-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QwMzExxMLvSAuPBLykP2dyUUESzeW1j1wHzShCAyddf7T+JqmK3eUkqDqlyhd/EU 1qv77Qe13iHc03aRprkkwg== 0000950129-98-000065.txt : 19980109 0000950129-98-000065.hdr.sgml : 19980109 ACCESSION NUMBER: 0000950129-98-000065 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19980108 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PCI CHEMICALS CANADA INC CENTRAL INDEX KEY: 0001050385 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 760549506 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221 FILM NUMBER: 98502655 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4300 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 4300 NATIONSBANK CENTER STREET 2: 700 LOUISIANA ST CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER AMERICAS ACQUISITION CORP CENTRAL INDEX KEY: 0000944649 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 061420850 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-01 FILM NUMBER: 98502656 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: SUITE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER AMERICAS INC CENTRAL INDEX KEY: 0000944717 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 760280373 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-02 FILM NUMBER: 98502657 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER CHLOR ALKALI CO INC CENTRAL INDEX KEY: 0000944718 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 510302028 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-03 FILM NUMBER: 98502658 BUSINESS ADDRESS: STREET 1: 4200 NATIONSBANK CENTER STREET 2: 700 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMPERIAL WEST CHEMICAL CO CENTRAL INDEX KEY: 0000944719 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 952375683 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-04 FILM NUMBER: 98502659 BUSINESS ADDRESS: STREET 1: 4200 NATIONSBANK CENTER STREET 2: 700 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALL PURE CHEMICAL CO CENTRAL INDEX KEY: 0000944720 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 942314942 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-05 FILM NUMBER: 98502660 BUSINESS ADDRESS: STREET 1: 4200 NATIONSBANK CENTER STREET 2: 700 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLACK MOUNTAIN POWER CO CENTRAL INDEX KEY: 0000944721 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 760291143 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-06 FILM NUMBER: 98502661 BUSINESS ADDRESS: STREET 1: 4200 NATIONSBANK CENTER STREET 2: 700 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALL PURE CHEMICAL NORTHWEST INC CENTRAL INDEX KEY: 0000944722 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 942714064 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-07 FILM NUMBER: 98502662 BUSINESS ADDRESS: STREET 1: 4200 NATIONSBANK CENTER STREET 2: 700 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER CHLOR ALKALI INTERNATIONAL INC CENTRAL INDEX KEY: 0000944723 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 980118164 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-08 FILM NUMBER: 98502663 BUSINESS ADDRESS: STREET 1: 4200 NATIONSBANK CENTER STREET 2: 700 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOW CORP CENTRAL INDEX KEY: 0000944724 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 880336831 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-09 FILM NUMBER: 98502664 BUSINESS ADDRESS: STREET 1: 4200 NATIONSBANK CENTER STREET 2: 700 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TC HOLDINGS INC CENTRAL INDEX KEY: 0001041860 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 911536884 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-10 FILM NUMBER: 98502665 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TC PRODUCTS INC CENTRAL INDEX KEY: 0001041861 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 760549506 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-11 FILM NUMBER: 98502666 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER EAST INC CENTRAL INDEX KEY: 0001041862 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 860311265 STATE OF INCORPORATION: NM FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-12 FILM NUMBER: 98502667 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER LICENSING INC CENTRAL INDEX KEY: 0001050376 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 522058031 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-13 FILM NUMBER: 98502668 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 900 LOUISIANA ST STREET 2: SUITE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PCI CAROLINA INC CENTRAL INDEX KEY: 0001050383 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 760549506 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-41221-14 FILM NUMBER: 98502669 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA ST STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 4300 NATIONSBANK CENTER STREET 2: 700 LOUISIANA ST CITY: HOUSTON STATE: TX ZIP: 77002 S-4/A 1 PCI CHEMICALS CANADA, INC. - AMENDMENT #1) 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1998 REGISTRATION NO. 333-41221 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- AMENDMENT NO. 1 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 PCI CHEMICALS CANADA INC. (Exact name of registrant as specified in its charter) NEW BRUNSWICK, CANADA 2812 NOT APPLICABLE (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) 630 WEST RENE-LEVESQUE BOULEVARD, MONTREAL, QUEBEC, H3B 1S6, (514) 397-6100 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) PIONEER AMERICAS ACQUISITION CORP. DELAWARE 06-1420850 PIONEER AMERICAS, INC. DELAWARE 76-0280373 PIONEER CHLOR ALKALI COMPANY, INC. DELAWARE 51-0302028 IMPERIAL WEST CHEMICAL CO. NEVADA 95-2375683 ALL-PURE CHEMICAL CO. CALIFORNIA 94-2314942 BLACK MOUNTAIN POWER COMPANY TEXAS 76-0291143 ALL-PURE CHEMICAL NORTHWEST, INC. WASHINGTON 94-2714064 PIONEER CHLOR ALKALI INTERNATIONAL, INC. BARBADOS 98-0118164 G.O.W. CORPORATION NEVADA 88-0336831 PIONEER (EAST), INC. DELAWARE 51-0375981 T.C. HOLDINGS, INC. NEW MEXICO 86-0311265 T.C. PRODUCTS, INC. WASHINGTON 91-1536884 PCI CAROLINA, INC. DELAWARE 76-0549506 PIONEER LICENSING, INC. DELAWARE 52-2058031 (Exact name of registrants as (State or other jurisdiction of (I.R.S. Employer specified in their charters) incorporation or organization) Identification No.)
--------------- 4300 NATIONSBANK CENTER, 700 LOUISIANA STREET, HOUSTON, TEXAS 77002, (713) 225-3831 (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) --------------- KENT R. STEPHENSON, ESQ. PIONEER AMERICAS ACQUISITION CORP. 4300 NATIONSBANK CENTER 700 LOUISIANA STREET HOUSTON, TEXAS 77002 (713) 225-3831 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------- with a copy to: CORNELIUS T. FINNEGAN III, ESQ. WILLKIE FARR & GALLAGHER ONE CITICORP CENTER 153 EAST 53RD STREET NEW YORK, NEW YORK 10022 (212) 821-8000 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] --------------- The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ 2 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. PCI Canada is a wholly-owned subsidiary of PAAC. PAAC, which is a Delaware corporation, is empowered by the Delaware General Corporation Law, subject to the procedures and limitations stated therein, to indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any threatened, pending or completed action, suit or proceeding in which such person is made a party by reason of his being or having been a director, officer, employee or agent of PAAC. The statute provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any by-law, agreement, vote of stockholders or disinterested directors, or otherwise. The Certificate of Incorporation and by-laws of PAAC provide for indemnification of the directors and officers of such entities to the full extent permitted by the Delaware General Corporation Law. PAAC maintains an insurance policy providing for indemnification of its officers, directors and certain other persons against liabilities and expenses incurred by any of them in certain stated proceedings and under certain stated conditions. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
*2.1 -- Asset Purchase Agreement, dated as of September 22, 1997, by and among PCI Canada, PCI Carolina, Pioneer, ICI, ICI Canada and ICI Americas (incorporated by reference to Exhibit 2 to the Company's Report on Form 10-Q, for the quarter ended September 30, 1997). *2.2 -- First Amendment to Asset Purchase Agreement, dated as of October 31, 1997, among PCI Canada, PCI Carolina, Pioneer, ICI, ICI Canada and ICI Americas (incorporated by reference to Exhibit 2(b) to the Company's Current Report on Form 8-K, dated November 5, 1997). *3.1 -- Certificate of Incorporation of PCI Canada. *3.2 -- By-laws of PCI Canada. *3.3 -- Certificate of Incorporation of PAAC (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.4 -- By-laws of PAAC (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.5 -- Certificate of Incorporation of PAI (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.6 -- By-laws of PAI (incorporated by reference to Exhibit 3.4 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.7 -- Certificate of Incorporation of PCAC (incorporated by reference to Exhibit 3.5 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.8 -- By-laws of PCAC (Incorporated by reference to Exhibit 3.6 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.9 -- Certificate of Incorporation of Imperial West (incorporated by reference to Exhibit 3.7 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995).
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*3.10 -- By-laws of Imperial West (incorporated by reference to Exhibit 3.8 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.11 -- Certificate of Incorporation of All-Pure (incorporated by reference to Exhibit 3.9 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.12 -- By-laws of All-Pure (incorporated by reference to Exhibit 3.10 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.13 -- Certificate of Incorporation of Black Mountain Power Company (incorporated by reference to Exhibit 3.11 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.14 -- By-laws of Black Mountain Power Company (incorporated by reference to Exhibit 3.12 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.15 -- Certificate of Incorporation of All-Pure Chemical Northwest, Inc. (incorporated by reference to Exhibit 3.13 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.16 -- By-laws of All-Pure Chemical Northwest, Inc. (incorporated by reference to Exhibit 3.14 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.17 -- Certificate of Incorporation of Pioneer Chlor Alkali International, Inc. (incorporated by reference to Exhibit 3.15 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.18 -- By-laws of Pioneer Chlor Alkali International, Inc. (incorporated by reference to Exhibit 3.16 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.19 -- Certificate of Incorporation of G.O.W. Corporation (incorporated by reference to Exhibit 3.17 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.20 -- By-laws of G.O.W. Corporation (incorporated by reference to Exhibit 3.18 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.21 -- Certificate of Incorporation of Pioneer (East), Inc. (incorporated by reference to Exhibit 3.19 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.22 -- By-laws of Pioneer (East), Inc. (incorporated by reference to Exhibit 3.20 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.23 -- Certificate of Incorporation of T.C. Holdings, Inc. (incorporated by reference to Exhibit 3.21 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.24 -- By-laws of T.C. Holdings, Inc. (incorporated by reference to Exhibit 3.22 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.25 -- Certificate of Incorporation of T.C. Products, Inc. (incorporated by reference to Exhibit 3.23 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.26 -- By-laws of T.C. Products, Inc. (incorporated by reference to Exhibit 3.24 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.27 -- Certificate of Incorporation of PCI Carolina, Inc.
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*3.28 -- By-laws of PCI Carolina, Inc. *3.29 -- Certificate of Incorporation of Pioneer Licensing, Inc. *3.30 -- By-laws of Pioneer Licensing, Inc. *4.1 -- Indenture, dated as of October 30, 1997, by and among PCI Canada, the Guarantors and United States Trust Company of New York, as Trustee, relating to $175,000,000 principal amount of 9 1/4% Series A Senior Notes due 2007, including form of Note and Guarantees. 4.2 -- Deed of Hypothec, dated as of October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.3 -- Affiliate Security Agreement, dated as of October 30, 1997, among PCI Carolina, Inc., Pioneer Licensing, Inc. and United States Trust Company of New York, as Collateral Agent. 4.4 -- Debenture (New Brunswick), dated October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.5(a) -- Demand Debenture (Ontario), dated as of October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.5(b) -- Demand Debenture (Nova Scotia), dated October 30, 1997, issued by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.6(a) -- Debenture Pledge Agreement (Ontario), dated October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.6(b) -- Debenture Pledge Agreement (Nova Scotia), dated October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.6(c) -- Debenture Pledge Agreement (New Brunswick), dated October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.7 -- Subsidiary Security Agreement, dated as of October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. *4.8(a) -- Term Loan Agreement, dated as of October 30, 1997, among PAI, PAAC, Various Financial Institutions, as Lenders, DLJ Capital Funding, Inc. as the Syndication Agent, Salomon Brothers Holding Company Inc, as the Documentation Agent, Bank of America National Trust and Savings Association, as the Administrative Agent and United States Trust Company of New York, as Collateral Agent. *4.8(b) -- Affiliate Guaranty, dated as of October 30, 1997, among the Affiliate Guarantors named therein. *4.9 -- Consent and Amendment No. 1, dated November 5, 1997, to Loan and Security Agreement, dated June 17, 1997, among PAAC, Bank of America National Trust and Savings Association, as Agent and Lender and the other Lenders Party thereto. *4.10 -- Intercreditor and Collateral Agency Agreement, dated as of October 30, 1997 by and among United States Trust Company of New York, as Trustee and Collateral Agent, Bank of America National Trust and Savings Association, as Agent, PCI Canada, PAAC and PAI. *4.11 -- Exchange and Registration Rights Agreement, dated as of October 30, 1997, by and among PCI Canada, the Guarantors and the Initial Purchasers. 5.1 -- Opinion of Willkie Farr & Gallagher. 5.2 -- Opinion of Kent R. Stephenson, Esq. 5.3 -- Opinion of Stewart McKelvey Stirling Scales, St. John, New Brunswick. 8.1 -- Opinion of Willkie Farr & Gallagher with respect to certain tax matters. 8.2 -- Opinion of Stikeman, Elliot, Montreal, Quebec with respect to certain tax matters. *10.1 -- Contingent Payment Agreement, dated as of April 20, 1995, by and among Pioneer (formerly, GEV corporation), PAAC and the Sellers defined therein (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Pioneer, dated April 20, 1995).
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*10.2 -- Tax Sharing Agreement, dated as of April 20, 1995, by and among Pioneer, PAAC and the Subsidiary Guarantors defined therein (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *10.3 -- Pioneer Companies, Inc. 1995 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *10.4 -- Pioneer Companies, Inc. Key Executive Stock Grant Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Pioneer for the quarterly period ended June 30, 1996). *10.5 -- Pioneer Chlor Alkali Company, Inc. Supplemental Retirement Plan (incorporated by reference to Exhibit 10.5 to the Annual Report on Form 10-K of Pioneer for the fiscal year ended December 31, 1995). *10.6 -- Employment Agreement, dated as of April 20, 1995, between Pioneer and Richard C. Kellogg, Jr. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Pioneer for the quarterly period ended June 30, 1995). *10.7 -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and James E. Glattly (incorporated by reference to Exhibit 10.8 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). *10.8 -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and Verrill M. Norwood, Jr. (incorporated by reference to Exhibit 10.9 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). *10.9 -- Executive Employment Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1996). *10.10 -- Stock Purchase Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1996). *10.11 -- Non-Qualified Stock Option Agreement, dated May 15, 1997, between Pioneer Companies, Inc. and Andrew M. Bursky. *10.12 -- Noncompetition Agreement, dated as of October 31, 1997, between ICI, ICI Canada, ICI Americas, PCI Canada and PCI Carolina. *12.1 -- Statement Regarding Computation of Ratio of Earnings to Fixed Charges. *16.1 -- Letter from Ernst & Young LLP regarding change in independent accountants (incorporated by reference to Exhibit 16.1 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *21.1 -- Subsidiaries of the Registrants. *23.1 -- Independent Auditors' Consent of Deloitte & Touche LLP. *23.2 -- Independent Auditors' Consent of Ernst & Young LLP. *23.3 -- Independent Auditors' Consent of Piercy, Bowler, Taylor & Kern. *23.4 -- Independent Public Accountants' Consent of Arthur Andersen LLP. *23.5 -- Independent Auditor's Consent of KPMG. 23.6 -- Consents of Willkie Farr & Gallagher (included in their opinions filed as Exhibits 5.1 and 8.1). 23.7 -- Consent of Kent R. Stephenson, Esq. (included in his opinion filed as Exhibit 5.2).
II-4 6
23.8 -- Consent of Stewart McKelvey Stirling Scales, St. John, New Brunswick (included in their opinion filed as Exhibit 5.3). 23.9 -- Consent of Stikeman, Elliot, Montreal, Quebec (included in their opinion filed as Exhibit 8.2). *24.1 -- Powers of Attorney (included in the signature pages hereto). *25.1 -- Statement on Form T-1 of Eligibility of Trustee. 99.1 -- Form of Letter of Transmittal. 99.2 -- Form of Notice of Guaranteed Delivery. 99.3 -- Form of Letter to Clients. 99.4 -- Form of Letter to Nominees.
- --------------- * Previously filed. (b) Financial Statement Schedules: SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS. All other schedules have been omitted because they are not applicable or not required or the required information is included in the financial statements or notes thereto. ITEM 22. UNDERTAKINGS. The undersigned Registrants hereby undertake that, for purposes of determining any liability under the Securities Act, each filing of PAAC's annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of Registrants pursuant to the provisions, described under Item 20 above, or otherwise, the Registrants have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrants of expenses incurred or paid by a director, officer or controlling person of the Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrants hereby undertake that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of II-5 7 receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned Registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this Registration Statement when it became effective. II-6 8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. PCI CHEMICALS CANADA INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) Norman E. Thogersen /s/ PHILIP J. ABLOVE Vice President, Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Vice President and Controller January 8, 1998 - --------------------------------------------------- (principal accounting officer) Pierre Prud'homme * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * Director January 8, 1998 - --------------------------------------------------- Raymond E. Boucher * Director January 8, 1998 - --------------------------------------------------- G.P. Donnini * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-7 9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. PIONEER AMERICAS ACQUISITION CORP. By: /s/ PHILIP J. ABLOVE ---------------------------------- Name: Philip J. Ablove Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President, Chief Executive Officer January 8, 1998 - ----------------------------------------------------- and Director (principal executive Michael J. Ferris officer) /s/ PHILIP J. ABLOVE Vice President, Chief Financial January 8, 1998 - ----------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Controller (principal accounting January 8, 1998 - ----------------------------------------------------- officer) John R. Beaver * Director January 8, 1998 - ----------------------------------------------------- William R. Berkley * Director January 8, 1998 - ----------------------------------------------------- Andrew M. Bursky * Director January 8, 1998 - ----------------------------------------------------- Donald J. Donahue * Director January 8, 1998 - ----------------------------------------------------- Richard C. Kellogg, Jr. * Director January 8, 1998 - ----------------------------------------------------- Paul J. Kienholz * Director January 8, 1998 - ----------------------------------------------------- Jack H. Nusbaum * Director January 8, 1998 - ----------------------------------------------------- Thomas H. Schnitzius
* By: /s/ PHILIP J. ABLOVE ------------------------------- Philip J. Ablove Attorney-in-fact II-8 10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. PIONEER AMERICAS, INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board and President January 8, 1998 - --------------------------------------------------- (principal executive officer) Michael J. Ferris /s/ PHILIP J. ABLOVE Vice President, Chief Financial January 8, 1998 - --------------------------------------------------- Officer, Treasurer and Director Philip J. Ablove (principal financial officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Director January 8, 1998 - --------------------------------------------------- William L. Mahone * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-9 11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. PIONEER CHLOR ALKALI COMPANY, INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) James E. Glattly /s/ PHILIP J. ABLOVE Vice President and Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * Director January 8, 1998 - --------------------------------------------------- William L. Mahone * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-10 12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. IMPERIAL WEST CHEMICAL CO. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) James M. Wingard /s/ PHILIP J. ABLOVE Vice President and Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * Director January 8, 1998 - --------------------------------------------------- William L. Mahone * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-11 13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. ALL-PURE CHEMICAL CO. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) Ronald E. Ciora /s/ PHILIP J. ABLOVE Vice President and Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * Director January 8, 1998 - --------------------------------------------------- William L. Mahone * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-12 14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. BLACK MOUNTAIN POWER COMPANY By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) Terry K. Graves /s/ PHILIP J. ABLOVE Vice President and Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * Director January 8, 1998 - --------------------------------------------------- James E. Glattly * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-13 15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. ALL-PURE CHEMICAL NORTHWEST, INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) Ronald E. Ciora /s/ PHILIP J. ABLOVE Vice President and Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-14 16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. PIONEER CHLOR ALKALI INTERNATIONAL, INC. By: /s/ KENT R. STEPHENSON ---------------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board (principal January 8, 1998 - --------------------------------------------------- executive officer) Michael J. Ferris /s/ PHILIP J. ABLOVE Vice President (principal financial January 8, 1998 - --------------------------------------------------- officer) Philip J. Ablove * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Director January 8, 1998 - --------------------------------------------------- David F. Callaghan * Director January 8, 1998 - --------------------------------------------------- James A. Fields * Director January 8, 1998 - --------------------------------------------------- David A. Leslie * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-15 17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. G. O. W. CORPORATION By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- <->Y * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) Terry K. Graves /s/ PHILIP J. ABLOVE Vice President and Chief Financial January 8, 1998 - --------------------------------------------------- Officer (principal financial Philip J. Ablove officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-16 18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. PIONEER (EAST), INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ KENT R. STEPHENSON President, Secretary and Chairman of January 8, 1998 - --------------------------------------------------- the Board (principal executive Kent R. Stephenson officer) * Treasurer and Director (principal January 8, 1998 - --------------------------------------------------- financial and accounting officer) Robert C. Williams * Director January 8, 1998 - --------------------------------------------------- Victoria L. Garrett * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-17 19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. T.C. HOLDINGS, INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) Ronald E. Ciora /s/ PHILIP J. ABLOVE Vice President and Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * Director January 8, 1998 - --------------------------------------------------- William L. Mahone * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-18 20 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. T.C. PRODUCTS, INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director (principal January 8, 1998 - --------------------------------------------------- executive officer) Ronald E. Ciora /s/ PHILIP J. ABLOVE Vice President and Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director (principal Philip J. Ablove financial officer) * Controller (principal accounting January 8, 1998 - --------------------------------------------------- officer) John R. Beaver * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * Director January 8, 1998 - --------------------------------------------------- William L. Mahone * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-19 21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. PCI CAROLINA, INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * President and Director January 8, 1998 - --------------------------------------------------- (principal executive officer) Norman E. Thogersen /s/ PHILIP J. ABLOVE Vice President, Chief Financial January 8, 1998 - --------------------------------------------------- Officer and Director Philip J. Ablove (principle financial and accounting Officer) * Chairman of the Board January 8, 1998 - --------------------------------------------------- Michael J. Ferris * Director January 8, 1998 - --------------------------------------------------- G. P. Donnini * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-20 22 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on the 8th day of January, 1998. PIONEER LICENSING, INC. By: /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: President Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ KENT R. STEPHENSON President, Secretary and Chairman of January 8, 1998 - --------------------------------------------------- the Board (principal executive Kent R. Stephenson officer) * Treasurer and Director (principal January 8, 1998 - --------------------------------------------------- financial and accounting officer) Robert C. Williams * Director January 8, 1998 - --------------------------------------------------- Victoria L. Garrett * By: /s/ KENT R. STEPHENSON ------------------------------------------- Kent R. Stephenson Attorney-in-fact
II-21 23 SCHEDULE II PIONEER AMERICAS ACQUISITION CORP. VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF PERIOD EXPENSE ADDITIONS DEDUCTIONS PERIOD ----------- ---------- ---------- --------- ---------- ---------- Year Ended December 31, 1996: Allowance for doubtful accounts....... $1,424 $ -- $ -- $(113)(A) $1,311 Year Ended December 31, 1995: Allowance for doubtful accounts....... -- 138 1,416(B) (130)(A) 1,424
- --------------- (A) Uncollectible accounts written off, net of recoveries. (B) Allowance balance established on April 20, 1995 in connection with the acquisition of Pioneer Americas, Inc. PIONEER AMERICAS, INC. VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND END OF DESCRIPTION OF PERIOD EXPENSE ADDITIONS DEDUCTIONS PERIOD ----------- ---------- ---------- --------- ---------- ---------- Period from January 1, 1995 through April 20, 1995: Allowance for doubtful accounts....... $2,038 $ 47 $ -- $(169)(A) $1,916 Year ended December 31, 1994: Allowance for doubtful accounts....... 521 1,235 300(B) (18)(A) 2,038
- --------------- (A) Uncollectible accounts written off, net of recoveries. (B) Allowance balance established in May 1994 in connection with the acquisition of GPS. 24 EXHIBIT INDEX
EXHIBIT DESCRIPTION ------- ----------- *2.1 -- Asset Purchase Agreement, dated as of September 22, 1997, by and among PCI Canada, PCI Carolina, Pioneer, ICI, ICI Canada and ICI Americas (incorporated by reference to Exhibit 2 to the Company's Report on Form 10-Q, for the quarter ended September 30, 1997). *2.2 -- First Amendment to Asset Purchase Agreement, dated as of October 31, 1997, among PCI Canada, PCI Carolina, Pioneer, ICI, ICI Canada and ICI Americas (incorporated by reference to Exhibit 2(b) to the Company's Current Report on Form 8-K, dated November 5, 1997). *3.1 -- Certificate of Incorporation of PCI Canada. *3.2 -- By-laws of PCI Canada. *3.3 -- Certificate of Incorporation of PAAC (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.4 -- By-laws of PAAC (incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.5 -- Certificate of Incorporation of PAI (incorporated by reference to Exhibit 3.3 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.6 -- By-laws of PAI (incorporated by reference to Exhibit 3.4 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.7 -- Certificate of Incorporation of PCAC (incorporated by reference to Exhibit 3.5 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.8 -- By-laws of PCAC (Incorporated by reference to Exhibit 3.6 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.9 -- Certificate of Incorporation of Imperial West (incorporated by reference to Exhibit 3.7 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.10 -- By-laws of Imperial West (incorporated by reference to Exhibit 3.8 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.11 -- Certificate of Incorporation of All-Pure (incorporated by reference to Exhibit 3.9 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.12 -- By-laws of All-Pure (incorporated by reference to Exhibit 3.10 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.13 -- Certificate of Incorporation of Black Mountain Power Company (incorporated by reference to Exhibit 3.11 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.14 -- By-laws of Black Mountain Power Company (incorporated by reference to Exhibit 3.12 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995).
25
EXHIBIT DESCRIPTION ------- ----------- *3.15 -- Certificate of Incorporation of All-Pure Chemical Northwest, Inc. (incorporated by reference to Exhibit 3.13 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.16 -- By-laws of All-Pure Chemical Northwest, Inc. (incorporated by reference to Exhibit 3.14 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.17 -- Certificate of Incorporation of Pioneer Chlor Alkali International, Inc. (incorporated by reference to Exhibit 3.15 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.18 -- By-laws of Pioneer Chlor Alkali International, Inc. (incorporated by reference to Exhibit 3.16 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.19 -- Certificate of Incorporation of G.O.W. Corporation (incorporated by reference to Exhibit 3.17 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.20 -- By-laws of G.O.W. Corporation (incorporated by reference to Exhibit 3.18 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *3.21 -- Certificate of Incorporation of Pioneer (East), Inc. (incorporated by reference to Exhibit 3.19 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.22 -- By-laws of Pioneer (East), Inc. (incorporated by reference to Exhibit 3.20 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.23 -- Certificate of Incorporation of T.C. Holdings, Inc. (incorporated by reference to Exhibit 3.21 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.24 -- By-laws of T.C. Holdings, Inc. (incorporated by reference to Exhibit 3.22 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.25 -- Certificate of Incorporation of T.C. Products, Inc. (incorporated by reference to Exhibit 3.23 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.26 -- By-laws of T.C. Products, Inc. (incorporated by reference to Exhibit 3.24 to the Company's Registration Statement on Form S-4 (File No. 333-30683) declared effective by the Commission on October 17, 1997). *3.27 -- Certificate of Incorporation of PCI Carolina, Inc. *3.28 -- By-laws of PCI Carolina, Inc. *3.29 -- Certificate of Incorporation of Pioneer Licensing, Inc. *3.30 -- By-laws of Pioneer Licensing, Inc. *4.1 -- Indenture, dated as of October 30, 1997, by and among PCI Canada, the Guarantors and United States Trust Company of New York, as Trustee, relating to $175,000,000 principal amount of 9 1/4% Series A Senior Notes due 2007, including form of Note and Guarantees. 4.2 -- Deed of Hypothec, dated as of October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent.
26 4.3 -- Affiliate Security Agreement, dated as of October 30, 1997, among PCI Carolina, Inc., Pioneer Licensing, Inc. and United States Trust Company of New York, as Collateral Agent. 4.4 -- Debenture (New Brunswick), dated October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.5(a) -- Demand Debenture (Ontario), dated as of October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.5(b) -- Demand Debenture (Nova Scotia), dated October 30, 1997, issued by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.6(a) -- Debenture Pledge Agreement (Ontario), dated October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.6(b) -- Debenture Pledge Agreement (Nova Scotia), dated October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.6(c) -- Debenture Pledge Agreement (New Brunswick), dated October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. 4.7 -- Subsidiary Security Agreement, dated as of October 30, 1997, by PCI Canada in favor of United States Trust Company of New York, as Collateral Agent. *4.8(a) -- Term Loan Agreement, dated as of October 30, 1997, among PAI, PAAC, Various Financial Institutions, as Lenders, DLJ Capital Funding, Inc. as the Syndication Agent, Salomon Brothers Holding Company Inc, as the Documentation Agent, Bank of America National Trust and Savings Association, as the Administrative Agent and United States Trust Company of New York, as Collateral Agent. *4.8(b) -- Affiliate Guaranty, dated as of October 30, 1997, among the Affiliate Guarantors named therein. *4.9 -- Consent and Amendment No. 1, dated November 5, 1997, to Loan and Security Agreement, dated June 17, 1997, among PAAC, Bank of America National Trust and Savings Association, as Agent and Lender and the other Lenders Party thereto. *4.10 -- Intercreditor and Collateral Agency Agreement, dated as of October 30, 1997 by and among United States Trust Company of New York, as Trustee and Collateral Agent, Bank of America National Trust and Savings Association, as Agent, PCI Canada, PAAC and PAI. *4.11 -- Exchange and Registration Rights Agreement, dated as of October 30, 1997, by and among PCI Canada, the Guarantors and the Initial Purchasers. 5.1 -- Opinion of Willkie Farr & Gallagher. 5.2 -- Opinion of Kent R. Stephenson, Esq. 5.3 -- Opinion of Stewart McKelvey Stirling Scales, St. John, New Brunswick. 8.1 -- Opinion of Willkie Farr & Gallagher with respect to certain tax matters. 8.2 -- Opinion of Stikeman, Elliot, Montreal, Quebec with respect to certain tax matters. *10.1 -- Contingent Payment Agreement, dated as of April 20, 1995, by and among Pioneer (formerly, GEV corporation), PAAC and the Sellers defined therein (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Pioneer, dated April 20, 1995). *10.2 -- Tax Sharing Agreement, dated as of April 20, 1995, by and among Pioneer, PAAC and the Subsidiary Guarantors defined therein (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995).
27
EXHIBIT DESCRIPTION ------- ----------- *10.3 -- Pioneer Companies, Inc. 1995 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *10.4 -- Pioneer Companies, Inc. Key Executive Stock Grant Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Pioneer for the quarterly period ended June 30, 1996). *10.5 -- Pioneer Chlor Alkali Company, Inc. Supplemental Retirement Plan (incorporated by reference to Exhibit 10.5 to the Annual Report on Form 10-K of Pioneer for the fiscal year ended December 31, 1995). *10.6 -- Employment Agreement, dated as of April 20, 1995, between Pioneer and Richard C. Kellogg, Jr. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Pioneer for the quarterly period ended June 30, 1995). *10.7 -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and James E. Glattly (incorporated by reference to Exhibit 10.8 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). *10.8 -- Employment Agreement, dated April 20, 1995, between Pioneer Americas, Inc. and Verrill M. Norwood, Jr. (incorporated by reference to Exhibit 10.9 to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995). *10.9 -- Executive Employment Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1996). *10.10 -- Stock Purchase Agreement, dated January 4, 1997, between Pioneer Companies, Inc. and Michael J. Ferris (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1996). *10.11 -- Non-Qualified Stock Option Agreement, dated May 15, 1997, between Pioneer Companies, Inc. and Andrew M. Bursky. *10.12 -- Noncompetition Agreement, dated as of October 31, 1997, between ICI, ICI Canada, ICI Americas, PCI Canada and PCI Carolina. *12.1 -- Statement Regarding Computation of Ratio of Earnings to Fixed Charges. *16.1 -- Letter from Ernst & Young LLP regarding change in independent accountants (incorporated by reference to Exhibit 16.1 to the Company's Registration Statement on Form S-4 (File No. 33-98828) declared effective by the Commission on December 22, 1995). *21.1 -- Subsidiaries of the Registrants. *23.1 -- Independent Auditors' Consent of Deloitte & Touche LLP. *23.2 -- Independent Auditors' Consent of Ernst & Young LLP. *23.3 -- Independent Auditors' Consent of Piercy, Bowler, Taylor & Kern. *23.4 -- Independent Public Accountants' Consent of Arthur Andersen LLP. *23.5 -- Independent Auditor's Consent of KPMG. 23.6 -- Consents of Willkie Farr & Gallagher (included in their opinions filed as Exhibits 5.1 and 8.1).
28
EXHIBIT DESCRIPTION ------- ----------- 23.7 -- Consent of Kent R. Stephenson, Esq. (included in his opinion filed as Exhibit 5.2). 23.8 -- Consent of Stewart McKelvey Stirling Scales, St. John, New Brunswick (included in their opinion filed as Exhibit 5.3). 23.9 -- Consent of Stikeman, Elliot, Montreal, Quebec (included in their opinion filed as Exhibit 8.2). *24.1 -- Powers of Attorney (included in the signature pages hereto). *25.1 -- Statement on Form T-1 of Eligibility of Trustee. 99.1 -- Form of Letter of Transmittal. 99.2 -- Form of Notice of Guaranteed Delivery. 99.3 -- Form of Letter to Clients. 99.4 -- Form of Letter to Nominees.
