative Agent or any Lender of such default; or


 


8.6                 Involuntary
Bankruptcy; Appointment of Receiver, etc.


 


(i)        A
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of Holdings, Company or any of its Subsidiaries in an
involuntary case under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect, which decree
or order is not controverted within 30 days or remains unstayed or undischarged
for a period of 60 days; or any other similar relief shall be granted under any
applicable federal or state law; or


 


(ii)       an
involuntary case shall be commenced against Holdings, Company or any of its
Subsidiaries under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect; or there
shall have occurred the involuntary appointment of an interim receiver, trustee
or other custodian of Holdings, Company or any of its Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Holdings, Company or any of its Subsidiaries, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed, bonded
or discharged; or


 


8.7                 Voluntary
Bankruptcy; Appointment of Receiver, etc.


 


(i)        Holdings,
Company or any of its Subsidiaries shall commence a voluntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property, or Holdings, Company or any of its
Subsidiaries shall make a general assignment for the benefit of creditors; or


 


(ii)       Holdings, Company or any of its Subsidiaries shall be unable,
or shall fail generally, or shall admit in writing its inability, to pay its
debts as such debts become due; or the Governing Body of Holdings, Company or
any of its Subsidiaries (or any committee thereof) shall adopt any resolution
of the actions referred to in clause (i) above or this clause (ii); or


 


113

















 


8.8                 Judgments and
Attachments.


 


Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $7,500,000 or (ii)
in the aggregate at any time an amount in excess of $7,500,000, in either case
to the extent not adequately covered by insurance as to which a solvent
insurance company has been notified of such judgment and has not denied coverage,
shall be entered or filed against Company or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of 60 days; or


 


8.9                 Dissolution.


 


Any order, judgment or decree shall be entered against Holdings,
Company or any of its material Subsidiaries decreeing the dissolution or split
up of Holdings, Company or that material Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of 60 days; or


 


8.10          Employee Benefit
Plans.


 


There shall occur one or more ERISA Events that individually or in the
aggregate result in or could reasonably be expected to result in a Material
Adverse Effect; or


 


8.11          Change in Control.


 


A Change in Control shall have occurred; or


 


8.12          Invalidity of Loan
Documents; Failure of Security; Repudiation of Obligations.


 


At any time after the execution and delivery thereof, (i) any Loan
Document or any material provision thereof, for any reason other than as
expressly permitted hereunder or thereunder or the satisfaction in full of all
Obligations, shall cease to be in full force and effect (other than in
accordance with its terms) or shall be declared to be null and void, (ii)
Administrative Agent shall not have or shall cease to have a valid and
perfected First Priority Lien in any Collateral purported to be covered by the
Collateral Documents having a fair market value, individually or in the
aggregate, exceeding $1,000,000, in each case for any reason other than the
failure of Administrative Agent or any Lender to take any action within its
control, or (iii) any Loan Party shall contest the validity or enforceability
of any Loan Document or any provision thereof in writing or deny in writing
that it has any further liability, other than as a result of repayment in full
of the Obligations, under any Loan Document or any provision thereof to which
it is a party; or


 


8.13          Failure to Consummate
Acquisition.


 


The Acquisition, including the Panolam Merger, shall not be consummated
concurrently with the making of the initial Loans, or the Acquisition or the
Panolam Merger shall be unwound, reversed or otherwise rescinded in whole or in
part for any reason:


 


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THEN (i) upon the
occurrence of any Event of Default described in subsection 8.6 or 8.7, each of
(a) the unpaid principal amount of and accrued interest on the Loans, (b) an
amount equal to the maximum amount that may at any time be drawn under all
Letters of Credit then outstanding (whether or not any beneficiary under any
such Letter of Credit shall have presented, or shall be entitled at such time
to present, the drafts or other documents or certificates required to draw
under such Letter of Credit), and (c) all other Obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by
Company, and the obligation of each Lender to make any Loan, the obligation of
Administrative Agent to issue any Letter of Credit and the right of any Lender
to issue any Letter of Credit hereunder shall thereupon terminate, and (ii)
upon the occurrence and during the continuation of any other Event of Default,
Administrative Agent shall, upon the written request or with the written
consent of Requisite Lenders, by written notice to Company, declare all or any
portion of the amounts described in clauses (a) through (c) above to be, and
the same shall forthwith become, immediately due and payable, and the
obligation of each Lender to make any Loan, the obligation of Administrative
Agent to issue any Letter of Credit and the right of any Lender to issue any
Letter of Credit hereunder shall thereupon terminate; provided that the
foregoing shall not affect in any way the obligations of Revolving Lenders
under subsection 3.3C(i) or the obligations of Revolving Lenders to purchase
assignments of any unpaid Swing Line Loans as provided in subsection 2.1A(iii);
provided  further that from the date of delivery of a written
notice to Administrative Agent of the intent to cure an Event of Default with a
Permitted Cure Issuance in accordance with subsection 8.3 above until the date
that is 15 Business Days thereafter, neither Administrative Agent nor the Lenders
shall exercise any such remedies with respect to any Event of Default under
subsection 8.3 addressed in such notice.


 


Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Administrative Agent pursuant to the
terms of the Security Agreement and shall be applied as therein provided.


 


Section
9.                ADMINISTRATIVE
AGENT


 


9.1                 Appointment.


 


A.        Appointment
of Administrative Agent. Credit Suisse is hereby appointed
Administrative Agent hereunder and under the other Loan Documents. Each Lender
(including any Lender in its capacity as a Swap Counterparty) hereby authorizes
Administrative Agent to act as its agent in accordance with the terms of this
Agreement and the other Loan Documents. Credit Suisse agrees to act upon the
express conditions contained in this Agreement and the other Loan Documents, as
applicable. The provisions of this Section 9 are solely for the benefit of
Administrative Agent and Lenders and no Loan Party shall have rights as a third
party beneficiary of any of the provisions thereof (other than subsection
9.5A). In performing its functions and duties under this Agreement,
Administrative Agent (other than as provided in subsection 2.1D) shall act
solely as an agent of Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for Company or any other Loan Party.


 


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B.        Appointment
of Supplemental Collateral Agents. It is the purpose of this
Agreement and the other Loan Documents that there shall be no violation of any
law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the
enforcement of any of the Loan Documents, or in case Administrative Agent deems
that by reason of any present or future law of any jurisdiction it may not
exercise any of the rights, powers or remedies granted herein or in any of the
other Loan Documents or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that Administrative Agent
appoint an additional individual or institution as a separate trustee,
co-trustee, collateral agent or collateral co-agent (any such additional
individual or institution being referred to herein individually as a “Supplemental Collateral Agent” and collectively as “Supplemental Collateral Agents”).


 


In the event that Administrative Agent appoints a Supplemental
Collateral Agent with respect to any Collateral, (i) each and every right,
power, privilege or duty expressed or intended by this Agreement or any of the
other Loan Documents to be exercised by or vested in or conveyed to
Administrative Agent with respect to such Collateral shall be exercisable by
and vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable
by either Administrative Agent or such Supplemental Collateral Agent, and (ii)
the provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to
Administrative Agent shall inure to the benefit of such Supplemental Collateral
Agent and all references therein to Administrative Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Collateral Agent,
as the context may require.