- --------------- * Previously filed. EX-4.2 2 DEED OF HYPOTHEC - DATED 10/30/97 1 EXHIBIT 4.2 DEED OF HYPOTHEC ON the Thirtieth (30th) day of October, Nineteen hundred and ninety-seven (1997), BEFORE Me Kevin Leonard, the undersigned Notary for the Province of Quebec, practising in the City of Montreal APPEARED: PCI CHEMICALS CANADA INC./PRODUITS CHIMIQUES PCI CANADA INC., a corporation duly incorporated pursuant to the New Brunswick Business Corporations Act (New Brunswick), having its registered office at 44 Chipman Hill, Suite 1000, in the City of Saint John, Province of New Brunswick, E2L 4S6, herein acting and represented by Robert C. Williams, its representative, hereunto duly authorized in virtue of a resolution of the board of directors of the said corporation duly adopted on the Twenty-ninth (29th) day of October, Nineteen hundred and ninety-seven (1997), a certified copy of which remains hereto annexed after having been acknowledged true and signed for identification by the said representative in the presence of the undersigned Notary (hereinafter referred to as the "GRANTOR"); PARTY OF THE FIRST PART AND: UNITED STATES TRUST COMPANY OF NEW YORK, a New York banking corporation, having a place of business at 114 West 47th Street, in the City of New York, State of New York, USA, 10036-1532, herein acting and represented by Rita Lc de Santis, duly authorized as she so declares, hereinacting for its own account and for the account of, and as holder of an irrevocable power of attorney of, the Trustee, the Administrative Agent, the Noteholders and the Lenders (hereinafter referred to as the "COLLATERAL AGENT"). PARTY OF THE SECOND PART WHICH PARTIES HAVE DECLARED AND AGREED, IN THE PRESENCE OF THE UNDERSIGNED NOTARY, AS FOLLOWS: 2 -2- 1. DEFINITIONS: The following words or expressions, wherever used in this Deed, shall have the following meanings: 1.1 "ACCESSORIES" means any interest, interest on interest, indebtedness resulting from exchange rate fluctuations, legal fees, charges, costs of realization, expenses, insurance premiums, Taxes and sums incurred by the Collateral Agent, acting for its own account or for the account of the Trustee, the Administrative Agent, the Noteholders or the Lenders to protect, preserve or enforce its rights under this Deed and the security herein created; 1.2 "ACCOUNTS RECEIVABLE" means the universality consisting of all the right, title and interest which the Grantor has from time to time in and to any and all present and future accounts and any other right of Grantor to payment for goods sold or leased or for services rendered, whether or not evidenced by an instrument or chattel paper and whether or not yet earned by performance; 1.3 "ACM has the meaning ascribed thereto in section 7.24; 1.4 "ADDITIONAL UNDERTAKING" means (i) cash or cash equivalents or (ii) a Surety Bond, an Additional Undertaking Guarantee or an Additional Undertaking Letter of Credit which is provided by a Person, whose long-term unsecured debt is rated at least "AA" (or equivalent) by a nationally recognized statistical rating agency and is otherwise satisfactory to the Collateral Agent; Additional Undertakings are addressed directly to the Collateral Agent and name the Collateral Agent as the beneficiary thereof and the party entitled to make claims thereunder; 1.5 "ADDITIONAL UNDERTAKING GUARANTEE" means the unconditional guarantee of payment of any corporation or partnership organized and existing under the laws of the United States of America or any State or the District of Columbia or Canada or province thereof that has a long-term unsecured debt rating satisfactory to the Collateral Agent at the time such guarantee is delivered, given to the Collateral Agent, accompanied by an opinion of counsel to such guarantor to the effect that such guarantee has been duly authorized, executed and delivered by such guarantor and constitutes the legal, valid and binding obligation of such guarantor enforceable against such guarantor by the 3 - 3 - Collateral Agent in accordance with its terms, subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Deed of Hypothec for which such guarantee will be given, such guarantee and accompanying opinion are responsive to the requirements of this Deed of Hypothec; 1.6 "ADDITIONAL UNDERTAKING LETTER OF CREDIT" means a clean, irrevocable, unconditional letter of credit in favour of the Collateral Agent and entitling the Collateral Agent to draw thereon in the City of New York issued by a bank satisfactory to the Collateral Agent, accompanied by an opinion of counsel to such bank to the effect that such letter of credit has been duly authorized, executed and delivered by such bank and constitutes the legal, valid and binding obligation of such bank enforceable against such bank by the Collateral Agent in accordance with its terms subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Deed of Hypothec for which such letter of credit will be given, such letter of credit and accompanying opinion are responsive to the requirements of this Deed of Hypothec; 1.7 "ADMINISTRATIVE AGENT" means Bank of America National Trust and Savings Association, and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to the Term Loan Agreement; 1.8 "ALTERATION" has the meaning ascribed thereto in section 7.22; 1.9 "ARCHITECT'S CERTIFICATE" has the meaning ascribed thereto in section 7.21.4.3; 1.10 "BOND" means the Bond of even date herewith issued by PAI to and in favour of the Collateral Agent, in the principal amount of One Hundred and Forty Million Dollars ($140,000,000) in lawful currency of Canada, together with all renewals thereof, substitutions thereafter and supplements thereto; 4 - 4 - 1.11 "BOND PLEDGE AGREEMENT" means the Bond Pledge Agreement of even date between PAI and the Collateral Agent, as same may be amended, supplemented or restated from time to time; 1.12 "BUILDINGS" means the universality consisting of all the right, title and interest which the Grantor has from time to time in and to (i) any and all present and future structures and works of a permanent nature located, from time to time in, on or upon the Lands, including, without limitation, all buildings, structures, facilities, accessories, appurtenances and other improvements (including present and future parking areas) located from time to time in, on or upon the Lands, (ii) any and all present and future movable property which is deemed by Law to be immovable for purposes of hypothecation located or incorporated from time to time therein, thereon or thereupon, and (iii) any and all alterations, reconstructions, additions or expansions to and all repairs or replacements of any such property during the term of this Deed; 1.13 "CERTIFICATE OF LOCATION" means the certificate of location prepared by Mr. Gaston Lemay, Quebec Land Surveyor, dated October 14, 1997, bearing his minute number 2812 (his file number 4-14614-C-1); 1.14 "CLAIMS" means the universality consisting of all the right, title and interest which the Grantor has from time to time, directly or indirectly, in and to any and all present and future claims in respect of the Immovable Property, the Leases, the Licenses, the Contracts, the Equipment, the Securities and the Intellectual Property, including, without limitation, solely to the extent they relate to the Immovable Property, the Leases, the Licenses, the Contracts, the Equipment, the Securities and the Intellectual Property: (a) all accounts, accounts receivable, book accounts, book debts, debts, claims, customer accounts, bank accounts, rentals, revenues, income, loans receivable, choses in action, judgments, proceeds of sale, bills of exchange, notes, negotiable instruments, letters of credit or guarantees, promissory notes, rebates, refunds, amounts owing by or claimable from the Crown, state or government (or any departments, agents or agencies thereof), warehouse receipts, bills of lading and any other amounts or demands of every nature and kind howsoever arising, whether or not secured, which are now or become hereafter due or owing to the Grantor; (b) all security present or future including all legal or conventional hypothecs, held from 5 - 5 - time to time by the Grantor; (c) the benefit of all guarantees and indemnities for the performance of the obligations of any party to which the Grantor is or may become entitled; (d) all indemnities, insurance proceeds and expropriation proceeds received, which may be received or to which the Grantor is or may become entitled, the hypothecation of which would not result in an immovable hypothec; (e) the benefit of any contractor's, manufacturer's and supplier's warranties which relate to the Equipment: (f) all proceeds of sale, lease or other disposition of any part or parts of the Hypothecated Property; and (g) all Rents, the hypothecation of which would not result in an immovable hypothec; provided that, for greater certainty, Immovable Claims are excluded from "Claims" and further provided that all Accounts Receivable, Contract Rights and General Intangibles are also excluded; 1.15 "CLOSING DATE" has the meaning ascribed thereto in the Purchase Agreement; 1.16 "COLLATERAL AGENT" means the Party of the Second Part and its successors and permitted assigns; 1.17 "COLLATERAL ACCOUNT" has the meaning ascribed thereto in the Intercreditor and Collateral Agency Agreement; 1.18 "COLLATERAL PROCEEDS" has the meaning ascribed thereto in the Indenture; 1.19 "CONTRACT RIGHT" means the universality consisting of all right, title and interest which the Grantor has from time to time in and to any payment under any contract (now existing or hereafter arising) for the sale or lease of goods or the rendering of services, which right is not yet earned by performance; 1.20 "CONTRACTS" means the universality consisting of all the right, title and interest which the Grantor has from time to time in and to (a) any and all present and future contracts, leases, options, subcontracts, agreements, service agreements, warranties, purchase orders, construction contracts, subscriber contracts, customer service agreements, management agreements, rights of way, servitudes, transmission capacity agreements, public utility contracts and other agreements, the whole as they relate to Immovable Property to which the Grantor is or may become entitled, or any part or parts thereof and all 6 - 6 - extensions, amendments, renewals or substitutions thereof or therefore which may hereafter be affected or entered into and all benefits, power, and advantage of the Grantor, and (b) any and all licences, permits, approvals, certificates and agreements with or from the Crown, state or government (or any departments, agents or agencies thereof) relating directly or indirectly to the Immovable Property or the Movable Property, (c) any and all existing or future agreements of purchase and sale, options to purchase or mortgage, loan or other financing commitment affecting the Hypothecated Property or any part or parts thereof (but excluding all proceeds and other moneys now due and payable or hereafter to become due and payable thereunder which, for certainty, constitute Claims) and all benefits, power and advantage of the Grantor to be derived therefrom, and the benefit of all covenants, obligations, agreements, representations, warranties and undertakings in favour of the Grantor relating to the Immovable Property or the Movable Property; provided that, for greater certainty, Leases and Contract Rights are excluded from "CONTRACTS"; 1.21 "DEED" means collectively this Deed of Hypothec, all of the Schedules hereto, and every deed amending, supplementing or implementing the same; "this Deed", "these presents", "hereto", "herein", "hereof", "hereby", "hereunder", and any similar expressions refer to this Deed and not to any particular Article or other portion thereof; 1.22 "DESTRUCTION" has the meaning ascribed thereto in section 7.21.1; 1.23 "ENVIRONMENT" means all components of the earth, including, without limitation, air (and all layers of the atmosphere), land (and all surface and subsurface soil, underground spaces and cavities and all land submerged under water) and water (and all surface and underground water), organic and inorganic matter and living organisms, and the interacting natural systems that include components referred to above in this definition of "Environment"; 1.24 "ENVIRONMENTAL LAWS" means all applicable Laws relating to the Environment, Hazardous Substances, pollution or protection of the Environment, including Laws relating to: (i) on site or off-site contamination; (ii) chemical substances or products; (iii) Releases of pollutants, contaminants, chemicals or other industrial, toxic or radioactive substances or Hazardous Substances into the Environment; 7 - 7 - and (iv) the manufacture, processing, distribution, use, treatment, storage, transport, packaging, labelling, sale, recycling, disposal, destruction, incineration, burial, advertising, display or handling of Hazardous Substances; 1.25 "EQUIPMENT" means the universality consisting of all the right, title and interest which the Grantor has from time to time in and to any and all present and future equipment now owned or hereafter acquired by the Grantor including, without limitation, all plants, facilities, machinery, tools, equipment, computer equipment, software, office furniture, furnishings, motor vehicles, towers, antennas, distribution systems and all components thereof, hardware, cables, fibre optic cables, switches, amplifiers, associated devices and rolling stock as well as any and all movable equipment used in connection with the operation, security, maintenance, management, cleaning, landscaping, snow removal, repairs and improvements to the Lands or the Buildings; and all accessories, additions, attachments, improvements, substitutions and replacements therefor and all accessories related thereto and all licenses and other rights and all records, files, software, charts, plans, drawings, specifications, manuals and documents relating thereto; 1.26 "ESTIMATE" has the meaning ascribed thereto in section 7.21.4.3; 1.27 "EVENT OF DEFAULT" has the meaning ascribed thereto in Article 8; 1.28 "EXCLUDED PROPERTY" means (i) the Accounts Receivable, (ii) the Inventory, (iii) the General Intangibles, (iv) the Contract Rights, (v) any and all balances, credits, deposits (general or special, time or demand, provisional or final), accounts or monies of or in the name of the Grantor now or hereafter with the agent, any lender or any participant under the Grantor's working capital loan facility and any and all property of every kind or description of or in the name of the Grantor now or hereafter, for any reason or purpose whatsoever, in the possession or control of, or in transit to, or standing to the Grantor's credit on the books of, such agent, any agent or bailee for such agent, any such lender, or any such participant, (vi) to the extent related to the property described in clauses (i) through (v) above, all books, correspondence, credit files, records, invoices and other papers and documents, including without limitation, to the extent so related, all 8 - 8 - tapes, cards, computer runs, computer programs and other papers and documents in the possession or control of the Grantor or any computer bureau from time to time acting for the Grantor, and, to the extent so related, all rights in, to and under all policies of insurance, including claims of rights to payments thereunder and proceeds therefrom, including business interruption insurance and any credit insurance, and (vii) all products and proceeds (including but not limited to any Accounts Receivable or other proceeds arising from the sale or other disposition of any property described above, any returns of Inventory sold by the Grantor, and the proceeds of any insurance covering any of the property described above) of any of the foregoing; 1.29 "GENERAL INTANGIBLES" means the universality consisting of all of the right, title and interest which the Grantor has from time to time in and to all present and future incorporeal property, to the extent that any of the foregoing arises out of or relates to Accounts Receivable or Inventory, including without limitation, all right, title and interest of the Grantor in and to: (i) all tax refunds and tax refund claims; (ii) registered and unregistered patents, service marks, copyrights and applications for any of the foregoing; and (iii) all trade secrets and other confidential information relating to the business of the Grantor, in each case to the extent that any of the foregoing arises out of or relates to Accounts Receivable or Inventory; 1.30 "GOVERNMENTAL AUTHORITY" means the country, state, province, county, city and political subdivisions in which any Person or such Person's property is located or which exercises valid jurisdiction over any such Person or such Person's property, and any court, agency, department, commission, board, bureau or instrumentality of any of them including monetary authorities which exercise valid jurisdiction over any such Person or such Person's property; unless otherwise specified, all references to "Governmental Authority" herein means a Governmental Authority having jurisdiction over, where applicable, the Grantor; 1.31 "GOVERNMENTAL REQUIREMENT" means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, including, without limitation, Environmental Laws, energy regulations and occupational safety and health standards or controls, of any Governmental Authority; 9 - 9 - 1.32 "GRANTOR" means the Party of the First Part and its successors and permitted assigns; 1.33 "HAZARDOUS SUBSTANCE" means any Substance which is or is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a contaminant or a source of pollution or contamination under any applicable Environmental Laws; 1.34 "HYPOTHEC OBLIGATIONS" means all of the obligations, liabilities and indebtedness of the Grantor to the Collateral Agent, the Administrative Agent, the Trustee, the Lenders and the Noteholders, or any one of them, from time to time, whether present or future, direct or indirect, absolute or contingent, liquidated or unliquidated, as principal or surety, alone or with others (including principal, interest, interest on interest, accessories, and all other expenses incurred from time to time by the Collateral Agent, the Administrative Agent, the Trustee, the Lenders or the Noteholders for the protection of their rights, or in pursuance of their recourses hereunder or at Law) under or in respect of or arising from this Deed, as same may be amended, restated or supplemented from time to time; 1.35 "HYPOTHECATED PROPERTY" means the universality comprising all of the Grantor's property, rights, interests and assets, movable and immovable, corporeal and incorporeal, both present and future, of whatsoever nature or kind and wheresoever situate, including, without limitation, the Immovable Property and the Movable Property, but excluding the Excluded Property. 1.36 "IMMOVABLE CLAIMS" means the universality consisting of all the right, title and interest which the Grantor has from time to time in and to any and all present and future immovable claims directly or indirectly held or enjoyed by the Grantor including, without limitation, all Rents which may be received or to which the Grantor is or may become entitled in connection with the Leases, the hypothecation of which would result in an immovable hypothec, and all immovable insurance proceeds; 1.37 "IMMOVABLE PROPERTY" means collectively the Lands, the Buildings, the Immovable Claims and all other present and future immovable property, assets or rights of the Grantor; 10 - 10 - 1.38 "INDENTURE" means the Indenture of even date among the Grantor, as issuer, Pioneer Americas Acquisition Corp, PAI, certain other guarantors thereunder, the Trustee, as trustee for the Noteholders, and the Collateral Agent, as same may be amended, supplemented or restated from time to time; 1.39 "INDENTURE OBLIGATIONS" means all of the obligations, liabilities and indebtedness of the Grantor to the Collateral Agent, the Trustee and the Noteholders, or any one of them, from time to time, whether present or future, direct or indirect, absolute or contingent, liquidated or unliquidated, as principal or as surety, alone or with others (including principal, interest, interest on interest, accessories, and all other expenses incurred from time to time by the Collateral Agent, the Trustee or the Noteholders for the protection of their rights, or in pursuance of their recourses hereunder or at Law) under or in respect of or arising from: 1.39.1 the Indenture; and 1.39.2 the Notes; or any one or more of the aforesaid as the same may be amended, restated or supplemented from time to time; 1.40 "INSURANCE PROCEEDS" has the meaning ascribed thereto in section 7.21.1; 1.41 "INTELLECTUAL PROPERTY" means the universality consisting of any and all present and future goodwill of the Grantor, and the present and future right, title and interest of the Grantor in and to any and all patents and patents pending, registered and unregistered trademarks, trade or brand names, service marks, copyrights, industrial designs, formulae, processes, trade secrets or inventions, licenses, permits and all other intellectual property; provided however, that General Intangibles are excluded from Intellectual Property; 1.42 "INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT" means the Intercreditor and Collateral Agency Agreement of even date herewith, among the Trustee, the Collateral Agent, Pioneer Americas Acquisition Corp., PAI, the Grantor and Bank of America National Trust and Savings Association, as administrative agent and as agent under a 11 - 11 - certain revolving credit facility, as same may be amended, supplemented or restated from time to time; 1.43 "INVENTORY" means the universality consisting of all the right, title and interest which the Grantor has from time to time in and to any and all present and future movable inventory, goods, wares and merchandise, property in stock, raw materials, components, work in process, goods in transit, new and unused production, packing and shipping materials, and any other movable property directly or indirectly kept by or on behalf of the Grantor for sale, lease, processing, manufacture, transformation, packing, shipping, advertising, selling or furnishing of goods and services and all goods the sale or other disposition of which has given rise to an Account Receivable or Contract Right which are returned to and/or repossessed and/or stopped in transit by, or at any time hereafter, are in the possession or under the control of the Grantor or of any of its affiliates or of the agent or any lender under the Grantor's working capital loan facility, or any agent or bailee of any of them, and all documents of title or other documents representing same; provided however, that material used in connection with the operation, security, maintenance, management, cleaning, landscaping, snow removal, repairs and improvements to the Lands or Buildings are excluded from Inventory; 1.44 "LANDS" means all right, title, and interest of the Grantor in and to all present and future immovable property, including without limitation, the Lands described in the First Schedule hereto; 1.45 "LAWS" means all statutes, codes, ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, policies and guidelines which are binding (or, if not binding, the observance of which are in accordance with the practice of the relevant industry in the jurisdiction concerned), or any provisions of the foregoing, including general principles of common and civil law and equity, binding on (or, if not binding, the observance of which are in accordance with the practice of the relevant industry in the jurisdiction concerned) the Person referred to in the context in which such word is used; and "LAW" means any one of such Laws; 12 - 12 - 1.46 "LEASES" means the universality consisting of all right, title and interest which the Grantor has from time to time in and to any and all present and future leases, offers to lease and other agreements to lease of the whole or any part of Lands or Buildings and any and all present or future agreements and licences whereby the Grantor gives any other Person the right to use or occupy the whole or any part of the Lands or Buildings, in each case for the time being in effect, and all revisions, alterations, modifications, amendments, extensions, renewals, replacements or substitutions thereof or therefor which may hereafter be effected or entered into but does not include registered servitudes, rights of superficies, or rights in the nature of a servitude, or a right of superficies; 1.47 "LENDERS" has the meaning ascribed thereto in the Term Loan Agreement; 1.48 "LICENSES" means all franchises, licenses, authorizations, approvals, permits and operating rights of the Grantor; 1.49 "LIEN" means, with respect to any property of any Person, any charge, mortgage, prior claims, pledge, hypothec, security interest, security under the Bank Act (Canada), lien, conditional sales (or other title retention agreement or lease in the nature hereof, lease (where such Person is the lessee of such property), servitudes, assignment, adverse claims, defect of title, restriction, trust, right of set-off or other encumbrance of any kind in respect of such property, whether or not filed, recorded or otherwise perfected under applicable law; 1.50 "MATERIAL ADVERSE EFFECT" means, as to any Person, asset or property, a material adverse effect on the business, assets, properties, condition (financial or other), operations or results of operations of such Person, asset or property, which effect is not adequately and effectively insured or indemnified against by a financially sound insurance company, and excepting effects arising solely out of general national economic conditions and/or effects arising solely out of matters affecting the industry in which such Person, asset or property conducts business a whole; 1.51 "MONEY" or "MONEYS" means those certain proceeds set forth in sections 7.21.1 and 7.21.2; 13 - 13 - 1.52 "MOVABLE PROPERTY" means collectively the Claims, the Contracts, the Equipment, the Intellectual Property, the Leases (other than Rent payable thereunder), the Licenses, the Securities and all movable property, assets or rights, present and future, corporeal and incorporeal of the Grantor, including (i) cash on hand and in bank or other deposit accounts and certificates of deposit and other deposit instruments; and (ii) immovable property located or incorporated in, on, at or upon the Lands and the Buildings which is deemed by Law to be movable for purposes of hypothecation; provided however, that Excluded Property is excluded from Movable Property; 1.53 "NET AWARD" has the meaning ascribed thereto in section 7.21.2; 1.54 "NOTEHOLDERS" means the Persons in whose names the Notes are registered at any time in the Security Register, as such term is defined in the Indenture; 1.55 "NOTES" has the meaning ascribed to "Securities" under the Indenture; 1.56 "OBLIGATIONS" means the Indenture Obligations, the Term Loan Obligations and the Hypothec Obligations, collectively; 1.57 "PAI" means Pioneer Americas, Inc. and its successors and assigns; 1.58 "PARTIES" means, collectively, the Grantor and the Collateral Agent; 1.59 "PERMIT" or "PERMITS" has the meaning ascribed thereto in section 7.14.4; 1.60 "PERMITTED LIENS" has the meaning ascribed thereto in the Term Loan Agreement; 1.61 "PERSON" or "PERSONS" means a corporation, a legal person, a legal entity, an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a government agency; 14 - 14 - 1.62 "PLANS AND SPECIFICATIONS" has the meaning ascribed thereto in section 7.21.4.1; 1.63 "PLANT" means the Lands and the Building, collectively; 1.64 "PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as of the 22nd day of September, 1997 between the Grantor, ICI Canada Inc., PCI Carolina Inc., Pioneer Companies, Inc., ICI Americas Inc. and Imperial Chemical Industries PLC, as same may be amended from time to time; 1.65 "RATE OF INTEREST" means the rate of interest of twenty-five percent (25%) per annum; 1.66 "RECEIVER" means any agent appointed by the Collateral Agent or a court of competent jurisdiction to possess and administer all or any of the Hypothecated Property after the security has become enforceable; 1.67 "RELEASE" when used as a verb includes release, spill, leak, emit, deposit, discharge, leach, migrate, dump, issue, empty, place, seep, exhaust, abandon, bury, incinerate or dispose into the Environment and "RELEASE" when used as a noun has a correlative meaning; 1.68 "RENTS" means all the right, title and interest the Grantor has from time to time in and to (i) any and all rent, income, revenues and profits and other amounts payable or derived from the Leases or securing obligations thereunder; and (ii) any and all indemnities and insurance proceeds received, which may be received or to which the Grantor is or may become entitled in connection with the Rents; 1.69 "RESTORATION" has the meaning ascribed thereto in section 7.21.3; 1.70 "RESTORATION ELECTION NOTICE" has the meaning ascribed thereto in section 7.21.3; 1.71 "SECURITIES" means all shares, stocks, warrants, bonds, debentures, debenture stock, stock options and other securities 15 - 15 - now or hereafter held, owned or acquired by or on behalf of the Grantor, together with all renewals thereof, substitutions therefor, accretions thereto and all rights, claims and proceeds in respect thereof and including, without limitation, any such securities of the Grantor which are now or hereafter held by or delivered to the Grantor and all rights, title and interest in any of the foregoing which the Grantor now or at any time in the future has or may have; 1.72 "SUBSTANCE" means any substance, waste, liquid, gaseous or solid matter, fuel, micro-organism, sound, vibration, ray, heat, odour, radiation, energy vector, plasma, and organic or inorganic matter; 1.73 "SURETY BOND" means a clean irrevocable surety bond or credit insurance policy in favour of the Collateral Agent issued by an insurance company the claims paying ability rating of which at the time such surety bond or credit insurance policy is delivered is satisfactory to the Collateral Agent, accompanied by an opinion of counsel to such insurance company to the effect that such surety bond or credit insurance policy has been duly authorized, executed and delivered by such insurance company and constitutes the legal, valid and binding obligation of such insurance company enforceable against such insurance company by the Collateral Agent in accordance with its terms subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Deed of Hypothec for which such surety bond will be given, such surety bond and accompanying opinions are responsive to the requirements of this Deed of Hypothec; 1.74 "TAKING" has the meaning ascribed thereto in section 7.21.2; 1.75 "TAXES" means all taxes, surtaxes, rates or assessments, general or special, municipal, regional or for school or ecclesiastic purposes, which now are or may hereafter be imposed, charged or levied upon any of the Hypothecated Property (or any portion thereof, or upon any property, asset or right comprised therein); and 1.76 "TERM LOAN AGREEMENT" means the Term Loan Agreement of even date herewith, among PAI, as borrower, Pioneer Americas Acquisition Corp., as the parent guarantor, the Lenders, DLJ Capital Funding Inc, as the syndication agent for the Lenders, Salomon 16 - 16 - Brothers Holding Company Inc, as the documentation agent for the Lenders, the Administrative Agent, as administrative agent for the Lenders and the Collateral Agent, as the same may be amended, supplemented or restated from time to time; 1.77 "TERM LOAN OBLIGATIONS" means all of the obligations, liabilities and indebtedness of PAI to the Collateral Agent, the Administrative Agent and the Lenders, or any one of them, from time to time, whether present or future, direct or indirect, absolute or contingent, liquidated or unliquidated, as principal or as surety, alone or with others (including principal, interest, interest on interest, accessories and all other expenses incurred from time to time by the Collateral Agent, the Administrative Agent or the Lenders, for the protection of their rights, or in pursuance of their recourses hereunder or at Law) under or in respect of or arising from: 1.77.1 the Bond; 1.77.2 the Bond Pledge Agreement; 1.77.3 the Term Notes; and 1.77.4 the Term Loan Agreement; or any one or more of the aforesaid as the same may be amended, restated or supplemented from time to time, whether or not the Grantor (if not a party thereto) shall have consented thereto; 1.78 "TERM NOTES" has the meaning ascribed thereto in the Term Loan Agreement; 1.79 "TRANSFER" has the meaning ascribed thereto in section 7.20; 1.80 "TRUSTEE" means United States Trust Company of New York, and includes each other Person as shall have subsequently been appointed as the successor Trustee pursuant to the Indenture. 17 - 17 - 2. CHARGING PROVISIONS: 2.1 HYPOTHEC: As continuing and collateral security for the due and punctual payment, performance and fulfilment of the Obligations and Accessories, the Grantor does hereby hypothecate in favour of the Collateral Agent, the Hypothecated Property for the sum of THREE HUNDRED AND EIGHTY-FIVE MILLION DOLLARS ($385,000,000) in lawful money of Canada with interest thereon at the Rate of Interest, calculated daily and payable monthly in arrears, from the date hereof and before and after demand, default and judgment. 2.2 ADDITIONAL HYPOTHEC: As additional security for the due and punctual payment, performance and fulfilment of the Accessories, including without limitation the payment of interest on interest, legal fees, costs of realization, expenses incurred by the Collateral Agent in connection with the preservation and maintenance of the hypothecs hereby created and of the Hypothecated Property or otherwise in connection with the Obligations and Accessories, the Grantor does hereby further hypothecate, with effect as of and from this date, the Hypothecated Property in favour of the Collateral Agent, for an additional sum of SEVENTY-SEVEN MILLION DOLLARS ($77,000,000) in lawful money of Canada with interest thereon at the Rate of Interest calculated daily and payable monthly, in arrears, from the date hereof and before and after demand, default and judgment; the hypothecs created by the Grantor in favour of the Collateral Agent, pursuant to this Deed being for the aggregate sum of FOUR HUNDRED AND SIXTY-TWO MILLION DOLLARS ($462,000,000) in lawful money of Canada. 2.3 NO FLOATING HYPOTHEC: The hypothecs granted hereunder do not constitute and shall not constitute nor be construed as floating hypothecs within the meaning of Article 2715 of the Civil Code of Quebec. 2.4 CONTINUING VALIDITY: The full amount of the foregoing hypothecs shall be and remain continuing collateral security in favour of the Collateral Agent for the full payment or fulfilment of the Obligations and Accessories, if any, and such hypothecs shall be and remain in full force and effect notwithstanding the repayment and reduction or fulfilment at any time and from time to time of the Obligations and Accessories, if any, or any part thereof or the fact that at any time and from time to time there may be no Obligations and Accessories, if any, owing by the Grantor or PAI, as the case may be, 18 - 18 - the whole until all Obligations and Accessories, if any, at any time and from time to time existing shall have been entirely repaid, fulfilled and released to the reasonable satisfaction of the Collateral Agent, and such hypothecs shall not be reduced unless and until a document evidencing the discharge is executed by the Collateral Agent and is delivered in which it shall be expressly stated that the amounts therein referred to are in reduction of the hypothecs hereby created and until the hypothecs herein created are released and discharged to the extent therein stated. 2.5 NO REDUCTION: No payment made by the Grantor or by any Person on its behalf to the Collateral Agent shall in any way operate to extinguish the hypothecs created herein or as a reduction of said hypothecs hereby created, or effect novation, save only as and when such payment is expressly applied by the Collateral Agent in reduction of the said hypothecs by means of a document evidencing the discharge executed by the Collateral Agent, pursuant to Article 2.4 hereof. 2.6 REQUIRED CONSENTS: Notwithstanding any other provision of this Deed, the hypothecs granted by the Grantor shall not extend or apply to any Contracts, or rights or interests arising thereunder or subject thereto, as to which the grants, creation or making of a hypothec would constitute a violation or a breach of a validly enforceable restriction thereon. 2.7 NO NOVATION: Nothing herein shall affect, novate, terminate or supersede any covenants and obligations of the Grantor under the Bond. 2.8 FURTHER ASSURANCES: The Grantor will at its own expense do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, assignments, registrations, publications and assurances (including instruments supplemental or ancillary hereto) as the Collateral Agent may from time to time reasonably request to perfect its security on the Hypothecated Property, including, without limitation, specifically hypothecating in favour of the Collateral Agent the right, title and interest of the Grantor in all property and assets subject to, or intended to be subject to, the charges of this Deed which the Grantor will hereafter acquire. 19 - 19 - 3. PAST, PRESENT OR FUTURE ADVANCES: The security hereby constituted shall have effect whether or not the Obligations thereby secured shall have been incurred before or after or upon the date of the execution of this Deed. 4. POSSESSION BY GRANTOR: Until the security hereby constituted shall become enforceable, the Grantor shall, subject always to the provisions of this Deed, peaceably and quietly have, hold, use, occupy, possess and enjoy the Hypothecated Property and manage and operate the same for its own use and benefit. 5. COLLECTION OF CLAIMS AND RENTS: 5.1 AUTHORIZATION TO COLLECT: The Collateral Agent hereby expressly authorizes the Grantor to manage and collect the Claims and the Rents as and when they become due. If an Event of Default has occurred and is continuing, the Collateral Agent shall have the right to serve upon the Grantor and the debtors under such Claims and Rents a notice withdrawing such authorization, whereupon the Collateral Agent shall, subject to applicable Law, immediately have the right to collect all such Claims and Rents. 5.2 COLLECTION: In the event that the Grantor receives payment of any Claims or Rents after an Event of Default has occurred and is continuing, whether or not the Collateral Agent shall have served upon the Grantor and the debtors under such Claims and Rents such notice withdrawing the authorization granted to the Grantor to collect the Claims and the Rents, the Grantor shall receive payment of the Claims and the Rents as mandatary or depositary of the Collateral Agent and the Grantor hereby undertakes to pay forthwith to the Collateral Agent all Claims and Rents so received. 5.3 STATEMENTS OF CLAIMS: Following the occurrence and continuation of an Event of Default, should the Collateral Agent serve such a notice withdrawing the authorization granted to the Grantor to collect all Claims and Rents as provided herein, the Grantor hereby agrees that all statements provided by the Collateral Agent to the Grantor with respect to the Claims and Rents received and their application by the Collateral Agent, shall be prima facie conclusive and binding unless manifestly wrong or incorrect. 20 - 20 - 5.4 NO REQUIREMENT TO ENFORCE: The Collateral Agent shall have no obligation to exercise any rights in respect of any Claims or Rents nor to enforce or to see to payment of the same, whether by legal action or otherwise. The Collateral Agent shall not be liable for any loss or damage resulting from any decision on the part of the Collateral Agent not to exercise, to exercise only in part or to delay or suspend the exercise or any failure or delay by the Collateral Agent in exercising any of its rights under this Article 5, Article 10 or any other provision of this Deed or under the Bond. 5.5 DEALINGS BY COLLATERAL AGENT: The Collateral Agent may give acquittances for any sums it collects and may, but shall not be obligated to, realize any of the claims, grant extensions, grant releases, accept compositions, renounce and generally deal with the Claims or Rents, and any guarantees or security therefor, and take any action to preserve, protect or secure such Claims or Rents, at such times and in such manner as it deems advisable in its sole discretion, without notice to or the consent of the Grantor, and without incurring any liability therefor. 5.6 IRREGULAR PAYMENTS: The Collateral Agent shall have no obligation to inform the Grantor of any irregularity in the payment of the Claims and Rents. 5.7 APPLICATION: Any amounts collected by the Collateral Agent on account of Claims or Rents may, at the Collateral Agent's option, either be deposited by the Collateral Agent in a bank account in the name of the Grantor, subject to such conditions as the Collateral Agent may determine to be necessary or appropriate in the circumstances (in which event, for certainty, such proceeds shall form part of the Hypothecated Property and be subject to the hypothecs herein created) or applied towards payment of any part or parts of the Obligations and Accessories as the Collateral Agent, in accordance with the provisions of the Intercreditor and Collateral Agency Agreement, the Indenture or the Term Loan Agreement in respect of application of payments, acting reasonably, shall decide. 6. NO ASSUMPTION OF OBLIGATIONS: The Collateral Agent does not, in exercising any of its rights and recourses under this Deed or at Law, in any way personally assume the obligations of the 21 - 21 - Grantor. The Grantor will remain liable under the Contracts and the Leases to observe and perform all the conditions and obligations to be observed and performed by the Grantor thereunder. 7. REPRESENTATIONS AND COVENANTS OF THE GRANTOR: The Grantor hereby represents and covenants to the Collateral Agent that: 7.1 CORPORATE POWER AND AUTHORITY: The Grantor has the full corporate power and authority to enter into this Deed and to grant the hypothecs herein created without obtaining the waiver, consent or approval of any lessor, sublessor, Governmental Authority or entity or other party whomsoever and whatsoever which has not been obtained except in the case of certain environmental permits and approvals which, by their terms, are not transferable or cannot be transferred without the prior approval of the issuing agency. 7.2 EXECUTION AND DELIVERY: The execution and delivery of this Deed have been duly authorized by all necessary corporate action. 7.3 BINDING OBLIGATION: This Deed, when duly executed and delivered, will be a legal, valid and binding obligation of the Grantor enforceable against it in accordance with its terms; provided that such enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors' rights generally. 7.4 GOOD TITLE: The Grantor has good and marketable title to the Hypothecated Property. The Buildings upon the Land are all within the boundary lines of the Lands except as may be set forth in the Certificate of Location, and there are no encroachments thereon that would materially impair the use thereof. The Hypothecated Property is free and clear of any and all Liens or encumbrances of any nature or kind except for the Permitted Liens. 7.5 ALL PERMITS: The Grantor has all necessary permits, franchises, licenses, rights-of-way, servitudes or other rights or authority needed in connection with the operation and maintenance of the 22 - 22 - Plant, except where the failure to have the same would not have a Material Adverse Effect; all of the Contracts are presently in full force and effect and no default has occurred or exists thereunder, except where such default would not individually or in the aggregate have a Material Adverse Effect; except for Permitted Liens, the Grantor's grant of the hypothecs in the Hypothecated Property in the manner herein provided does not result in the creation or imposition of any other Lien or security interest, adverse claim or option upon any of the Hypothecated Property. 7.6 PLACE OF BUSINESS: The Grantor's registered office is located in the City of Saint John, New Brunswick. The Grantor will not change its name, identity or corporate structure or its registered office or chief place of business without notifying the Collateral Agent at least thirty (30) days prior to the effective date of such change. 7.7 DEFENCE OF TITLE: The Grantor will warrant and defend title to the Hypothecated Property, subject to Permitted Liens, against the claims and demands of all other Persons whomsoever and will maintain and preserve the hypothecs created hereby so long as any of the Obligations secured hereby remain outstanding. Should an adverse claim be made against the title to any material part of the Hypothecated Property, the Grantor agrees it will immediately notify the Collateral Agent in writing thereof and defend against such adverse claim to the extent necessary to preserve the Collateral Agent's rights and benefits hereunder, subject to Permitted Liens, and the Grantor further agrees that the Collateral Agent may take such other reasonable action as it deem advisable to protect and preserve its interests in the Hypothecated Property, and in such event the Grantor will indemnify the Collateral Agent against any and all costs, reasonable attorney's fees and other expenses which it may incur in defending against any such adverse claim. Such obligations shall be payable on demand and shall bear interest from the date of demand therefor until paid at the Rate of Interest. Any proceeds of any policy of title insurance maintained by the Grantor with respect to the Hypothecated Property shall, for the purposes of this Deed of Hypothec, be paid and applied in the same manner as Insurance Proceeds. 7.8 FIRST-RANKING HYPOTHEC: This Deed of Hypothec is, and always will be maintained as first-ranking hypothec upon the Hypothecated Property, subject to the Permitted Liens, and the Grantor will not create or suffer to be created or permit to exist any Lien, 23 - 23 - security interest or charge prior or junior to or on parity with the hypothecs created under this Deed of Hypothec upon the Hypothecated Property or any part thereof or upon the rents, issues, revenues, profits or other income therefrom, except for the Permitted Liens. 7.9 MAINTENANCE OF HYPOTHECATED PROPERTY: The Grantor will, at its own expense, do or cause to be done all things necessary to preserve and keep in full repair, working order and efficiency, reasonable wear and tear excepted, all of the Hypothecated Property, including, without limitation, all Equipment and, from time to time, will make all the needful and proper repairs, renewals and replacements so that at all times the state and condition of the Hypothecated Property will be fully preserved and maintained, unless the failure to repair, renew or replace would not materially interfere with the present use or operation of the Hypothecated Property. 7.10 PERFORMANCE OF CONTRACTS: The Grantor will promptly pay and discharge all rentals, or other payments and will perform or cause to be performed each and every act, matter or thing required by, each and all of the contracts, instruments or agreements executed in connection with or incident to the ownership and operation of the Plant and being a portion of the Hypothecated Property and will do all other things necessary to keep unimpaired the Grantor's rights with respect thereto and to prevent any forfeiture thereof or default thereunder, unless such forfeiture or default shall not individually or in the aggregate have a Material Adverse Effect. The Grantor will operate the facilities comprising the Plant in a good and workmanlike manner and in accordance with the practices of the industry and in compliance in all material respects with all Governmental Requirements affecting ownership and operation of such facilities, including without limitation, Environmental Laws. 7.11 NAME OF GRANTOR: The Grantor does not do business with respect to the Hypothecated Property under any name other than PCI Chemicals Canada Inc./Produits Chimiques PCI Canada Inc. 7.12 OPERATION BY THIRD PARTIES: To the extent any of the Hypothecated Property is operated by a party or parties other than the Grantor, the Grantor's covenants as expressed hereunder are modified to require that the Grantor use its best efforts (including without limitation the reasonable exercise of all rights and remedies as are 24 - 24 - available to the Grantor) to obtain compliance with such covenants by the operator or operators of the Hypothecated Property. 7.13 COMPLIANCE WITH LAWS: The Plant complies in all material respects with all local zoning, land use, setback and other development, use and occupancy requirements of Governmental Authorities except for possible nonconforming uses or violations which do not and will not materially interfere with the present use, operation or maintenance thereof as now used, operated or maintained. 7.14 PAYMENT OF TAXES, INSURANCE PREMIUMS, ASSESSMENTS; COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS: 7.14.1 Unless contested in accordance with the provisions of section 7.14.5 hereof, the Grantor shall pay and discharge or cause to be paid and discharged, from time to time when the same shall become due, all real estate and other taxes, special assessments, levies, permits, inspection and license fees, all premiums for insurance, all water and sewer rents and charges, and all other public charges imposed upon or assessed against the Hypothecated Property or any part thereof or upon the revenues, rents, issues, income and profits of the Hypothecated Property, including, without limitation, those arising in respect of the occupancy, use or possession thereof. 7.14.2 During the continuance of an Event of Default, the Grantor shall deposit with the Collateral Agent, on the first day of each month, an amount reasonably estimated by the Grantor to be equal to one- twelfth (1/12th) of the annual taxes, assessments and other items required to be discharged by the Grantor under section 7.14.1 and amounts reasonably estimated by the Grantor to be necessary to maintain the insurance coverages contemplated in section 7.16 below, which estimates shall not be less than one-twelfth (1/12th) of the annual taxes, assessments, insurance premiums and other items required to be discharged by the Grantor during the year immediately preceding the year during which such Event of Default occurred. Such amounts shall be held by the Collateral Agent without interest to the Grantor and applied to the payment of each obligation in respect of which such amounts were deposited, in such order or priority as the Collateral Agent shall determine, on or before the date on which such obligation would become delinquent. If at any time the amounts so deposited by the 25 - 25 - Grantor shall, in the Collateral Agent's judgment, be insufficient (when added to the instalments anticipated to be paid thereafter) to discharge any of such obligations when due, the Grantor shall, immediately upon demand, deposit with the Collateral Agent such additional amounts as may be requested by the Collateral Agent. Nothing contained in this section 7.14 shall affect any right or remedy of the Collateral Agent under any provision of this Deed of Hypothec or of any statute or rule of Law to pay any such amount from its own funds (provided, however, that the Collateral Agent shall not in any event be obligated to pay any of such amounts from its own funds) and to add the amount so paid, together with interest at the Rate of Interest, to the obligations, or relieve the Grantor of its obligations to make or provide for the payment of the annual taxes, assessments and other charges required to be discharged by the Grantor under section 7.14.1. All sums held pursuant to this section 7.14 shall form part of the Hypothecated Property. During the continuance of any Event of Default, the Collateral Agent may apply all or any part of the sums held pursuant to this section 7.14 to payment and performance of the Obligations in accordance with the provisions of the Intercreditor and Collateral Agency Agreement. The Grantor shall redeposit with the Collateral Agent an amount equal to all amounts so applied as a condition to the cure, if any, of such Event of Default, in addition to fulfilment of any other required conditions. 7.14.3 Unless contested in accordance with the provisions of section 7.14.5, the Grantor shall timely pay (or obtain a bond in the amount of) all lawful claims and demands of mechanics, materialmen, labourers, warehousemen, employees, suppliers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid or not bonded, could result in or permit the creation of a Lien (other than a Permitted Lien) on the Hypothecated Property or any part thereof or the Rents arising therefrom, or which might result in forfeiture of all or any part of the Hypothecated Property. 7.14.4 The Grantor shall maintain, or cause to be maintained, in full force and effect, all permits, certificates, authorizations, consents, approvals, registrations, filings, licenses, franchises or other instruments now or hereafter required by any Governmental Authority to operate or use and occupy the Immovable Property and the Equipment for its intended uses (collectively, the 26 - 26 - "PERMITS"; each, a "PERMIT"), unless the failure to maintain such Permits would not individually or in the aggregate have a Material Adverse Effect. Unless contested in accordance with the provisions of section 7.14.5, the Grantor shall comply promptly with, or cause prompt compliance with, all requirements set forth in the Permits and all Governmental Requirements applicable to all or any part of the Hypothecated Property or the condition, use or occupancy of all or any part thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force unless the compliance therewith would not individually or in the aggregate have a Material Adverse Effect. The Grantor shall not initiate or consent to any change in the zoning, subdivision or any other use classification of the Lands, if such action could have a material adverse effect on the hypothecs granted under of this Deed of Hypothec or materially impair the present use and operation of the Hypothecated Property or materially impair the Collateral Agent's rights or benefits hereunder, without the prior written consent of the Collateral Agent. 7.14.5 The Grantor may at its own expense contest the amount or applicability of any of the obligations described in sections 7.14.1, 7.14.3 and 7.14.4 by appropriate legal proceedings, prosecution of which operates to prevent the collection or enforcement thereof or the sale or forfeiture of the Hypothecated Property or any part thereof to satisfy such obligations; provided, however, that: 7.14.5.1 any such contest shall be conducted in good faith by appropriate legal proceedings promptly instituted and diligently conducted; and 7.14.5.2 in connection with such contest, the Grantor shall have made provision for the payment or performance of such contested obligation on the Grantor's books if and to the extent required by generally accepted accounting principles then utilized by the Grantor in the preparation of its financial statements, or shall have deposited with the Collateral Agent a sum sufficient to pay and discharge such obligation and the Collateral Agent's estimate of all interest and penalties related thereto. Notwithstanding the foregoing provisions of this section 7.14.5: 27 - 27 - 7.14.5.3 no contest of any such obligations may be pursued by the Grantor if such contest would expose the Collateral Agent, or any of the Administrative Agent, the Trustee, the Noteholders or the Lenders to any possible criminal liability or, unless the Grantor shall have furnished an Additional Undertaking therefor satisfactory to the Collateral Agent in respect of any civil liability for failure to comply with such obligations; and 7.14.5.4 if at any time payment or performance of any obligation contested by the Grantor pursuant to this section 7.14.5 shall become necessary to prevent the delivery of a tax or similar deed conveying the Hypothecated Property or any portion thereof because of nonpayment or nonperformance, the Grantor shall pay or perform the same in sufficient time to prevent the delivery of such tax or similar deed. 7.14.6 The Grantor shall, not in its use and occupancy, of the Plant or the Equipment (including, without limitation, in the making of any Alteration) take any action that would cause the termination, revocation or denial of any insurance coverage required to be maintained under this Deed of Hypothec or, that pursuant to written notice from any applicable insurer, would be the basis for a defense to any claim under any insurance policy maintained in respect of the Plant or the Equipment and the Grantor shall otherwise comply in all material respects with the requirements of any insurer that issues a policy of insurance in respect of the Plant or the Equipment. 7.14.7 The Grantor shall, promptly upon receipt of any written notice regarding any failure by the Grantor to pay or discharge any of the obligations described in section 7.14.1 or 7.14.6, furnish a copy of such notice to the Collateral Agent. The Grantor shall, promptly upon receipt of any written notice regarding any failure by the Grantor to pay or discharge any of the obligations described in section 7.14.3 or 7.14.4, furnish a copy of such notice to the Collateral Agent, if such failure would have a Material Adverse Effect. 7.15 CERTAIN TAX LAW CHANGES: In the event of the passage after the date of this Deed of Hypothec of any Law deducting from the value of immovable property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the Laws for the taxation of deeds of hypothec or debts secured by deeds of 28 - 28 - hypothec for federal, provincial, municipal or local purposes or the manner of the collection of any such taxes, and imposing a new tax, either directly or indirectly, on this Deed of Hypothec or the interest of any of the Collateral Agent, the Administrative Agent, the Trustee, the Lenders and the Noteholders in any Hypothecated Property (other than income, franchise or similar taxes imposed on such Person), or in the event that any regulation or regulatory amendment becoming effective after the date hereof imposes any federal or provincial or municipal or local tax on interest income received with respect to any Obligation, the Grantor shall promptly pay the Collateral Agent such amount or amounts as may be necessary from time to time to pay such tax. 7.16 REQUIRED INSURANCE POLICIES: 7.16.1 The Grantor shall maintain, or cause to be maintained, as of and from the Closing Date, in full force and effect the following insurance coverages in respect of the Plant and the Equipment: 7.16.1.1 Physical hazard insurance on an "all risk" basis covering hazards commonly covered by fire and extended coverage, lightning, civil commotion, hail, riot, strike, water damage, sprinkler leakage, collapse and malicious mischief, in an amount equal to the full replacement cost of the Buildings and all Equipment, with such deductibles as would be maintained by a prudent operator of property similar in use and configuration to the Plant and located in the locality where the Plant is located. "Full replacement cost" means the cost of construction to replace the Buildings and the Equipment, exclusive of depreciation, excavation, foundation and footings, as determined from time to time by a proper officer of the Grantor in consultation with its insurance company or insurance agent, as appropriate; 7.16.1.2 Comprehensive general liability insurance against claims for bodily injury, death or property damage occurring on, in or about the Plant and any adjoining streets, sidewalks and passageways and covering any and all claims, including, without limitation, all legal liability, subject to customary exclusions, to the extent insurable, imposed upon the Collateral Agent or any of the Administrative Agent, Trustee, Lenders or Noteholders, and all court costs and attorneys' fees, arising out of or connected with the possession, use, leasing, operation or condition of the Plant, with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use 29 - 29 - and configuration to the Plant and located in the locality where the Plant is located; 7.16.1.3 Comprehensive boiler and machinery insurance to cover sudden and accidental breakdown, including but not limited to, explosion of any boilers and machinery located on the Plant or comprising any Equipment, with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and the Equipment and located in the locality where the Plant is located; 7.16.1.4 Comprehensive automobile liability insurance policy against claims for bodily injury, death and property damage covering all owned, leased, non-owned and hired motor vehicles, including loading and unloading in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and the Equipment and located in the locality where the Plant is located; 7.16.1.5 Business interruption insurance on an annual basis in amounts not less than the projected gross profit of the Plant during the applicable twelve-month period but in no event less than the amount necessary to pay the fixed charges and other expenses of owning, operating and maintaining the Hypothecated Property for the same period; 7.16.1.6 To the extent not otherwise covered by the insurance required under sections 7.16.1.1 and 7.16.1.2, during the performance of any Alterations, renovations, repairs, restorations or construction, broad form Builders Risk Insurance on an all-risk completed value basis; and 7.16.1.7 Such other insurance, against such risks and with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and located in the locality in which the Plant is located. 7.16.2 The Grantor may maintain the coverages required by this section 7.16 under blanket policies covering the Plant and other locations owned or operated by the Grantor if the terms of such blanket policies otherwise comply with the provisions of this section 7.16 and contain specific coverage allocations in respect of the Plant determined in accordance with the provisions of this section 7.16. All insurance 30 - 30 - policies in respect of the coverages required by sections 7.16.1.1, 7.16.1.4, 7.16.1.6 and, if applicable, 7.16.1.7 shall be in amounts at least sufficient to prevent coinsurance liability and all losses thereunder shall be payable to the Collateral Agent, as loss payee, subject to the terms of the Intercreditor and Collateral Agency Agreement, pursuant to a standard Canadian Insurance Bureau standard mortgagee clause for use in the Province of Quebec, or any equivalent thereof, and each such policy shall, to the extent obtainable at commercially reasonable costs, 7.16.2.1 include effective waivers (whether under the terms of such policy or otherwise) by the insurer of all claims for insurance premiums against all loss payees and named insureds other than the Grantor and all rights of subrogation against any named insured, and 7.16.2.2 provide that any losses thereunder shall be payable notwithstanding (i) any act, failure to act, negligence of, or violation or breach of warranties, declarations or conditions contained in such policy by the Grantor or the Collateral Agent or any other named insured or loss payee, (ii) the occupation or use of the Plant or the Equipment for purposes more hazardous than permitted by the terms of the policy, (iii) any foreclosure or other proceeding or notice of sale relating to the Plant or the Equipment, or (iv) any change in the title to or ownership or possession of the Plant or the Equipment; provided, however, that (with respect to items contemplated in clauses (iii) and (iv) above) any notice requirements of the applicable policies are satisfied. All insurance policies in respect of the coverages required by sections 7.16.1.2, 7.16.1.5 and, if applicable, 7.16.1.7 shall name the Collateral Agent as an additional insured. 7.16.3 Each policy of insurance required under this section 7.16 shall provide that: 7.16.3.1 notices of any failure by the Grantor to pay any insurance premium in respect thereof, be furnished to the Collateral Agent contemporaneously with any such notice given to the Grantor and 7.16.3.2 it may not be cancelled or otherwise terminated without at least twenty (20) days' prior written notice to the Collateral Agent and shall permit the Collateral Agent to pay any premium therefor within twenty (20) days after receipt of any notice stating that such premium has not been paid when due. The policy or policies of such 31 -31- insurance or certificates of insurance evidencing the required coverages and all renewals or extensions thereof shall be delivered to the Collateral Agent upon receipt by the Grantor. Settlement of any claim under any of the insurance policies referred to in this section 7.16 (other than the insurance contemplated in section 7.16.1.3 which in the Grantor's reasonable judgment involves loss of $1,000,000 in lawful currency of the United States or more, shall require the prior approval of the Collateral Agent (acting pursuant to the provisions of the Intercreditor and Collateral Agency Agreement) and the Grantor shall use its best efforts to cause each such insurance policy to contain a provision to such effect. 7.16.4 At least fifteen (15) days prior to the expiration of any insurance policy required by this section 7.16, the Grantor shall deliver to the Collateral Agent evidence that such policy or policies shall be renewed or extended and the Grantor shall deliver promptly to the Collateral Agent after receipt thereof the policy or policies renewing or extending such expiring policy or renewal or extension certificates or other evidence of renewal or extension, together with a receipt showing payment of the premium thereof. 7.16.5 The Grantor shall not purchase additional policies in respect of the insurance coverages required to be maintained under this section 7.16, unless the Collateral Agent is included thereon as an additional named insured and, if applicable, with loss payable to the Collateral Agent under an endorsement containing the provisions described in section 7.16.2 and the policy evidencing such insurance otherwise complies with the requirements of section 7.16.2. The Grantor immediately shall notify the Collateral Agent whenever any such separate insurance policy is obtained and promptly shall deliver to the Collateral Agent the policy or certificate evidencing such insurance. 7.17 INSPECTION: The Grantor shall permit the Collateral Agent, by its agents, accountants and attorneys, to visit and inspect the Hypothecated Property upon reasonable prior notice at such times as may be reasonably requested by the Collateral Agent. 7.18 THE GRANTOR TO MAINTAIN IMPROVEMENTS: The Grantor shall not commit any waste on the Plant or with respect to any Equipment or make any change in the use of the Plant or any Equipment. The Grantor represents and warrants that: 32 -32- 7.18.1 to the Grantor's knowledge, the Plant is served by all electric, gas, sewer, water facilities and any other utilities required or necessary for the current use thereof and any easements or servitudes necessary to the furnishing of such utility service by the Grantor have been obtained and duly recorded, and 7.18.2 the Grantor has access to the Plant from public roads sufficient to allow the Grantor and its tenants and invitees to conduct its and their businesses at the Plant as it is currently conducted. The Grantor shall not materially alter the occupancy or use of the Plant without the prior written consent of the Collateral Agent. Except as otherwise permitted by the Intercreditor and Collateral Agency Agreement, no Buildings comprising a portion of the Plant may be demolished nor shall any Equipment be removed without the prior written consent of the Collateral Agent. 7.19 LEASES: 7.19.1 All of the Leases are valid and effective in accordance with their respective terms, except that the enforcement thereof may be subject to: 7.19.1.1 bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors' rights generally, and 7.19.1.2 general equitable principles. To the Grantor's knowledge, the Grantor is not in material breach of or in default (and to the Grantor's knowledge, no event has occurred which with due notice or lapse of time or both, may constitute such a material breach or default) under any Lease, and no party to any Lease has given the Grantor written notice of or made a claim with respect to any breach or default, the consequences of which, individually or in the aggregate, would have a Material Adverse Effect on the Grantor. 7.19.2 The Grantor shall manage and operate the Hypothecated Property or cause the Hypothecated Property to be managed and operated in a reasonably prudent manner and, except as otherwise permitted under section 7.20, will not enter into any Lease (or any amendment or modification thereof) or other agreement subsequent 33 - 33 - to the date hereof with any Person which, in the reasonable judgment of the Grantor, individually or in the aggregate, would have a Material Adverse Effect on the value of the property subject thereto. 7.19.3 The Grantor shall not: 7.19.3.1 receive or collect, or permit the receipt or collection of, any rental or other payments under any Lease more than one (1) month in advance of the respective period in respect of which they are to accrue, except that (i) in connection with the execution and delivery of any Lease or of any amendment to any Lease, rental payments thereunder may be collected and received in advance in an amount not in excess of one (1) month's rent and (ii) the Grantor may receive and collect escalation and other charges in accordance with the terms of each Lease; 7.19.3.2 assign, transfer or hypothecate (other than to the Collateral Agent hereunder or as otherwise permitted under section 7.20 of this Deed of Hypothec) any rental or other payment under any Lease whether then due or to accrue in the future, the interest of the Grantor as lessor under any Lease or the Rents, issues, revenues, profits or other income of the Hypothecated Property; 7.19.3.3 enter into any Lease after the date hereof that does not contain terms to the effect as follows: (i) such Lease and the rights of the tenant thereunder shall be subject and subordinate to the rights of the Collateral Agent under this Deed of Hypothec; (ii) such Lease has been hypothecated by the Grantor, as landlord thereunder, to the Collateral Agent under this Deed of Hypothec; (iii) in the case of any hypothecary recourse hereunder, the rights and remedies of the tenant in respect of any obligations of any successor landlord thereunder shall be limited to the equity interest of such successor landlord in the Plant and any successor landlord shall not (a) be liable for any act, omission or default of any prior landlord under the Lease or (b) be required to make or complete any tenant improvements or 34 - 34 - capital improvements or repair, restore, rebuild or replace the demised premises or any part thereof in the event of damage, casualty or condemnation or (c) be required to pay any amounts to tenant arising under the Lease prior to such successor landlord taking possession; (iv) the tenant's obligation to pay rent and any additional rent shall not be subject to any abatement, deduction, counterclaim or setoff as against the Collateral Agent or any purchaser upon the exercise hereunder of any hypothecary recourse in respect of any portion of the Plant, and the Collateral Agent or such purchaser will not be bound by any advance payments of rent in excess of one month or any security deposits unless such security was actually received; and (v) the tenant agrees to attorn, at the option of the Collateral Agent or any purchaser of the Plant, to the successor owner upon the exercise hereunder of any hypothecary recourse in respect of the Plant or the giving or granting of a deed in lieu thereof; and 7.19.3.4 terminate or permit the termination of any Lease of space, accept surrender of all or any portion of the space demised under any Lease prior to the end of the term thereof or accept assignment of any Lease to the Grantor which, in the reasonable judgment of the Grantor, individually or in the aggregate, would have a Material Adverse Effect or materially impair the hypothecs created under this Deed of Hypothec unless: (i) the tenant under such Lease has not paid the equivalent of two months' rent and the Grantor has made reasonable efforts to collect such rent; or (ii) the Grantor shall deliver to the Collateral Agent an officer's certificate to the effect that the Grantor has entered into a new Lease (or Leases) for the space covered by the terminated or assigned Lease with a term (or terms) which expire(s) no earlier than the date on which the terminated or assigned Lease was to expire (excluding renewal options), and with a tenant (or tenants) having a creditworthiness (as reasonably determined by the Grantor) sufficient to pay the rent and other charges due 35 - 35 - under the new Lease (or Leases), and the tenant(s) shall have commenced paying rent, including, without limitation, all operating expenses and other amounts payable under the new Lease (or Leases), without any abatement or concession, in an amount at least equal to the amount which would have then been payable under the terminated or assigned Lease. 7.19.4 The Grantor timely shall perform and observe all the terms, covenants and conditions required to be performed and observed by the Grantor under each Lease and will not engage in any conduct in respect of any Lease which would have individually or in the aggregate a Material Adverse Effect or materially impair the hypothecs created under this Deed of Hypothec. The Grantor promptly shall notify the Collateral Agent of the receipt of any notice from any lessee under any Lease claiming that the Grantor is in material default in the performance or observance of any of the terms, covenants or conditions thereof to be performed or observed by the Grantor and will cause a copy of each such notice to be delivered promptly to the Collateral Agent. 7.20 TRANSFER RESTRICTIONS: Except as otherwise permitted by the Intercreditor and Collateral Agency Agreement, the Grantor shall not, without the prior written consent of the Collateral Agent, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Hypothecated Property or suffer any of the foregoing to occur by operation of Law or otherwise (each a "TRANSFER"); provided, however, the Grantor may so encumber the Hypothecated Property to the extent such encumbrances are of the kind listed in clause (d) of the definition of "Permitted Liens". Any proceeds of such permitted Transfer shall be deemed Collateral Proceeds and are hereby assigned and shall be paid to the Collateral Agent to be held in the Collateral Account and disbursed pursuant to the Intercreditor and Collateral Agency Agreement. 7.21 DESTRUCTION; CONDEMNATION: 7.21.1 If there shall occur any damage to, or loss or destruction of, the Buildings and Equipment, or any part of any thereof (each, a "DESTRUCTION"), the Grantor shall promptly send to the Collateral Agent a notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of any such Destruction are hereby assigned and shall be paid to the Collateral Agent to be held 36 - 36 - in the Collateral Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, if such proceeds are in an amount less than $1,000,000 in lawful currency of the United States, such proceeds shall be paid directly to the Grantor. All insurance proceeds paid to the Collateral Agent pursuant to this section, less the amount of any expenses incurred in litigating, arbitrating, compromising or settling any claim arising out of such Destruction (the "INSURANCE PROCEEDS"), shall constitute Moneys and be applied in accordance with the provisions of sections 7.21.3, 7.21.4 and 7.21.5. 7.21.2 If there shall occur any taking of the Hypothecated Property or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any Law, general or special, or by reason of the temporary requisition of the use or occupancy of the Hypothecated Property or any part thereof, by any Governmental Authority, civil or military (each, a "TAKING"), the Grantor immediately shall notify the Collateral Agent upon receiving notice of such Taking or commencement of proceedings therefor. The Collateral Agent may (but shall not be obligated to) participate in any proceedings or negotiations which might result in any Taking. The Collateral Agent may be represented by counsel satisfactory to it at the expense of the Grantor. The Grantor shall deliver or cause to be delivered to the Collateral Agent all instruments requested by it to permit such participation. The Grantor shall in good faith and with due diligence file and prosecute what would otherwise be the Grantor's claim for any such award or payment and cause the same to be collected and paid over to the Collateral Agent, and hereby irrevocably authorizes and empowers the Collateral Agent, in the name of the Grantor as its true and lawful attorney-in-fact or otherwise, during the continuance of an Event of Default to collect and to receipt for any such award or payment, and, in the event the Grantor fails so to act, to file and prosecute such claim. The Grantor shall pay all costs, fees and expenses incurred by the Collateral Agent in connection with any Taking and seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the Collateral Agent to be held in the Collateral Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, if such proceeds are in an amount less than $1,000,000 in lawful currency of the United States, such proceeds shall be paid directly to the Grantor. The Grantor shall take all steps necessary to notify the condemning authority of such assignment. Such proceeds, award or payment paid to the Collateral 37 - 37 - Agent, less the amount of any expenses incurred in litigating, arbitrating, compromising or settling any claim arising out of such Taking ("NET AWARD"), shall constitute Moneys and be applied in accordance with the provisions of sections 7.21.3, 7.21.4 and 7.21.5. 7.21.3 So long as no Event of Default shall have occurred and be continuing, the Grantor shall have the right, at the Grantor's option, to perform a restoration (a "RESTORATION") of the affected portions of the Plant and the Equipment. In the event the Grantor elects to perform a Restoration, the Grantor shall give written notice ("RESTORATION ELECTION NOTICE") of such election to the Collateral Agent within twenty (20) business days after the date that the Collateral Agent receives the applicable Insurance Proceeds or Net Award, as the case may be. The Grantor shall, within twenty (20) business days following the date of delivery of a Restoration Election Notice, commence and diligently continue to perform the Restoration of that portion or portions of the Plant and Equipment subject to such Destruction or affected by such Taking so that, upon the completion of the Restoration, the Hypothecated Property shall be in the same condition and shall be of at least equal utility for its intended purposes as the Hypothecated Property was immediately prior to such Destruction or Taking. The Grantor shall so complete such Restoration with its own funds to the extent that the amount of any Net Award or Insurance Proceeds is insufficient for such purpose. In the event the Collateral Agent does not receive a Restoration Election Notice within such twenty (20) business day period, the Collateral Agent shall deal with such Insurance Proceeds or Net Award in accordance with the provisions of the Intercreditor and Collateral Agency Agreement. 7.21.4 In the event a Restoration is to be performed under this section 7.21.4, the Collateral Agent shall not release any part of the Net Award or the Insurance Proceeds except in accordance with the provisions of section 7.21.5 and the Grantor shall, prior to commencing any work to effect a Restoration of the Plant and the Equipment, promptly (but in no event later than one-hundred twenty (120) days following any Destruction or Taking) furnish to the Collateral Agent: 7.21.4.1 complete plans and specifications (the "PLANS AND SPECIFICATIONS") for the Restoration; 38 - 38 - 7.21.4.2 an officers' certificate stating that all permits and approvals required by Law to commence work in connection with the Restoration have been obtained; 7.21.4.3 a certificate (an "ARCHITECT'S CERTIFICATE") of an independent, reputable architect or engineer acceptable to the Collateral Agent and licensed in the Province of Quebec (i) stating that the Plans and Specifications have been reviewed and approved by the signatory thereto, (ii) containing such signatory's estimate (an "ESTIMATE") of the costs of completing the Restoration, and (iii) upon completion of such Restoration in accordance with the Plans and Specifications, the utility of the Plant and the Equipment will be equal to or greater than the utility thereof immediately prior to the Destruction or Taking relating to such Restoration; and 7.21.4.4 if the Estimate exceeds the Insurance Proceeds or the Net Award, as the case may be, by $5,000,000 in lawful currency of the United States or more, an Additional Undertaking in an amount equal to not less than the Estimate less the amount of the Insurance Proceeds or the Net Award, as the case may be, then held by the Collateral Agent for application toward the cost of such Restoration. Upon receipt by the Collateral Agent of each of the items required pursuant to sections 7.21.4.1 through 7.21.4.4 above, the Collateral Agent shall acknowledge receipt of the Plans and Specifications. Promptly upon such acknowledgment of receipt by the Collateral Agent, the Grantor shall commence and diligently continue to perform the Restoration substantially in accordance with such Plans and Specifications and in material compliance with all Governmental Requirements, free and clear of all Liens except Permitted Liens. The Grantor shall so complete such Restoration with its own funds to the extent that the amount of any Net Award or Insurance Proceeds is insufficient for such purpose. 7.21.5 In the event the Grantor performs a Restoration of the Plant and Equipment as provided in section 7.21.4, the Collateral Agent shall apply any Insurance Proceeds or Net Award held by the Collateral Agent on account of the Destruction or Taking to the payment of the cost of performing such Restoration pursuant to the relevant provisions of the Intercreditor and Collateral Agency Agreement. In the event there shall be any surplus after application of the Net Award or the 39 - 39 - Insurance Proceeds to Restoration of the Plant and the Equipment, such surplus shall become Net Proceeds, as defined in the Indenture for application in accordance thereunder; provided, however, that if an Event of Default shall have occurred and be continuing, such surplus shall be applied by the Collateral Agent to the payment of the Obligations, in accordance with Article 6 of the Intercreditor and Collateral Agency Agreement. Notwithstanding anything to the contrary herein, if a Destruction or Taking of all or substantially all of the Hypothecated Property occurs on a date which is less than 12 months prior to Maturity, as such term is defined in the Indenture, all Insurance Proceeds and Net Awards shall be applied to the permanent repayment or prepayment of any Secured Obligations then outstanding in accordance with the Intercreditor and Collateral Agency Agreement. 7.22 ALTERATIONS: The Grantor shall not make any material structural addition, modification or change (each, an "ALTERATION") to the Plant or the Equipment which would materially diminish the utility of the Hypothecated Property or impair the hypothecs under this Deed of Hypothec. Whether or not the Collateral Agent has consented to the making of any Alteration, the Grantor shall (i) complete each Alteration promptly, in a good and workmanlike manner and in material compliance with all applicable local Laws, and (ii) pay when due all claims for labour performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of section 7.14.5. 7.23 HAZARDOUS MATERIAL: 7.23.1 Except with respect to those matters which would not reasonably be expected to have a Material Adverse Effect, to the best knowledge of the Grantor, the Grantor holds all Permits required to permit the Grantor to conduct its business in the manner now conducted and none of the Grantor's operations are being conducted in a manner that violates in any material respect the terms and conditions under which any such Permit was granted, including without limitation, under any Environmental Laws, except those permits that are expected to be transferred in the ordinary course after the date hereof; to the best of the knowledge of the Grantor all such Permits are valid and in full force and effect; and to the knowledge of the Grantor, no suspension, cancellation, revocation or termination of any such Permit is threatened. 40 - 40 - 7.23.2 Except as set forth in the Term Loan Agreement, there are no material claims, actions, suits, proceedings or investigations pending or to the knowledge of the Grantor, threatened, before any Governmental Authority or before any arbitrator brought by or against the Grantor or with respect to any of the Hypothecated Property the basis of which is any Environmental Law. 7.23.3 The Grantor shall (or shall cause other parties obligated to do so under or in accordance with contract or indemnity to the Grantor): 7.23.3.1 take all commercially reasonable actions to comply with any and all applicable present and future Environmental Laws relating to the Plant; 7.23.3.2 pay in a timely fashion the cost of any removal, response measure or corrective action relating to any Hazardous Materials required by any Environmental Law or any order, regulation, consent decree or similar agreement or instrument and keep the Hypothecated Property free of any Lien imposed pursuant to any Environmental Law; 7.23.3.3 take all commercially reasonable actions to not Release any Hazardous Materials on, under or from the Hypothecated Property in violation of any Environmental Law; 7.23.3.4 apply any insurance proceeds or other sums received by it in respect of the removal of any Hazardous Material or any other corrective action relating to any Hazardous Material to such removal or corrective action; and 7.23.3.5 not take, or fail to take any action required under any Environmental Laws or in connection with any Hazardous Materials that could reasonably be expected to result in the incurrence of any obligation or liability of any of the Collateral Agent, Administrative Agent, Trustee, Lenders or Noteholders. During the continuance of an Event of Default, in the event the Grantor fails to comply with the covenants in the preceding sentence, the Collateral Agent may (upon receipt of an indemnity satisfactory to the Collateral Agent), in addition to any other remedies set forth herein, but shall not be obligated to, as mandatary for and at the Grantor's sole cost and expense cause to be taken, any 41 - 41 - remediation, removal, response or corrective action relating to Hazardous Materials that is required by Environmental Law and is not being done or contested by the Grantor. Any costs or expenses incurred by the Collateral Agent for such purpose shall be immediately due and payable by the Grantor and shall bear interest at the Rate of Interest. The Grantor shall provide to the Collateral Agent and its agents and employees access to the Hypothecated Property to take any action required by Environmental Laws, or in connection with any Hazardous Materials, that could be expected to result in the incurrence of any obligation or liability of any of the Collateral Agent, Administrative Agent, Trustee, Lenders or Noteholders, if the Grantor fails to do so and such action or removal is required under any Environmental Laws as provided above. Upon written request by the Collateral Agent, which shall include a reasonably specific statement of the basis thereof (which shall be specific to the condition of the Hypothecated Property and the alleged violation of Environmental Law) and which shall be made not more frequently than once in any twelve-month period or at any time that the Collateral Agent is exercising its remedies under this Deed of Hypothec, the Collateral Agent shall have the right (upon receipt of an indemnity satisfactory to the Collateral Agent), but shall not be obligated, at the sole cost and expense of the Grantor, to conduct an environmental audit or review of the Hypothecated Property relating to the specific items as required in writing or relating to the remedy that the Collateral Agent is exercising under this Deed of Hypothec by persons or firms appointed by the Collateral Agent, and the Grantor shall cooperate in all reasonable respects in the conduct of such environmental audit or review, including, without limitation, by providing reasonable access to the Hypothecated Property and to all records relating thereto. The Grantor shall indemnify and hold each of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders harmless from and against all loss, cost, damage or expense (including, without limitation, attorneys' fees) that any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders may sustain by reason of the assertion against such party of any claim relating to such Hazardous Materials or actions taken with respect thereto as authorized hereunder. Nothing contained herein shall result in any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders being deemed an "owner" or "operator" under applicable Environmental Law. 7.23.4 The Grantor may at its own expense contest the amount or applicability of any of the obligations described in the first 42 - 42 - sentence of section 7.23.3 by appropriate legal proceedings, prosecution of which operates to prevent the enforcement thereof; provided, however, that: 7.23.4.1 any such contest shall be conducted in good faith by appropriate legal proceedings promptly instituted and diligently conducted and 7.23.4.2 in connection with such contest, the Grantor shall have made provision for the payment or performance of such contested obligation on the Grantor's books if and to the extent required by generally accepted accounting principles then utilized by the Grantor in the preparation of its financial statements, or shall have deposited with the Collateral Agent a sum sufficient to pay and discharge such obligation and the Collateral Agent's estimate of all interest and penalties related thereto. Notwithstanding the foregoing provisions of this section 7.23.4, no contest of any such obligations may be pursued by the Grantor if such contest would expose the Collateral Agent, or any of the Administrative Agent, Trustee, Lenders or Noteholders to any possible criminal liability or, unless the Grantor shall have furnished an Additional Undertaking therefor satisfactory to the Collateral Agent or for any civil liability for failure to comply with such obligations. 7.24 ASBESTOS: The Grantor shall not install nor permit to be installed in the Hypothecated Property friable asbestos or any asbestos-containing material (collectively, "ACM") except in compliance with all applicable Environmental Laws respecting such material. With respect to any ACM currently present in the Hypothecated Property, except with respect to matters which would not have a Material Adverse Effect, the Grantor shall comply with all Laws applicable to ACM located on the Plant, all at the Grantor's sole cost and expense. If the Grantor shall fail so to comply with such Laws, the Collateral Agent may (upon receipt of an indemnity satisfactory to the Collateral Agent) during the continuance of an Event of Default, but shall not be obligated to, in addition to any other remedies set forth herein, take those steps reasonably necessary to comply with applicable Laws. Any costs or expenses incurred by the Collateral Agent for such purpose shall be immediately due and payable by the Grantor and bear interest at the Rate of Interest. The Grantor shall provide to the Collateral Agent and its agents and employees reasonable access to the Hypothecated Property upon reasonable prior notice to remove such ACM if the Grantor fails to do so and removal is required under any Environmental Law as provided 43 - 43 - for above; provided, however, that nothing contained herein shall obligate the Collateral Agent to exercise any rights under such access. The Grantor shall indemnify and hold each of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders harmless from and against all loss, cost, damage and expense that any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders may sustain as a result of the presence of any ACM and any removal thereof in compliance with any applicable Environmental Law. 7.25 BOOKS AND RECORDS; REPORTS: The Grantor shall keep proper books of record and account, which shall accurately represent the financial condition of the Grantor and the business affairs of the Grantor relating to the Hypothecated Property. The Collateral Agent and its authorized representatives shall have the right, from time to time, upon reasonable prior notice to examine the books and records of the Grantor relating to the operation of the Hypothecated Property at the office of the Grantor. 7.26 NO CLAIMS AGAINST THE COLLATERAL AGENT: Nothing contained in this Deed of Hypothec shall constitute any consent or request by the Collateral Agent, express or implied, for the performance of any labour or services or the furnishing of any materials or other property in respect of the Plant or any part thereof, nor as giving the Grantor any right, power or authority to contract for or permit the performance of any labour or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Collateral Agent in respect thereof or any claim that any Lien based on the performance of such labour or services or the furnishing of any such materials or other property is ranked in priority to the hypothecs under this Deed of Hypothec. 7.27 UTILITY SERVICES: The Grantor shall pay, or cause to be paid, when due all charges for all public or private utility services, all public or private rail and highway services, all public or private communication services, all sprinkler systems, and all protective services, any other services of whatever kind or nature at any time rendered to or in connection with the Plant or any part thereof, shall comply in all material respects with all contracts relating to any such services, and shall do all other things reasonably required for the maintenance and continuance of all such services to the extent required to fulfil the obligations set forth in section 7.18. 