 


Should any instrument in writing from Company or any other Loan Party
be required by any Supplemental Collateral Agent so appointed by Administrative
Agent for more fully and certainly vesting in and confirming to him or it such
rights, powers, privileges and duties, Company shall, or shall cause such Loan
Party to, execute, acknowledge and deliver any and all such instruments
promptly upon request by Administrative Agent. In case any Supplemental
Collateral Agent, or a successor thereto, shall die, become incapable of
acting, resign or be removed, all the rights, powers, privileges and duties of
such Supplemental Collateral Agent, to the extent permitted by law, shall vest
in and be exercised by Administrative Agent until the appointment of a new
Supplemental Collateral Agent.


 


C.        Control.
Each Lender and Administrative Agent hereby appoint each other Lender as agent
for the purpose of perfecting Administrative Agent’s security interest in
assets that, in accordance with the UCC, can be perfected by possession or
control.


 


9.2                 Powers
and Duties; General Immunity.


 


A.        Powers;
Duties Specified. Each Lender irrevocably authorizes
Administrative Agent to take such action on such Lender’s behalf and to
exercise such powers,


 


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rights and
remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to Administrative Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Administrative Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan Documents.
Administrative Agent may exercise such powers, rights and remedies and perform
such duties by or through its agents or employees. Administrative Agent shall
not have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender or Company; and nothing in this
Agreement or any of the other Loan Documents, expressed or implied, is intended
to or shall be so construed as to impose upon Administrative Agent any
obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein.


 


B.        No Responsibility for Certain Matters. Administrative Agent shall not be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any other
Loan Document or for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral statements or in any
financial or other statements, instruments, reports or certificates or any
other documents furnished or made by Administrative Agent to Lenders or by or
on behalf of Company to Administrative Agent or any Lender in connection with
the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Company or any other Person liable
for the payment of any Obligations, nor shall Administrative Agent be required
to ascertain or inquire as to the performance or observance of any of the
terms, conditions, provisions, covenants or agreements contained in any of the
Loan Documents or as to the use of the proceeds of the Loans or the use of the
Letters of Credit or as to the existence or possible existence of any Event of
Default or Potential Event of Default. Anything contained in this Agreement to
the contrary notwithstanding, Administrative Agent shall not have any liability
arising from confirmations of the amount of outstanding Loans or the Letter of
Credit Usage or the component amounts thereof.


 


C.        Exculpatory Provisions. Neither Administrative Agent nor any of its officers, directors,
employees or agents shall be liable to Lenders for any action taken or omitted
by Administrative Agent under or in connection with any of the Loan Documents
except to the extent caused by Administrative Agent’s gross negligence or
willful misconduct. Administrative Agent shall be entitled to refrain from any
act or the taking of any action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents or from the
exercise of any power, discretion or authority vested in it hereunder or
thereunder unless and until Administrative Agent shall have received
instructions in respect thereof from Requisite Lenders (or such other Lenders
as may be required to give such instructions under subsection 10.6) and, upon receipt
of such instructions from Requisite Lenders (or such other Lenders, as the case
may be), Administrative Agent shall be entitled to act or (where so instructed)
refrain from acting, or to exercise such power, discretion or authority, in
accordance with such instructions; provided that Administrative Agent shall not
be required to take any action that, in its opinion or the opinion of its
counsel, may expose Administrative Agent to liability or that is contrary to
any Loan Document or applicable law. Without prejudice to the generality of the
foregoing, (i) Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any communication (including any electronic
message, Internet or intranet website posting or other distribution),
instrument or document believed by it to be genuine and correct


 


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and to have been
signed or sent by the proper person or persons, and shall be entitled to rely
and shall be protected in relying on opinions and judgments of attorneys (who
may be attorneys for Company and its Subsidiaries), accountants, experts and
other professional advisors selected by it; and (ii) no Lender shall have any
right of action whatsoever against Administrative Agent as a result of
Administrative Agent acting or (where so instructed) refraining from acting
under this Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders (or such other Lenders as may be required to
give such instructions under subsection 10.6).


 


D.        Administrative
Agent Entitled to Act as Lender. The agency hereby created
shall in no way impair or affect any of the rights and powers of, or impose any
duties or obligations upon, Administrative Agent in its individual capacity as
a Lender hereunder. With respect to its participation in the Loans and the
Letters of Credit, Administrative Agent shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
performing the duties and functions delegated to it hereunder, and the term
“Lender” or “Lenders” or any similar term shall, unless the context clearly
otherwise indicates, include Administrative Agent in its individual capacity.
Administrative Agent and its Affiliates may accept deposits from, lend money
to, acquire equity interests in and generally engage in any kind of commercial
banking, investment banking, trust, financial advisory or other business with
Company or any of its Affiliates as if it were not performing the duties
specified herein, and may accept fees and other consideration from Company for
services in connection with this Agreement and otherwise without having to
account for the same to Lenders.


 


9.3                 Independent
Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness.


 


Each Lender agrees that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries.
Administrative Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to make any such investigation or any such
appraisal on behalf of Lenders or to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before the making of the Loans or at any time or times thereafter, and
Administrative Agent shall not have any responsibility with respect to the
accuracy of or the completeness of any information provided to Lenders.


 


9.4                 Right to
Indemnity.


 


Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Administrative Agent and its officers, directors, employees, agents,
attorneys, professional advisors and Affiliates to the extent that any such
Person shall not have been reimbursed by Company, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including reasonable counsel fees and disbursements and
fees and disbursements of any financial advisor engaged by Administrative
Agent) or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against Administrative Agent or such other Person
in exercising the powers, rights and remedies of


 


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Administrative
Agent or performing duties of Administrative Agent hereunder or under the other
Loan Documents or otherwise in its capacity as Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents; provided
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of Administrative Agent resulting solely from
Administrative Agent’s gross negligence or willful misconduct as determined by
a final judgment of a court of competent jurisdiction. If any indemnity
furnished to Administrative Agent or any other such Person for any purpose
shall, in the opinion of Administrative Agent, be insufficient or become
impaired, Administrative Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against until such additional
indemnity is furnished.


 


9.5                 Resignation of
Administrative Agent; Successor Administrative Agent and Swing Line Lender.


 


A.        Resignation;
Successor Administrative Agent. Administrative Agent may
resign at any time by giving 30 days’ prior written notice thereof to Lenders
and Company. Upon any such notice of resignation by Administrative Agent,
Requisite Lenders shall have the right, upon five Business Days’ notice to
Company, to appoint a successor Administrative Agent, subject, except during
the existence of an Event of Default under subsection 8.1, 8.6 or 8.7, to the
consent of Company (which consent shall not be unreasonably withheld). If no
such successor shall have been so appointed by Requisite Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, the retiring Administrative Agent may,
on behalf of Lenders, after consulting with Company, appoint a successor
Administrative Agent. If Administrative Agent shall notify Lenders and Company
that no Person has accepted such appointment as successor Administrative Agent,
such resignation shall nonetheless become effective in accordance with
Administrative Agent’s notice and (i) the retiring Administrative Agent shall
be discharged from its duties and obligations under the Loan Documents, except
that any Collateral held by Administrative Agent will continue to be held by it
until a Person shall have accepted the appointment of successor Administrative
Agent, and (ii) all payments, communications and determinations provided to be
made by, to or through Administrative Agent shall instead be made by, to or
through each Lender directly, until such time as Requisite Lenders appoint a
successor Administrative Agent in accordance with this subsection 9.5A. Upon
the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent and the retiring Administrative
Agent shall be discharged from its duties and obligations under this Agreement
(if not already discharged as set forth above). After any retiring
Administrative Agent’s resignation hereunder, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.