44 - 44 - 8. DEFAULT: 8.1 EVENTS OF DEFAULT: Each and every one of the following events shall constitute an Event of Default under this Deed: 8.1.1 an Event of Default as defined in the Term Loan Agreement; 8.1.2 an Event of Default as defined in the Indenture; or 8.1.3 if any representation or warranty of the Grantor made hereunder is or shall be incorrect when made in any material respect; 8.1.4 if the Grantor shall default in the due performance and observance of any of the Hypothec Obligations; 8.1.5 the publication of any prior notice of the exercise of a hypothecary recourse, or a notice of crystallization as required by the Civil Code of Quebec with respect to the Hypothecated Property or any part thereof, unless same is being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted, and provided there is no immediate danger that such Hypothecated Property be taken in payment, be taken for purposes of administration or be sold. 9. EFFECTS OF DEFAULT: 9.1 RIGHTS UPON DEFAULT: Upon the occurrence of an Event of Default, the security hereby constituted shall become enforceable and the Collateral Agent shall, in addition to any of its other rights, forthwith be entitled to exercise any and all of the rights provided for in this Deed and in Chapter V of Title III of Book VI of the Civil Code of Quebec and in the Code of Civil Procedure of Quebec. In exercising any of the rights and recourses available hereunder or at Law, the Collateral Agent may, at its option, in respect of all or any part of the Hypothecated Property, exercise such rights and recourses as are available hereunder or at Law, as it chooses to exercise, without prejudicing the Collateral Agent's other rights and recourses available in respect of all or part of the other Hypothecated Property. Furthermore, the Collateral Agent may exercise any of its rights and recourses in 45 - 45 - respect of all or any part of the Hypothecated Property, simultaneously or successively. The Collateral Agent shall be entitled to acquire all or any part of the Hypothecated Property, when permitted by Law. 9.2 PERFORMANCE: The Collateral Agent shall be entitled, in its discretion, to perform on behalf of the Grantor any of the Grantor's obligations hereunder, should there be an Event of Default which has occurred and is continuing with respect thereto. In addition, the Collateral Agent shall be entitled to do such things and make such reasonable expenditures as it considers appropriate to enforce, preserve and protect its rights and interests hereunder and the security constituted hereby. 9.3 NO WAIVER: Any action taken by or on behalf of the Collateral Agent to remedy any Event of Default shall not constitute a waiver of such default, nor be deemed to have relieved the Grantor therefrom. Failure of the Collateral Agent to insist upon strict performance of any covenants of this Deed or to exercise any right or option hereunder shall not be construed as a waiver or relinquishment for the future of any such covenant, right or option. 9.4 RIGHTS CUMULATIVE: The acceptance by the Collateral Agent following the occurrence of any Event of Default or the exercise by the Collateral Agent of any right or recourse hereunder or under any other agreement between the Grantor and the Collateral Agent shall not preclude the Collateral Agent from exercising any other right or recourse, all rights and recourses of the Collateral Agent being cumulative and not alternative. 9.5 SURRENDER: If the Collateral Agent gives the Grantor a prior notice of its intention to exercise a hypothecary right, the Grantor shall, and shall cause any other Person in possession of the Hypothecated Property, to immediately voluntarily surrender same to the Collateral Agent. 10. POSSESSION FOR PURPOSES OF ADMINISTRATION: 10.1 COLLATERAL AGENT'S RIGHTS: In addition to the rights available to the Collateral Agent under the Bond and the rights and recourses upon default described in Article 9 hereof, in the event that the 46 - 46 - Collateral Agent exercises the hypothecary right to take possession for purposes of administration, the Collateral Agent shall have, in addition to the rights and powers provided by Law as administrator entrusted with full administration of the property of others, the rights and powers contained in this Article 10. 10.2 ADMINISTRATION: The Collateral Agent shall have the right, after having fulfilled all formalities provided for at Law for the exercise of its hypothecary right of taking possession for purposes of administration, to enter into and take possession of, through its officers, representatives, Receivers or other lawful attorney, all or any part of each of the Hypothecated Property, with full power of a Person entrusted with full administration of the property of others including the full power to administer all or any part of each of the Hypothecated Property, with the full power to (i) manage, operate, repair, alter, preserve, maintain or extend all or any part of the Hypothecated Property, including, without limitation, the full power to make any improvements or additions to the Hypothecated Property, or any part thereof, as the Collateral Agent shall deem desirable or necessary (provided that the Collateral Agent shall not be under any obligation to take any action of any nature in connection with the Hypothecated Property or any part thereof) and in connection therewith the power to enter into any contracts or other agreements in respect of all or any part of the Hypothecated Property in the name of and for the account of the Grantor, the Grantor expressly authorizing the Collateral Agent to execute any and all such contracts or agreements for, in the name of and on behalf of the Grantor, and the power to cancel any contracts entered into by the Grantor or by the Collateral Agent on its behalf and the power to renew any such contracts, in each case for such term and subject to such provisions as the Collateral Agent shall deem advisable or expedient, and (ii) the power to exercise all rights of the Grantor in connection with the Hypothecated Property, including without limitation, all rights and recourses available to the Grantor in connection with any contracts or agreements relating to the Hypothecated Property, the full power to institute proceedings against any Person in connection therewith and generally the full right, power and authority to carry on the business of the Grantor in connection with the Hypothecated Property in the place and stead of the Grantor. Furthermore, the Collateral Agent may, at its option, advance its own moneys (and any such advance shall bear interest at the Rate of Interest) for the payment of Taxes, wages and other charges or hypothecs, costs or expenses ranking in priority to the Obligations or the security hereof and other current operating expenses 47 - 47 - incurred before or after such taking of possession, or for any other purpose which the Collateral Agent deems necessary or advisable, but the Collateral Agent shall not in any event be obliged to advance any such moneys and shall have no liability to the Grantor or any other Person in the event that it shall elect not to do so. Moneys so advanced shall be repaid by the Grantor on demand and until repaid, shall bear interest at the Rate of Interest and be secured by the hypothecs constituted hereby. The Collateral Agent may borrow money in connection with the business and affairs of the Grantor in connection with the Hypothecated Property, in the name of and on behalf of the Grantor, and may, in the name of and on behalf of the Grantor, grant security over all or any part of the Hypothecated Property to secure the repayment of such money or any other obligations undertaken by the Collateral Agent pursuant hereto in connection with the Hypothecated Property. 10.3 SURRENDER: If the Collateral Agent exercises its hypothecary right of taking possession for the purpose of administration, the Grantor hereby binds and obliges itself to yield up possession of and surrender the Hypothecated Property to the Collateral Agent on demand and agrees to put no obstacles and not to hinder the rights and recourses of the Collateral Agent, but to facilitate by all legal means, the actions of the Collateral Agent hereunder and not to interfere with the powers hereby granted to the Collateral Agent pursuant to this Deed and at Law. 10.4 DOCUMENTS: If an Event of Default occurs and is continuing, the Grantor shall forthwith by and through its officers and directors execute such documents and transfers as may be necessary to place the Collateral Agent in legal possession of any or all of the Hypothecated Property in order to transfer the control of the administration to the Collateral Agent and thereupon all the powers, functions, rights and privileges of each and every of the directors and officers of the Grantor shall cease and determine with respect to such Hypothecated Property unless specifically continued in writing by the Collateral Agent for specific purposes. 11. SALE BY COLLATERAL AGENT: 11.1 SALE: The Grantor agrees that with respect to any sale by the Collateral Agent of all or any part of the Hypothecated Property in the exercise of the Collateral Agent's rights hereunder or at 48 - 48 - Law upon the occurrence of an Event of Default which is continuing, it will be commercially reasonable to sell all or any part of the Hypothecated Property: 11.1.1 together or separately; 11.1.2 by auction or by call for tenders by advertising such sale or call for tenders once in a local daily newspaper of the Collateral Agent's choice at least seven (7) days prior to such sale or close of call for tenders; 11.1.3 by sale by agreement after receipt by the Collateral Agent of a bona fide offer from at least one prospective purchaser, who may include a Person related to or affiliated with the Collateral Agent or customers of the Collateral Agent; and 11.1.4 by any combination of the foregoing; and any such sale may be on such terms as to credit or otherwise and as to upset price or reserve bid or price as the Collateral Agent in its sole discretion may deem advantageous, and the Grantor agrees that the price received at any such sale shall constitute a commercially reasonable price. 11.2 OTHER SALES: The foregoing shall not preclude the Collateral Agent from agreeing to sell, or making any sale in any other manner not prohibited by Law nor shall it be interpreted to mean that only a sale made in conformity with the foregoing is commercially reasonable or that only the price received at a sale made in conformity with the foregoing shall constitute a commercially reasonable price. 11.3 TIMING OF SALE: The Collateral Agent may at its entire discretion, determine the appropriate moment for such sale to be conducted and the Grantor acknowledges and agrees that such determination by the Collateral Agent will not constitute unnecessary delay. 12. APPLICATION OF MONEYS: All amounts collected by the Collateral Agent (or collected by the Grantor as agent for the Collateral Agent) in enforcing the rights under this Deed and all sums received by 49 - 49 - the Collateral Agent arising from the possession and administration of or from the sale or other realization (except by way of taking in payment) of all or any part of the Hypothecated Property, including Claims and Immovable Claims, shall be applied by the Collateral Agent, to the extent permitted by applicable Law, in accordance with the provisions of the Intercreditor and Collateral Agency Agreement, the Term Loan Agreement or the Indenture in respect of the application of moneys. 13. APPLICATION NOT PAYMENT: Notwithstanding any Law, agreement, usage or custom to the contrary, including Article 2743 of the Civil Code of Quebec, receipt by the Collateral Agent (or by the Grantor as agent for the Collateral Agent) of any Claims, Rents or Immovable Claims shall not operate as payment of any Obligations unless the Collateral Agent expressly applies the amounts so received in reduction of such Obligations in accordance with this Deed and to the extent only of such application. 14. APPOINTED ATTORNEY OF THE GRANTOR: The Grantor hereby irrevocably nominates, constitutes and appoints the Collateral Agent and any Person further designated by the Collateral Agent, upon the occurrence of an Event of Default which is continuing, to be the lawful attorney-in-fact and mandatary of the Grantor for and in the name and on behalf of the Grantor to execute and do any deeds, documents, transfers, demands, conveyances, assignments, assurances, consents and things which the Grantor ought to sign, execute or do hereunder and to commence, continue and defend any proceedings authorized to be taken hereunder and generally to use the name of the Grantor in the exercise of all or any of the powers hereby conferred on the Collateral Agent and any agent appointed hereunder. 15. REMEDIES CUMULATIVE: No remedy, right or recourse of the Collateral Agent conferred or reserved hereunder is intended to be exclusive of any other remedy, right or recourse under this Deed, under any other security or at Law, but each and every such remedy shall be cumulative, and shall be in addition to every other remedy, right or recourse given hereunder or now existing or hereafter to exist by contract or by Law. The exercise by the Collateral Agent of any right, remedy or recourse available to it pursuant to this Deed or at Law shall not 50 - 50 - preclude the Collateral Agent from exercising any other right, remedy or recourse at any time or from time to time. 16. JUDGMENT FOR AMOUNTS REMAINING DUE: In the case of any judicial or other proceedings to enforce the security hereby constituted, and without limiting any right of the Collateral Agent to obtain judgment for any greater amount, judgment may be rendered against the Grantor in favour of the Collateral Agent for any amount which may remain due in respect of the Obligations after the application to the payment thereof of the proceeds of any sale of all or part of each of the Hypothecated Property or any or all of them or any additional security therefor. 17. PAYMENTS TO THIRD PARTIES: If the Collateral Agent is at any time or from time to time required to make a payment pursuant to this Deed, any such payment or payments, and all costs of the Collateral Agent (including legal costs and legal fees) shall be at once payable by the Grantor and shall bear interest at the Rate of Interest, and the repayment thereof to the Collateral Agent shall be secured hereby. 18. OTHER PROVISIONS CONCERNING THE COLLATERAL AGENT: By way of supplement to the provisions of any applicable Laws and without limiting any provisions of this Deed dealing with the same subject matters, the Grantor agrees that upon the occurrence of an Event of Default which is continuing: 18.1 The Collateral Agent and any agent or Receiver appointed by it shall, as regards all the powers, authorities and discretions vested in them have absolute and uncontrolled discretion as to the exercise thereof, whether in relation to the manner or as to the mode and time for the exercise thereof; 18.2 Neither the Collateral Agent nor any agent or Receiver appointed by it shall be responsible or liable, otherwise than for any debts contracted by them, for damages to persons or property, or for salaries or non-fulfilment of contracts during any period during which the Collateral Agent or such agent or Receiver shall manage the Hypothecated Property or any part thereof upon or after entry as herein 51 - 51 - provided and the Collateral Agent shall not be bound to do, observe or perform or to see to the observance or performance by the Grantor of any of the Grantor's obligations pursuant to this Deed or to other Persons, nor in any other way to supervise or intervene in the conduct of the Grantor's operation of any of the Hypothecated Property (or any portion thereof or any asset or right comprised therein); 18.3 In the event of any sale in accordance with the provisions of this Deed, whether by the Collateral Agent, by any agent or Receiver or under judicial proceedings, the Grantor shall execute and deliver to the purchaser on demand any instrument or assurance reasonably necessary to confirm to the purchaser the title of the property so sold and, in the case of any such sale, the Collateral Agent is hereby irrevocably authorized by the Grantor to execute on its behalf any such confirmatory instrument or assurance; 18.4 No Person dealing with the Collateral Agent or its agents or any Receiver shall be concerned to inquire whether the powers which the Collateral Agent or such agents or Receiver are purporting to exercise have become exercisable, or whether any money remains due on the security of this Deed, or as to the necessity or expediency of the stipulations and conditions subject to which any sale shall be made, or otherwise as to the propriety or regularity of any sale or of any other dealing by the Collateral Agent or such agents or Receiver with the Hypothecated Property or to see to the application of any money paid to the Collateral Agent or such agents or Receiver. In the absence of fraud on the part of such Person, such dealings shall be deemed, insofar as regards the safety and protection of such Person, to be within the powers hereby conferred and to be valid and effectual accordingly; 18.5 Subject to applicable Laws, no delay or omission of the Collateral Agent to exercise any right or power accruing upon any Event of Default shall impair such right or power, or shall be construed to be a waiver of any such Event of Default or an acquiescence therein and every power and remedy given hereby to the Collateral Agent may be exercised by it from time to time and as often as may be deemed expedient by it. 18.6 The Collateral Agent may invest any Person with the powers vested in the Collateral Agent pursuant to this Deed or at Law, or appoint any Person to perform the powers vested in the Collateral 52 - 52 - Agent pursuant to this Deed and at Law for and on behalf of the Grantor, in which case the following provisions shall apply: 18.6.1 every such Person shall be the irrevocable mandatary of the Grantor for the collection of all Claims or other sums falling due in respect of all or any part of each of the Hypothecated Property or any or all of them; 18.6.2 every such Person shall have the power to carry on the enterprise of the Grantor, in whole or in part, with respect to all or any part of each of the Hypothecated Property or any or all of them, and may, in the discretion of the Collateral Agent, be vested with all or any of the powers and discretion of the Collateral Agent hereunder; 18.6.3 the Collateral Agent may from time to time determine the reasonable remuneration of every such Person who shall be entitled to deduct the same out of the receipts from any part of each of the Hypothecated Property or any or all of them or the proceeds therefrom; 18.6.4 every such Person shall, as concerns the responsibility for his acts or omissions, be deemed the agent, or mandatary, or attorney of, or employed or engaged by the Grantor and in no event an agent or employee of the Collateral Agent; 18.6.5 the engagement or appointment of every such Person by the Collateral Agent shall not create any liability on the part of the Collateral Agent to such Person in any respect and such engagement, appointment or delegation or anything which may be done by any such Person or the removal of any Person or the termination of any such appointment or engagement shall not have the effect of creating any liability of any nature whatsoever of any such Person towards the Collateral Agent; 18.6.6 every such Person shall from time to time have the power to operate, in accordance with normal practice, all or any part of each of the Hypothecated Property or any or all of them, cancel any contracts and renew from time to time any or all of the contracts, for such term and subject to such provisions as such Person may deem advisable or expedient including exercising all rights and recourses available to the Grantor and in so doing every such Person shall act as 53 - 53 - the attorney, or mandatary, or agent of the Grantor and shall have the authority to execute, whether or not under seal, any contract in the name of and on behalf of the Grantor and the Grantor undertakes to and does hereby ratify and confirm whatever any such Person may do; 18.6.7 every such Person shall have full power to manage, operate, repair, alter, complete, preserve, maintain or extend all or any part of each of the Hypothecated Property or any or all of them in the name of the Grantor for the purpose of securing the payment of the Obligations, including taking all such steps as the Collateral Agent may consider necessary or desirable for the purposes of completing all or any part of each of the Hypothecated Property or any or all of them, or any improvements or additions thereto as the Collateral Agent may determine and for such purposes to enter into all such contracts and undertake all such obligations as the Collateral Agent may determine, and obtain security therefor upon the Hypothecated Property; provided that the Collateral Agent shall not be under any obligation to complete any Buildings or any additions or improvements thereto. 19. POWER TO INSTITUTE SUITS: The Collateral Agent shall have power to institute and maintain such suits and proceedings as it may be deemed necessary or expedient to prevent any impairment of the security hereunder by any acts of the Grantor, or of others, in violation of this Deed or unlawful, or as the Collateral Agent may deem necessary or expedient to preserve and to protect its interests in respect of all or any part of the Hypothecated Property. 20. OTHER SECURITY: In the event that the Collateral Agent for its own account and for the account of the Trustee, the Administrative Agent, the Noteholders and the Lenders, or any Noteholder or Lender holds any security on account of the Obligations, or any part thereof, in addition to the hypothecs constituted hereunder, no single or partial exercise by the Collateral Agent for its own account or for the account of the Trustee, the Administrative Agent, the Noteholders or the Lenders, or by the Noteholders or the Lenders (or any of them), of any of their respective remedies under this Deed or under any such additional security shall preclude any other and further exercise of any other right, power or remedy pursuant to this Deed or pursuant to any of such additional security. The Collateral Agent for its own 54 - 54 - account and for the account of the Trustee, the Administrative Agent, the Noteholders and the Lenders, shall at all times have the right to proceed against all or any portion of each of the Hypothecated Properties or such additional security in such order and in such manner as it shall in its discretion deem fit without waiving any rights which the Collateral Agent for its own account and for the account of the Trustee, the Administrative Agent, the Noteholders and the Lenders, may have pursuant to this Deed, any such additional security, or in Law or in equity or otherwise. Without limiting the generality of the foregoing, the Grantor hereby acknowledges and agrees that the hypothecs granted hereunder are given in addition to and not in substitution for any other security given by the Grantor or PAI in connection with the Obligations. 21. DISCHARGE: After the Obligations and the Accessories have been paid in full, the Collateral Agent shall, at the written request and expense of the Grantor, cancel and discharge the charges of this Deed, relating to the Hypothecated Property or otherwise, and execute and deliver to the Grantor such deeds or other instruments as shall be requisite to effect the cancellation of the publication hereof. The registrar of any registration division in which any properties affected by this Deed are situate shall discharge and cancel the publication of any hypothec constituted hereby upon the publication of any acquittance, discharge, release, main-levee or document to that effect signed by the Collateral Agent, without being obliged to see that any of the conditions of this Deed or the Bond have been fulfilled. 22. COMMUNICATIONS: All communications provided for or permitted hereunder shall be given and any demand to any of the Parties shall be made in accordance with the notice provisions of the Intercreditor and Collateral Agency Agreement. 23. SCHEDULES 23.1 FIRST SCHEDULE: This is the First Schedule referred to in this Deed: An immovable property composed of the following: 55 - 55 - FACTORY: An immovable property known and designated as being composed of the following lots: a) resubdivision ONE of subdivision ONE of original lot EIGHT HUNDRED AND SEVENTY-NINE (879-1-1) of the Official Cadastre of the Parish of Saint-Edouard-de-Gentilly, Registration Division of Nicolet; b) subdivision SEVENTEEN of original lot EIGHT HUNDRED AND SEVENTY-NINE (879-17) of the Official Cadastre of the Parish of Saint-Edouard-de-Gentilly, Registration Division of Nicolet; c) subdivision THIRTY-FOUR of original lot SEVEN HUNDRED AND EIGHT (708-34) of the Official Cadastre of the Parish of Notre-Dame-de-la-Nativite-de-Becancour, Registration Division of Nicolet; d) subdivision ONE HUNDRED AND EIGHTEEN of original lot SEVEN HUNDRED AND EIGHT (708-118) of the Official Cadastre of the Parish of Notre-Dame-de-la-Nativite-de-Becancour, Registration Division of Nicolet; With all the buildings, constructions and accessories thereon erected, including the building bearing civic number 675 Alphonse Deshaies Boulevard, Town of Becancour, Province of Quebec, G0X 1B0. As the said immovable property now subsists, with all its rights, members and appurtenances, without exception or reserve of any kind. With and subject to all active and passive, apparent or non apparent servitudes attached thereto. The said immovable property is shown on a plan prepared by Mr. Gaston Lemay, Quebec Land Surveyor, dated October 14, 56 - 56 - 1997, bearing his minute number 2812 (his file number 4-14614-C-1). WASTE BURYING SITE: A waste burying site known and designated as being composed of the following lots, namely: a) Subdivision ONE of original lot TWO HUNDRED AND THIRTY-THREE (233-1) of the Official Cadastre of the Parish of Notre-Dame-de-la-Nativite-de-Becancour, Registration Division of Nicolet; b) Subdivision ONE of original lot TWO HUNDRED AND THIRTY-FIVE (235-1) of the Official Cadastre of the Parish of Notre-Dame-de-la-Nativite-de-Becancour, Registration Division of Nicolet; c) Subdivision ONE of original lot TWO HUNDRED AND SEVENTY-EIGHT (278-1) of the Official Cadastre of the Parish of Notre-Dame-de-la-Nativite-de-Becancour, Registration Division of Nicolet; d) Original lot SEVEN HUNDRED AND TWENTY-EIGHT (728) of the Official Cadastre of the Parish of Notre-Dame-de-la-Nativite-de-Becancour, Registration Division of Nicolet. With all the buildings, constructions and accessories thereon erected, including the building bearing civic number 6005 Du Chemin de Fer Street, Town of Becancour, Province of Quebec, GOX 1B0. As the said immovable property now subsists, with all its rights, members and appurtenances, without exception or reserve of any kind. With and subject to all active and passive, apparent or non apparent servitudes attached thereto. 57 - 57 - The said immovable property is shown on a plan prepared by Mr. Gaston Lemay, Quebec Land Surveyor, dated October 14, 1997, bearing his minute number 2811 (his file number 4-14614-C-2). VACANT LAND: An emplacement being a vacant land situated in the Town of Becancour, known and designated as being composed of the following lots, namely: a) Subdivision ONE of original lot TWO HUNDRED AND FORTY (240-1) of the Official Cadastre of the Parish of Notre-Dame-de-la-Nativite-de-Becancour, Registration Division of Nicolet; and b) Subdivision TWO of original lot TWO HUNDRED AND FORTY-ONE (241-2) of the Official Cadastre of the Parish of Notre-Dame-de-la-Nativite-de-Becancour, Registration Division of Nicolet; As the said immovable property now subsists, with all its rights, members and appurtenances, without exception or reserve of any kind. With and subject to all active and passive, apparent or non apparent servitudes attached thereto. The said immovable property is shown on a plan prepared by Mr. Gaston Lemay, Quebec Land Surveyor, dated October 14, 1997, bearing his minute number 2810 (his file number 4-14614-C-3). 24. INTERPRETATION AND MISCELLANEOUS 24.1 CURRENCY: All dollar amounts expressed herein are expressed as being lawful money of Canada except as otherwise specifically expressed herein. 58 - 58 - 24.2 HEADINGS: The headings of all the Articles hereof are inserted for convenience of reference only and shall not affect the construction or interpretation of this Deed. 24.3 GOVERNING LAW: This Deed shall be deemed to be made under and governed by the Laws of the Province of Quebec and the rights and obligations of the Parties contemplated hereunder shall be interpreted in accordance with the Laws of the Province of Quebec. The Grantor hereby irrevocably attorns to the jurisdiction of the Courts of Quebec. 24.4 INTERPRETATION: All references in this Deed to designated "Articles", "sections" and other subdivisions or Schedules are to the designated Articles, sections and other subdivisions or Schedules of or attached to this Deed. 24.5 GENDER: The singular of any term includes the plural, and vice versa; the use of any term is generally applicable to any gender and where applicable, a body corporate; the word "or" is not exclusive; and the word "including" is not limiting (whether or not non limiting language, such as "without limitation" or "but not limited to" or words of similar import, is used with reference thereto). 24.6 TIME OF ESSENCE: Time is in all respects of the essence of this Deed. In addition to any other circumstances where the Grantor has been put in default by operation of Law, the occurrence of an Event of Default as provided hereunder shall constitute the Grantor in default without any further requirement of notification or demand (other than as specifically contemplated hereunder). 24.7 SEVERABILITY: If any covenant or condition in this Deed or any provision or part thereof shall be invalid or void for any reason, it shall be severed from the remainder of the provisions hereof and such remainder shall remain in full force and effect notwithstanding such severance. 24.8 SUCCESSOR: This Deed shall enure to the benefit of and be binding upon the Grantor, the Collateral Agent and their respective successors and assigns. 59 - 59 - 24.9 ASSIGNMENT: The Collateral Agent, and any assignee of the Collateral Agent, may at any time, and from time to time, assign in whole or in part, their right, title and interest under this Deed, including, without limitation, the security created hereunder. 24.10 CONFLICT: If any term, condition or provision of this Deed is inconsistent or in conflict with any term, condition or provision of the Term Loan Agreement or the Indenture, as the case may be, the relevant term, condition or provision of the Term Loan Agreement or the Indenture, as the case may be, shall govern and prevail and this Deed shall be deemed to be amended to the extent necessary to eliminate such conflict or inconsistency save and except in respect of the provisions of this Deed which relate to the creation and enforcement of the hypothecs hereby constituted, which provisions shall govern and prevail over the provisions of the Term Loan Agreement or the Indenture, as the case may be. 24.11 LANGUAGE: The Parties have required that this Deed and all related documents be in English; les parties ont exige que cet acte ainsi que tous documents s'y rapportant soient rediges en anglais. WHEREOF ACT, done and passed at the City of Montreal on the date aforesaid, and remains of record in the office of the undersigned Notary under his minute number Two thousand nine hundred and fifty-four (2,954). The representatives of the parties declared to the Notary to have taken cognizance of the present deed and to have exempted him from 60 - 60 - reading same, following which the representatives of the parties signed in the presence of the Notary and as follows: PCI CHEMICALS CANADA INC./ PRODUITS CHIMIQUES PCI CANADA INC. Per: /s/ Robert C. Williams ------------------------- UNITED STATES TRUST COMPANY OF NEW YORK Per: /s/ Rita De Santis ------------------------- ----------------------------- Kevin Leonard, Notary EX-4.3 3 AFFILIATE SECURITY AGREEMENT - DATED 10/30/97 1 EXHIBIT 4.3 AFFILIATE SECURITY AGREEMENT This AFFILIATE SECURITY AGREEMENT (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Security Agreement"), dated as of October 30, 1997, is made by each Affiliate (as defined in the Term Loan Agreement referred to below) of the Borrower (as defined below) a signatory hereto (each, individually, a "Grantor", and collectively, the "Grantors"), in favor of UNITED STATES TRUST COMPANY OF NEW YORK, as collateral agent (together with any successor(s) thereto in such capacity, the "Collateral Agent") under the Intercreditor Agreement (as defined below) for each of the Secured Parties (as defined below). W I T N E S S E T H : WHEREAS, pursuant to a Term Loan Agreement, dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Term Loan Agreement"), among Pioneer Americas, Inc., a corporation organized under the laws of Delaware (the "Borrower"), the Parent Guarantor named therein, the various financial institutions as are, or may from time to time become, parties thereto (each, individually, a "Term Loan Lender", and collectively, the "Term Loan Lenders"), DLJ Capital Funding, Inc., as Syndication Agent for the Term Loan Lenders, Salomon Brothers Holding Company Inc, as Documentation Agent for the Term Loan Lenders, Bank of America National Trust and Savings Association, as Administrative Agent for the Term Loan Lenders (the Syndication Agent, the Documentation Agent and the Administrative Agent are hereinafter collectively referred to as the "Term Loan Agents"), and the Collateral Agent, the Term Loan Lenders have extended Term Loan Commitments to make Term Loans to the Borrower, which Term Loans will be evidenced by notes (as amended, supplemented, amended and restated, or otherwise modified from time to time, including all notes issued in exchange or substitution therefor, the "Term Loan Notes") in an aggregate principal amount of $100,000,000; WHEREAS, pursuant to that certain Indenture, dated as of the date hereof (as amended, supplemented, amended and restated, or otherwise modified from time to time, the "Senior Secured Note Indenture"), among PCI Chemicals Canada Inc., a corporation organized under the laws of the Province of New Brunswick ("PCICC"), the Affiliate Guarantors (as defined therein) and United States Trust Company of New York, as trustee (in such capacity, the "Trustee") for the holders of the Notes (as defined therein) (the "Holders"), PCICC will issue its 9 1/4% Senior Secured Notes due 2007 (as amended, supplemented, amended and restated, or otherwise modified from time to time, including all notes issued in exchange or substitution therefor upon the registration of such notes pursuant to the Securities Act of 1933 or otherwise, the "Senior Secured Notes") in an aggregate principal amount of $175,000,000; 2 WHEREAS, as a condition precedent to the purchase of Senior Secured Notes by the Initial Purchasers (as defined in the Senior Secured Note Indenture) and the making of the Term Loans under the Term Loan Agreement, each Grantor is required to execute and deliver this Security Agreement; WHEREAS, each Grantor is an Affiliate of the Borrower; WHEREAS, each Grantor has duly authorized the execution, delivery and performance of this Security Agreement; and WHEREAS, it is in the best interests of each Grantor to execute this Security Agreement inasmuch as such Grantor will derive substantial direct and indirect benefits from the Term Loans made to the Borrower by the Term Loan Lenders pursuant to the Term Loan Agreement and the purchase of the Senior Secured Notes by the Initial Purchasers pursuant to the Senior Secured Note Indenture; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce (i) the Initial Purchasers to purchase the Senior Secured Notes pursuant to the Senior Secured Note Indenture and (ii) the Term Loan Lenders to make Term Loans to the Borrower pursuant to the Term Loan Agreement, each Grantor agrees, for the benefit of each Secured Party, as follows: ARTICLE I DEFINITIONS SECTION 1.1. Certain Terms. The following terms (whether or not underscored) when used in this Security Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Borrower" is defined in the first recital. "Collateral" is defined in Section 2.1. "Collateral Account" is defined in Section 4.1.2(b). "Collateral Agent" is defined in the preamble. "Computer Hardware and Software Collateral" means: (a) all computer and other electronic data processing hardware, integrated computer systems, central processing units, memory units, display terminals, printers, -2- 3 features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other related computer hardware; (b) all software programs (including both source code, object code and all related applications and data files), whether now owned, licensed or leased or hereafter acquired by any Grantor, designed for use on the computers and electronic data processing hardware described in clause (a) above; (c) all firmware associated therewith; (d) all documentation (including flow charts, logic diagrams, manuals, guides and specifications) with respect to such hardware, software and firmware described in the preceding clauses (a) through (c); and (e) all rights with respect to all of the foregoing, including any and all copyrights, licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications and any substitutions, replacements, additions or model conversions of any of the foregoing. "Contracts" is defined in clause (b) of Section 2.1. "Copyright Collateral" means all copyrights (including all copyrights for semi-conductor chip product mask works) of each Grantor, whether statutory or common law, registered or unregistered, now or hereafter in force throughout the world including all of such Grantor's right, title and interest in and to all copyrights registered in the United States Copyright Office or anywhere else in the world and also including the copyrights referred to in Item A of Schedule IV attached hereto, and all applications for registration thereof, whether pending or in preparation, all copyright licenses, including each copyright license referred to in Item B of Schedule IV attached hereto, the right to sue for past, present and future infringements of any thereof, all rights corresponding thereto throughout the world, all extensions and renewals of any thereof and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and proceeds of suit. "Equipment" is defined in clause (a) of Section 2.1. "Grantor" and "Grantors" are defined in the preamble. "Holders" is defined in the second recital. "Intellectual Property Collateral" means, collectively, the Computer Hardware and Software Collateral, the Copyright Collateral, the Patent Collateral, the Trademark Collateral and -3- 4 the Trade Secrets Collateral (except to the extent any of the foregoing arises out of or relates to any inventory or accounts receivable). "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement, dated as of October 30, 1997, among the Borrower, PCI Chemicals Canada Inc., PCI Carolina, Inc., Pioneer Licensing, Inc., the Trustee, the Administrative Agent and the Collateral Agent, as amended, supplemented, amended and restated or otherwise modified from time to time. "Patent Collateral" means: (a) all letters patent and applications for letters patent throughout the world, including all patent applications in preparation for filing anywhere in the world and including each patent and patent application referred to in Item A of Schedule II attached hereto; (b) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described in clause (a); (c) all patent licenses, including each patent license referred to in Item B of Schedule II attached hereto; and (d) all proceeds of, and rights associated with, the foregoing (including license royalties and proceeds of infringement suits), the right to sue third parties for past, present or future infringements of any patent or patent application, including any patent or patent application referred to in Item A of Schedule II attached hereto, and for breach or enforcement of any patent license, including any patent license referred to in Item B of Schedule II attached hereto, and all rights corresponding thereto throughout the world. "PCICC" is defined in the second recital. "Related Contracts" is defined in clause (b) of Section 2.1. "Secured Obligations" is defined in Section 2.2. "Secured Parties" means the Collateral Agent, the Trustee, the Holders, the Term Loan Agents, the Term Loan Lenders and any holder of a Term Loan Note. "Security Agreement" is defined in the preamble. "Senior Secured Note Indenture" is defined in the second recital. "Senior Secured Notes" is defined in the second recital. -4- 5 "Term Loan Agreement" is defined in the first recital. "Term Loan Lender" and "Term Loan Lenders" are defined in the first recital. "Term Loan Notes" is defined in the first recital. "Trademark Collateral" means: (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, service marks, certification marks, collective marks, logos, and general intangibles of a like nature (all of the foregoing items in this clause (a) being collectively called a "Trademark"), now existing anywhere in the world or hereafter adopted or acquired, all registrations and recordings thereof and all applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and Trademark Office or in any office or agency of the United States of America or any State thereof or any foreign country, including those referred to in Item A of Schedule III attached hereto; (b) all Trademark licenses, including each Trademark license referred to in Item B of Schedule III attached hereto; (c) all extensions or renewals of any of the items described in clauses (a) and (b); (d) all of the goodwill of the business connected with the use of, and symbolized by the items described in, clauses (a) and (b); and (e) all proceeds of, and rights associated with, the foregoing, including any claim by any Grantor against third parties for past, present or future infringement or dilution of any Trademark, Trademark registration or Trademark license, including any Trademark, Trademark registration or Trademark license referred to in Item A and Item B of Schedule III attached hereto, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license. "Trade Secrets Collateral" means all confidential or proprietary information and all know-how obtained by or used in or contemplated at any time for use in the business of any Grantor (all of the foregoing being collectively called a "Trade Secret"), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses, including each Trade Secret license referred to in Schedule V attached hereto, and including the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license. -5- 6 "Trustee" is defined in the second recital. "U.C.C." means the Uniform Commercial Code, as in effect from time to time in the State of New York. SECTION 1.2. Intercreditor Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Security Agreement, including its preamble and recitals, have the meanings provided in the Intercreditor Agreement. SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the Intercreditor Agreement or the context otherwise requires, terms for which meanings are provided in the U.C.C. are used in this Security Agreement, including its preamble and recitals, with such meanings. ARTICLE II SECURITY INTEREST SECTION 2.1. Grant of Security. Each Grantor hereby assigns and pledges to the Collateral Agent, for the ratable benefit of each of the Secured Parties, and hereby grants to the Collateral Agent, for the ratable benefit of each of the Secured Parties, a security interest in all of the following, whether now or hereafter existing or acquired by such Grantor (the "Collateral"): (a) all pipelines, valves, pipes, pumps and equipment in all of its forms of such Grantor, wherever located, including all parts thereof and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor and all accessories related thereto (any and all of the foregoing being the "Equipment"); (b) all contracts, contract rights, chattel paper, documents, instruments, and general intangibles (excluding any of the foregoing arising out of or relating to inventory or accounts receivable but including tax refunds) of such Grantor, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights of such Grantor now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such contracts, contract rights, chattel paper, documents, instruments, and general intangibles (any and all such contracts, contract rights, chattel paper, documents, instruments, and general intangibles being the "Contracts", and any and all such security agreements, guaranties, leases and other contracts being the "Related Contracts"); (c) all Intellectual Property Collateral of such Grantor; -6- 7 (d) all books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section 2.1; (e) all of such Grantor's other property and rights of every kind and description and interests therein (other than inventory, accounts receivable or any other property or rights arising out of or relating to any inventory or accounts receivable); and (f) all products, offspring, rents, issues, profits, returns, income and proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in clauses (a), (b), (c), (d) and (e), proceeds deposited from time to time in the Collateral Account and in any lock boxes of such Grantor, and, to the extent not otherwise included, all payments under insurance (whether or not the Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral). Notwithstanding the foregoing, "Collateral" shall not include any general intangibles or other rights arising under any contracts, instruments, licenses or other documents as to which the grant of a security interest would constitute a violation of a valid and enforceable restriction in favor of a third party on such grant, unless and until any required consents shall have been obtained. Each Grantor shall, upon the request of the Collateral Agent, use its best commercial efforts to obtain any such required consent. SECTION 2.2. Security for Obligations. This Security Agreement secures the payment of (i) all Term Loan Obligations, whether for principal, interest, costs, fees, expenses or otherwise, (ii) all Indenture Obligations, whether for principal, interest, costs, fees, expenses or otherwise and (iii) all obligations of each Grantor and each other Obligor now or hereafter existing under this Security Agreement, each Collateral Document and each other Loan Document (as such term is defined in the Term Loan Agreement) to which such Grantor or such other Obligor is or may become a party (all such obligations of the Borrower and such Grantor or such other Obligor listed in items (i) through (iii) above being the "Secured Obligations"). SECTION 2.3. Continuing Security Interest; Transfer of Term Loan Notes. This Security Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until payment in full in cash of all Secured Obligations, the termination of all Term Loan Commitments, and the termination of all obligations under the Intercreditor Agreement, (b) be binding upon each Grantor, its successors, transferees and assigns, and -7- 8 (c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Collateral Agent and each other Secured Party. Without limiting the generality of the foregoing clause (c), any Term Loan Lender may assign or otherwise transfer (in whole or in part) any Term Loan Note or Term Loan held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all the rights and benefits in respect thereof granted to such Term Loan Lender under any Collateral Document or any Loan Document (including this Security Agreement) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 11.11 and Article X of the Term Loan Agreement. Upon the payment in full in cash of all Secured Obligations, the termination of all Term Loan Commitments, and the termination of all obligations under the Intercreditor Agreement, the security interest granted herein shall terminate and all rights to the Collateral shall revert to such Grantor. Upon any such termination, the Collateral Agent will, at such Grantor's sole expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. Upon any sale or other transfer of Collateral permitted by the terms of the Intercreditor Agreement, the security interest created hereunder in such Collateral (but not in the proceeds thereof) shall be deemed to be automatically released and the Collateral Agent will, at such Grantor's sole expense, execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such release. SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary notwithstanding (a) each Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, and shall perform all of its duties and obligations under such contracts and agreements, (b) the exercise by the Collateral Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under any such contracts or agreements included in the Collateral, and (c) neither the Collateral Agent nor any other Secured Party shall have any obligation or liability under any such contracts or agreements included in the Collateral by reason of this Security Agreement, nor shall the Collateral Agent or any other Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent and the security interests granted to the Collateral Agent hereunder, and all obligations of each Grantor hereunder, shall be absolute and unconditional, irrespective of -8- 9 (a) any lack of validity or enforceability of the Intercreditor Agreement, the Senior Secured Note Indenture, the Term Loan Agreement, any Term Loan Note, any Senior Secured Note, any Collateral Document or any other Loan Document; (b) the failure of any Secured Party (i) to assert any claim or demand or to enforce any right or remedy against the Borrower, any other Obligor or any other Person under the provisions of the Intercreditor Agreement, the Senior Secured Note Indenture, the Term Loan Agreement, any Term Loan Note, any Senior Secured Note, any Collateral Document or any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Secured Obligations; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations or any other extension, compromise or renewal of any Secured Obligations; (d) any reduction, limitation, impairment or termination of any Secured Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Grantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Secured Obligations or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of the Intercreditor Agreement, the Senior Secured Note Indenture, the Term Loan Agreement, any Term Loan Note, any Senior Secured Note, any Collateral Document, or any other Loan Document; (f) any addition, exchange, release, surrender or non-perfection of any collateral (including the Collateral), or any amendment to or waiver or release of or addition to or consent to departure from any guaranty, for any of the Secured Obligations; or (g) any other circumstances which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any other Obligor, any surety or any guarantor. SECTION 2.6. Postponement of Subrogation, etc. Each Grantor hereby agrees that it will not exercise any rights which it may acquire by reason of any payment made hereunder, whether by way of subrogation, reimbursement or otherwise, until the prior payment in full in -9- 10 cash of all Secured Obligations, the termination of all Term Loan Commitments and the termination of all obligations under the Intercreditor Agreement. Any amount paid to any Grantor on account of any payment made hereunder prior to the payment in full in cash of all Secured Obligations shall be held in trust for the benefit of the Secured Parties and shall immediately be paid to the Collateral Agent for the account of the Secured Parties and credited and applied against the Secured Obligations, whether matured or unmatured, in accordance with the terms of the Intercreditor Agreement; provided, however, that if (a) such Grantor has made payment to the Secured Parties of all or any part of the Secured Obligations, and (b) all Secured Obligations have been paid in full in cash, all Term Loan Commitments have been terminated and all obligations under the Intercreditor Agreement, each Secured Party agrees that, at the requesting Grantor's request, the Secured Parties will execute and deliver to such Grantor appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to such Grantor of an interest in the Secured Obligations resulting from such payment by such Grantor. In furtherance of the foregoing, for so long as any Secured Obligations, Term Loan Commitments or any obligations under either the Senior Secured Note Indenture or the Intercreditor Agreement remain outstanding, each Grantor shall refrain from taking any action or commencing any proceeding against the Borrower or any other Person (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in respect of payments made under this Security Agreement to any Secured Party. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. Representations and Warranties. Each Grantor represents and warrants to each Secured Party (a) as to all matters contained in Article VI of the Term Loan Agreement insofar as the representations and warranties contained therein are applicable to such Grantor and its properties, each such representation and warranty set forth in such Article (insofar as applicable as aforesaid) and all other terms of the Term Loan Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby incorporated into this Security Agreement by reference as though specifically set forth in this Section and (b) insofar as the representations and warranties contained herein are applicable to such Grantor and its properties, as set forth in this Section. SECTION 3.1.1. Location of Collateral, etc. All of the Equipment of such Grantor is located at the places specified in Item A of Schedule I hereto. None of the Equipment has, within -10- 11 the four months preceding the date of this Security Agreement, been located at any place other than the places specified in Item A of Schedule I hereto except as set forth in a footnote thereto. All of the lock boxes of the Grantor are located at the places specified in Item B of Schedule I hereto. The place(s) of business and chief executive office of such Grantor and the office(s) where such Grantor keeps its records concerning the Contracts, and all originals of all chattel paper which evidence Contracts, are located at the address set forth in Item C of Schedule I hereto. Such Grantor has no trade names other than those set forth in Item D of Schedule I hereto. During the four months preceding the date hereof, such Grantor has not been known by any legal name different from the one set forth on the signature page hereto, nor has such Grantor been the subject of any amalgamation, merger or other corporate reorganization, except as set forth in Item E of Schedule I hereto. All Contracts evidenced by a promissory note or other instrument, negotiable document or chattel paper have been duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent and delivered and pledged to the Collateral Agent pursuant to Section 4.1.7. Such Grantor is not a party to any Federal, state or local government contract except as set forth in Item F of Schedule I hereto. SECTION 3.1.2. Ownership, No Liens, etc. Such Grantor owns its Collateral free and clear of any Lien, security interest, charge or encumbrance except for the security interest created by this Security Agreement and except (a) as permitted under Section 7.2.2 of the Term Loan Agreement or (b) for any Permitted Liens (as defined in the Senior Secured Note Indenture). No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Collateral Agent relating to this Security Agreement or as have been filed in connection with Liens permitted pursuant to the Intercreditor Agreement. SECTION 3.1.3. Possession and Control. Such Grantor has exclusive possession and control (subject only to (a) Liens permitted under Section 7.2.2 of the Term Loan Agreement or (b) Permitted Liens (as defined in the Senior Secured Note Indenture) of its Equipment. SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. Subject to the proviso to clause (b) of Section 4.1.7, such Grantor has, contemporaneously herewith, delivered to the Collateral Agent possession of all originals of all negotiable documents, instruments and chattel paper currently owned or held by such Grantor (duly endorsed in blank, if requested by the Collateral Agent). SECTION 3.1.5. Intellectual Property Collateral. With respect to any Intellectual Property Collateral the loss, impairment or infringement of which might have a Material Adverse Effect: (a) such Intellectual Property Collateral is subsisting and has not been adjudged invalid or unenforceable, in whole or in part; -11- 12 (b) such Intellectual Property Collateral is valid and enforceable; (c) such Grantor has made all necessary filings and recordations to protect its interest in such Intellectual Property Collateral, including recordations of all of its interests in the Patent Collateral and Trademark Collateral in the United States Patent and Trademark Office and in corresponding offices throughout the world and its claims to the Copyright Collateral in the United States Copyright Office and in corresponding offices throughout the world; (d) such Grantor is the exclusive owner of the entire and unencumbered right, title and interest in and to such Intellectual Property Collateral and no claim has been made that the use of such Intellectual Property Collateral does or may violate the asserted rights of any third party; and (e) such Grantor has performed and will continue to perform all acts and has paid and will continue to pay all required fees and taxes to maintain each and every item of Intellectual Property Collateral in full force and effect throughout the world, as applicable. Such Grantor owns directly or is entitled to use by license or otherwise, all patents, Trademarks, Trade Secrets, copyrights, mask works, licenses, technology, know-how, processes and rights with respect to any of the foregoing used in, necessary for or of importance to the conduct of such Grantor's business. SECTION 3.1.6. Validity, etc. This Security Agreement creates a valid first priority security interest in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained or made and are in full force and effect, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (a) for the grant by such Grantor of the security interest granted hereby or for the execution, delivery and performance of this Security Agreement by such Grantor, or (b) for the perfection of or the exercise by the Collateral Agent of its rights and remedies hereunder. SECTION 3.1.8. Compliance with Laws. Such Grantor is in compliance with the requirements of all applicable laws (including the provisions of the Fair Labor Standards Act), rules, regulations and orders of every governmental authority, the non-compliance with which -12- 13 would be reasonably likely to have a Material Adverse Effect or materially adversely affect the value of the Collateral or the worth of the Collateral as collateral security. ARTICLE IV COVENANTS SECTION 4.1. Certain Covenants. Each Grantor covenants and agrees that, so long as any portion of the Secured Obligations shall remain unpaid, any Term Loan Lender shall have any outstanding Term Loan Commitment, or any obligations under the Intercreditor Agreement shall remain outstanding, such Grantor will, unless the Collateral Agent (with the consent of the Term Loan Lenders and the Holders as specified in the Intercreditor Agreement) shall otherwise consent in writing, perform, comply with and be bound by (a) all of the agreements, covenants and obligations contained in Article VII of the Term Loan Agreement and in Article Ten of the Senior Secured Note Indenture which are applicable to such Grantor or its properties, each such agreement, covenant and obligation contained in each such Article and all other terms of each of the Term Loan Agreement and the Senior Secured Note Indenture to which reference is made herein, together with all related definitions and ancillary provisions, being hereby incorporated into this Security Agreement by reference as though specifically set forth in this Section and (b) the obligations set forth in this Section. SECTION 4.1.1. As to Equipment. Such Grantor hereby agrees that it shall (a) keep all the Equipment at the places therefor specified in Section 3.1.1 or, upon 30 days' prior written notice to the Collateral Agent, at such other places in a jurisdiction where all representations and warranties set forth in Article III (including Section 3.1.6) shall be true and correct, and all action required pursuant to the first sentence of Section 4.1.7 shall have been taken with respect to the Equipment; (b) cause the Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with any manufacturer's manual; and forthwith, or in the case of any loss or damage to any of the Equipment, as quickly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements, and other improvements in connection therewith which are necessary or desirable to such end; and promptly furnish to the Collateral Agent a statement respecting any loss or damage to any of the Equipment; and (c) pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Equipment, except to the extent the validity thereof is -13- 14 being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside. SECTION 4.1.2. As to Contracts. (a) Such Grantor shall keep its place(s) of business and chief executive office and the office(s) where it keeps its records concerning the Contracts, and all originals of all chattel paper which evidences Contracts, located at the address(es) set forth in Item D of Schedule I hereto, or, upon 30 days' prior written notice to the Collateral Agent, at such other locations in a jurisdiction where all actions required by the first sentence of Section 4.1.7 shall have been taken with respect to the Contracts; not change its name except upon 30 days' prior written notice to the Collateral Agent; hold and preserve such records and chattel paper; and permit representatives of the Collateral Agent at any time during normal business hours to inspect and make abstracts from such records and chattel paper. (b) Upon written notice by the Collateral Agent to such Grantor pursuant to this Section 4.1.2(b), all proceeds of Collateral received by such Grantor shall be delivered in kind to the Collateral Agent for deposit to a deposit account (the "Collateral Account") of such Grantor maintained with the Collateral Agent, and such Grantor shall not commingle any such proceeds, and shall hold separate and apart from all other property, all such proceeds in express trust for the benefit of the Collateral Agent until delivery thereof is made to the Collateral Agent. The Collateral Agent will not give the notice referred to in the preceding sentence unless there shall have occurred and be continuing a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default. (c) The Collateral Agent shall have the right to apply any amount in the Collateral Account to the payment of any Secured Obligations which are due and payable or payable upon demand, or to the payment of any Secured Obligations at any time that an Event of Default shall exist. SECTION 4.1.3. As to Collateral. (a) Until the occurrence and continuance of a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, and such time as the Collateral Agent shall notify such Grantor of the revocation of such power and authority, such Grantor (i) may use and consume, in the ordinary course of its business (except as otherwise permitted under the Intercreditor Agreement), any raw materials, work in process or materials normally held by such Grantor for such purpose, (ii) will, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as the Collateral Agent may reasonably request following the occurrence of a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note -14- 15 Indenture or an Event of Default or, in the absence of such request, as such Grantor may deem advisable, and (iii) may grant, in the ordinary course of business (except as otherwise permitted under the Intercreditor Agreement), to any party obligated on any of the Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to such Collateral. The Collateral Agent, however, may, at any time following a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, whether before or after any revocation of such power and authority or the maturity of any of the Secured Obligations, notify any parties obligated on any of the Collateral to make payment to the Collateral Agent of any amounts due or to become due thereunder and enforce collection of any of the Collateral by suit or otherwise and surrender, release, or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of the Collateral Agent following a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, such Grantor will, at its own expense, notify any parties obligated on any of the Collateral to make payment to the Collateral Agent of any amounts due or to become due thereunder. (b) The Collateral Agent is authorized to endorse, in the name of such Grantor, any item, howsoever received by the Collateral Agent, representing any payment on or other proceeds of any of the Collateral. SECTION 4.1.4. As to Intellectual Property Collateral. Each Grantor covenants and agrees to comply with the following provisions as such provisions relate to any Intellectual Property Collateral of such Grantor that: (a) such Grantor shall not, unless such Grantor shall either (i) reasonably and in good faith determine (and notice of such determination shall have been delivered to the Collateral Agent) that any of the Patent Collateral is of negligible economic value to such Grantor, or (ii) have a valid business purpose to do otherwise, do any act, or omit to do any act, whereby any of the Patent Collateral may lapse or become abandoned or dedicated to the public or unenforceable except upon expiration at the end of the unrenewable term of registration thereof. (b) such Grantor shall not, and such Grantor shall not permit any of its licensees to, unless such Grantor shall either (i) reasonably and in good faith determine (and notice of such determination shall have been delivered to the Collateral Agent) that any of the Trademark Collateral is of negligible economic value to such Grantor, or (ii) have a valid business purpose to do otherwise, -15- 16 (i) fail to continue to use any of the Trademark Collateral in order to maintain all of the Trademark Collateral in full force free from any claim of abandonment for non-use, (ii) fail to maintain as in the past the quality of products and services offered under all of the Trademark Collateral, (iii) fail to employ all of the Trademark Collateral registered with any Federal or state or foreign authority with an appropriate notice of such registration, (iv) adopt or use any other Trademark for a period of sixty days which is confusingly similar or a colorable imitation of any of the Trademark Collateral unless such Trademark becomes a part of the Trademark Collateral, (v) use any of the Trademark Collateral registered with any Federal or state or foreign authority for a period of sixty days except for the uses for which registration or application for registration of all of the Trademark Collateral has been made unless a registration or application for registration for such use is made with such Federal or state or foreign authority, and (vi) do or permit any act or knowingly omit to do any act whereby any of the Trademark Collateral may lapse or become invalid or unenforceable. (c) such Grantor shall not, unless such Grantor shall either (i) reasonably and in good faith determine (and notice of such determination shall have been delivered to the Collateral Agent) that any of the Copyright Collateral or any of the Trade Secrets Collateral is of negligible economic value to such Grantor, or (ii) have a valid business purpose to do otherwise, do or permit any act or knowingly omit to do any act whereby any of the Copyright Collateral or any of the Trade Secrets Collateral may lapse or become invalid or unenforceable or placed in the public domain except upon expiration of the end of an unrenewable term of a registration thereof. (d) such Grantor shall notify the Collateral Agent immediately if it knows, or has reason to know, that any application or registration relating to any material item of the Intellectual Property Collateral may become abandoned or dedicated to the public or placed in the public domain or invalid or unenforceable, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States -16- 17 Copyright Office or any foreign counterpart thereof or any court) regarding such Grantor's ownership of any of the Intellectual Property Collateral, its right to register the same or to keep and maintain and enforce the same. (e) in no event shall such Grantor or any of its agents, employees, designees or licensees file an application for the registration of any Intellectual Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent, and upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent's security interest in such Intellectual Property Collateral and the goodwill and general intangibles of such Grantor relating thereto or represented thereby. (f) such Grantor shall take all necessary steps, including in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue any application (and to obtain the relevant registration) filed with respect to, and to maintain any registration of, the Intellectual Property Collateral, including the filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and the payment of fees and taxes (except to the extent that dedication, abandonment or invalidation is permitted under the foregoing clauses (a), (b) and (c)). (g) such Grantor shall, contemporaneously herewith, execute and deliver to the Collateral Agent a Patent Security Agreement, a Trademark Security Agreement and a Copyright Security Agreement in the forms of Exhibit A, Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver to the Collateral Agent any other document required to acknowledge or register or perfect the Collateral Agent's interest in any part of the Intellectual Property Collateral. SECTION 4.1.5. Insurance. Such Grantor will maintain or cause to be maintained with responsible insurance companies insurance with respect to its business and properties (including the Equipment) against such casualties and contingencies and of such types and in such amounts as is required pursuant to each of the Term Loan Agreement and the Senior Secured Note Indenture, and will, upon the request of the Collateral Agent, furnish a certificate of a reputable insurance broker setting forth the nature and extent of all insurance maintained by such Grantor in accordance with this Section. Without limiting the foregoing, such Grantor further agrees as follows: (a) Each policy for property insurance shall show the Collateral Agent as loss payee. -17- 18 (b) Each policy for liability insurance shall show the Collateral Agent as an additional insured. (c) Each insurance policy shall provide that at least 30 days' prior written notice of cancellation or of lapse shall be given to the Collateral Agent by the insured. (d) Such Grantor shall, if so requested by the Collateral Agent, deliver to the Collateral Agent a copy of each insurance policy. (e) All payments in respect of property insurance shall be deposited to the Collateral Account and if there shall be no Collateral Account shall be paid to such Grantor. SECTION 4.1.6. Transfers and Other Liens. Such Grantor shall not: (a) sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except as permitted by the Intercreditor Agreement; or (b) create or suffer to exist any Lien or other charge or encumbrance upon or with respect to any of the Collateral to secure Indebtedness of any Person or entity, except for the security interest created by this Security Agreement and except as permitted by the Intercreditor Agreement. SECTION 4.1.7. Further Assurances, etc. Such Grantor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Agent may request, in order to perfect, preserve and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, such Grantor will (a) mark conspicuously each chattel paper included in the Contracts and each Related Contract and, at the request of the Collateral Agent, each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that such document, chattel paper, Related Contract or Collateral is subject to the security interest granted hereby; (b) if any Contract shall be evidenced by a promissory note or other instrument, negotiable document or chattel paper, deliver and pledge to the Collateral Agent hereunder such promissory note, instrument, negotiable document or chattel paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent; provided, however, that unless there shall have occurred and be continuing a Default of the nature set forth in -18- 19 Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, (i) no such promissory note, instrument, negotiable document or chattel paper that has a fair market value less than $500,000, individually, or (ii) such promissory notes, instruments, negotiable documents or chattel paper that collectively have a fair market value in the aggregate less than $1,000,000, shall be required to be delivered unless otherwise required pursuant to the Term Loan Agreement, any other Loan Document (as such term is defined in the Term Loan Agreement), the Senior Secured Indenture or any other Collateral Document; (c) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices (including any assignment of claim form under or pursuant to the federal assignment of claims statute, 31 U.S.C. Section 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof), as may be necessary or desirable, or as the Collateral Agent may request, in order to perfect and preserve the security interests and other rights granted or purported to be granted to the Collateral Agent hereby; and (d) furnish to the Collateral Agent, from time to time at the Collateral Agent's request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail. With respect to the foregoing and the grant of the security interest hereunder, such Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor where permitted by law. A carbon, photographic or other reproduction of this Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. ARTICLE V THE COLLATERAL AGENT SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Collateral Agent such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Collateral Agent's discretion, following the occurrence and continuation of a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default -19- 20 of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, to take any action and to execute any instrument which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement, including: (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) above; (c) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Agent with respect to any of the Collateral; and (d) to perform the affirmative obligations of such Grantor hereunder (including all obligations of such Grantor pursuant to Section 4.1.7). Such Grantor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest. SECTION 5.2. Collateral Agent May Perform. If any Grantor fails to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by such Grantor pursuant to Section 6.2. SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in limitation of, Section 2.4, the powers conferred on the Collateral Agent hereunder are solely to protect its interest (on behalf of the Secured Parties) in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession; provided, however, the Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral, if it takes such action for that purpose as any Grantor reasonably requests in writing at times other than upon the occurrence and during the continuance of any Event of Default, but failure of the Collateral Agent to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care. -20- 21 ARTICLE VI REMEDIES SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred and be continuing: (a) The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and also may (i) require each Grantor to, and such Grantor hereby agrees that it will, at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent which is reasonably convenient to both parties, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' prior notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) All cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 6.2) in whole or in part by the Collateral Agent for the ratable benefit of the Secured Parties against, all or any part of the Secured Obligations in such order as the Collateral Agent shall elect. Any surplus of such cash or cash proceeds held by the Collateral Agent and remaining after payment in full in cash of all the Secured Obligations shall be paid over to the applicable Grantor or to whomsoever may be lawfully entitled to receive such surplus. -21- 22 SECTION 6.2. Indemnity and Expenses. (a) Each Grantor jointly and severally agrees to indemnify the Collateral Agent from and against any and all claims, losses and liabilities arising out of or resulting from this Security Agreement (including enforcement of this Security Agreement), except claims, losses or liabilities resulting from the Collateral Agent's gross negligence or wilful misconduct. (b) Each Grantor will upon demand pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Collateral Agent may incur in connection with (i) the administration of this Security Agreement, (ii) the custody, preservation, use or operation of, or, after the occurrence and during the continuance of an Event of Default, the sale of, collection from, or other realization upon, any of the Collateral, and (iii) the exercise or enforcement of any of the rights of the Collateral Agent or the Secured Parties hereunder, or (iv) the failure by any Grantor to perform or observe any of the provisions hereof. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.1. Collateral Document. This Security Agreement is a Collateral Document executed pursuant to the Intercreditor Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions of the Intercreditor Agreement. SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of this Security Agreement nor consent to any departure by any Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent (on behalf of the Secured Parties), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 7.3. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing or by facsimile and, if to any Grantor, addressed, delivered or transmitted to such Grantor in care of the Borrower at the address or facsimile number of the Borrower specified in the Intercreditor Agreement, if to the Collateral Agent, addressed, -22- 23 delivered or transmitted to it at the address or facsimile number of the Collateral Agent specified in the Intercreditor Agreement. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given which transmitted (and electronic confirmation of receipt thereof has been received). SECTION 7.4. Section Captions. Section captions used in this Security Agreement are for convenience of reference only, and shall not affect the construction of this Security Agreement. SECTION 7.5. Severability. Wherever possible each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Security Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Security Agreement. SECTION 7.6. Counterparts. This Security Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed an original and all of which shall constitute together but one and the same agreement. SECTION 7.7. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. -23- 24 IN WITNESS WHEREOF, each Grantor has caused this Security Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PCI CAROLINA, INC., a Delaware corporation By /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President PIONEER LICENSING, INC., a Delaware corporation By /s/ KENT R. STEPHENSON ---------------------------------- Name: Kent R. Stephenson Title: Vice President UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By /s/ PATRICIA STERMER ---------------------------------- Name: Patricia Stermer Title: Assistant Vice President EX-4.4 4 DEBENTURE (NEW BRUNSWICK) DATED 10/30/97 1 EXHIBIT 4.4 FORM A56 DEBENTURE STANDARD FORMS OF CONVEYANCES ACT, S.N.B. 1980, c. S-12.2, s.2 The parties to this debenture are: PCI CHEMICALS CANADA INC., of the City of Saint John, in the Province of New Brunswick, a body corporate, the "CORPORATION" and UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent, of New York, New York, U.S.A., a body corporate, the "LENDER" For value received, the corporation promises to pay on demand to or to the order of the lender the principal sum and interest as hereafter set out. PRINCIPAL SUM: U.S. Five Hundred Million Dollars (U.S. $500,000,000.00); INTEREST RATE: Twenty-Five per cent (25%) per annum; HOW INTEREST CALCULATED: Calculated daily, not in advance, both before and after maturity and default, commencing from the date hereof. PLACE OF PAYMENT: At such address, or addresses, as the lender may designate at any time and from time to time by notice in writing to the corporation; PAYMENTS ON PRINCIPAL SUM: On demand; PAYMENTS ON INTEREST: Payable in lawful money of the United States of America, on demand, both before and after maturity and default, with interest on overdue interest at the same rate; As security for the payment of all money payable hereunder and the performance of the covenants and conditions herein contained, the corporation grants, mortgages and charges, as applicable, to and in favour of the lender: (a) [intentionally deleted]; (b) [intentionally deleted]; (c) [intentionally deleted]; (d) [intentionally deleted]; (e) [intentionally deleted]; (f) in accordance with Schedule "F". 2 2 This debenture contains the covenants and conditions which are set out in: (a) [intentionally deleted]; (b) Schedule "C" attached hereto. DATED on October 30, 1997. IN WITNESS WHEREOF the corporation has executed this debenture. SIGNED, SEALED AND ) PCI CHEMICALS CANADA INC. DELIVERED ) in the presence of ) ) ) Per: /s/ DARRYL STEPHENSON ) ------------------------------ ) Authorized Signing Officer ) (c.s) ) 3 SCHEDULE "A" DESCRIPTION OF LANDS AND PREMISES This is Schedule "A" to a debenture between PCI CHEMICALS CANADA INC. as corporation, and UNITED STATES TRUST COMPANY OF NEW YORK, as lender, which debenture is dated October 30, 1997. - -------------------------------------------------------------------------------- FIRSTLY All that certain lot, piece or parcel of land situate in the Town of Dalhousie in the County of Restigouche, Province of New Brunswick, bounded and described as follows:- BEGINNING at a point on the Southerly shore of Restigouche Harbour, said point being located North thirty degrees forty-four minutes thirty seconds East (N30 degrees 44'30"E) a distance of ten (10) feet from a survey monument; Thence South thirty degrees forty-four minutes thirty seconds West (S30 degrees 44'30"W) a distance of one hundred ninety and seven tenths (190.7) feet to a survey monument, said survey monument being distant thirty-three (33) feet from the centre line of the Dalhousie Branch, Canadian National Railways; and being on the Northeasterly limits of the Dalhousie Branch of the Canadian National Railways; Thence Northwesterly along the Northeasterly limits of the Dalhousie Branch of the Canadian National Railways a distance of one hundred forty-seven and four tenths (147.4) feet to a point; Thence northeasterly a distance of seventeen (17) feet to a point, said point being distant fifty (50) feet from the centre line of the Dalhousie Branch of the Canadian National Railways; Thence Northwesterly and Westerly along the Northeasterly and Northerly limits of the Dalhousie Branch of the Canadian National Railways, a distance of two thousand seven hundred thirty-five and eight tenths (2735.8) feet to a survey monument, said survey monument being at the Southeast corner of property now in the possession of one Helen Wallace; Thence North eighteen degrees East (N18 degrees E) along the Helen Wallace Easterly property line a distance of four hundred (400) feet to the shore of Restigouche Harbour; Thence Northeasterly, Easterly, Southeasterly and Southerly along the shore of Restigouche Harbour to the Point of beginning. Comprising: (a) the part of the land sold by the P.Q. Lumber Company to Canadian International Paper Company by deed dated March 23, 1927, and registered in the Registry Office for the County of Restigouche as No. 23892 in Book 03, pages 194 to 200, and subsequently sold by Canadian International Paper Company to New Brunswick International Paper Company by deed dated January 8, 1931, and registered in the Registry Office for the County of Restigouche as No. 27099 in Book No. Y3, pages 46 to 48, described in the above mentioned deed in paragraph one, and (b) part of the land sold by Dalhousie Lumber Company Limited to New Brunswick International Paper Company by deed dated October 15, 1928, and registered in the Registry Office for the County of Restigouche as No. 25868 in Book U-3, pages 360 to 371 and described in sub-paragraph two of paragraph 19 in Schedule "A" thereto. The whole as shown outlined in red on the plan sheets 1 and 2 of Plan A-1019 prepared by Alan C. Crandall and Associates dated 25th October, 1961, attached as Appendix A1 and A2 to a Deed dated 24th April, 1963, by New Brunswick International Paper Company to the Grantor and registered in the Registry Office for the County of Restigouche as No. 59950 in Book W6 pages 211 to 213. SUBJECT HOWEVER to the rights, privileges and easements reserved by New Brunswick International Paper Company for itself and its successors and assigns and which are appurtenant to the lands hereby conveyed under the provisions of the Deed hereinabove mentioned and registered in the Registry Office for the County of Restigouche as No. 59950 in Book W6, pages 211 to 213. SUBJECT ALSO to an easement for an electric power transmission line granted to The New Brunswick Electric Power Commission by agreement dated 3rd July, 1963. The parcel of land hereinabove described was 4 2 conveyed to Canadian Industries Limited by Deed recorded in the office of the Registrar of Deeds in and for the County of Restigouche under No. 59950, Book W-6. SECONDLY ALL AND SINGULAR that certain lot, piece or parcel of land situate, lying and being in the Town of Dalhousie, County of Restigouche and Province of New Brunswick, being more particularly bounded and described as follows:- "BEGINNING at the intersection of the Westerly side line of the Roman Catholic Cemetery, said Westerly side line also being the Westerly side line of Lot No. 775, as shown on the Dalhousie Land Co. Ltd. Plan duly recorded in the Record Office for the County of Restigouche, with the Northerly side line of Victoria Street (so-called); thence North sixty-one degrees thirty minutes thirty-seven seconds West (N 61 degrees 30' 37" W) along the Northerly side line of Victoria Street a distance of five hundred eighty-nine and five tenths (589.5) feet to the point of curvature of a curve or radius of one thousand two hundred fifty-eight and ninety-five hundredths (1258.95) feet; thence Westerly along the arc of the above mentioned curve of radius of one thousand two hundred fifty-eight and ninety-five hundredths (1258.95) feet a distance of three hundred sixty-seven and six hundredths (367.06) feet to the point of curvature of the aforesaid curve; thence North seventy-eight degrees twelve minutes fifty-six seconds west (N78 degrees 12' 56" W) continuing along the Northerly limits of Victoria Street a distance of three hundred seventy-five and two tenths (375.2) feet to the point of curvature of a curve of radius of one thousand five hundred thirty-four and fifty-eight hundredths (1534.58) feet; thence Westerly along the arc of the above mentioned curve of radius of one thousand five hundred thirty-four and fifty-eight hundredths (1534.58) feet, a distance of three hundred eighty-nine and fifty-three hundredths (389.53) feet to the point of curvature of the aforesaid curve; thence North sixty-three degrees forty minutes eighteen seconds West (N 63 degrees 40' 18" W) continuing along the Northerly limits of Victoria Street, a distance of fifty-eight and six hundred seventy-six thousandths (58.676) feet to an iron pipe, said iron pipe being the Southeast corner of the property now in the possession of one David Poirier; thence North twenty-seven degrees three minutes fifty-one seconds East (N 27 degrees 03' 51" E) along the Easterly side line of the property of aforesaid David Poirier, and property now in the possession of E.D.A. Motels Ltd., a distance of one hundred thirty-four (134) feet to an iron pipe, said iron pipe being on the Southerly limits of the Dalhousie Branch of the Canadian National Railway; thence South seventy-one degrees East (S 71 degrees E) along the Southerly limits of the Dalhousie branch of the Canadian National Railway, a distance of one thousand three hundred twenty-six and nine tenths (1326.9) feet to a point, said point being the point of change of width of the Dalhousie Branch of the Canadian National Railway; thence South nineteen degrees West (S 19 degrees W) a distance of one hundred and ten (110) feet to a point; thence South seventy-one degrees East (S 71 degrees E) along the Southerly limits of the Dalhousie Branch of the Canadian National Railway a distance of three hundred (300) feet to a point, said point being the point of change of width of the Dalhousie Branch of the Canadian National Railway; thence North nineteen degrees East (N 19 degrees E) a distance of one hundred and ten (110) feet to a point; thence South seventy-one degrees East (S 71 degrees E) along the Southerly limits of the Dalhousie Branch of the Canadian National Railway, a distance of fifty and two tenths (50.2) feet to the point of curvature of a curve of irregular radius; thence South sixty-eight degrees eighteen minutes thirty seconds East (S 68 degrees 18' 30" E) along the chord of an arc of the aforesaid curve of irregular radius, a distance of one hundred and seventy-two hundredths (100.72) feet to a survey marker, said survey marker being the Northwest corner of the Roman Catholic Cemetery property; thence South twenty-seven degrees fifty-seven minutes thirty-two seconds West (S 27 degrees 58' 32" W) along the Westerly sideline of the Roman Catholic Cemetery property, a distance of one hundred ninety-five and five tenths (195.5) feet to a survey marker, said survey marker being 5 3 the point of beginning. The whole of the above described property containing three and fifty-six hundredths (3.56) acres." SAVE AND EXCEPTING from the above described property an area of 3,600 square feet of land sold to and occupied by the New Brunswick Electric Power Commission by Deed dated 3rd July, 1963. The lands above described are composed of parcels conveyed to Canadian Industries Limited by Deeds recorded in the office of the Registrar of Deeds in and for the County of Restigouche under Nos. 59,000, 59,333, 59,330 59,336 and 59,337 respectively. Subject, however, to an easement for an electric power transmission line granted to The New Brunswick Electric Power Commission by agreement dated July 3, 1963. Subject also to a right-of-way to and from the above described property conveyed to The New Brunswick Electric Power Commission as described in Deed No. 60793. THIRDLY ALL AND SINGULAR that certain lot, piece or parcel of land and premises, situate, lying and being in the Town of Dalhousie in the County of Restigouche and Province of New Brunswick, more particularly bounded and described as follows: BEGINNING at a point in the southerly sideline of Victoria Street where the westerly sideline of the eastern half of Grant Number 80 intersects the same; thence southerly along the said grant line to a point 200 feet distant from the said southerly sideline of Victoria Street, being measured at right angles to Victoria Street; thence by the magnet of the year 1962, being parallel to and 200 feet southerly from the said Victoria Street southerly sideline, a scaled distance of 53.5 feet; thence N 69 degrees 08' W, being parallel to and 200 feet southerly from the said Victoria Street southerly sideline, a distance of 338.5 feet; thence N 71 degrees 08'W, being parallel to and 200 feet southerly from the said southerly sideline of Victoria Street, a distance of 93.8 feet; thence N 71 degrees 46'W, being parallel to and 200 feet southerly from the said southerly sideline of Victoria street, a distance of 57.7 feet; thence at right angles N 18 degrees 14'E, a distance of 200 feet to the said southerly sideline of Victoria Street; thence at right angles S 71 degrees 46'E, being along the said Victoria Street sideline, a distance of 60.5 feet; thence S 71 degrees 08'E, being along the said Victoria Street sideline, a distance of 98.3 feet; thence S 69 degrees 08'E, also being along the said Victoria Street sideline, a scaled distance of 325.7 feet to the place of beginning. CONTAINING 2.36 acres more or less. The same being shown on a Plan of survey dated the 21st day of September, A.D., 1962, prepared by F.C. Woods, N.B.L.S., and filed in the Office of the Registrar of Deeds in and for the County of Restigouche as Plan No. 851, and being the lands conveyed to Canadian Industries Limited by Deed recorded in the office of the Registrar of Deeds in and for the County of Restigouche under No. 59751, Book W-6. FOURTHLY ALL AND SINGULAR that certain lot, piece or parcel of land situate, lying and being in the Town of Dalhousie, County of Restigouche and Province of New Brunswick, being more particularly bounded and described as follows:- "BEGINNING at a point in the westerly sideline of Grant Number 3 granted to Perry Scott, said point being 50.7 feet, measured along the said grant line S 17 degrees 26'W, by the magnet of the year 1962, from the southerly sideline of Victoria Street or from the northwesterly corner of Lot Number 700 of the Montgomery Subdivision; thence continuing along the said Grant line S 17 degrees 26W, a distance of 152.1 feet; thence N 63 degrees 04'W, being parallel to and 200 feet southerly from the said Victoria Street sideline, a distance of 709.3 feet; thence N 79 degrees 45'W, being parallel to and 200 feet southerly from the said Victoria Street southerly sideline, a 6 4 distance of 734.9 feet; thence N 66 degrees 00'W, being parallel to and 200 feet southerly from the said Victoria Street southerly sideline, a scaled distance of 380.0 feet or to the easterly sideline of the westerly half of Grant Number 80, said point being 200 feet distant from the said southerly sideline of Victoria Street and being measured at right angles to the said Victoria Street southerly sideline; thence in a northerly direction, being along the said easterly sideline of the westerly half of Grant number 80 to the said Victoria Street southerly sideline; thence S 69 degrees 08'E, a scaled distance of 20.0 feet, thence S 66 degrees 00'E, a distance of 415.0 feet also along the said Victoria Street sideline; being along the said Victoria Street sideline; thence S 79 degrees 45'E, continuing along the said Victoria Street Sideline, a distance of 740.2 feet; thence S 63 degrees 04'E and continuing along the said Victoria Street sideline, a distance of 630.0 feet or to the northwesterly corner of the lot of land now owned by Charles Sabean; thence S 17 degrees 26'W being along the westerly sideline of the said Charles Sabean property or to the rear of the same, a distance of 50.7 feet; thence S 63 degrees 04'E, being along the southerly sideline of the said Sabean property, a distance of 75 feet to the place of beginning. CONTAINING 8.80 acres more or less. EXCEPTING therefrom a roadway as a right-of-way twenty (20) feet wide extending from the southerly sideline of Victoria Street the centerline being ninety feet N 63 degrees 04'W, measured along the said highway sideline from the northwesterly corner of the lot now belonging to Charles Sabean, this right-of-way containing 0.15 acres more or less. Subject, however, to an easement for an electric power transmission line granted to Saint John River Power Company by agreement dated July 4, 1929. Subject also to two easements for an electric power transmission line granted to The New Brunswick Electric Power Commission by agreements dated December 2, 1962 and March 16, 1963. Subject also to an easement for one anchor with guys attached granted to The New Brunswick Telephone Company, Ltd. by agreement dated May 6, 1952. The lands above described are composed of parcels conveyed to Canadian Industries Limited by Deeds registered in the office of the Registrar of Deeds in and for the County of Restigouche as No. 59750 and 60079. The same being shown on a Plan of Survey dated 21st September A.D., 1962, prepared by F.C. Woods, N.B.L.S. and filed in the office of the Registrar of Deeds in and for the County of Restigouche as Plan No. 851. FIFTHLY ALL that certain lot, piece or parcel of land and premises situate, lying and being in the Town of Dalhousie, in the County of Restigouche and Province of New Brunswick, bounded and described as follows: "BOUNDED on the North by the Restigouche River, on the East by property of New Brunswick International Paper Company (old P. Q. Mill property), on the South by the Canadian National Railway right-of-way and on the West by the Alexander Cook Estate property." Being part and parcel of those lands and premises conveyed to James Wallace by Indenture of Deed dated the 4th day of April 1953, and duly registered in the Restigouche County Registry Office on the 7th day of April 1953, in Book 0-5, at page 546 and bearing official number 45593. Being same lands and premises conveyed to THE TRUSTEES OF THE ST. JOHN PRESBYTERIAN CHURCH by Helen M. Wallace, by Deed dated the 8th day of June 1989, and duly registered in the Restigouche County Registry Office on the 9th day of June 1989, in Book 484, at page 456, as document number 144765. 7 5 SIXTHLY ALL AND SINGULAR that certain lot, piece or parcel of land and premises, situate, lying and being in the Parish of Dalhousie, County of Restigouche and Province of New Brunswick, more particularly bounded and described as follows to wit: Beginning at a point on the east side of the Blair Malcolm Road said point of beginning being situate at the point of intersection of the Southern boundary of a certain service access road (situate at the Northern limit of Lot A and B in Block 50, Parish of Dalhousie) with the division line between Lot A and B aforementioned; thence running in a southerly direction following the division line between Lot A and B presently marked by distinct blazes on trees and the remains of an old rail fence, one thousand six hundred and ninety-seven (1697) feet to a point; thence turning approximately eighty-nine (89) degrees east and running in an Easterly direction five hundred and thirty (530) feet more or less to a point on the Eastern boundary of the Grantor's property; thence turning at about right angles and running in a Northerly direction following the Eastern boundary of the Grantors property marked by the remains of an old wire fence one thousand six hundred and ninety-seven (1697) feet more or less to the Southern boundary of the aforementioned service access road; thence turning and running in a Westerly direction following the southern boundary of the access road four hundred and ninety-seven (497) feet more or less to a point being the point at the place of beginning. The entire lot herein described containing twenty (20) acres more or less and being part of a lot of land conveyed to the Grantor herein by his brother Octave Phillippe by deed dated April 15, 1943, registered April 15, 1943 as number 34124 in Book P - - 4 at pages 291 - 292 of the records in and for the County of Restigouche. Reserving, however, to Lazarre Phillippe and May Phillippe, their heirs and assigns a right-of-way approximately fifteen (15) feet in width situate immediately East of the division line between the Western half of lot 'B' in Block 50, Parish of Dalhousie and lot 'A' also in Block 50, Parish of Dalhousie which right-of-way shall lead from the aforementioned access road to the rear of the Grantor's lot. 8 SCHEDULE "C" COVENANTS AND CONDITIONS This is Schedule "C" to a debenture between PCI CHEMICALS CANADA INC. as corporation, and UNITED STATES TRUST COMPANY OF NEW YORK, as lender, which debenture is dated October 30, 1997. - -------------------------------------------------------------------------------- In consideration of the foregoing and the sum of One Dollar ($1.00) now paid to the corporation by the lender (receipt and sufficiency whereof is hereby acknowledged), and to secure the due payment of the principal sum and interest and all monies from time to time owing upon the security of this debenture and the performance of the obligations of the corporation herein contained, the corporation covenants and agrees with the lender, and represents and warrants to the lender, as hereinbefore and hereinafter set forth. DEFINITIONS 1. "ACM" has the meaning ascribed thereto in paragraph 12(x). "ADDITIONAL UNDERTAKING" means (i) cash or cash equivalents or (ii) a Surety Bond, an Additional Undertaking Guarantee or an Additional Undertaking Letter of Credit which is provided by a Person, whose long-term unsecured debt is rated at least "AA" (or equivalent) by a nationally recognized statistical rating agency and is otherwise satisfactory to the lender; Additional Undertakings are addressed directly to the lender and name the lender as the beneficiary thereof and the party entitled to make claims thereunder. "ADDITIONAL UNDERTAKING GUARANTEE" means the unconditional guarantee of payment of any corporation or partnership organized and existing under the laws of the United States of America or any State or the District of Columbia or Canada or province thereof that has a long-term unsecured debt rating satisfactory to the lender at the time such guarantee is delivered, given to the lender, accompanied by an opinion of counsel to such guarantor to the effect that such guarantee has been duly authorized, executed and delivered by such guarantor and constitutes the legal, valid and binding obligation of such guarantor enforceable against such guarantor by the lender in accordance with its terms, subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such guarantee will be given, such guarantee and accompanying opinion are responsive to the requirements of this Debenture. "ADDITIONAL UNDERTAKING LETTER OF CREDIT" means a clean, irrevocable, unconditional letter of credit in favour of the lender and entitling the lender to draw thereon in the City of New York issued by a bank satisfactory to the lender, accompanied by an opinion of counsel to such bank to the effect that such letter of credit has been duly authorized, executed and delivered by such bank and constitutes the legal, valid and binding obligation of such bank enforceable against such bank by the lender in accordance with its terms subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such letter of credit will be given, such letter of credit and accompanying opinion are responsive to the requirements of this Debenture. "ADMINISTRATIVE AGENT" means Bank of America National Trust and Savings Association, as administrative agent, together with any successors thereto in such capacity. 9 2 "ALTERATION" has the meaning ascribed thereto in paragraph 12(v). "ARCHITECT'S CERTIFICATE" has the meaning ascribed thereto in paragraph 12(u)(iv)(cc). "BUILDINGS" means all of the right, title and interest which the corporation has from time to time in and to (i) any and all present and future structures and works of a permanent nature located, from time to time in, on or upon the Real Property, including, without limitation, all buildings, structures, facilities, accessories, appurtenances and other improvements (including present and future parking areas) located from time to time in, on or upon the Real Property, and (ii) any and all alterations, reconstructions, additions or expansions to and all repairs or replacements of any such property during the term of this Debenture. "BUSINESS DAY" means any day, other than a Saturday or a Sunday, and any day on which banks situated in the Province of New Brunswick are authorized or obligated to be closed. "CLOSING DATE" has the meaning ascribed thereto in the Purchase Agreement. "COLLATERAL" has the meaning ascribed thereto in subparagraph (c) of Schedule "F". "COLLATERAL ACCOUNT" has the meaning ascribed thereto in the Intercreditor Agreement. "COLLATERAL PROCEEDS" has the meaning ascribed thereto in the Indenture. "CONTRACTS" has the meaning ascribed thereto in subparagraph (b) of Schedule "F". "CORPORATION" means PCI Chemicals Canada Inc./Produits Chimiques PCI Canada Inc. and its successors and assigns. "DESTRUCTION" has the meaning ascribed thereto in paragraph 12(u)(i). "EXCLUDED ASSETS" means (a) the inventory of the corporation, including goods held for sale or lease, goods furnished or to be furnished to third parties under contracts of lease, consignment or service, goods which are raw materials or work in process, goods used in or procured for packing and materials used or consumed in the business of the corporation, (b) accounts due or accruing due and all records entered or recorded by any system of mechanical or electronic data processing or any other information storage device, agreements, books, accounts, invoices, letters, documents and papers recording evidencing or relating thereto, and (c) all contracts, contract rights, chattel paper, documents, instruments and general intangibles arising from or relating to any of the foregoing. "ENVIRONMENT" means all components of the earth, including, without limitation, air (and all layers of the atmosphere), land (and all surface and subsurface soil, underground spaces and cavities and all land submerged under water) and water (and all surface and underground water), organic and inorganic matter and living organisms, and the interacting natural systems that include components referred to above in this definition of "Environment". "ENVIRONMENTAL LAWS" means all applicable Laws relating to the Environment, Hazardous Substances, pollution or protection of the Environment, including Laws relating to: (i) on site or off-site contamination; (ii) chemical substances or products; (iii) Releases of pollutants, contaminants, chemicals or other industrial, toxic or radioactive substances or Hazardous Substances into the Environment; and (iv) the manufacture, processing, distribution, use, treatment, storage, transport, packaging, labelling, sale, recycling, disposal, destruction, 10 3 incineration, burial, advertising, display or handling of Hazardous Substances. "EQUIPMENT" has the meaning ascribed thereto in subparagraph (c)(ii) of Schedule "F". "EVENT OF DEFAULT" has the meaning ascribed thereto in paragraph 13. "GOVERNMENTAL ENTITY" means any: (i) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, commission, board, bureau, agency or instrumentality, domestic or foreign; (ii) any subdivision, agent, commission, board, or authority of any of the foregoing; or (iii) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing. "GOVERNMENTAL REQUIREMENT" means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, including, without limitation, Environmental Laws, energy regulations and occupational safety and health standards or controls, of any Governmental Entity; "HAZARDOUS SUBSTANCE" means any Substance which is or is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a contaminant or a source of pollution or contamination under any applicable Environmental Laws. "INDENTURE" means that certain Indenture, dated the date hereof, among the corporation, Pioneer Americas Acquisition Corp. and the other Guarantors named therein, and the Trustee. "INSURANCE PROCEEDS" has the meaning ascribed thereto in paragraph 12(u)(i). "INTERCREDITOR AGREEMENT" means that certain Intercreditor and Collateral Agency Agreement, dated the date hereof, among the corporation, the Trustee, the Administrative Agent and the lender. "LAWS" means all statutes, codes, ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, policies, guidelines, or any provisions of the foregoing, including general principles of common and civil law and equity, binding on or affecting the Person referred to in the context in which such word is used; and "LAW" means any one of such Laws. "LEASES" means all of the right, title and interest which the corporation has from time to time in and to any and all present and future leases, offers to lease and other agreements to lease of the whole or any part of the Real Property, Leasehold Property or Buildings and any and all present or future agreements and licences whereby the corporation gives any other Person the right to use or occupy the whole or any part of the Real Property or Buildings, in each case for the time being in effect, and all revisions, alterations, modifications, amendments, extensions, renewals, replacements or substitutions thereof or therefor which may hereafter be effected or entered into but does not include registered servitudes, rights of superficies, or rights in the nature of a servitude, or a right of superficies. "LEASEHOLD PROPERTY" has the meaning ascribed thereto in subparagraph (b) of Schedule "F". 11 4 "LEASEHOLD PROPERTY CONTRACTS" has the meaning ascribed thereto in subparagraph (b) of Schedule "F". "LENDER" means United States Trust Company of New York, as collateral agent, together with any successors thereto in such capacity. "LENDERS" means the various financial institutions as are, or may from time to time become, parties to the Term Loan Agreement. "LICENSES" has the meaning ascribed thereto in subparagraph (a) of Schedule "F". "LIEN" means, with respect to any property of any Person, any charge, mortgage, prior claims, pledge, hypothec, security interest, security under the Bank Act (Canada), lien, conditional sales (or other title retention agreement or lease in the nature hereof, lease (where such Person is the lessee of such property), servitudes, assignment, adverse claims, defect of title, restriction, trust, right of set-off or other encumbrance of any kind in respect of such property, whether or not filed, recorded or otherwise perfected under applicable law. "MATERIAL ADVERSE EFFECT" means, as to any Person, asset or property, a material adverse effect on the business, assets, properties, condition (financial or other), operations or results of operations of such Person, asset or property, which effect is not adequately and effectively insured or indemnified against by a financially sound insurance company, and excepting effects arising solely out of general national economic conditions and/or effects arising solely out of matters affecting the industry in which such Person, asset or property conducts business as a whole. "MONEY" OR "MONEYS" means those certain proceeds set forth in paragraphs 12 (u)(i) and 12(u)(ii). "NEGOTIABLE COLLATERAL" has the meaning ascribed thereto in clause (c)(v) of Schedule "F". "NET AWARD" has the meaning ascribed thereto in paragraph 12(u)(ii). "NOTEHOLDERS" means the holders of Notes issued pursuant to the Indenture. "NOTES" means notes issued by the corporation pursuant to the Indenture. "OBLIGATIONS" has the meaning ascribed thereto in paragraph 8 of this Schedule "C". "PAI" means Pioneer Americas, Inc. "PAAC" means Pioneer Americas Acquisition Corp. "PPSA" means the Personal Property Security Act (New Brunswick). "PERMITTED LIENS" has the meaning ascribed thereto in the Term Loan Agreement. "PERSON" or "PERSONS" means a corporation, a legal person, a legal entity, an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a government agency. 12 5 "PLANT" or "PLANTS" means the Real Property and the Buildings, collectively. "PLANS AND SPECIFICATIONS" has the meaning ascribed thereto in paragraph 12(u)(iv)(aa). "PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as of the 22nd day of September, 1997 between the corporation, ICI Canada Inc., PCI Carolina Inc., Pioneer Companies Inc., ICI Americas Inc. and Imperial Chemical Industries PLC, as same may be amended from time to time. "RATE OF INTEREST" means the rate of interest of twenty-five percent (25%) per annum. "REAL PROPERTY" has the meaning ascribed thereto in subparagraph (a) of Schedule "F". "REAL PROPERTY CONTRACTS" has the meaning ascribed thereto in subparagraph (a) of Schedule "F". "RECEIVER" means any of a receiver, manager, receiver-manager and receiver and manager. "RELEASE" when used as a verb includes, spill, leak, emit, deposit, discharge, leach, migrate, dump, issue, empty place, seep, exhaust, abandon, bury, incinerate or dispose into the Environment and "RELEASE" when used as a noun has a correlative meaning. "RENTS" means all the right, title and interest the corporation has from time to time in and to (i) any and all rent, income, revenues and profits and other amounts payable or derived from the Leases or securing obligations thereunder; and (ii) any and all indemnities and insurance proceeds received, which may be received or to which the corporation is or may become entitled in connection with the Rents. "RESTORATION" has the meaning ascribed thereto in paragraph 12(u)(iii). "RESTORATION ELECTION NOTICE" has the meaning ascribed thereto in paragraph 12(u)(iii). "SECURITY INTEREST" has the meaning ascribed thereto in paragraph 8 of this Schedule "C". "SUBSTANCE" means any substance, waste, liquid, gaseous or solid matter, fuel, micro-organism, sound, vibration, ray, heat, odour, radiation, energy vector, plasma and organic or inorganic matter. "SURETY BOND" means a clean irrevocable surety bond or credit insurance policy in favour of the lender issued by an insurance company the claims paying ability rating of which at the time such surety bond or credit insurance policy is delivered is satisfactory to the lender accompanied by an opinion of counsel to such insurance company to the effect that such surety bond or credit insurance policy has been duly authorized, executed and delivered by such insurance company and constitutes the legal, valid and binding obligation of such insurance company enforceable against such insurance company by the lender in accordance with its terms subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such surety bond will be given, such surety bond and accompanying opinions are responsive to the requirements of this Debenture. "TAKING" has the meaning ascribed thereto in paragraph 12(u)(ii). 13 6 "TERM LOAN AGREEMENT" means the term loan agreement, dated as of October 30, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time) among Pioneer Americas, Inc., Pioneer Americas Acquisition Corp., as the parent guarantor, the Lenders, the Administrative Agent, DLJ Capital Funding, Inc., as the Syndication Agent for the Lenders and Salomon Brothers Holding Company Inc., as the Documentation Agent for the Lenders. "TRUSTEE" means United States Trust Company of New York, together with any successor(s) thereto in such capacity pursuant to the Indenture. PPSA DEFINITIONS 2. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the PPSA are used in this Debenture, including its preamble and recitals, with such meanings. INTERPRETATION 3. This Debenture shall be interpreted in accordance with the following: (a) words denoting the singular include the plural and vice versa and words denoting any gender include all genders; (b) the division of this Debenture into schedules, paragraphs and clauses and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Debenture; and (c) the word "including" shall mean "including without limitation" and "includes" shall mean "includes without limitation". SEVERABILITY 4. If any provision of this Debenture is or becomes illegal, invalid or unenforceable, such provision shall be severed from this Debenture and be ineffective to the extent of such illegality, invalidity or unenforceability. The remaining provisions hereof shall be unaffected by such provision and shall continue to be valid and enforceable. STATUTES, ETC. 5. Unless otherwise specified herein all references to statutes or regulations are to be treated as references to the same as amended, consolidated, revised or re-enacted from time to time, or to any successor or replacement statutes or regulations. GOVERNING LAW 6. This Debenture shall be governed by, and interpreted in accordance with, the Laws of the Province of New Brunswick and the Laws of Canada applicable therein, without giving effect to any conflicts of laws rules thereof. The Corporation hereby irrevocably attorns and submits to the non-exclusive jurisdiction of the courts of New Brunswick with respect to any matter arising under or related to this Debenture. 14 7 SCHEDULES 7. The following schedule attached hereto shall, for all purposes hereof, be incorporated in and form an integral part of this Debenture: Schedule "A" Real Property OBLIGATIONS SECURED 8. (a) The mortgages, hypothecs, charges, subleases, pledges, transfers, assignments and security interests granted hereby (collectively, the "Security Interest") secure payment to the lender, the Trustee, the Noteholders, the Administrative Agent, the Lenders or any of them of the principal amount hereof, interest thereon and all debts, liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or not and all other amounts from time to time owing hereunder pursuant hereto or arising from dealings between the lender, the Trustee, the Noteholders, the Administrative Agent, the Lenders or any of them and the corporation or from any other dealings or proceedings by which the lender, the Trustee, the Noteholders, the Administrative Agent, the Lenders or any of them may be or become in any manner whatever a creditor of the corporation and wherever incurred and performance and satisfaction by the corporation of all its obligations hereunder and thereunder (collectively, and together with the expenses, costs and charges set out in subparagraph 8(b) of this Schedule "C", the "Obligations"). (b) All expenses, costs and charges incurred by or on behalf of the lender, the Trustee, the Noteholders, the Administrative Agent or the Lenders, or any of them, in connection with this Debenture, the Security Interest or the realization of the Collateral including, after the occurrence and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be), all legal fees, court costs, Receiver's remuneration and other expenses of taking possession of, repairing, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral shall be added to and form a part of the Obligations. ATTACHMENT 9. (a) The corporation hereby acknowledges and agrees that: (i) value has been given; (ii) the corporation has rights in the Collateral (other than Collateral acquired after the date hereof); and (iii) the corporation has not agreed with any of the lender, the Trustee, the Noteholders, the Administrative Agent or the Lenders to postpone the time for attachment of the Security Interest which shall attach upon the execution of this Debenture and, in the case of Collateral acquired after the date hereof, when the corporation has rights therein. (b) The corporation hereby agrees to execute and deliver at its own cost and expense from time to time amendments to this Debenture or the schedules hereto or additional security or schedules as may be required by the lender in order that the Security Interest shall attach to any personal property subsequently acquired by the corporation or not adequately described herein. 15 8 SCOPE OF SECURITY INTEREST 10. (a) To the extent that the creation of the Security Interest would constitute a breach or permit the acceleration of any agreement, lease, right, license or permit to which the corporation is a party, the Security Interest shall not attach thereto but the corporation shall hold its interest therein in trust for the lender and shall assign such agreement, right, license or permit to the lender or as the lender may direct, forthwith upon obtaining the consent of the other party thereto and the corporation hereby agrees that it shall, upon the request of the lender, use its best efforts to obtain any consent required to permit any such agreement, lease, right, license or permit to be subject to the Security Interest. (b) The Security Interest shall not extend or apply to the last day of any term reserved by any lease, verbal or written, or any agreement therefor, now held or hereafter acquired by the corporation, but the corporation shall stand possessed of any such reversion in trust to assign and dispose thereof as the lender may direct. (c) Neither the lender, the Trustee, the Noteholders, the Administrative Agent nor the Lenders will be deemed in any manner to have assumed any obligation of the corporation under any of the Licenses or Contracts nor shall the lender, the Trustee, the Noteholders, the Administrative Agent or the Lenders be liable to any Governmental Entity by reason of any default by any Person under the Licenses or Contracts. The corporation agrees to indemnify and hold each of the lender, the Trustee, the Noteholders, the Administrative Agent and the Lenders harmless of and from any and all liability, loss or damage which such persons incur by reason of any claim or demand against it based on its alleged assumption of the corporation's duty and obligation to perform and discharge the terms, covenants and agreements in the Licenses and Contracts. (d) The Security Interest shall not extend or apply to Excluded Assets. CORPORATION'S DEALINGS WITH COLLATERAL 11. Except as permitted by the Term Loan Agreement and the Indenture, the corporation shall not: (a) sell, exchange, lease, release or abandon or otherwise dispose of or otherwise deal with the Collateral; or (b) move or transfer the Collateral or any part thereof to a location other than those specified in Schedule "A" or, upon 30 days notice to the lender, to any location owned or leased by a subsidiary of the corporation or PAI. REPRESENTATIONS AND COVENANTS OF THE CORPORATION 12. The corporation hereby represents and covenants to the lender that: (a) CORPORATE POWER AND AUTHORITY. The corporation has the full corporate power and authority to enter into this Debenture and to grant the Security Interest without obtaining the waiver, consent or approval of any lessor, sublessor, Governmental Entity or entity or other party whomsoever and whatsoever which has not been obtained except in the case of certain environmental permits and approvals which, by their terms, are not transferable or cannot be transferred without the prior approval of the issuing agency. 16 9 (b) EXECUTION AND DELIVERY. The execution and delivery of this Debenture have been duly authorized by all necessary corporate action. (c) BINDING OBLIGATION. This Debenture, when duly executed and delivered, will be a legal, valid and binding obligation of the corporation enforceable against it in accordance with its terms; provided that such enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors' rights generally. (d) GOOD TITLE. The corporation has good and marketable title to the Collateral. The Buildings upon the Real Property are all within the boundary lines of the Real Property and there are no encroachments thereon that would materially impair the use thereof. The Collateral is free and clear of any and all Liens or encumbrances of any nature or kind except for the Permitted Liens. (e) ALL PERMITS. The corporation has all necessary permits, franchises, licenses, rights-of-way, servitudes or other rights or authority needed in connection with the operation and maintenance of the Plants, except where the failure to have the same would not have a Material Adverse Effect; all of the Contracts are presently in full force and effect and no default has occurred or exists thereunder, except where such default would not individually or in the aggregate have a Material Adverse Effect; except for Permitted Liens, the corporation's grant of the Security Interest in the manner herein provided does not result in the creation or imposition of any other Lien or security interest, adverse claim or option upon any of the Collateral. (f) PLACE OF BUSINESS. The corporation's registered office is located in the City of Saint John, New Brunswick. The corporation will not change its name, identity or corporate structure or its registered office or chief place of business without notifying the lender at least thirty (30) days prior to the effective date of such change. (g) DEFENCE OF TITLE. The corporation will warrant and defend title to the Collateral, subject to Permitted Liens, against the claims and demands of all other Persons whomsoever and will maintain and preserve the Security Interest so long as any of the Obligations secured hereby remain outstanding. Should an adverse claim be made against the title to any material part of the Collateral, the corporation agrees it will immediately notify the lender in writing thereof and defend against such adverse claim to the extent necessary to preserve the lender's rights and benefits hereunder, subject to Permitted Liens, and the corporation further agrees that the lender may take such other reasonable action as it deems advisable to protect and preserve its interests in the Collateral, and in such event the corporation will indemnify the lender against any and all costs, reasonable attorney's fees and other expenses which it may incur in defending against any such adverse claim. Such obligations shall be payable on demand and shall bear interest from the date of demand therefor until paid at the Rate of Interest. Any proceeds of any policy of title insurance maintained by the corporation with respect to the Collateral shall, for the purposes of this Debenture, be paid and applied in the same manner as Insurance Proceeds. (h) FIRST-RANKING SECURITY INTEREST. This Debenture is, and always will be maintained as first-ranking Security Interest upon the Collateral, subject to the Permitted Liens, and the corporation will not create or suffer to be created or permit to exist any Lien, security interest or charge prior or junior to or on parity with the Security Interest upon the Collateral or any part thereof or upon the rents, issues, revenues, profits or other income therefrom, except for the Permitted Liens. 17 10 (i) MAINTENANCE OF COLLATERAL. The corporation will, at its own expense, do or cause to be done all things necessary to preserve and keep in full repair, working order and efficiency, reasonable wear and tear excepted, all of the Collateral, including, without limitation, all Equipment and, from time to time, will make all the needful and proper repairs, renewals and replacements so that at all times the state and condition of the Collateral will be fully preserved and maintained, unless the failure to repair, renew or replace would not materially interfere with the present use or operation of the Collateral. (j) PERFORMANCE OF CONTRACTS. The corporation will promptly pay and discharge all rentals, or other payments and will perform or cause to be performed each and every act, matter or thing required by, each and all of the contracts, instruments or agreements executed in connection with or incident to the ownership and operation of the Plants and being a portion of the Collateral and will do all other things necessary to keep unimpaired the corporation's rights with respect thereto and to prevent any forfeiture thereof or default thereunder, unless such forfeiture or default shall not individually or in the aggregate have a Material Adverse Effect. The corporation will operate the facilities comprising the Plants in a good and workmanlike manner and in accordance with the practices of the industry and in compliance in all material respects with all Governmental Requirements affecting ownership and operation of such facilities, including without limitation, Environmental Laws. (k) NAME OF CORPORATION. The corporation does not do business with respect to the Collateral under any name other than PCI Chemicals Canada Inc./Produits Chimiques PCI Canada Inc. (l) OPERATION BY THIRD PARTIES. To the extent any of the Collateral is operated by a party or parties other than the corporation, the corporation's covenants as expressed hereunder are modified to require that the corporation use its best efforts (including without limitation the reasonable exercise of all rights and remedies as are available to the corporation) to obtain compliance with such covenants by the operator or operators of the Collateral. (m) COMPLIANCE WITH LAWS. The Plants comply in all material respects with all local land use requirements of Governmental Entities except for possible nonconforming uses or violations which do not and will not materially interfere with the present use, operation or maintenance thereof as now used, operated or maintained. (n) PAYMENT OF TAXES, INSURANCE PREMIUMS, ASSESSMENTS; COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS. (i) Unless contested in accordance with the provisions of paragraph 12(n)(v) hereof, the corporation shall pay and discharge or cause to be paid and discharged, from time to time when the same shall become due, all real estate and other taxes, special assessments, levies, permits, inspection and license fees, all premiums for insurance, all water and sewer rents and charges, and all other public charges imposed upon or assessed against the Collateral or any part thereof or upon the revenues, rents, issues, income and profits of the Collateral, including, without limitation, those arising in respect of the occupancy, use or possession thereof. (ii) During the continuance of an Event of Default, the corporation shall deposit with the lender, on the first day of each month, an amount reasonably estimated by the corporation to be equal to one-twelfth (1/12th) of the annual taxes, assessments and other items required to be discharged by the corporation under paragraph 12(n)(i) and amounts 18 11 reasonably estimated by the corporation to be necessary to maintain the insurance coverages contemplated in paragraph 12(p) below, which estimates shall not be less than one-twelfth (1/12th) of the annual taxes, assessments, insurance premiums and other items required to be discharged by the corporation during the year immediately preceding the year during which such Event of Default occurred. Such amounts shall be held by the lender without interest to the corporation and applied to the payment of each obligation in respect of which such amounts were deposited, in such order or priority as the lender shall determine, on or before the date on which such obligation would become delinquent. If at any time the amounts so deposited by the corporation shall, in the lender's judgment, be insufficient (when added to the installments anticipated to be paid thereafter) to discharge any of such obligations when due, the corporation shall, immediately upon demand, deposit with the lender such additional amounts as may be requested by the lender. Nothing contained in this paragraph 12(n) shall affect any right or remedy of the lender under any provision of this Debenture or of any statute or rule of Law to pay any such amount from its own funds (provided however, that the lender shall not in any event be obligated to pay any of such amounts from its own funds) and to add the amount so paid, together with interest at the Rate of Interest, to the obligations, or relieve the corporation of its obligations to make or provide for the payment of the annual taxes, assessments and other charges required to be discharged by the corporation under paragraph 12(n)(i). All sums held pursuant to this paragraph 12(n) shall form part of the Collateral. During the continuance of any Event of Default, the lender may apply all or any part of the sums held pursuant to this paragraph 12(n) to payment and performance of the Obligations in accordance with the provisions of the Intercreditor Agreement. The corporation shall redeposit with the lender an amount equal to all amounts so applied as a condition to the cure, if any, of such Event of Default, in addition to fulfilment of any other required conditions. (iii) Unless contested in accordance with the provisions of paragraph 12(n)(v), the corporation shall timely pay (or obtain a bond in the amount of) all lawful claims and demands of mechanics, materialmen, labourers, warehousemen, employees, suppliers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid or not bonded, could result in or permit the creation of a Lien (other than a Permitted Lien) on the Collateral or any part thereof or the Rents arising therefrom, or which might result in forfeiture of all or any part of the Collateral. (iv) The corporation shall maintain, or cause to be maintained, in full force and effect, all permits, certificates, authorizations, consents, approvals, registrations, filings, licenses, franchises or other instruments now or hereafter required by any Governmental Entity to operate or use and occupy the Plants and the Equipment for its intended uses (collectively, the "PERMITS"; each, a "PERMIT"), unless the failure to maintain such Permits would not individually or in the aggregate have a Material Adverse Effect. Unless contested in accordance with the provisions of paragraph 12(n)(v), the corporation shall comply promptly with, or cause 19 12 prompt compliance with, all requirements set forth in the Permits and all Governmental Requirements applicable to all or any part of the Collateral or the condition, use or occupancy of all or any part thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force unless the compliance therewith would not individually or in the aggregate have a Material Adverse Effect. The corporation shall not initiate or consent to any change in the zoning, subdivision or any other use classification of the Real Property, if such action could have a material adverse effect on the Security Interest or materially impair the present use and operation of the Collateral or materially impair the lender's rights or benefits hereunder, without the prior written consent of the lender. (v) The corporation may at its own expense contest the amount or applicability of any of the obligations described in 12(n)(i), 12(n)(iii) and 12(n)(iv) by appropriate legal proceedings, prosecution of which operates to prevent the collection or enforcement thereof or the sale or forfeiture of the Collateral or any part thereof to satisfy such obligations; provided, however, that: aa) any such contest shall be conducted in good faith by appropriate legal proceedings promptly instituted and diligently conducted; and bb) in connection with such contest, the corporation shall have made provision for the payment or performance of such contested obligation on the corporation's books if and to the extent required by generally accepted accounting principles then utilized by the corporation in the preparation of its financial statements, or shall have deposited with the lender a sum sufficient to pay and discharge such obligation and the lender's estimate of all interest and penalties related thereto. Notwithstanding the foregoing provisions of this paragraph 12(n)(v): cc) no contest of any such obligations may be pursued by the corporation if such contest would expose the lender, or any of the Administrative Agent, the Trustee, the Noteholders or the Lenders to any possible criminal liability or, unless the corporation shall have furnished an Additional Undertaking therefor satisfactory to the lender in respect of any civil liability for failure to comply with such obligations; and dd) if at any time payment or performance of any obligation contested by the corporation pursuant to this paragraph 12(n)(v) shall become necessary to prevent the delivery of a tax or similar deed conveying the Collateral or any portion thereof because of nonpayment or nonperformance, the corporation shall pay or perform the same in sufficient time to prevent the delivery of such tax or similar deed. 20 13 (vi) The corporation shall, not in its use and occupancy of the Plants or the Equipment (including, without limitation, in the making of any Alteration) take any action that would cause the termination, revocation or denial of any insurance coverage required to be maintained under this Debenture or, that pursuant to written notice from any applicable insurer, would be the basis for a defence to any claim under any insurance policy maintained in respect of any of the Plants or the Equipment and the corporation shall otherwise comply in all material respects with the requirements of any insurer that issues a policy of insurance in respect of any of the Plants or the Equipment. (vii) The corporation shall, promptly upon receipt of any written notice regarding any failure by the corporation to pay or discharge any of the obligations described in paragraph 12(n)(i) or 12(n)(vi), furnish a copy of such notice to the lender. The corporation shall, promptly upon receipt of any written notice regarding any failure by the corporation to pay or discharge any of the obligations described in paragraph 12(n)(iii) or 12(n)(iv), furnish a copy of such notice to the lender, if such failure would have a Material Adverse Effect. (o) CERTAIN TAX LAW CHANGES. In the event of the passage after the date of this Debenture of any Law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the Laws for the taxation of debentures or debts secured by debentures for federal, provincial, municipal or local purposes or the manner of the collection of any such taxes, and imposing a new tax, either directly or indirectly, on this Debenture or the interest of any of the lender, the Administrative Agent, the Trustee, the Lenders and the Noteholders in any Collateral (other than income, franchise or similar taxes imposed on such Person), or in the event that any regulation or regulatory amendment becoming effective after the date hereof imposes any federal or provincial or municipal or local tax on interest income received with respect to any Obligation, the corporation shall promptly pay the lender such amount or amounts as may be necessary from time to time to pay such tax. (p) REQUIRED INSURANCE POLICIES. (i) The corporation shall maintain, or cause to be maintained, as of and from the Closing Date, in full force and effect the following insurance coverages in respect of the Plants and the Equipment: (aa) Physical hazard insurance on an "all risk" basis covering hazards commonly covered by fire and extended coverage, lightning, civil commotion, hail, riot, strike, water damage, sprinkler leakage, collapse and malicious mischief, in an amount equal to the full replacement cost of the Buildings and all Equipment, with such deductibles as would be maintained by a prudent operator of property similar in use and configuration to the Plant and located in the locality where such Plant is located. "Full replacement cost" means the cost of construction to replace the Buildings and the Equipment, exclusive of depreciation, excavation, foundation and footings, as determined from time to time by a proper officer of the corporation in consultation with its insurance company or insurance agent, as appropriate; 21 14 (bb) Comprehensive general liability insurance against claims for bodily injury, death or property damage occurring on, in or about any of the Plants and any adjoining streets, sidewalks and passageways and covering any and all claims, including, without limitation, all legal liability, subject to customary exclusions, to the extent insurable, imposed upon the lender or any of the Administrative Agent, Trustee, Lenders or Noteholders, and all court costs and attorneys' fees arising out of or connected with the possession, use, leasing, operation or condition of the Plants, with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and located in the locality where the Plant is located; (cc) Comprehensive boiler and machinery insurance to cover sudden and accidental breakdown, including but not limited to, explosion of any boilers and machinery located on the Plants or comprising any Equipment, with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and the Equipment and located in the locality where the Plant is located; (dd) Comprehensive automobile liability insurance policy against claims for bodily injury, death and property damage covering all owned, leased, non-owned and hired motor vehicles, including loading and unloading in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and the Equipment and located in the locality where the Plant is located; (ee) Business interruption insurance on an annual basis in amounts not less than the projected gross profit of each of the Plants during the applicable twelve-month period but in no event less than the amount necessary to pay the fixed charges and other expenses of owning, operating and maintaining the Collateral for the same period; (ff) To the extent not otherwise covered by the insurance required under paragraphs 12(p)(i)(aa) and 12(p)(i)(bb), during the performance of any Alterations, renovations, repairs, restorations or construction, broad form Builders Risk Insurance on an all- risk completed value basis; and (gg) Such other insurance, against such risks and with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plants and located in the localities in which the Plants are located. (ii) The corporation may maintain the coverages required by this paragraph 12(p) under blanket policies covering the Plants and other locations owned or operated by the corporation if the terms of such blanket policies otherwise comply with the provisions of this paragraph 12(p) and 22 15 contain specific coverage allocations in respect of each of the Plants determined in accordance with the provisions of this paragraph 12(p). All insurance policies in respect of the coverages required by paragraphs 12(p)(i)(aa), 12(p)(i)(dd), 12(p)(i)(ff) and, if applicable, 12(p)(i)(gg) shall be in amounts at least sufficient to prevent coinsurance liability and all losses thereunder shall be payable to the lender, as loss payee, subject to the terms of the Intercreditor Agreement, pursuant to a standard Canadian Insurance Bureau standard mortgagee clause for use in the Province of New Brunswick, or any equivalent thereof, and each such policy shall, to the extent obtainable at commercially reasonable costs, (aa) include effective waivers (whether under the terms of such policy or otherwise) by the insurer of all claims for insurance premiums against all loss payees and named insureds other than the corporation and all rights of subrogation against any named insured, and (bb) provide that any losses thereunder shall be payable notwithstanding (I) any act, failure to act, negligence of, or violation or breach of warranties, declarations or conditions contained in such policy by the corporation or the lender or any other named insured or loss payee, (II) the occupation or use of the Plant or the Equipment for purposes more hazardous than permitted by the terms of the policy, (III) any foreclosure or other proceeding or notice of sale relating to the Plant or the Equipment, or (IV) any change in the title to or ownership or possession of the Plant or the Equipment; provided, however, that (with respect to items contemplated in clauses (III) and (IV) above) any notice requirements of the applicable policies are satisfied. All insurance policies in respect of the coverages required by paragraphs 12(p)(i)(bb), 12(p)(i)(ee) and, if applicable, 12(p)(i)(gg) shall name the lender as an additional insured. (iii) Each policy of insurance required under this paragraph 12(p) shall provide that: (aa) notices of any failure by the corporation to pay any insurance premium in respect thereof, be furnished to the lender contemporaneously with any such notice given to the corporation; and (bb) it may not be cancelled or otherwise terminated without at least twenty (20) days' prior written notice to the lender and shall permit the lender to pay any premium therefor