 


B.        Successor Swing Line Lender. Any resignation of Administrative Agent
pursuant to subsection 9.5A shall also constitute the resignation of Credit
Suisse or its successor as Swing Line Lender, and any successor Administrative
Agent appointed pursuant to subsection 9.5A shall, upon its acceptance of such
appointment, become the successor Swing Line Lender for all purposes hereunder.
In such event (i) Company shall prepay any outstanding Swing Line


 


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Loans made by the
retiring Administrative Agent in its capacity as Swing Line Lender, (ii) upon
such prepayment, the retiring Administrative Agent and Swing Line Lender shall
surrender any Swing Line Note held by it to Company for cancellation, and (iii)
if so requested by the successor Administrative Agent and Swing Line Lender in
accordance with subsection 2.1E, Company shall issue a Swing Line Note to the
successor Administrative Agent and Swing Line Lender substantially in the form
of Exhibit VI annexed hereto, in the amount of the Swing Line Loan
Commitment then in effect and with other appropriate insertions.


 


9.6                 Collateral
Documents and Guaranties.


 


Each Lender (which term shall include, for purposes of this subsection
9.6, any Swap Counterparty)
hereby further authorizes Administrative Agent, on behalf of and for the
benefit of Lenders, to enter into each Collateral Document as secured party and
to be the agent for and representative of Lenders under each Guaranty, and each
Lender agrees to be bound by the terms of each Collateral Document and the
Guaranties; provided that Administrative Agent shall not (i) enter into
or consent to any material amendment, modification, termination or waiver of
any provision contained in any Collateral Document or the Guaranties or (ii)
release any Collateral (except as otherwise expressly permitted or required
pursuant to the terms of this Agreement or the applicable Collateral Document),
in each case without the prior consent of Requisite Lenders (or such other
Lenders as may be required to give such consent under subsection 10.6); provided
further, however, that, without further written consent or
authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (a) release any Lien encumbering any item of
Collateral that is the subject of a sale or other disposition of assets
permitted by this Agreement or to which Requisite Lenders (or such other
Lenders as may be required to give such consent under subsection 10.6) have
otherwise consented, (b) release any Subsidiary Guarantor from the Subsidiary
Guaranty if all of the Capital Stock of such Subsidiary Guarantor is sold to
any Person (other than a Domestic Subsidiary of Company) pursuant to a sale or
other disposition permitted hereunder or to which Requisite Lenders (or such
other Lenders as may be required to give such consent under subsection 10.6)
have otherwise consented or (c) subordinate the Liens of Administrative Agent,
on behalf of Lenders, to any Liens permitted by clauses (i)-(xvi), (xviii)-(xx)
and (xxii) of subsection 7.2A; provided that, in the case of a sale of
such item of Collateral or stock referred to in clauses (a) or (b) above, the
requirements of subsection 10.13 are satisfied. Anything contained in any of
the Loan Documents to the contrary notwithstanding, Company, Administrative
Agent and each Lender hereby agree that (1) no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral
Document or to enforce any Guaranty, it being understood and agreed that all
powers, rights and remedies under the Collateral Documents and the Guaranties
may be exercised solely by Administrative Agent for the benefit of Lenders in
accordance with the terms thereof, and (2) in the event of a foreclosure by
Administrative Agent on any of the Collateral pursuant to a public or private
sale, Administrative Agent or any Lender may be the purchaser of any or all of
such Collateral at any such sale and Administrative Agent, as agent for and
representative of Lenders (but not any Lender or Lenders in its or their
respective individual capacities unless Requisite Lenders shall otherwise agree
in writing) shall be entitled, for the purpose of bidding and making settlement
or payment of the purchase price for all or any portion of the Collateral sold
at any such public sale, to use and apply any of the Obligations as a credit on
account of the purchase price for any Collateral payable by Administrative
Agent at such sale.


 


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9.7                 Duties of
Other Agents.


 


To the extent that any Lender is identified
in this Agreement as a co-agent or syndication agent, such Lender shall not
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, none of such Lenders shall have or be deemed to have a fiduciary
relationship with any Lender.


 


9.8                 Administrative
Agent May File Proofs of Claim.


 


In  case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to Holdings, Company or any of the Subsidiaries of Holdings
or Company, Administrative Agent (irrespective of whether the principal of any
Loan shall then be due and payable as herein expressed or by declaration or
otherwise and irrespective of whether Administrative Agent shall have made any
demand on Company) shall be entitled and empowered, by intervention in such
proceeding or otherwise


 


(i)        to
file and prove a claim for the whole amount of principal and interest owing and
unpaid in respect of the Loans and any other Obligations that are owing and
unpaid and to file such other papers or documents as may be necessary or
advisable in order to have the claims of Lenders and Administrative Agent
(including any claim for the reasonable compensation, expenses, disbursements
and advances of Lenders and Administrative Agent and their agents and counsel
and all other amounts due Lenders and Administrative Agent under subsections
2.3 and 10.2) allowed in such judicial proceeding, and


 


(ii)       to
collect and receive any moneys or other property payable or deliverable on any
such claims and to distribute the same;


 


and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make
such payments to Administrative Agent and, in the event that Administrative
Agent shall consent to the making of such payments directly to Lenders, to pay
to Administrative Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of Administrative Agent and its agents and
counsel, and any other amounts due Administrative Agent under subsections 2.3
and 10.2.


 


Nothing herein contained shall be deemed to
authorize Administrative Agent to authorize or consent to or accept or adopt on
behalf of any Lender any plan of reorganization, arrangement, adjustment or
composition affecting the Obligations or the rights of any Lenders or to
authorize Administrative Agent to vote in respect of the claim of any Lender in
any such proceeding.


 


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Section 10.   MISCELLANEOUS


 


10.1          Successors and
Permitted Assigns; Assignments and Participations in Loans and Letters of
Credit.


 


A.        General.
This Agreement shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of the parties
hereto and the successors and permitted assigns of Lenders (it being understood
that Lenders’ rights of assignment are subject to the further provisions of
this subsection 10.1). Neither Company’s rights or obligations hereunder nor
any interest therein may be assigned or delegated by Company without the prior
written consent of all Lenders (and any attempted assignment or transfer by
Company without such consent shall be null and void). No sale, assignment or
transfer or participation of any Letter of Credit or any participation therein
may be made separately from a sale, assignment, transfer or participation of a
corresponding interest in the Revolving Loan Commitment and the Revolving Loans
of the Revolving Lender effecting such sale, assignment, transfer or
participation. Anything contained herein to the contrary notwithstanding,
except as provided in subsection 2.1A(iii) and subsection 10.5, the Swing Line
Loan Commitment and the Swing Line Loans of Swing Line Lender may not be sold,
assigned or transferred as described below to any Person other than a successor
Administrative Agent and Swing Line Lender to the extent contemplated by
subsection 9.5. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Indemnitees) any legal or equitable right, remedy or
claim under or by reason of this Agreement.