within twenty (20) days after receipt of any notice stating that such premium has not been paid when due. The policy or policies of such insurance or certificates of insurance evidencing the required coverages and all renewals or extensions thereof shall be delivered to the lender upon receipt by the corporation. Settlement of any claim under any of the insurance policies referred to in this paragraph 12(p) (other than the insurance contemplated in paragraph 12(p)(i)(cc)) which in the corporation's reasonable judgment involves loss of 23 16 $1,000,000 in lawful currency of the United States or more, shall require the prior approval of the lender (acting pursuant to the provisions of the Intercreditor Agreement) and the corporation shall use its best efforts to cause each such insurance policy to contain a provision to such effect. (iv) At least fifteen (15) days prior to the expiration of any insurance policy required by this paragraph 12(p), the corporation shall deliver to the lender evidence that such policy or policies shall be renewed or extended and the corporation shall deliver promptly to the lender after receipt thereof the policy or policies renewing or extending such expiring policy or renewal or extension certificates or other evidence of renewal or extension, together with a receipt showing payment of the premium thereof. (v) The corporation shall not purchase additional policies in respect of the insurance coverages required to be maintained under this paragraph 12(p), unless the lender is included thereon as an additional named insured and, if applicable, with loss payable to the lender under an endorsement containing the provisions described in paragraph 12(p)(ii) and the policy evidencing such insurance otherwise complies with the requirements of paragraph 12(p)(ii). The corporation immediately shall notify the lender whenever any such separate insurance policy is obtained and promptly shall deliver to the lender the policy or certificate evidencing such insurance. (q) INSPECTION. The corporation shall permit the lender, by its agents, accountants and attorneys, to visit and inspect the Collateral upon reasonable prior notice at such times as may be reasonably requested by the lender. (r) THE CORPORATION TO MAINTAIN IMPROVEMENTS. The corporation shall not commit any waste on the Plants or with respect to any Equipment or make any change in the use of the Plant or any Equipment. The corporation represents and warrants that: (i) to the corporation's knowledge, the Plants are served by all electric, gas, sewer, water facilities and any other utilities required or necessary for the current use thereof and any easements or servitudes necessary to the furnishing of such utility service by the corporation have been obtained and duly recorded; and (ii) the corporation has access to the Plants from public roads sufficient to allow the corporation and its tenants and invitees to conduct its and their businesses at the Plants as they are currently conducted. The corporation shall not materially alter the occupancy or use of the Plant without the prior written consent of the lender. Except as otherwise permitted by the Intercreditor Agreement, no Buildings comprising a portion of any of the Plants may be demolished nor shall any Equipment be removed without the prior written consent of the lender. (s) LEASES. (i) All of the Leases are valid and effective in accordance with their respective terms, except that the enforcement thereof may be subject to: 24 17 (aa) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors' rights generally; and (bb) general equitable principles. To the corporation's knowledge, the corporation is not in material breach of or in default (and to the corporation's knowledge, no event has occurred which with due notice or lapse of time or both, may constitute such a material breach or default) under any Lease, and no party to any Lease has given the corporation written notice of or made a claim with respect to any breach or default, the consequences of which, individually or in the aggregate, would have a Material Adverse Effect on the corporation. (ii) The corporation shall mange and operate the Collateral or cause the Collateral to be managed and operated in a reasonably prudent manner and, except as otherwise permitted under paragraph 12(t), will not enter into any Lease (or any amendment or modification thereof) or other agreement subsequent to the date hereof with any Person which, in the reasonable judgment of the corporation, individually or in the aggregate, would have a Material Adverse Effect on the value of the property subject thereto. (iii) The corporation shall not: (aa) receive or collect, or permit the receipt or collection of, any rental or other payments under any Lease more than one (1) month in advance of the respective period in respect of which they are to accrue, except that (i) in connection with the execution and delivery of any Lease or of any amendment to any Lease, rental payments thereunder may be collected and received in advance in an amount not in excess of one (1) month's rent and (ii) the corporation may receive and collect escalation and other charges in accordance with the terms of each Lease; (bb) assign transfer, mortgage or grant a security interest in (other than to the lender hereunder or as otherwise permitted under paragraph 12(t) of this Debenture) any rental or other payment under any Lease whether then due or to accrue in the future, the interest of the corporation as lessor under any Lease or the Rents, issues, revenues, profits or other income of the Collateral; (cc) enter into any Lease after the date hereof that does not contain terms to the effect as follows: (I) such Lease and the rights of the tenant thereunder shall be subject and subordinate to the rights of the lender under this Debenture; (II) such Lease has been mortgaged or charged by the corporation, as landlord thereunder, to the lender under this Debenture; 25 18 (III) in the case of any foreclosure, the rights and remedies of the tenant in respect of any obligations of any successor landlord thereunder shall be limited to the equity interest of such successor landlord in the Plant and any successor landlord shall not (a) be liable for any act, omission or default of any prior landlord under the Lease, or (b) be required to make or complete any tenant improvements or capital improvements or repair, restore, rebuild or replace the demised premises or any part thereof in the event of damage, casualty or condemnation, or (c) be required to pay any amounts to tenant arising under the lease prior to such successor landlord taking possession; (IV) the tenant's obligation to pay rent and any additional rent shall not be subject to any abatement, deduction, counterclaim or setoff as against the lender or any purchaser upon any foreclosure hereunder in respect of any portion of a Plant, and the lender or such purchaser will not be bound by any advance payments of rent in excess of one month or any security deposits unless such security was actually received; and (V) the tenant agrees to attorn, at the option of the lender or any purchaser of a Plant, to the successor owner upon any foreclosure hereunder in respect of a Plant or the giving or granting of a deed in lieu thereof; and (dd) terminate or permit the termination of any Lease of space, accept surrender of all or any portion of the space demised under any Lease prior to the end of the term thereof or accept assignment of any Lease to the corporation which, in the reasonable judgment of the corporation, individually or in the aggregate, would have a Material Adverse Effect or materially impair the Security Interest unless: (I) the tenant under such Lease has not paid the equivalent of two months' rent and the corporation has made reasonable efforts to collect such rent; or (II) the corporation shall deliver to the lender an officer's certificate to the effect that the corporation has entered into a new Lease (or Leases) for the space covered by the terminated or assigned Lease with a term (or terms) which expire(s) no earlier than the date on which the terminated or assigned Lease was to expire (excluding renewal options), and with a tenant (or tenants) having a creditworthiness (as reasonably determined by the corporation) sufficient to pay the rent and other charges due under the new Lease (or Leases), and the tenant(s) shall have commenced paying rent, including, without limitation, all operating expenses and other amounts payable under the new Lease (or Leases), without any abatement or concession, in an amount at least equal to 26 19 the amount which would have then been payable under the terminated or assigned Lease. (iv) The corporation timely shall perform and observe all the terms, covenants and conditions required to be performed and observed by the corporation under each Lease and will not engage in any conduct in respect of any Lease which would have individually or in the aggregate a Material Adverse Effect or materially impair the Security Interest. The corporation promptly shall notify the lender of the receipt of any notice from any lessee under any Lease claiming that the corporation is in material default in the performance or observance of any of the terms, covenants or conditions thereof to be performed or observed by the corporation and will cause a copy of each such notice to be delivered promptly to the lender. (t) TRANSFER RESTRICTIONS. Except as otherwise permitted by the Intercreditor Agreement, the corporation shall not, without the prior written consent of the lender, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Collateral or suffer any of the foregoing to occur by operation of Law or otherwise (each a "TRANSFER"); provided, however, the corporation may so encumber the Collateral to the extent such encumbrances are of the kind listed in clause (d) of the definition of "Permitted Liens". Any proceeds of such permitted Transfer shall be deemed Collateral Proceeds (as defined in the Indenture) and are hereby assigned and shall be paid to the lender to be held in the Collateral Account (as defined in the Intercreditor Agreement) and disbursed pursuant to the Intercreditor Agreement. (u) DESTRUCTION; EXPROPRIATION. (i) If there shall occur any damage to, or loss or destruction of, the Buildings and Equipment, or any part of any thereof (each, a "DESTRUCTION"), the corporation shall promptly send to the lender a notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of any such Destruction are hereby assigned and shall be paid to the lender to be held in the Collateral Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, if such proceeds are in an amount less than $1,000,000 in lawful currency of the United States, such proceeds shall be paid directly to the corporation. All insurance proceeds paid to the lender pursuant to this section, less the amount of any expenses incurred in litigating, arbitrating, compromising or settling any claim arising out of such Destruction (the "INSURANCE PROCEEDS"), shall constitute Moneys and be applied in accordance with the provisions of paragraphs 12(u)(iii) , 12(u)(iv) and (12(u)(v). (ii) If there shall occur any taking of the Collateral or any part thereof, in or by expropriation proceedings pursuant to any Law, general or special, or by reason of the temporary requisition of the use or occupancy of the Collateral or any part thereof, by any Governmental Entity, civil or military (each, a "TAKING"), the corporation immediately shall notify the lender upon receiving notice of such Taking or commencement of proceeding therefor. The lender may (but shall not be obligated to) participate in any proceedings or negotiations which might result in any Taking. The lender may be represented by counsel satisfactory to it at 27 20 the expense of the corporation. The corporation shall deliver or cause to be delivered to the lender all instruments requested by it to permit such participation. The corporation shall in good faith and with due diligence file and prosecute what would otherwise be the corporation's claim for any such award or payment and cause the same to be collected and paid over to the lender, and hereby irrevocably authorizes and empowers the lender, in the name of the corporation as its true and lawful attorney-in-fact or otherwise, during the continuance of an Event of Default to collect and to receipt for any such award or payment, and, in the event the corporation fails so to act, to file and prosecute such claim. The corporation shall pay all costs, fees and expenses incurred by the lender in connection with any Taking and seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the lender to be held in the Collateral Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, if such proceeds are in an amount less than $1,000,000 in lawful currency of the United States, such proceeds shall be paid directly to the corporation. The corporation shall take all steps necessary to notify the condemning authority of such assignment. Such proceeds, award or payment paid to the lender, less the amount of any expenses incurred in litigating, arbitrating, compromising or settling any claim arising out of such Taking ("NET AWARD"), shall constitute Moneys and be applied in accordance with the provisions of paragraphs 12(u)(iii), 12(u)(iv) and 12(u)(v). (iii) So long as no Event of Default shall have occurred and be continuing, the corporation shall have the right, at the corporation's option, to perform a restoration (a "RESTORATION") of the affected portions of the Plant and the Equipment. In the event the corporation elects to perform a Restoration, the corporation shall give written notice ("RESTORATION ELECTION NOTICE") of such election to the lender within twenty (20) business days after the date that the lender receives the applicable Insurance Proceeds or Net Award, as the case may be. The corporation shall, within twenty (20) business days following the date of delivery of a Restoration Election Notice, commence and diligently continue to perform the Restoration of that portion or portions of the Plant and Equipment subject to such Destruction or affected by such Taking so that, upon the completion of the Restoration, the Collateral shall be in the same condition and shall be of at least equal utility for its intended purposes as the Collateral was immediately prior to such Destruction or Taking. The corporation shall so complete such Restoration with its own funds to the extent that the amount of any Net Award or Insurance Proceeds is insufficient for such purpose. In the event the lender does not receive a Restoration Election Notice within such twenty (20) business day period, the lender shall deal with such Insurance Proceeds or Net Award in accordance with the provisions of the Intercreditor Agreement. (iv) In the event a Restoration is to be performed under this paragraph 12(u)(iv), the lender shall not release any part of the Net Award or the Insurance Proceeds except in accordance with the provisions of paragraph 12(u)(iii) and the corporation shall, prior to commencing any work to 28 21 effect a Restoration of the Plant and the Equipment, promptly (but in no event later than one- hundred twenty (120) days following any Destruction or Taking) furnish to the lender: (aa) complete plans and specifications (the "PLANS AND SPECIFICATIONS") for the Restoration; (bb) an officers' certificate stating that all permits and approvals required by Law to commence work in connection with the Restoration have been obtained; (cc) a certificate (an "ARCHITECT'S CERTIFICATE") of an independent, reputable architect or engineer acceptable to the lender and licensed in the Province of New Brunswick (i) stating that the Plans and Specifications have been reviewed and approved by the signatory thereto, (ii) containing such signatory's estimate (an "ESTIMATE") of the costs of completing the Restoration, and (iii) upon completion of such Restoration in accordance with the Plans and Specifications, the utility of the Plant and the Equipment will be equal to or greater than the utility thereof immediately prior to the Destruction or Taking relating to such Restoration; and (dd) if the Estimate exceeds the Insurance Proceeds or the Net Award, as the case may be, by $5,000,000 in lawful currency of the United States or more, an Additional Undertaking in an amount equal to not less than the Estimate less the amount of the Insurance Proceeds or the Net Award, as the case may be, then held by the lender for application toward the cost of such Restoration. Upon receipt by the lender of each of the items required pursuant to paragraphs 12(u)(iv)(aa) through 12(u)(iv)(dd) above, the lender shall acknowledge receipt of the Plans and Specifications. Promptly upon such acknowledgement of receipt by the lender, the corporation shall commence and diligently continue to perform the Restoration substantially in accordance with such Plans and Specifications and in material compliance with all Governmental Requirements, free and clear of all Liens except Permitted Liens. The corporation shall so complete such Restoration with its own funds to the extent that the amount of any Net Award or Insurance Proceeds is insufficient for such purpose. (v) In the event the corporation performs a Restoration of any of the Plants and Equipment as provided in paragraph 12(u)(iv), the lender shall apply any Insurance Proceeds or Net Award held by the lender on account of the Destruction or Taking to the payment of the cost of performing such Restoration pursuant to the relevant provisions of the Intercreditor Agreement. In the event there shall be any surplus after application of the Net Award or the Insurance Proceeds to Restoration of the Plants and the Equipment, such surplus shall become Net Proceeds, as defined in the Indenture for application in accordance thereunder; provided, however, that if an Event of Default shall have occurred and be continuing, such surplus shall be applied by the lender to the payment of the Obligations, in accordance with Article 6 of the Intercreditor 29 22 Agreement. Notwithstanding anything to the contrary herein, if a Destruction or Taking of all or substantially all of the Collateral occurs on a date which is less than 12 months prior to Maturity, as such term is defined in the Indenture, all Insurance Proceeds and Net Awards shall be applied to the permanent repayment or prepayment of any Secured Obligations then outstanding in accordance with the Intercreditor Agreement. (v) ALTERATIONS. The corporation shall not make any material structural addition, modification or change (each, an "ALTERATION") to any Plant or the Equipment which would materially diminish the utility of the Collateral or impair the Security Interest. Whether or not the lender has consented to the making of any Alteration, the corporation shall (i) complete each Alteration promptly, in a good and workmanlike manner and in material compliance with all applicable local Laws, and (ii) pay when due all claims for labour performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of paragraph 12(n)(v). (w) HAZARDOUS MATERIAL. (i) Except with respect to those matters which would not reasonably be expected to have a Material Adverse Effect, to the best knowledge of the corporation, the corporation holds all Permits required to permit the corporation to conduct its business in the manner now conducted and none of the corporation's operations are being conducted in a manner that violates in any material respect the terms and conditions under which any such Permit was granted, including without limitation, under any Environmental Laws, except those permits that are expected to be transferred in the ordinary course after the date hereof; to the best of the knowledge of the corporation all such Permits are valid and in full force and effect; and to the knowledge of the corporation, no suspension, cancellation, revocation or termination of any such Permit is threatened. (ii) Except as set forth in the Term Loan Agreement, there are no material claims, actions, suits, proceedings or investigations pending or to the knowledge of the corporation, threatened, before any Governmental Entity or before any arbitrator brought by or against the corporation or with respect to any of the Collateral the basis of which is any Environmental Law. (iii) The corporation shall (or shall cause other parties obligated to do so under or in accordance with contracts with or indemnity to the corporation): (aa) take all commercially reasonable actions to comply with any and all applicable present and future Environmental Laws relating to the Plants; (bb) pay in a timely fashion the cost of any removal, response measure or corrective action relating to any Hazardous Materials required by any Environmental Law or any order, regulation, consent decree or similar agreement or instrument and keep the Collateral free of any Lien imposed pursuant to any Environmental Law; 30 23 (cc) take all commercially reasonable actions to not Release any Hazardous Materials on, under or from the Collateral in violation of any Environmental Law; (dd) apply any insurance proceeds or other sums received by it in respect of the removal of any Hazardous Material or any other corrective action relating to any Hazardous Material to such removal or corrective action; and (ee) not take, or fail to take any action required under any Environmental Laws or in connection with any Hazardous Materials that could reasonably be expected to result in the incurrence of any obligation or liability of any of the lender, Administrative Agent, Trustee, Lenders or Noteholders. During the continuance of an Event of Default, in the event the corporation fails to comply with the covenants in the preceding sentence, the lender may (upon receipt of an indemnity satisfactory to the lender), in addition to any other remedies set forth herein, but shall not be obligated to, as mandatary for and at the corporation's sole cost and expense cause to be taken, any remediation, removal, response or corrective action relating to Hazardous Materials that is required by Environmental Law and is not being done or contested by the corporation. Any costs or expenses incurred by the lender for such purpose shall be immediately due and payable by the corporation and shall bear interest at the Rate of Interest. The corporation shall provide to the lender and its agents and employees access to the Collateral to take any action required by Environmental Laws, or in connection with any Hazardous Materials, that could be expected to result in the incurrence of any obligation or liability of any of the lender, Administrative Agent, Trustee, Lenders or Noteholders, if the corporation fails to do so and such action or removal is required under any Environmental Laws as provided above. Upon written request by the lender, which shall include a reasonably specific statement of the basis thereof (which shall be specific to the condition of the Collateral and the alleged violation of Environmental Law) and which shall be made not more frequently than once in any twelve-month period or any time that the lender is exercising its remedies under this Debenture, the lender shall have the right (upon receipt of an indemnity satisfactory to the lender), but shall not be obligated, at the sole cost and expense of the corporation, to conduct an environmental audit or review of the Collateral relating to the specific items as required in writing or relating to the remedy that the lender is exercising under this Debenture by persons or firms appointed by the lender, and the lender shall cooperate in all reasonable respects in the conduct of such environmental audit or review, including, without limitation, by providing reasonable access to the Collateral and to all records relating thereto. The corporation shall indemnify and hold each of the lender, Administrative Agent, Trustee, Lenders and Noteholders harmless from and against all loss, cost, damage or expense (including, without limitation, attorneys' fees) that any of the lender, 31 24 Administrative Agent, Trustee, Lenders and Noteholders may sustain by reason of the assertion against such party of any claim relating to such Hazardous Materials or actions taken with respect thereto as authorized hereunder. Nothing contained herein shall result in any of the lender, Administrative Agent, Trustee, Lenders and Noteholders being deemed an "owner" or "operator" under applicable Environmental Law. (iv) The corporation may at its own expense contest the amount or applicability of any of the obligations described in the first sentence of paragraph 12(w)(iii) by appropriate legal proceedings, prosecution of which operates to prevent the enforcement thereof; provided, however, that: (aa) any such contest shall be conducted in good faith by appropriate legal proceedings promptly instituted and diligently conducted; and (bb) in connection with such contest, the corporation shall have made provision for the payment or performance of such contested obligation on the corporation's books if and to the extent required by generally accepted accounting principles then utilized by the corporation in the preparation of its financial statements, or shall have deposited with the lender a sum sufficient to pay and discharge such obligation and the lender's estimate of all interest and penalties related thereto. Notwithstanding the foregoing provisions of this paragraph 12(w)(iv), no contest of any such obligations may be pursued by the corporation if such contest would expose the lender, or any of the Administrative Agent, Trustee, Lenders or Noteholders to any possible criminal liability or, unless the corporation shall have furnished an Additional Undertaking therefor satisfactory to the lender for any civil liability for failure to comply with such obligations. (x) ASBESTOS. The corporation shall not install nor permit to be installed in the Collateral friable asbestos or any asbestos-containing material (collectively, "ACM") except in compliance with all applicable Environmental Laws respecting such material. With respect to ACM currently present in the Collateral, except with respect to matters which would not have a Material Adverse Effect, the corporation shall comply with all Laws applicable to ACM located on any of the Plants, all at the corporation' sole cost and expense. If the corporation shall fail so to comply with such Laws, the lender may (upon receipt of an indemnity satisfactory to the lender) during the continuance of an Event of Default, but shall not be obligated to, in addition to any other remedies set forth herein, take those steps reasonably necessary to comply with applicable Laws. Any costs or expenses incurred by the lender for such purpose shall be immediately due and payable by the corporation and bear interest at the Rate of Interest. The corporation shall provide to the lender and its agents and employees reasonable access to the Collateral upon reasonable prior notice to remove such ACM if the corporation fails to do so and removal is required under any Environmental Law as provided for above; provided, however, that nothing contained herein shall obligate the lender to exercise any rights under such access. The corporation shall indemnify and hold each of the lender, Administrative Agent, Trustee, Lenders and Noteholders harmless from and against all loss, cost, damage and expense that any of the lender, Administrative Agent, Trustee, Lenders and Noteholders may sustain as a result of the presence of any ACM and any removal thereof in 32 25 compliance with any applicable Environmental Law. (y) BOOKS AND RECORDS; REPORTS. The corporation shall keep proper books of record and account, which shall accurately represent the financial condition of the corporation and the business affairs of the corporation relating to the Collateral. The lender and its authorized representatives shall have the right, from time to time, upon reasonable prior notice to examine the books and records of the corporation relating to the operation of the Collateral at the office of the corporation. (z) NO CLAIMS AGAINST THE LENDER. Nothing contained in this Debenture shall constitute any consent or request by the lender, express or implied, for the performance of any labour or services or the furnishing of any materials or other property in respect of the Plant or any part thereof, nor as giving the corporation any right, power or authority to contract for or permit the performance of any labour or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the lender in respect thereof or any claim that any Lien based on the performance of such labour or services or the furnishing of any such materials or other property is ranked in priority to the Security Interest. (aa) UTILITY SERVICES. The corporation shall pay, or cause to be paid, when due all charges for all public or private utility services, all public or private rail and highway services, all public or private communication services, all sprinkler systems, and all protective services, any other services of whatever kind or nature at any time rendered to or in connection with the Plants or any part thereof, shall comply in all material respects with all contracts relating to any such services, and shall do all other things reasonably required for the maintenance and continuance of all such services to the extent required to fulfil the obligations set forth in paragraph 12(r). DEFAULT 13. The Security Interest shall become enforceable against the corporation if and only if and when the corporation shall fail to pay, perform or satisfy any of the Obligations when due and payable or required to be performed or satisfied, as the case may be, but not otherwise (each such failure is an "Event of Default"). Upon the occurrence of an Event of Default, the Obligations shall immediately become due and payable by the corporation to the lender without the necessity of any further act or formality and, thereafter, the corporation shall not be entitled to sell, assign, transfer, exchange, lease or otherwise dispose of or deal with all or any part of the Collateral. REMEDIES 14. Whenever the Security Interest has become enforceable, the lender may in its discretion: (a) take possession of all or any part of the Collateral with power to exclude the corporation and its officers, employees and agents therefrom; (b) take all such steps as the lender may consider necessary or desirable for the purposes of preserving, maintaining and completing all or any part of the Collateral and making such replacements thereof and improvements and additions thereto as the lender may consider expedient; (c) carry on all or any part of the business of the corporation relating to the Collateral and use all or any part of the Collateral directly in carrying on the corporation's 33 26 business or as security for loans or advances to enable the lender to carry on the corporation's business or otherwise; (d) receive the rents, incomes and profits of any kind whatsoever from the Collateral and pay therefrom: (i) any expenses of preserving, maintaining and completing the Collateral, of making such replacements thereof and improvements and additions thereto as the lender may consider expedient and of carrying on all or any part of the corporation's business relating to the Collateral; and (ii) any charges against the Collateral ranking in priority to or pari passu with the Security Interest or the payment of which may be necessary or desirable to preserve or protect all or any part of the Collateral or the interest of the lender therein; (e) lease all or any part of the Collateral and renew from time to time all or any of the Leases on such terms and conditions as the lender may determine; (f) with or without taking possession, take any action or proceedings to enforce the performance of any covenant contained in any of the Leases; (g) enjoy and exercise all the powers of the corporation as the lender considers necessary or desirable for the exercise of any and all of the remedies of the lender provided for herein, including the powers to make any arrangement or compromise on behalf and in the name of the corporation which the lender considers expedient, to purchase on credit and borrow money on behalf and in the name of the corporation and to advance moneys to the corporation, all at such rates of interest as the lender may consider reasonable, and to enter into contracts and undertake obligations on behalf of and in the name of the corporation for any and all of the foregoing purposes or which the lender considers necessary or desirable for the exercise of any of the rights, powers and remedies of the lender provided for herein, all of which borrowings, advances and obligations together with interest thereon shall, at the discretion of the lender, be entitled to the security hereof in priority to the payment of the Obligations; (h) sell or otherwise dispose of all or any part of the Collateral; (i) apply to a court for the appointment of a Receiver to take possession of all or such part of the Collateral as the lender shall designate, with such duties, powers and obligations as the court making the appointment shall confer; (j) appoint a Receiver of all or any part of the Collateral by instrument in writing executed by the lender; (k) institute proceedings in any court of competent jurisdiction for sale or foreclosure of the Collateral; and (l) take any steps or proceedings of any kind permitted by applicable Law or in equity or otherwise to enforce payment of the Obligations or performance of any other covenant or obligation of the corporation contained herein, including without limitation the powers conferred upon a mortgagee under the Property Act (New Brunswick), and exercise all rights and remedies of a secured party under the PPSA. REMEDIES CUMULATIVE AND WAIVER 15. The rights and remedies hereunder of the lender are cumulative and are in addition to and not in substitution for any other rights and remedies provided by law or by equity. Any single or partial exercise by the lender of any right or remedy in respect of a default or breach of any term, covenant or condition contained herein shall not be deemed to 34 27 be a waiver thereof or to alter, affect or prejudice any other right or remedy or other rights or remedies to which the lender may be lawfully entitled, for such default or breach. The lender shall at all times have the right to proceed against all or any portion of the Collateral or any other security in such order and in such manner as it shall determine without waiving any rights, powers or remedies which the lender may have with respect to this Debenture or any other security or at law, in equity or otherwise. No delay or omission by the lender in exercising any right, power or remedy hereunder or otherwise shall operate as a waiver thereof or of any other right, power or remedy. Any waiver by the lender of the strict observance, performance or compliance with any term, covenant, condition or agreement herein contained and any indulgence granted, either expressly or by course of conduct, by the lender shall be effective only in the specific instance and for the purpose of which it was given and shall be deemed not to be a waiver of any rights and remedies of the lender hereunder as a result of any other default or breach hereunder. No consent or waiver by the lender shall be effective unless made in writing and signed by an authorized officer of the lender. CONCERNING THE RECEIVER 16. (a) Any Receiver appointed by the lender shall be vested with the rights and remedies which could have been exercised by the lender in respect of the corporation or the Collateral and such other powers and discretions as are granted in the instrument of appointment and any instrument or instruments supplemental thereto. The identity of the Receiver, any replacement thereof and any remuneration thereof shall be within the sole and unfettered discretion of the lender. (b) Any Receiver appointed by the lender shall act as agent for the lender for the purposes of taking possession of the Collateral, but otherwise and for all other purposes (except as provided below) as agent for the corporation. The Receiver may sell, lease, or otherwise dispose of the Collateral as agent for the corporation or as agent for the lender as the lender may determine in its discretion. The Receiver shall apply all monies from time to time received by the Receiver in such order or priority, as the lender may at its option direct. If there shall be a deficiency, the corporation shall remain liable for such deficiency and shall pay the amount of such deficiency to the lender forthwith. The balance of proceeds realized in respect of the Collateral, if any, remaining after repayment in full of the Obligations shall be paid to the corporation or such other Person or Persons entitled thereto by applicable Law. The corporation agrees to ratify and confirm all actions of the Receiver acting as agent for the corporation, and to release and indemnify the Receiver in respect of all such actions. (c) The lender, in appointing or refraining from appointing any Receiver, shall not incur liability to the Receiver, the corporation or otherwise and shall not be responsible for any misconduct or negligence of such Receiver. APPOINTMENT OF ATTORNEY 17. The corporation hereby irrevocably appoints the lender (and any of its officers) as attorney of the corporation with full power of substitution to exercise, at any time when the Security Interest shall have become enforceable, in the name of and on behalf of the corporation and any of the corporation's right, title and interest in and to the Collateral (including the right of disposal, execution, endorsement, delivery and transfer of all or any part of the Collateral). All acts of any such attorney are hereby ratified and approved, and such attorney shall not be liable for any act, failure to act or any other matter or thing in connection therewith, except for its own gross negligence or wilful misconduct. 35 28 DEALING WITH THE COLLATERAL AND THE SECURITY INTEREST 18. (a) The lender shall not be obliged to exhaust its recourse against the corporation or any other Person or Persons or against any other security the lender may hold in respect of the Obligations before realizing upon or otherwise dealing with the Collateral in such manner as the lender may consider desirable. (b) The lender may grant extensions or other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the corporation and with other parties, sureties or securities as the lender may see fit without prejudice to the Obligations or the rights of the lender in respect of the Collateral. (c) The lender shall not be: (i) liable or accountable for any failure to collect, realize or obtain payment in respect of the Collateral; (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Collateral or for the purpose of preserving any rights of the lender the corporation or any other Person in respect thereof; (iii) responsible for any loss occasioned by any sale or other dealing with the Collateral or by the retention of or failure to sell or otherwise deal therewith; or (iv) bound to protect the Collateral from depreciating in value or becoming worthless. STANDARDS OF SALE 19. Without prejudice to the ability of the lender to dispose of the Collateral in any manner which is commercially reasonable, the corporation acknowledges that a disposition of Collateral by the lender which takes place substantially in accordance with the following provisions shall be deemed to be commercially reasonable: (a) Collateral may be disposed of in whole or in part; (b) Collateral may be disposed of by public auction, public tender or private contract, with or without advertising and without any other formality; (c) any purchaser or lessee of such Collateral may be a customer of the lender, provided that such transaction is bona fide; (d) a disposition of Collateral may be on such terms and conditions as to credit or otherwise as the lender, in its sole discretion, may deem advantageous; and (e) the lender may establish an upset or reserve bid or price in respect of the Collateral. DEALINGS BY THIRD PARTIES 20. No person dealing with any of the lender or its agent or a Receiver shall be required: (i) to determine whether the Security Interest has become enforceable; (ii) to determine whether the powers which the lender or its agent is purporting to exercise have been exercisable; (iii) to determine whether any money remains due to the lender by the corporation; (iv) to determine the necessity or expediency of the stipulations and conditions subject to which any sale or lease shall be made; (v) to determine the propriety or regularity of any sale or any other dealing by the lender with the Collateral; or (vi) to see to the application of any money paid to the lender. The Security Interest is in addition to and not in substitution for any security now held or hereafter acquired by the lender as security for the Obligations. 36 29 CORPORATION LIABLE FOR THE DEFICIENCY 21. In the case of any judicial or other steps or proceedings to enforce the Security Interest, and without limiting any right of the lender to obtain judgment for any greater amount, the corporation shall remain liable to the lender for any amount which may remain due in respect of the Obligations after application to the payment thereof of the proceeds of any sale, lease or other disposition of the Collateral or any part thereof. NOTICE OF SALE 22. Unless required by applicable Law, neither the lender nor any Receiver appointed by it shall be required to give the corporation any notice of any sale, lease or other disposition of the Collateral or any part thereof or the date after which any private disposition of Collateral or any part thereof is to be made. PAYMENT OF PRIOR CLAIMS 23. If the lender is at any time or from time to time required to make a payment to defeat or honour the priority or possible priority of any Liens on or in respect of all or any part of the Collateral, any such payment or payments, and the costs, charges and expenses of the lender in connection therewith (including legal fees on a solicitor and client basis) shall be payable by the corporation on demand. NOTICE 24. Any and all demands, notices or other communications to be made or given pursuant to this Debenture shall be given and received in the manner and at the addresses specified in Section 11.2 of the Intercreditor Agreement. RELEASES 25. Subject to the provisions of the Term Loan Agreement and the Indenture, the lender may in its discretion, from time to time, release any part of the Collateral or any other security held by the lender either with or without any sufficient consideration therefor, without responsibility therefor and without thereby releasing any other part of the Collateral or any other security or any Person from the security created by this Debenture or from any of the covenants herein contained. Each and every portion into which the Collateral is or may hereafter be divided does and shall stay charged with the Obligations. No Person shall have the right to require the Obligations to be apportioned and the lender shall not be accountable to the corporation for any moneys except those actually received by the lender. EXPENSES 26. The corporation shall pay to the lender on demand all of the costs, charges and expenses of the lender (including legal fees on a solicitor and client basis and Receiver's fees) in connection with the preparation, registration or amendment of this Debenture, the perfection or preservation of the Security Interest, the enforcement by any means of any provision hereof or, after the occurrence of and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture, or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be), the exercise of any rights, powers or remedies hereunder, including all such costs, charges and expenses in connection with taking possession, maintaining, completing, preserving, protecting, collecting or realizing 37 30 upon all or any part of the Collateral or carrying on all or any part of the corporation's business relating to the Collateral. DISCHARGE OF DEBENTURE 27. The Security Interest shall be released and discharged upon full and complete payment, performance and satisfaction of all of the Obligations and at the request and sole cost and expense of the corporation. The lender, the Administrative Agent and the Trustee shall execute and deliver to the corporation such releases and discharges as the corporation may reasonably require. NO MERGER OF ESTATES 28. There shall not be deemed to be any merger of this Debenture, nor of the rights and interests of the lender hereunder, with the estate in the Real Property or with the reversion or rights and interests of the corporation or the lender under any instrument affecting the Collateral by reason only of the fact that the same Person may own or acquire, directly or indirectly, two or more estates, rights or interests in the Collateral until all Persons having any interest under this Debenture, the estate in the Real Property or the reversion or rights and interests of the corporation or the lender under any instrument affecting the Collateral, by an appropriate instrument, so declare and provide. NO OBLIGATION TO ADVANCE 29. Neither the issue nor delivery of this Debenture shall obligate the lender, the Trustee, any Noteholder, the Administrative Agent or any Lender to advance any funds, or otherwise make or continue to make any credit available, to the corporation. PERFECTION OF SECURITY 30. The corporation shall register, file or record all financing statements and other documents in all offices where, in the opinion of the lender, such registration, filing or recording is necessary or desirable to preserve, perfect or otherwise protect the Security Interest and the priority thereof. The lender shall have the right to require that the form of this Debenture or any part thereof be amended to reflect any changes in applicable Law whether arising as a result of statutory amendments, court decisions or otherwise, in order to confer upon the lender the security interest intended to be created by this Debenture, except that in no event shall the lender require that any such amendment be effected if the result thereof would be to grant to the lender greater rights than are otherwise contemplated herein. ASSIGNMENTS AND PARTICIPATIONS 31. The lender may sell, assign, transfer or otherwise dispose of all or any of the Obligations in accordance with the provisions governing the Obligations and, in such event, each and every immediate and successive assignee, transferee or holder of all or any of the Obligations, shall have, in respect of the rights or obligations sold, assigned, transferred or otherwise disposed of, the full benefit hereof to the same extent as if it were an original party to the Obligations or the part thereof so sold, assigned, transferred or otherwise disposed of, without regard to any set-off, counterclaim or equities between the corporation and the lender. None of the rights or obligations hereunder of the corporation may be assigned without the prior written consent of the lender, except in accordance with the provisions of the Intercreditor Agreement. 