 


B.        Assignments.


 


(i)        Amounts
and Terms of Assignments. Any Lender may assign to one or more Eligible
Assignees all or any portion of its rights and obligations under this
Agreement; provided that (a), except (1) in the case of an assignment of
the entire remaining amount of the assigning Lender’s rights and obligations
under this Agreement or (2) in the case of an assignment to a Lender or an
Affiliate of a Lender or an Approved Fund of a Lender, the aggregate amount of
the Revolving Loan Exposure or Term Loan Exposure, as the case may be, of the
assigning Lender and the assignee subject to each such assignment shall not be
less than $5,000,000 or an integral multiple thereof, in the case of any
assignment of a Revolving Loan, or $1,000,000 or an integral multiple thereof,
in the case of any assignment of a Term Loan, provided that simultaneous
assignments to two or more related Funds shall be treated as one assignment for
purposes of determining whether such minimum assignment requirements are met,
(b) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement
with respect to the Loans or Commitments assigned, and any assignment of all or
any portion of a Revolving Loan Commitment, Revolving Loan or Letter of Credit
participation shall be made only as an assignment of the same proportionate
part of the assigning Lender’s Revolving Loan Commitment, Revolving Loans and
Letter of Credit participations, (c) the parties to each assignment shall (A)
electronically execute and deliver to Administrative Agent an Assignment
Agreement via an electronic settlement system acceptable to Administrative
Agent or (B) manually execute and deliver to Administrative Agent an Assignment
Agreement, together with a processing and


 


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recordation fee of
$3,500 (which fee Company shall not be obligated to pay except as required
hereunder, and provided that only one such fee shall be payble in connection
with simultaneous assignments to or by related Funds), and the Eligible
Assignee, if it shall not already be a party to this Agreement, shall deliver
to Administrative Agent information reasonably requested by Administrative
Agent, including an administrative questionnaire and such forms, certificates
or other evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may be
required to deliver to Administrative Agent pursuant to subsection 2.7B(iv) and
with respect to information requested under the Patriot Act, and (d) (1)
Administrative Agent, (2) with respect to assignments of Revolving Loans and
Revolving Loan Commitments, any Issuing Lender and Swing Line Lender and (3),
if no Event of Default has occurred and is continuing under subsection 8.1, 8.6
or 8.7, Company, shall have consented thereto (which consents shall not be
unreasonably withheld or delayed); provided that no consent of Company
shall be required with respect to (I) any assignment to a Lender, any Affiliate
of a Lender or any Approved Fund and (II) any assignment relating to the
primary allocation or syndication of the Loans and Commitments by Credit Suisse
to Persons previously agreed with Company.


 


Upon acceptance and
recording by Administrative Agent pursuant to clause (ii) below, from and after
the effective date specified in such Assignment Agreement, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and
shall be deemed to have made all of the agreements of a Lender contained in the
Loan Documents arising out of or otherwise related to such rights and
obligations and (y) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights (other than any rights which survive
the termination of this Agreement under subsection 10.8B) and be released from
its obligations under this Agreement (and, in the case of an Assignment
Agreement covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto; provided that, anything contained in any of the Loan Documents
to the contrary notwithstanding, if such Lender is an Issuing Lender such
Lender shall continue to have all rights and obligations of an Issuing Lender
until the cancellation or expiration of any Letters of Credit issued by it and
the reimbursement of any amounts drawn thereunder). The assigning Lender shall,
upon the effectiveness of such assignment or as promptly thereafter as practicable,
surrender its Notes, if any, to Administrative Agent for cancellation, and
thereupon new Notes shall, if so requested by the assignee and/or the assigning
Lender in accordance with subsection 2.1E, be issued to the assignee and/or to
the assigning Lender, substantially in the form of Exhibit IV or Exhibit
V annexed hereto, as the case may be, with appropriate insertions, to
reflect the amounts of the new Commitments and/or outstanding Revolving Loans
and/or outstanding Term Loans, as the case may be, of the assignee and/or the
assigning Lender. Other than as provided in subsection 2.1A(iii) and subsection
10.5, any assignment or transfer by a Lender of rights or obligations under
this Agreement that does not comply with this subsection 10.1B shall be treated
for purposes of this Agreement as a sale by such Lender of a participation in
such rights and obligations in accordance with subsection 10.1C.


 


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(ii)       Acceptance by Administrative Agent; Recordation in Register.
Upon its receipt of an Assignment Agreement executed by an assigning Lender and
an assignee representing that it is an Eligible Assignee, together with the
processing and recordation fee referred to in subsection l0.1B(i) and any
forms, certificates or other evidence with respect to United States federal
income tax withholding matters that such assignee may be required to deliver to
Administrative Agent pursuant to subsection 2.7B(iv), Administrative Agent
shall, if Administrative Agent and Company have consented to the assignment
evidenced thereby (in each case to the extent such consent is required pursuant
to subsection l0.lB(i)), (a) accept such Assignment Agreement by executing a
counterpart thereof as provided therein (which acceptance shall evidence any
required consent of Administrative Agent to such assignment) and (b) record the
information contained therein in the Register. Administrative Agent shall
maintain a copy of each Assignment Agreement delivered to and accepted by it as
provided in this subsection 10. 1B(ii). No assignment shall be effective for
purposes of this Agreement unless it has been recorded in the Register as
provided in this clause (ii).


 


(iii)      Special Purpose Funding Vehicles. Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special
purpose funding vehicle (a “SPC”), identified as such in
writing from time to time by the Granting Lender to Administrative Agent and
Company, the option to provide to Company all or any part of any Loan that such
Granting Lender would otherwise be obligated to make to Company pursuant to
this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan, and (ii) if an SPC elects not to exercise
such option or otherwise fails to provide all or any part of such Loan, the
Granting Lender shall be obligated to make such Loan pursuant to the terms
hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment
of the Granting Lender to the same extent, and as if, such Loan were made by
such Granting Lender. Each party hereto hereby agrees that (i) neither the
grant to any SPC nor the exercise by any SPC of such option shall increase the
costs or expenses or otherwise increase or change the obligations of Company or
any Subsidiary under this Agreement; (ii) no SPC shall be liable for any
indemnity or similar payment obligation under this Agreement (all liability for
which shall remain with the Granting Lender); and (iii) the Granting Lender
shall for all purposes, including the approval of any amendment, waiver or
other modification of any provision of any Loan Document, remain the Lender of
record hereunder. In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior indebtedness of any SPC, it will
not institute against, or join any other person in instituting against, such
SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any state thereof. In
addition, notwithstanding anything to the contrary contained in this subsection
10.1B(iii), any SPC may (i) without paying any processing fee therefor, assign
all or a portion of its interests in any Loans to the Granting Lender (with
notice to, but without the prior written consent of, Company and Administrative
Agent) or to any financial institutions (with prior written consent of Company
and Administrative Agent) providing liquidity and/or credit support to or for
the account of such SPC to support the funding or maintenance of Loans and (ii)
disclose on a confidential basis


 


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any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guarantee or credit or liquidity enhancement to such
SPC.


 


C.        Participations.
Any Lender may, without the consent of, or notice to, Company or Administrative
Agent, sell participations to one or more Persons (other than a natural Person
or Company or any of its Affiliates) in all or a portion of such Lender’s
rights and/or obligations under this Agreement; provided 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 and (iii) Company, Administrative 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. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and the other Loan Documents and to approve any amendment,
modification or waiver of any provision of this Agreement and the other Loan
Documents; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver directly affecting (i) the extension of (x)
the scheduled final maturity date of any Loan allocated to such participation
or (y) the regularly scheduled maturity of any portion of the principal amount
of or interest on any Loan allocated to such participation or (ii) a reduction
of the principal amount of or the rate of interest payable on any Loan
allocated to such participation. Subject to the further provisions of this
subsection 10.1C, Company agrees that each Participant shall be entitled to the
benefits of subsections 2.6D and 2.7 to the same extent as if it were a Lender
and had acquired its interest by assignment pursuant to subsection 10.1B. To
the extent permitted by law, each Participant also shall be entitled to the
benefits of subsection 10.4 as though it were a Lender, provided such
Participant agrees to be subject to subsection 10.5 as though it were a Lender.
A Participant shall not be entitled to receive any greater payment under
subsections 2.6D and 2.7 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant unless the
sale of the participation to such Participant is made with Company’s prior
written consent. No Participant shall be entitled to the benefits of subsection
2.7 unless Company is notified of the participation sold to such Participant
and such Participant specifically agrees (and references the obligations of
Company under subsection 2.7), for the benefit of Company, to comply with
subsection 2.7B(iv) as though it were a Lender.


 


D.        Pledges and Assignments. Any Lender may, without the consent of the
Administrative Agent or the Company, at any time pledge or assign a security
interest in all or any portion of its Loans, and the other Obligations owed to
such Lender, to secure
obligations of such Lender, including without limitation any pledge or
assignment to secure obligations to any Federal Reserve Bank; provided
that (i) no Lender shall be relieved of any of its obligations hereunder as a
result of any such assignment or pledge and (ii) in no event shall any assignee
or pledgee be considered to be a “Lender” or be entitled to require the
assigning Lender to take or omit to take any action hereunder.


 


E.         Information. Each Lender may furnish any information concerning Holdings and its
Subsidiaries in the possession of that Lender from time to time to permitted
assignees and participants (including prospective assignees and participants),
subject to subsection 10.18.


 


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F.         Agreements of Lenders. Each Lender listed on the signature pages
hereof hereby agrees, and each Lender that becomes a party hereto pursuant to
an Assignment Agreement shall be deemed to agree, (i) that it is an Eligible
Assignee described in clause (ii) of the definition thereof; (ii) that it has
experience and expertise in the making of or purchasing loans such as the
Loans; and (iii) that it will make or purchase its Loans for its own account in
the ordinary course of business and without a view to distribution of such
Loans within the meaning of the Securities Act or the Exchange Act or other
federal securities laws (it being understood that, subject to the provisions of
this subsection 10.1, the disposition of such Loans or any interests therein
shall at all times remain within its exclusive control). Each Lender that
becomes a party hereto pursuant to an Assignment Agreement shall also be deemed
to represent that such Assignment Agreement constitutes a legal, valid and
binding obligation of such Lender, enforceable against such Lender in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium or other
similar laws affecting creditors’ rights generally and by general principles of
equity.


 


10.2          Expenses.


 


Company agrees to pay Administrative Agent
promptly (i) all reasonable out-of-pocket costs and expenses of Administrative
Agent for the negotiation, preparation, syndication, execution and
administration of the Loan Documents and any consents, amendments, waivers or
other modifications thereto, including all reasonable out-of-pocket fees,
expenses and disbursements of counsel to Administrative Agent in connection
therewith; (ii) all reasonable out-of-pocket costs and expenses of perfecting
Liens in favor of Administrative Agent on behalf of Lenders pursuant to any
Collateral Document, including filing and recording fees, expenses and taxes,
stamp or documentary taxes, search fees, title insurance premiums, and
reasonable fees, expenses and disbursements of outside counsel to
Administrative Agent; (iii) all reasonable out-of-pocket costs and expenses
incurred by Administrative Agent in connection with the custody or preservation
of any of the Collateral; and (iv) all reasonable out-of-pocket costs and
expenses, including reasonable out-of-pocket attorneys’ fees and fees, costs
and expenses of accountants, advisors and consultants, incurred by
Administrative Agent relating to efforts to (a) evaluate or assess any Loan
Party, its business or financial condition and (b) protect, evaluate, assess or
dispose of any of the Collateral. Company agrees to pay Administrative Agent or
Lender promptly all reasonable out-of-pocket costs and expenses, including
reasonable attorneys’ fees of one counsel to Administrative Agent and the
Lenders (except that in the case of a bona fide conflict of interest the
attorney’s fees of one additional counsel shall be included, so that counsel
may be retained for the benefit of the Administrative Agent on the one hand and
the Lenders on the other hand), fees, costs and expenses of accountants,
advisors and consultants and costs of settlement, incurred by Administrative
Agent and Lenders in enforcing any Obligations of or in collecting any payments
due from any Loan Party hereunder or under the other Loan Documents (including
in connection with the sale of, collection from, or other realization upon any
of the Collateral or the enforcement of the Loan Documents) after the
occurrence of an Event of Default or pursuant to any insolvency or bankruptcy
proceedings.


 


10.3          Indemnity.


 


In addition to the payment of expenses
pursuant to subsection 10.2, whether or not the transactions contemplated
hereby shall be consummated, Company agrees to defend


 


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(subject to
Indemnitees’ selection of counsel), indemnify, pay and hold harmless
Administrative Agent and Lenders (including Issuing Lenders), and the officers,
directors, trustees, employees, agents, advisors, members, Affiliates and
successors and permitted assigns of Administrative Agent and Lenders
(collectively called the “Indemnitees”),
from and against any and all Indemnified Liabilities (as hereinafter defined); provided
that Company shall not have any obligation to any Indemnitee hereunder with
respect to any Indemnified Liabilities to the extent such Indemnified
Liabilities arise solely from (i) the gross negligence or willful misconduct or
material breach of the Loan Documents of such Indemnitee as determined by a
final judgment of a court of competent jurisdiction or (ii) any claim,
litigation, investigation or proceeding that does not involve an act, omission
or material breach by Company or any of its Affiliates of the Loan Documents
and that is brought by an Indemnitee against another Indemnitee unless brought
by a Lender against Administrative Agent in its capacity as such.


 


As used herein, “Indemnified Liabilities”
means, collectively, any and all liabilities, obligations, losses, damages
(including natural resource damages), penalties, actions, judgments, suits,
claims (including Environmental Claims), costs (including the costs of any
investigation, study, sampling, testing, abatement, cleanup, removal,
remediation or other response action necessary to remove, remediate, clean up
or abate any Hazardous Materials Activity), expenses and disbursements of any
kind or nature whatsoever (including the reasonable out-of-pocket fees and
disbursements of counsel (including costs of one special or local counsel for
Indemnitees in each appropriate jurisdiction), provided, however,
that all Indemnitees use a single outside counsel of each type, except that in
the case of a bona fide conflict of interest, the costs of one additional
counsel shall be included, so that counsel may be retained for the benefit of
the Administrative Agent on the one hand and the Lenders on the other hand) in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto, and any fees or expenses
incurred by Indemnitees in enforcing this indemnity), whether based on any
federal, state or foreign laws, statutes, rules or regulations (including
securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of (i) this Agreement, the
other Loan Documents or the transactions contemplated hereby or thereby
(including Lenders’ agreement to make the Loans hereunder or the use or
intended use of the proceeds thereof or the issuance of Letters of Credit
hereunder or the use or intended use of any thereof, or any enforcement of any
of the Loan Documents (including any sale of, collection from, or other
realization upon any of the Collateral or the enforcement of the Guaranties)),
(ii) the statements contained in the commitment letter delivered by any Lender
to Company with respect thereto, or (iii) any Environmental Claim or any
Hazardous Materials Activity relating to or arising from, directly or
indirectly, any past or present activity, operation, land ownership, or
practice of Company or any of its Subsidiaries.