38 31 ENUREMENT 32. This Debenture shall enure to the benefit of the lender, the Trustee, the Noteholders, the Administrative Agent and the Lenders, their respective successors and assigns and be binding upon the corporation and its successors and permitted assigns. TIME OF ESSENCE 33. Time shall be of the essence of this Debenture with respect to the obligations of the corporation hereunder. AMENDMENTS 34. This Debenture may be amended only by written agreement of the corporation and the lender. FURTHER ASSURANCES 35. The corporation shall from time to time, whether before or after the Security Interest shall have become enforceable, at its sole cost and expense, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the lender may reasonably require for protecting the Collateral or perfecting the Security Interest and for exercising all powers, authorities and discretions hereby conferred upon the lender and the corporation shall, from time to time after the Security Interest has become enforceable, at its sole cost and expense, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the lender may require for facilitating the sale of the Collateral in connection with any realization thereof. JUDGMENT CURRENCY 36. If, for the purposes of obtaining judgment in any court, it is necessary to convert any sum due, or owing to the lender in any currency (the "ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY"), the corporation hereby agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the lender could purchase the Original Currency with the Other Currency on the Business Day preceding that on which the final judgment is granted. The Obligations of the corporation in respect of any sum due in the Original Currency from it to the lender shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the lender of any such sum adjudged to be so due or owing in such Other Currency, the lender may, in accordance with normal banking procedures, purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due or owing to the lender in the Original Currency, the corporation shall, as a separate obligation and notwithstanding any such judgment, indemnify the lender for the benefit of the Trustee, on its own account and on account of each Noteholder, and the Administrative Agent, on its own account and on account of each of the Lenders, against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due or owing to the lender in the Original Currency, the lender shall remit such excess to the corporation. COPY RECEIVED 37. The corporation acknowledges receipt of a copy of this Debenture. 39 32 NEW BRUNSWICK FORM 38. This debenture, which is in the form prescribed by the Standard Forms of Conveyances Act, S.N.B. 1981 c.S-12.2, has been executed by the corporation for the purposes of registration in the Province of New Brunswick pursuant to the Registry Act, R.S.N.B. 1973 c.R-6 of a debenture (the "Non-Standard Form Debenture") in the principal amount of U.S. $500,000,000 executed prior to or contemporaneously herewith by the corporation and issued to the lender. This debenture and the Non-Standard Form Debenture constitute, and are to be read as, one instrument. EFFECTIVE DATE 39. Notwithstanding the actual date of execution hereof, this Debenture shall be effective from and shall be deemed to be dated as of October 30, 1997. 40 SCHEDULE "F" This is Schedule "F" to a debenture between PCI CHEMICALS CANADA INC. as corporation, and UNITED STATES TRUST COMPANY OF NEW YORK, as lender, which debenture is dated November , 1997. - -------------------------------------------------------------------------------- (a) Subject to paragraph 10 of Schedule "C" hereof, the corporation hereby: (i) grants, mortgages, hypothecates and charges to and in favour of the lender, as and by way of a first fixed and specific mortgage, hypothec and charge, all right, title and interest of the corporation in and to all real property now owned or hereafter acquired by the corporation, including the real property described in Schedule "A" hereto, including all buildings, erections and improvements of every kind thereon from time to time and fixtures forming a part thereof (collectively, the "Real Property"); and (ii) assigns and transfers to the lender by way of a specific assignment and transfer and grants to the lender a security interest in: (A) all Leases, all income, revenues and profits derived from Leases and all rents and other sums payable to the corporation pursuant to the terms of any Leases and all benefits, advantages and powers to be derived under such Leases, with full power and authority to demand, sue for, recover, receive and give receipts for all Rents and all other monies payable thereunder and otherwise to enforce the rights of the corporation thereunder; (B) all licenses, permits, approvals, certificates and agreements with or from any Governmental Entity relating directly or indirectly to the ownership, use, development, operation and maintenance of the Real Property or the alteration or renovation or construction of improvements on the Real Property, whether heretofore or hereafter issued or executed (collectively, the "Licenses"); and (C) all options, contracts, subcontracts, agreements, service agreements, warranties and purchase orders which have heretofore been or will hereafter be executed by or on behalf of the corporation or which have been assigned to the corporation, in connection with the use, development, operation and maintenance of the Real Property or the construction of improvements on the Real Property (collectively, the "Real Property Contracts"). (b) Subject to paragraph 10 of Schedule "C" hereof, the corporation hereby grants, assigns, mortgages, hypothecates and charges to and in favour of the lender, as and by way of a fixed and specific mortgage, hypothec and charge and sublease, all right, title and interest of the corporation in all real property now or hereafter leased by the corporation, including all buildings, erections and improvements of every kind thereon from time to time and fixtures forming a part thereof (collectively, the "Leasehold Property") and all Leases relating to such Leasehold Property (collectively, the "Leasehold Property Contracts" and, together with the Real Property Contracts, the "Contracts"). (c) Subject to paragraph 10 of Schedule "C" hereof, the corporation hereby mortgages, hypothecates and charges to and in favour of the lender, as and by way of a fixed and specific mortgage, hypothec and charge, pledges to and in favour of the lender, assigns and transfers to and in favour of the lender as and by way of specific transfer and assignment, and grants to and in favour of the lender a security interest in all of the corporation's right, title and interest in and to all of the following personal property and undertaking of the corporation now owned or hereafter acquired (collectively, and together with the property described in subparagraphs (a) and (b) of this Schedule "F", the "Collateral", and all references thereto herein including any part thereof), (i) all equipment in all of its forms of the corporation, wherever located, including all parts thereof and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor and all accessories related thereto ("Equipment"); 41 2 (ii) all contracts, contract rights, chattel paper, documents, instruments, and general intangibles (excluding (a) tax refunds as they may arise from or relate solely to the sale of inventory including, without limitation, excise, retail sales and goods and services taxes; and (b) excluding any of the foregoing as it may arise from or relate to inventory or accounts receivables) of the corporation (including, without limitation, the asset purchase agreement made as of September 22, 1997, between the corporation, PCI Carolina Inc., Pioneer Companies, Inc., ICI Canada Inc., ICI Americas Inc. and Imperial Chemical Industries PLC as same may be amended from time to time, and all of the rights and benefits of the corporation thereunder), whether or not arising out of or in connection with the sale or lease of goods and all rights of the corporation now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such contracts, contract rights, chattel paper, documents, instruments and general intangibles; (iii) all Intellectual Property Collateral (as defined in the Borrower (Canadian) Security Agreement dated of even date herewith made by the corporation in favour of the lender (the "Security Agreement")) of the corporation; (iv) all books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Schedule "F"; (v) all of the corporation's other property and rights of every kind and description and interests therein, including without limitation, all shares, stock, warrants, deeds, debentures, debenture stock and all other documents which constitute evidence of a share, participation or other interest of the corporation in property or in an enterprise or which constitutes evidence of an obligation of the issuer thereof (excluding any Capital Stock (as defined in the Term Loan Agreement) which is required to be pledged under the Existing Term Loan Agreement or the Existing Senior Secured Note Indenture (in each case as defined in the Term Loan Agreement) until such time as the obligations pursuant to or under such agreements have been paid in full) (collectively, the "Negotiable Collateral"); and (vi) all products, offspring, rents, issues, profits, returns, income and proceeds of and from any and all of the foregoing Collateral (including without limitation proceeds which constitute property of the types described in this Schedule "F", proceeds deposited from time to time in the Collateral Account (as defined in the Security Agreement) and in any lock boxes of the corporation in respect of the foregoing, and, to the extent not otherwise included, all payments under insurance (whether or not the lender, the Trustee or the Administrative Agent is a loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral). Notwithstanding the foregoing, "Collateral" shall not include the Excluded Assets and any general intangibles or other rights arising under any contracts, instruments, licenses or other documents as to which the grant of a security interest would constitute a violation of a valid and enforceable restriction in favour of a third party on such grant, unless and until any required consents shall have been obtained. Upon the request of the lender, the corporation shall use its best commercial efforts to obtain any consent required. 42 3 (d) In addition, the corporation hereby charges to and in favour of the lender, as and by way of a floating charge, all Collateral, both present and future, and every interest therein which the corporation now has or hereafter acquires (other than property and assets hereby effectively assigned or subjected to a specific mortgage, hypothec and charge, and subject to the exceptions herein contained). EX-4.5A 5 DEMAND DEBENTURE (ONTARIO) - DATED 10/30/97 1 EXHIBIT 4.5(a) DEMAND DEBENTURE (ONTARIO) U.S. $500,000,000 Date: October 30, 1997 This debenture (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Debenture"), dated as of October 30, 1997, is made by PCI Chemicals Canada Inc., a New Brunswick corporation (the "Corporation"), in favour of United States Trust Company of New York, as collateral agent (together with any successors thereto in such capacity, the "Collateral Agent") for its own benefit and the benefit of the Administrative Agent (as defined below) and of the Lenders (as defined below), and the Trustee (as defined below) and of the holders (the "Noteholders") of Notes (as defined below), pursuant to that certain Intercreditor and Collateral Agency Agreement (the "Intercreditor Agreement") dated the date hereof among the Corporation, the Trustee, the Administrative Agent, the Collateral Agent, Pioneer Americas, Inc. ("PAI") and Pioneer Americas Acquisition Corp. ("PAAC"). W I T N E S S E T H: WHEREAS pursuant to a term loan agreement dated as of October 30, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Term Loan Agreement"), among PAI, PAAC, as the parent guarantor, the various financial institutions as are, or may from time to time become, parties thereto (each individually a "Lender" and collectively the "Lenders"), the Collateral Agent, Bank of America National Trust and Savings Association, as administrative agent (together with any successor(s) thereto in such capacity, the "Administrative Agent"), DLJ Capital Funding, Inc., as the Syndication Agent for the Lenders and Salomon Brothers Holding Company Inc., as the Documentation Agent for the Lenders, the Lenders have extended commitments to make Term Loans (as defined therein) to PAI; AND WHEREAS the Corporation has executed a guarantee (the "Guarantee") dated the date hereof in favour of the Administrative Agent, for its own benefit and the benefit of each of the Lenders, of the obligations of PAI under the Term Loan Agreement; AND WHEREAS the Corporation has issued notes ("Notes") pursuant to that certain Indenture (the "Indenture") dated the date hereof among the Corporation, PAAC and the other Guarantors named therein, and United States Trust Company of New York (together with any successor(s) thereto in such capacity, the "Trustee"); AND WHEREAS the Corporation has duly authorized the execution, delivery and performance of this Debenture; 2 - 2 - NOW THEREFORE in consideration of the foregoing and for such other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation hereby covenants and agrees as follows: ARTICLE 1 PROMISE TO PAY 1.1 PROMISE TO PAY. The Corporation, for value received, hereby acknowledges itself indebted and promises to pay to or to the order of the Collateral Agent, at such address or addresses as the Collateral Agent may designate at any time and from time to time by notice in writing to the Corporation, ON DEMAND, the maximum principal amount of five hundred million dollars ($500,000,000) in lawful money of the United States of America, and to pay interest on the principal amount outstanding under or in connection with the Obligations from time to time and on all other amounts owing hereunder to the date of payment in accordance with terms and provisions hereof at a rate of twenty-five (25%) percent per annum; such interest to be calculated daily, not in advance and to be payable in like money on demand, both before and after maturity and default, with interest on overdue interest at the same rate. ARTICLE 2 INTERPRETATION 2.1 DEFINITIONS. "ACM" has the meaning ascribed thereto in section 4.24. "ADDITIONAL UNDERTAKING" means (i) cash or cash equivalents or (ii) a Surety Bond, an Additional Undertaking Guarantee or an Additional Undertaking Letter of Credit which is provided by a Person, whose long- term unsecured debt is rated at least "AA" (or equivalent) by a nationally recognized statistical rating agency and is otherwise satisfactory to the Collateral Agent; Additional Undertakings are addressed directly to the Collateral Agent and name the Collateral Agent as the beneficiary thereof and the party entitled to make claims thereunder. "ADDITIONAL UNDERTAKING GUARANTEE" means the unconditional guarantee of payment of any corporation or partnership organized and existing under the laws of the United States of America or any State or the District of Columbia or Canada or province thereof that has a long-term unsecured debt rating satisfactory to the Collateral Agent at the time such guarantee is delivered, given to the Collateral Agent, accompanied by an opinion of counsel to such guarantor to the effect that such guarantee has been duly authorized, executed and delivered by such guarantor and constitutes the legal, valid and binding obligation of such guarantor enforceable against such guarantor by the Collateral Agent in accordance with its terms, subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such guarantee will be given, such guarantee and accompanying opinion are responsive to the requirements of this Debenture. 3 - 3 - "ADDITIONAL UNDERTAKING LETTER OF CREDIT" means a clean, irrevocable, unconditional letter of credit in favour of the Collateral Agent and entitling the Collateral Agent to draw thereon in the City of New York issued by a bank satisfactory to the Collateral Agent, accompanied by an opinion of counsel to such bank to the effect that such letter of credit has been duly authorized, executed and delivered by such bank and constitutes the legal, valid and binding obligation of such bank enforceable against such bank by the Collateral Agent in accordance with its terms subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such letter of credit will be given, such letter of credit and accompanying opinion are responsive to the requirements of this Debenture. "ADMINISTRATIVE AGENT" has the meaning ascribed to it in the first recital. "ALTERATION" has the meaning ascribed thereto in section 4.22. "ARCHITECT'S CERTIFICATE" has the meaning ascribed thereto in section 4.21(d)(iii). "BUILDINGS" means all of the right, title and interest which the Corporation has from time to time in and to (i) any and all present and future structures and works of a permanent nature located, from time to time in, on or upon the Real Property, including, without limitation, all buildings, structures, facilities, accessories, appurtenances and other improvements (including present and future parking areas) located from time to time in, on or upon the Real Property and (ii) any and all alterations, reconstructions, additions or expansions to and all repairs or replacements of any such property during the term of this Debenture. "BUSINESS DAY" means any day other than a Saturday or a Sunday and any day on which banks situated in the Province of Ontario are authorized or obligated to be closed. "CLOSING DATE" has the meaning ascribed thereto in the Purchase Agreement. "COLLATERAL" has the meaning ascribed thereto in Section 3.1(c). "COLLATERAL AGENT" has the meaning ascribed thereto in the preamble to this Debenture. "COLLATERAL ACCOUNT" has the meaning ascribed thereto in the Intercreditor Agreement. "COLLATERAL PROCEEDS" has the meaning ascribed thereto in the Indenture. "CONTRACTS" has the meaning ascribed thereto in Section 3.1(b). "CORPORATION" means PCI Chemicals Canada Inc./Produits Chimiques PCI Canada Inc. and its successors and assigns. "DESTRUCTION" has the meaning ascribed thereto in section 4.21(a). 4 - 4 - "EXCLUDED ASSETS" means (a) the inventory of the Corporation, including goods held for sale or lease, goods furnished or to be furnished to third parties under contracts of lease, consignment or service, goods which are raw materials or work in process, goods used in or procured for packing and materials used or consumed in the business of the Corporation, (b) accounts due or accruing due and all records entered or recorded by any system of mechanical or electronic data processing or any other information storage device, agreements, books, accounts, invoices, letters, documents and papers recording evidencing or relating thereto, and (c) all contracts, contract rights, chattel paper, documents, instruments, and general intangibles arising from or relating to any of the foregoing. "ENVIRONMENT" means all components of the earth, including, without limitation, air (and all layers of the atmosphere), land (and all surface and subsurface soil, underground spaces and cavities and all land submerged under water) and water (and all surface and underground water), organic and inorganic matter and living organisms, and the interacting natural systems that include components referred to above in this definition of "Environment". "ENVIRONMENTAL LAWS" means all applicable Laws relating to the Environment, Hazardous Substances, pollution or protection of the Environment, including Laws relating to: (i) on site or off-site contamination; (ii) chemical substances or products; (iii) Releases of pollutants, contaminants, chemicals or other industrial, toxic or radioactive substances or Hazardous Substances into the Environment; and (iv) the manufacture, processing, distribution, use, treatment, storage, transport, packaging, labelling, sale, recycling, disposal, destruction, incineration, burial, advertising, display or handling of Hazardous Substances. "EQUIPMENT" has the meaning ascribed thereto in section 3.1(c). "EVENT OF DEFAULT" has the meaning ascribed thereto in section 5.1. "GOVERNMENTAL ENTITY" means any: (i) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, commission, board, bureau, agency or instrumentality, domestic or foreign; (ii) any subdivision, agent, commission, board, or authority of any of the foregoing; or (iii) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing. "GOVERNMENTAL REQUIREMENT" means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, including, without limitation, Environmental Laws, energy regulations and occupational safety and health standards or controls, of any Governmental Entity. "HAZARDOUS SUBSTANCE" means any Substance which is or is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a contaminant or a source of pollution or contamination under any applicable Environmental Laws. 5 - 5 - "INDENTURE" has the meaning ascribed thereto in the third recital hereof. "INSURANCE PROCEEDS" has the meaning ascribed thereto in section 4.21(a). "INTERCREDITOR AGREEMENT" has the meaning ascribed thereto in the preamble. "LAWS" means all statutes, codes, ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, policies, guidelines, or any provisions of the foregoing, including general principles of common and civil law and equity, binding on or affecting the Person referred to in the context in which such word is used; and "LAW" means any one of such Laws. "LEASES" means all of the right, title and interest which the Corporation has from time to time in and to any and all present and future leases, offers to lease and other agreements to lease of the whole or any part of the Real Property, Leasehold Property or Buildings and any and all present or future agreements and licences whereby the Corporation gives any other Person the right to use or occupy the whole or any part of the Real Property or Buildings, in each case for the time being in effect, and all revisions, alterations, modifications, amendments, extensions, renewals, replacements or substitutions thereof or therefor which may hereafter be effected or entered into but does not include registered servitudes, rights of superficies, or rights in the nature of a servitude, or a right of superficies. "LEASEHOLD PROPERTY" has the meaning ascribed thereto in Section 3.1(b). "LEASEHOLD PROPERTY CONTRACTS" has the meaning ascribed thereto in Section 3.1(b). "LENDERS" has the meaning ascribed thereto in the first recital hereof. "LICENSES" has the meaning ascribed thereto in Section 3.1(a). "LIEN" means, with respect to any property of any Person, any charge, mortgage, prior claims, pledge, hypothec, security interest, security under the Bank Act (Canada), lien, conditional sales (or other title retention agreement or lease in the nature hereof), lease (where such Person is the lessee of such property), servitudes, assignment, adverse claims, defect of title, restriction, trust, right of set-off or other encumbrance of any kind in respect of such property, whether or not filed, recorded or otherwise perfected under applicable law. "MATERIAL ADVERSE EFFECT" means, as to any Person, asset or property, a material adverse effect on the business, assets, properties, condition (financial or other), operations or results of operations of such Person, asset or property, which effect is not adequately and effectively insured or indemnified against by a financially sound insurance company, and excepting effects arising solely out of general national economic conditions and/or effects arising solely out of matters affecting the industry in which such Person, asset or property conducts business a whole. 6 - 6 - "MONEY" or "MONEYS" means those certain proceeds set forth in sections 4.21(a) and 4.21(b). "NEGOTIABLE COLLATERAL" has the meaning ascribed thereto in Section 3.1(c)(v). "NET AWARD" has the meaning ascribed thereto in section 4.21(b). "NOTEHOLDERS" has the meaning ascribed thereto in the preamble. "NOTES" has the meaning ascribed thereto in the third recital hereof. "OBLIGATIONS" has the meaning ascribed thereto in Section 3.2(a). "PAI" means Pioneer Americas, Inc. "PAAC" means Pioneer Americas Acquisition Corp. "PPSA" means the Personal Property Security Act (Ontario). "PERMITTED LIENS" has the meaning ascribed thereto in the Term Loan Agreement. "PERSON" OR "PERSONS" means a corporation, a legal person, a legal entity, an association, a partnership, an organization, a business, an individual, a government or political subsdivision thereof or a government agency. "PLANT" or "PLANTS" means the Real Property and the Buildings, collectively. "PLANS AND SPECIFICATIONS" has the meaning ascribed thereto in section 4.21(d)(i). "PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as of the 22nd day of September, 1997 between the Corporation, ICI Canada Inc., PCI Carolina Inc., Pioneer Companies Inc., ICI Americas Inc. and Imperial Chemical Industries PLC, as same may be amended from time to time. "RATE OF INTEREST" means the rate of interest of twenty-five percent (25%) per annum. "REAL PROPERTY" has the meaning ascribed thereto in Section 3.1(a). "REAL PROPERTY CONTRACTS" has the meaning ascribed thereto in Section 3.1(a). "RECEIVER" means any of a receiver, manager, receiver-manager and receiver and manager. "RELEASE" when used as a verb includes, spill, leak, emit, deposit, discharge, leach, migrate, dump, issue, empty place, seep, exhaust, abandon, bury, incinerate or dispose into the Environment and "RELEASE" when used as a noun has a correlative meaning. 7 - 7 - "RENTS" means all the right, title and interest the Corporation has from time to time in and to (i) any and all rent, income, revenues and profits and other amounts payable or derived from the Leases or securing obligations thereunder; and (ii) any and all indemnities and insurance proceeds received, which may be received or to which the Corporation is or may become entitled in connection with the Rents. "RESTORATION" has the meaning ascribed thereto in section 4.21(c). "RESTORATION ELECTION NOTICE" has the meaning ascribed thereto in section 4.21(c). "SECURITY INTEREST" has the meaning ascribed thereto in Section 3.2(a). "SUBSTANCE" means any substance, waste, liquid, gaseous or solid matter, fuel, micro-organism, sound, vibration, ray, heat, odour, radiation, energy vector, plasma and organic or inorganic matter. "SURETY BOND" means a clean irrevocable surety bond or credit insurance policy in favour of the Collateral Agent issued by an insurance company the claims paying ability rating of which at the time such surety bond or credit insurance policy is delivered is satisfactory to the Collateral Agent, accompanied by an opinion of counsel to such insurance company to the effect that such surety bond or credit insurance policy has been duly authorized, executed and delivered by such insurance company and constitutes the legal, valid and binding obligation of such insurance company enforceable against such insurance company by the Collateral Agent in accordance with its terms subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such surety bond will be given, such surety bond and accompanying opinions are responsive to the requirements of this Debenture; "TAKING" has meaning ascribed thereto in section 4.21(b). "TERM LOAN AGREEMENT" has the meaning ascribed thereto in the first recital hereof. 2.2 PPSA DEFINITIONS. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the PPSA are used in this Debenture, including its preamble and recitals, with such meanings. 2.3 INTERPRETATION. This Debenture shall be interpreted in accordance with the following: (a) words denoting the singular include the plural and vice versa and words denoting any gender include all genders; (b) the division of this Debenture into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Debenture; and 8 - 8 - (c) the word "including" shall mean "including without limitation" and "includes" shall mean "includes without limitation". 2.4 SEVERABILITY. If any provision of this Debenture is or becomes illegal, invalid or unenforceable, such provision shall be severed from this Debenture and be ineffective to the extent of such illegality, invalidity or unenforceability. The remaining provisions hereof shall be unaffected by such provision and shall continue to be valid and enforceable. 2.5 STATUTES, ETC.. Unless otherwise specified herein all references to statutes or regulations are to be treated as references to the same as amended, consolidated, revised or re-enacted from time to time, or to any successor or replacement statutes or regulations. 2.6 GOVERNING LAW. This Debenture shall be governed by, and interpreted in accordance with, the Laws of the Province of Ontario and the Laws of Canada applicable therein, without giving effect to any conflicts of laws rules thereof. The Corporation hereby irrevocably attorns and submits to the non-exclusive jurisdiction of the courts of Ontario with respect to any matter arising under or related to this Debenture. 2.7 SCHEDULES. The following schedule attached hereto shall, for all purposes hereof, be incorporated in and form an integral part of this Debenture: Schedule "A" Real Property ARTICLE 3 SECURITY 3.1 GRANT OF SECURITY. (a) Subject to Section 3.4 hereof, the Corporation hereby: (i) grants, mortgages, hypothecates and charges to and in favour of the Collateral Agent, as and by way of a first fixed and specific mortgage, hypothec and charge, all right, title and interest of the Corporation in and to all real property now owned or hereafter acquired by the Corporation, including the real property described in Schedule "A" hereto, including all buildings, erections and improvements of every kind thereon from time to time and fixtures forming a part thereof (collectively, the "Real Property"); and (ii) assigns and transfers to the Collateral Agent by way of a specific assignment and transfer and grants to the Collateral Agent a security interest in: (A) all Leases, all income, revenues and profits derived from Leases and all rents and other sums payable to the Corporation pursuant to the terms of any Leases and all benefits, advantages and powers to be derived under such Leases, with full power and authority to demand, sue for, recover, receive and give receipts for all Rents and all other monies payable thereunder and otherwise to enforce the rights of the Corporation thereunder; (B) all licenses, permits, approvals, certificates and agreements with or from any Governmental Entity relating directly or indirectly to the ownership, use, development, operation and maintenance of the Real Property or the alteration or renovation or construction of improvements on the Real Property, whether heretofore or hereafter issued or executed (collectively, the "Licenses"); and (C) all options, contracts, subcontracts, agreements, service agreements, warranties and purchase orders which have heretofore been or will hereafter be 9 - 9 - executed by or on behalf of the Corporation or which have been assigned to the Corporation, in connection with the use, development, operation and maintenance of the Real Property or the construction of improvements on the Real Property (collectively, the "Real Property Contracts"). (b) Subject to Section 3.4 hereof, the Corporation hereby grants, assigns, mortgages, hypothecates and charges to and in favour of the Collateral Agent as and by way of a fixed and specific mortgage, hypothec and charge and sublease, all right, title and interest of the Corporation in all real property now or hereafter leased by the Corporation, including all buildings, erections and improvements of every kind thereon from time to time and fixtures forming a part thereof (collectively, the "Leasehold Property") and all Leases relating to such Leasehold Property (collectively, the "Leasehold Property Contracts" and, together with the Real Property Contracts, the "Contracts"). (c) Subject to Section 3.4 hereof, the Corporation hereby mortgages, hypothecates and charges to and in favour of the Collateral Agent as and by way of a fixed and specific mortgage, hypothec and charge, pledges to and in favour of the Collateral Agent, assigns and transfers to and in favour of the Collateral Agent as and by way of specific transfer and assignment, and grants to and in favour of the Collateral Agent a security interest in all of the Corporation's right, title and interest in and to all of the following personal property and undertaking of the Corporation now owned or hereafter acquired (collectively, and together with the property described in Sections 3.1(a) and 3.1(b), the "Collateral", and all references thereto herein including any part thereof): (i) all equipment in all of its forms of the Corporation, wherever located, including all parts thereof and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor and all accessories related thereto ("Equipment"); (ii) all contracts, contract rights, chattel paper, documents, instruments, and general intangibles (excluding: (a) tax refunds as they may arise from or relate solely to the sale of inventory including, without limitation, excise, retail sales and goods and services taxes; and (b) excluding any of the foregoing as it may arise from or relate to inventory or accounts receivables) of the Corporation (including without limitation the asset purchase agreement made as of September 22, 1997 between the Corporation, PCI Carolina Inc., Pioneer Companies, Inc., ICI Canada Inc., ICI Americas Inc. and Imperial Chemical Industries PLC as same may be amended from time to time, and all of the rights and benefits of the Corporation thereunder), whether or not arising out of or in connection with the sale or lease of goods, and all rights of the Corporation now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such contracts, contract rights, chattel paper, documents, instruments, and general intangibles; (iii) all Intellectual Property Collateral (as defined in the Subsidiary (Canadian) Security Agreement dated of even date herewith made by the Corporation in favour of the Collateral Agent (the "Security Agreement")) of the Corporation; 10 - 10 - (iv) all books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section 3.1; (v) all of the Corporation's other property and rights of every kind and description and interests therein, including without limitation, all shares, stock, warrants, deeds, debentures, debenture stock and all other documents which constitute evidence of a share, participation or other interest of the Corporation in property or in an enterprise or which constitutes evidence of an obligation of the issuer thereof (excluding any Capital Stock (as defined in the Term Loan Agreement) which is required to be pledged under the Existing Term Loan Agreement or the Existing Senior Secured Note Indenture (in each case as defined in the Term Loan Agreement) until such time as the obligations pursuant to or under such agreements have been paid in full) (collectively, the "Negotiable Collateral"); and (vi) all products, offspring, rents, issues, profits, returns, income and proceeds of and from any and all of the foregoing Collateral (including without limitation proceeds which constitute property of the types described in this Section 3.1, proceeds deposited from time to time in the Collateral Account (as defined in the Security Agreement) and in any lock boxes of the Corporation in respect of the foregoing, and, to the extent not otherwise included, all payments under insurance (whether or not the Collateral Agent, the Trustee or the Administrative Agent is a loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral). Notwithstanding the foregoing, "Collateral" shall not include the Excluded Assets and any general intangibles or other rights arising under any contracts, instruments, licenses or other documents as to which the grant of a security interest would constitute a violation of a valid and enforceable restriction in favour of a third party on such grant, unless and until any required consents shall have been obtained. Upon the request of the Collateral Agent, the Corporation shall use its best commercial efforts to obtain any consent required. (d) In addition, the Corporation hereby charges to and in favour of the Collateral Agent as and by way of a floating charge, all Collateral, both present and future, and every interest therein which the Corporation now has or hereafter acquires (other than property and assets hereby effectively assigned or subjected to a specific mortgage, hypothec and charge, and subject to the exceptions hereinafter contained). 3.2 OBLIGATIONS SECURED. (a) The mortgages, hypothecs, charges, subleases, pledges, transfers, assignments and security interests granted hereby (collectively, the "Security Interest") secure payment to the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent, the Lenders or any of them of the principal amount hereof, interest thereon and all debts, liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or not, and all other amounts from time to time owing 11 - 11 - hereunder pursuant hereto or arising from dealings between the Collateral Agent, the Trustee, the Noteholder, the Administrative Agent, the Lenders or any of them and the Corporation or from any other dealings or proceedings by which the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent, the Lenders or any of them may be or become in any manner whatever a creditor of the Corporation, and wherever incurred and performance and satisfaction by the Corporation of all its obligations hereunder and thereunder, (collectively, and together with the expenses, costs and charges set out in Section 3.2(b), the "Obligations"). (b) All expenses, costs and charges incurred by or on behalf of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders, or any of them, in connection with this Debenture, the Security Interest or the realization of the Collateral, including, after the occurrence and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture, or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be), all legal fees, court costs, Receiver's remuneration and other expenses of taking possession of, repairing, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral shall be added to and form a part of the Obligations. 3.3 ATTACHMENT. (a) The Corporation hereby acknowledges and agrees that: (i) value has been given; (ii) the Corporation has rights in the Collateral (other than Collateral acquired after the date hereof); and (iii) the Corporation has not agreed with any of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders to postpone the time for attachment of the Security Interest which shall attach upon the execution of this Debenture and, in the case of Collateral acquired after the date hereof, when the Corporation has rights therein. (b) The Corporation hereby agrees to execute and deliver at its own cost and expense from time to time amendments to this Debenture or the schedules hereto or additional security or schedules as may be required by the Collateral Agent in order that the Security Interest shall attach to any personal property subsequently acquired by the Corporation or not adequately described herein. 3.4 SCOPE OF SECURITY INTEREST. (a) To the extent that the creation of the Security Interest would constitute a breach or permit the acceleration of any agreement, lease, right, license or permit to which the Corporation is a party, the Security Interest shall not attach thereto but the Corporation shall hold its interest therein in trust for the Collateral Agent and shall assign such agreement, right, license or permit to the Collateral Agent or as the Collateral Agent may direct, forthwith upon obtaining the consent of the other party thereto and the Corporation hereby agrees that it shall, upon the request of the Collateral Agent, use its best commercial efforts to obtain any consent required to permit any such agreement, lease, right, license or permit to be subject to the Security Interest. (b) The Security Interest shall not extend or apply to the last day of any term reserved by any lease, verbal or written, or any agreement therefor, now held or hereafter acquired by the Corporation, 12 - 12 - but the Corporation shall stand possessed of any such reversion in trust to assign and dispose thereof as the Collateral Agent may direct. (c) Neither the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent nor the Lenders will be deemed in any manner to have assumed any obligation of the Corporation under any of the Licenses or Contracts nor shall the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders be liable to any Governmental Entity by reason of any default by any Person under the Licenses or Contracts. The Corporation agrees to indemnify and hold each of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent and the Lenders harmless of and from any and all liability, loss or damage which such persons incur by reason of any claim or demand against it based on its alleged assumption of the Corporation's duty and obligation to perform and discharge the terms, covenants and agreements in the Licenses and Contracts. (d) The Security Interest shall not extend or apply to Excluded Assets. 3.5 CORPORATION'S DEALINGS WITH COLLATERAL. Except as permitted by the Term Loan Agreement and the Indenture, the Corporation shall not: (a) sell, exchange, lease, release or abandon or otherwise dispose of or otherwise deal with the Collateral; or (b) move or transfer the Collateral or any part thereof to a location other than those specified in Schedule A, or, upon 30 days notice to the Collateral Agent, to any location owned or leased by a subsidiary of the Corporation or PAI. ARTICLE 4 REPRESENTATIONS AND COVENANTS OF THE CORPORATION The Corporation hereby represents and covenants to the Collateral Agent that: 4.1 CORPORATE POWER AND AUTHORITY. The Corporation has the full corporate power and authority to enter into this Debenture and to grant the Security Interest without obtaining the waiver, consent or approval of any lessor, sublessor, Governmental Entity or entity or other party whomsoever and whatsoever which has not been obtained except in the case of certain environmental permits and approvals which, by their terms, are not transferable or cannot be transferred without the prior approval of the issuing agency. 4.2 EXECUTION AND DELIVERY. The execution and delivery of this Debenture have been duly authorized by all necessary corporate action. 4.3 BINDING OBLIGATION. This Debenture, when duly executed and delivered, will be a legal, valid and binding obligation of the Corporation enforceable against it in accordance with its terms; provided that such enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors' rights generally. 13 - 13 - 4.4 GOOD TITLE. The Corporation has good and marketable title to the Collateral. The Buildings upon the Real Property are all within the boundary lines of the Real Property and there are no encroachments thereon that would materially impair the use thereof. The Collateral is free and clear of any and all Liens or encumbrances of any nature or kind except for the Permitted Liens. 4.5 ALL PERMITS. The Corporation has all necessary permits, franchises, licenses, rights-of-way, servitudes or other rights or authority needed in connection with the operation and maintenance of the Plants, except where the failure to have the same would not have a Material Adverse Effect; all of the Contracts are presently in full force and effect and no default has occurred or exists thereunder, except where such default would not individually or in the aggregate have a Material Adverse Effect; except for Permitted Liens, the Corporation's grant of the Security Interest in the manner herein provided does not result in the creation or imposition of any other Lien or security interest, adverse claim or option upon any of the Collateral. 4.6 PLACE OF BUSINESS. The Corporation's registered office is located in the City of Saint John, New Brunswick. The Corporation will not change its name, identity or corporate structure or its registered office or chief place of business without notifying the Collateral Agent at least thirty (30) days prior to the effective date of such change. 4.7 DEFENCE OF TITLE. The Corporation will warrant and defend title to the Collateral, subject to Permitted Liens, against the claims and demands of all other Persons whomsoever and will maintain and preserve the Security Interest so long as any of the Obligations secured hereby remain outstanding. Should an adverse claim be made against the title to any material part of the Collateral, the Corporation agrees it will immediately notify the Collateral Agent in writing thereof and defend against such adverse claim to the extent necessary to preserve the Collateral Agent's rights and benefits hereunder, subject to Permitted Liens, and the Corporation further agrees that the Collateral Agent may take such other reasonable action as it deems advisable to protect and preserve its interests in the Collateral, and in such event the Corporation will indemnify the Collateral Agent against any and all costs, reasonable attorney's fees and other expenses which it may incur in defending against any such adverse claim. Such obligations shall be payable on demand and shall bear interest from the date of demand therefor until paid at the Rate of Interest. Any proceeds of any policy of title insurance maintained by the Corporation with respect to the Collateral shall, for the purposes of this Debenture, be paid and applied in the same manner as Insurance Proceeds. 4.8 FIRST-RANKING SECURITY INTEREST. This Debenture is, and always will be maintained as first-ranking Security Interest upon the Collateral, subject to the Permitted Liens, and the Corporation will not create or suffer to be created or permit to exist any Lien, security interest or charge prior or junior to or on parity with the Security Interest upon the Collateral or any part thereof or upon the rents, issues, revenues, profits or other income therefrom, except for the Permitted Liens. 4.9 MAINTENANCE OF COLLATERAL. The Corporation will, at its own expense, do or cause to be done all things necessary to preserve and keep in full repair, working order and efficiency, reasonable wear and tear excepted, all of the Collateral, including, without limitation, all Equipment and, from time to time, will make all the needful and proper repairs, renewals and replacements so that at all times the 14 - 14 - state and condition of the Collateral will be fully preserved and maintained, unless the failure to repair, renew or replace would not materially interfere with the present use or operation of the Collateral. 4.10 PERFORMANCE OF CONTRACTS. The Corporation will promptly pay and discharge all rentals, or other payments and will perform or cause to be performed each and every act, matter or thing required by, each and all of the contracts, instruments or agreements executed in connection with or incident to the ownership and operation of the Plants and being a portion of the Collateral and will do all other things necessary to keep unimpaired the Corporation's rights with respect thereto and to prevent any forfeiture thereof or default thereunder, unless such forfeiture or default shall not individually or in the aggregate have a Material Adverse Effect. The Corporation will operate the facilities comprising the Plants in a good and workmanlike manner and in accordance with the practices of the industry and in compliance in all material respects with all Governmental Requirements affecting ownership and operation of such facilities, including without limitation, Environmental Laws. 4.11 NAME OF CORPORATION. The Corporation does not do business with respect to the Collateral under any name other than PCI Chemicals Canada Inc./Produits Chimiques PCI Canada Inc. 4.12 OPERATION BY THIRD PARTIES. To the extent any of the Collateral is operated by a party or parties other than the Corporation, the Corporation's covenants as expressed hereunder are modified to require that the Corporation use its best efforts (including without limitation the reasonable exercise of all rights and remedies as are available to the Corporation) to obtain compliance with such covenants by the operator or operators of the Collateral. 4.13 COMPLIANCE WITH LAWS. The Plants comply in all material respects with all local land use requirements of Governmental Entities except for possible nonconforming uses