 


To the extent that the undertakings to defend, indemnify, pay and hold
harmless set forth in this subsection 10.3 may be unenforceable in whole or in
part because they are violative of any law or public policy, Company shall
contribute the maximum portion that it is permitted to pay and satisfy under applicable
law to the payment and satisfaction of all Indemnified Liabilities incurred by
Indemnitees or any of them.


 


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10.4          Set-Off.


 


In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence and during
the continuation of any Event of Default after obtaining the prior written
consent of Administrative Agent each of Lenders and their Affiliates is hereby
authorized by Company at any time or from time to time, without notice to
Company or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and to apply any and all deposits (general or
special, time or demand, provisional or final, including Indebtedness evidenced
by certificates of deposit, whether matured or unmatured, but not including
trust accounts) and any other Indebtedness at any time held or owing by that
Lender or any Affiliate of that Lender to or for the credit or the account of
Company and each other Loan Party against and on account of the Obligations of
Company or any other Loan Party to that Lender (or any Affiliate of that
Lender) or to any other Lender (or any Affiliate of any other Lender) under
this Agreement, the Letters of Credit and participations therein and the other
Loan Documents, including all claims of any nature or description arising out
of or connected with this Agreement, the Letters of Credit and participations
therein or any other Loan Document, irrespective of whether or not (i) that
Lender shall have made any demand hereunder or (ii) the principal of or the
interest on the Loans or any amounts in respect of the Letters of Credit or any
other amounts due hereunder shall have become due and payable pursuant to
Section 8 and although said obligations and liabilities, or any of them, may be
contingent or unmatured.


 


10.5          Ratable Sharing.


 


Lenders hereby agree among themselves that if any of them shall,
whether by voluntary or mandatory payment (other than a payment or prepayment
of Loans made and applied in accordance with the terms of this Agreement), by
realization upon security, through the exercise of any right of set-off or
banker’s lien, by counterclaim or cross action or by the enforcement of any right
under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, amounts payable in respect of Letters
of Credit, fees and other amounts then due and owing to that Lender hereunder
or under the other Loan Documents (collectively, the “Aggregate
Amounts Due” to such
Lender) that is greater than the proportion received by any other Lender in
respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall, unless such
proportionately greater payment is required by the terms of this Agreement, (i)
notify Administrative Agent and each other Lender of the receipt of such
payment and (ii) apply a portion of such payment to purchase assignments (which
it shall be deemed to have purchased from each seller of an assignment
simultaneously upon the receipt by such seller of its portion of such payment)
of the Aggregate Amounts Due to the other Lenders so that all such recoveries
of Aggregate Amounts Due shall be shared by all Lenders in proportion to the
Aggregate Amounts Due to them; provided that (A) if all or part of such
proportionately greater payment received by such purchasing Lender is
thereafter recovered from such Lender upon the bankruptcy or reorganization of
Company or otherwise, those purchases shall be rescinded and the purchase
prices paid for such assignments shall be returned to such purchasing Lender
ratably to the extent of such recovery, but without interest and (B) the
foregoing provisions shall not apply to (1) any payment made by Company
pursuant to and in accordance with the express terms of this


 


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Agreement or (2)
any payment obtained by a Lender as consideration for the assignment (other
than an assignment pursuant to this subsection 10.5) of or the sale of a
participation in any of its Obligations to any Eligible Assignee or Participant
pursuant to subsection 10.1C. Company expressly consents to the foregoing
arrangement and agrees that any purchaser of an assignment so purchased may
exercise any and all rights of a Lender as to such assignment as fully as if
that Lender had complied with the provisions of subsection 10.1B with respect
to such assignment. In order to further evidence such assignment (and without
prejudice to the effectiveness of the assignment provisions set forth above),
each purchasing Lender and each selling Lender agree to enter into an
Assignment Agreement at the request of a selling Lender or a purchasing Lender,
as the case may be, in form and substance reasonably satisfactory to each such
Lender.


 


10.6          Amendments and
Waivers.


 


No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, and no consent to any departure by Company
therefrom, shall in any event be effective without the written concurrence of
Requisite Lenders; provided that no such amendment, modification,
termination, waiver or consent shall, without the consent of:


 


(a)       each
Lender with Obligations directly affected (whose consent shall be sufficient
for any such amendment, modification, termination or waiver without the consent
of Requisite Lenders) (1) reduce or forgive the principal amount of any Loan,
(2) postpone the scheduled final maturity date of any Loan, or postpone the
date or reduce the amount of any scheduled payment (but not prepayment) of
principal of any Loan, (3) postpone the date on which any interest or any fees
are payable, (4) decrease the interest rate borne by any Loan (other than any
waiver of any increase in the interest rate applicable to any of the Loans
pursuant to subsection 2.2E) or the amount of any fees payable hereunder (other
than any waiver of any increase in the fees applicable to Letters of Credit
pursuant to subsection 3.2 following an Event of Default) excluding any change
in the manner in which any financial ratio used in determining any interest
rate or fee is calculated that would result in a reduction of any such rate or
fee), or (5) extend the Revolving Commitment Termination Date;


 


(b)       each
Lender, (1) change in any manner the definition of “Pro Rata Share” or the
definition of “Requisite Lenders” (except for any changes resulting solely from
an increase in the aggregate amount of the Commitments pursuant to subsection
2.1A(iv) or approved by Requisite Lenders), (2) change the provisions of
subsection 2.4C(iii) to provide that Lenders will not share pro rata in
payments of their respective interests, (3) release any Lien granted in favor
of Administrative Agent with respect to all or substantially all of the
Collateral or release Holdings from its obligations under the Holdings Guaranty
or release all or substantially all of the Subsidiary Guarantors from their
obligations under the Subsidiary Guaranty, in each case other than in
accordance with the terms of the Loan Documents, or (4) change in any manner or
waive the provisions contained in subsection 10.5 or this subsection 10.6.


 


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In addition, no amendment, modification, termination or waiver of any
provision (i) of any Note shall be effective without the written concurrence of
the Lender which is the holder of that Note, (ii) of subsection 2.1A(iii) or of
any other provision of this Agreement relating to the Swing Line Loan
Commitment or the Swing Line Loans shall be effective without the written
concurrence of Swing Line Lender, (iii) of Section 3 shall be effective without
the written concurrence of Administrative Agent and, with respect to the rights
or duties of an Issuing Lender, reduction in the amount or postponement of the
due date of any amount payable in respect of any Letter of Credit, extension of
the expiration date of any Letter of Credit beyond the Revolving Loan
Commitment Termination Date, or the purchase of participations in Letters of
Credit, without the written concurrence of each Issuing Lender that has issued
an outstanding Letter of Credit or has not been reimbursed for a payment under
a Letter of Credit, (iv) of Section 9 shall be effective without the written
concurrence of Administrative Agent, and (v) that increases the amount of a
Commitment of a Lender shall be effective without the consent of such Lender
(it being understood that a waiver of a condition precedent in Section 4, any
Event of Default or Potential Event of Default, any mandatory prepayment of the
Loans or any mandatory reduction of the Commitments shall not be deemed to
increase the Commitment of any Lender).


 


Administrative Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Company in any case shall entitle Company to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 10.6 shall be binding upon each Lender at the time
outstanding, each future Lender and, if signed by Company, on Company.


 


10.7          Notices;
Effectiveness of Signatures.


 


Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, or sent by telefacsimile or United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telefacsimile in complete and legible
form, or three Business Days after depositing it in the United States mail with
postage prepaid and properly addressed; provided that notices to
Administrative Agent, Swing Line Lender and any Issuing Lender under Sections 2
and 3 shall not be effective until received. For the purposes hereof, the
address of each party hereto shall be as set forth under such party’s name on
the signature pages hereof or (i) as to Company and Administrative Agent, such
other address as shall be designated by such Person in a written notice
delivered to the other parties hereto and (ii) as to each other party, such
other address as shall be designated by such party in a written notice
delivered to Administrative Agent and Company. Electronic mail and Internet and
intranet websites may be used to distribute routine communications, such as
financial statements and other information as provided in subsection 6.1. Administrative
Agent or Company may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may
be limited to particular notices or communications.


 


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Loan Documents and notices under the Loan Documents may be transmitted
and/or signed by telefacsimile and by signatures delivered in ‘PDF’ format by
electronic mail. The effectiveness of any such documents and signatures shall,
subject to applicable law, have the same force and effect as an original copy
with manual signatures and shall be binding on all Loan Parties, Administrative
Agent and Lenders. Administrative Agent may also require that any such
documents and signature be confirmed by a manually-signed copy thereof;
provided, however, that the failure to request or deliver any such
manually-signed copy shall not affect the effectiveness of any facsimile
document or signature.


 


10.8          Survival of
Representations, Warranties and Agreements.


 


A.        All
representations, warranties and agreements made herein shall survive the
execution and delivery of this Agreement and the making of the Loans and the
issuance of the Letters of Credit hereunder.


 


B.        Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of Company set forth in subsections 2.6D,
2.7,10.2,10.3,10.16 and 10.17 and the agreements of Lenders set forth in
subsections 9.2C, 9.4,10.5 and 10.17 shall survive the payment of the Loans,
the cancellation or expiration of, or other provision for cash collateral or
other support therefor in a manner reasonably satisfactory to the  Issuing
Lender, the Letters of Credit and the reimbursement of any amounts drawn
thereunder, and the termination of this Agreement.


 


10.9          Failure or Indulgence
Not Waiver; Remedies Cumulative.


 


No failure or delay on the part of Administrative Agent or any Lender
in the exercise of any power, right or privilege hereunder or under any other
Loan Document shall impair such power, right or privilege or be construed to be
a waiver of any default or acquiescence therein, nor shall any single or
partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.


 


10.10   Marshalling; Payments Set
Aside.


 


Neither Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law,
common law or any equitable cause, then, to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor or related thereto, shall be revived and continued
in full force and effect as if such payment or payments had not been made or
such enforcement or setoff had not occurred.


 


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10.11   Severability.


 


In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.


 


10.12   Obligations Several;
Independent Nature of Lenders’ Rights; Damage Waiver.


 


The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders, or
Lenders and Company, as a partnership, an association, a Joint Venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender
shall be a separate and independent debt, and, subject to subsection 9.6, each
Lender shall be entitled to protect and enforce its rights arising out of this
Agreement and it shall not be necessary for any other Lender to be joined as an
additional party in any proceeding for such purpose.


 


To the extent permitted by law, each of the parties hereto shall not
assert, and hereby waives, any claim against any party hereto, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with or as a result
of this Agreement (including, without limitation, subsection 2.1C hereof), any
other Loan Document, any transaction contemplated by the Loan Documents, any
Loan or the use of proceeds thereof. No Indemnitee shall be liable for any
damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with the Loan Documents or
the transactions contemplated thereby.


 


10.13   Release of Security Interest
or Guaranty.


 


Upon the proposed sale or other disposition of any Collateral to any
Person (other than a Domestic Subsidiary of Company) that is permitted by this
Agreement or to which Requisite Lenders have otherwise consented (or such
greater number of Lenders as required under subsection 10.6), or the sale or
other disposition of all of the Capital Stock of a Subsidiary Guarantor to any
Person (other than the Company or a Domestic Subsidiary of Company) that is
permitted by this Agreement or to which Requisite Lenders have otherwise
consented (or such greater number of Lenders as required under subsection
10.6), for which a Loan Party desires to obtain a security interest release or
a release of the Subsidiary Guaranty from Administrative Agent, such Loan Party
shall deliver an Officer’s Certificate (i) stating that the Collateral or the
Capital Stock subject to such disposition is being sold or otherwise disposed
of in compliance with the terms hereof and (ii) specifying the Collateral or
Capital Stock being sold or otherwise disposed of in the proposed transaction.
Upon the receipt of such Officer’s Certificate, Administrative Agent shall, at
such Loan Party’s expense, so long as Administrative Agent (a) has no reason to
believe that the facts stated in such Officer’s Certificate are not true and
correct and (b), if the sale or other disposition of such item of Collateral or
Capital Stock constitutes an


 


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Asset Sale
pursuant to subsection 7.7B (vi), (xiii) or (xvii), shall have received
evidence satisfactory to it that arrangements satisfactory to it have been made
for delivery of the Net Asset Sale Proceeds if and as required by subsection
2.4, execute and deliver such releases of its security interest in such
Collateral or such Subsidiary Guaranty, as may be reasonably requested by such
Loan Party.


 


10.14   Applicable Law.


 


THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN ANY SUCH LOAN DOCUMENT)
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING 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.


 


10.15   Construction of Agreement;
Nature of Relationship.


 


Each of the parties hereto acknowledges that (i) it has been
represented by counsel in the negotiation and documentation of the terms of
this Agreement, (ii) it has had full and fair opportunity to review and revise
the terms of this Agreement, (iii) this Agreement has been drafted jointly by
all of the parties hereto, and (iv) neither Administrative Agent nor any Lender
or other Agent has any fiduciary relationship with or fiduciary duty to Company
arising out of or in connection with this Agreement or any of the other Loan
Documents, and the relationship between Administrative Agent and Lenders, on
one hand, and Company, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor. Accordingly, each of the parties hereto
acknowledges and agrees that the terms of this Agreement shall not be construed
against or in favor of another party.


 


10.16   Consent to Jurisdiction and
Service of Process.


 


ALL JUDICIAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS
HEREUNDER AND THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH OF THE PARTIES HERETO, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY


 


(I)        ACCEPTS
GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH
COURTS;


 


(II)       WAIVES
ANY DEFENSE OF FORUM NON CONVENIENS;


 


(III)     AGREES
THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE
MADE BY REGISTERED OR


 


133

















 


CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
SUBSECTION 10.7;


 


(IV)     AGREES THAT SERVICE AS PROVIDED IN CLAUSE
(III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY
SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT; AND


 


(V)      AGREES THAT THE PROVISIONS OF THIS
SUBSECTION 10.16 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND
ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.


 


10.17   Waiver of Jury Trial.


 


EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING
ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO
ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS
WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SUBSECTION 10.17 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.


 


134

















 


10.18   Confidentiality.


 


Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement in accordance with such Lender’s customary
procedures for handling confidential information of this nature, it being
understood and agreed by Company that in any event a Lender may make
disclosures (a) to its and its Affiliates’ directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such information and instructed to keep such
information confidential) in connection with the transactions contemplated
hereby, (b) to the extent requested by any Government Authority, (c) to the
extent required by applicable laws or regulations or by any subpoena or similar
legal process, (d) to any other party to this Agreement in connection with the
transactions contemplated hereby, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this subsection 10.18, to any
pledgee under subsection 10.1D, or Eligible Assignee of or participant in, or
any prospective Eligible Assignee of or Participant in, any of its rights or
obligations under this Agreement, (g) with the written consent of Company, (h)
to the extent such information becomes publicly available prior to delivery by
Company other than as a result of a breach of this subsection 10.18 or (i) to
the National Association of Insurance Commissioners or any other similar
organization or any nationally recognized rating agency that requires access to
information about a Lender’s or its Affiliates’ investment portfolio in
connection with ratings issued with respect to such Lender or its Affiliates
and that no written or oral communications from counsel to Administrative Agent
and no information that is or is designated as privileged or as attorney work
product may be disclosed to any Person unless such Person is a Lender or a
Participant hereunder; provided that, unless specifically prohibited by
applicable law or court order, each Lender shall notify Company of any request
by any Government Authority or representative thereof (other than any such
request in connection with any examination of the financial condition of such
Lender by such Government Authority) for disclosure of any such non-public
information prior to disclosure of such information. In addition.
Administrative Agent and Lenders may disclose the existence of this Agreement
and information about this Agreement to market data collectors, similar service
providers to the lending industry, and service providers to Administrative
Agent and Lenders, and Administrative Agent or any of its Affiliates may place
customary “tombstone” advertisements relating hereto in publications (including
publications circulated in electronic form) of its choice at its own expense.


 


Notwithstanding anything herein to the contrary, information required
to be treated as confidential by reason of the foregoing shall not include, and
Administrative Agent and each Lender may disclose to any and all Persons,
without limitation of any kind, any information with respect to United States
federal income tax treatment and United States federal income tax structure of
the transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are provided to Administrative Agent or
such Lender relating to such tax treatment and tax structure.


 


135

















 


10.19   Counterparts; Effectiveness.


 


This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith 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. Delivery by telecopier or electronic mail of an executed counterpart
of a signature page to this Agreement and each other Loan Document shall be
effective as delivery of an original executed counterpart of such document.
This Agreement shall become effective upon the execution of a counterpart
hereof by each of the parties hereto.


 


10.20   USA Patriot Act.


 


Each Lender and Administrative Agent hereby notifies Company that
pursuant to the requirements of the Patriot Act, it is required to obtain,
verify and record information that identifies Loan Parties, which information
includes the name and address of each Loan Party and other information that
will allow such Lender and Administrative Agent to identify such Loan Party in
accordance with the Patriot Act.


 


[Remainder of page intentionally left blank]


 


136

















 


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


 


	
  MERGER
  SUB:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PIH
  ACQUISITION CO.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darren J. Gold

  	
   

  	
   

  
	
   

  	
  Name: Darren J. Gold

  	
   

  
	
   

  	
  Title: President and
  Treasurer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notice Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
  Fascimile:

  	
   

  	
   

  
								



 

















 


	
  HOLDINGS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PANOLAM
  HOLDINGS II CO.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darren J. Gold

  	
   

  	
   

  
	
   

  	
  Name: Darren J. Gold

  
	
   

  	
  Title: President and
  Treasurer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notice Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
  Fascimile:

  	
   

  	
   

  
							



 

















 


PANOLAM INDUSTRIES INTERNATIONAL, INC.:


 


Panolam shall have no obligations hereunder until completion of the
Panolam Merger. Prior to that time, the obligations of Company pursuant to this
Agreement and the other Loan Documents shall be solely those of Merger Sub.
Upon consummation of the Panolam Merger, Panolam shall assume, and hereby
assumes, all the obligations and other liabilities of Merger Sub under this Agreement
and all references to Company contained in this Agreement and the other Loan
Documents shall be deemed to refer to Panolam.


 


	
   

  	
  PANOLAM INDUSTRIES INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J. Muller,
  Jr.

  	
   

  
	
   

  	
  Name: Robert J. Muller Jr.

  	
   

  
	
   

  	
  Title: President and
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notice Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
  Fascimile:

  	
   

  	
   

  
								



 

















 


	
  LENDERS:

  	
   

  
	
   

  	
   

  
	
   

  	
  CREDIT
  SUISSE, Cayman Islands Branch,

  
	
   

  	
  individually

  
	
   

  	
  and as Administrative
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William O’Daly

  	
   

  
	
   

  	
   

  	
  Name: William O’Daly

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rianka Mohan

  	
   

  
	
   

  	
   

  	
  Name: Rianka Mohan

  
	
   

  	
   

  	
  Title: Associate

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Notice Address:

  
	
   

  	
   

  	
  OMA-2

  
	
   

  	
   

  	
  Eleven Madison Avenue

  
	
   

  	
   

  	
  New York, New York
  10010

  
	
   

  	
   

  	
  Attention: Agency
  Department Manager

  
	
   

  	
   

  	
  Facsimile: (212) 325-8304

  
	
   

  	
   

  	
   

  
	
   

  	
  Payment Instructions:

  
	
   

  	
   

  	
  Bank of New York

  
	
   

  	
   

  	
  ABA 021000018

  
	
   

  	
   

  	
  A/C Name: CS Agency
  Cayman Account

  
	
   

  	
   

  	
  A/C Number: 8900492627

  
	
   

  	
   

  	
  Reference: Panolam

  
					



 

















 


	
   

  	
  GENERAL
  ELECTRIC CAPITAL CORPORATION,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert M. Kadlick

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Robert M.
  Kadlick

  	
   

  
	
   

  	
  Title: 

  	
      Duly
  Authorized Signatory

  	
   

  
						



 

















 


	
   

  	
  JEFFERIES &  COMPANY, INC.,

  	
   

  
	
   

  	
  as
  Syndication Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew Woolford

  	
   

  
	
   

  	
  Name:

  	
  Andrew Woolford

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Notice Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Jefferies
  & Company, Inc.

  	
   

  
	
   

  	
   

  	
  Metro
  Center, One Station Place

  	
   

  
	
   

  	
   

  	
  Stamford,
  CT 06902

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Andrew
  Woolford

  	
   

  
	
   

  	
   

  	
  Facsimile:

  	
  203-708-5882

  	
   

  
								



 

















 


	
   

  	
  JEFFERIES
  BABSON FINANCE CP FUNDING LLC,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carl A. Toriello

  	
   

  
	
   

  	
  Name:

  	
    Carl A.
  Toriello

  	
   

  
	
   

  	
  Title: 

  	
       SR.
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Notice Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile:

  	
   

  	
   

  
						



 

















 


	
   

  	
  JEFFERIES BABSON FINANCE LLC,

  as a Joint Arranger and Joint Bookrunner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carl A. Toriello

  	
   

  
	
   

  	
  Name:

  	
    Carl A.
  Toriello

  	
   

  
	
   

  	
  Title: 

  	
  Senior Managing
  Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Notice Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile: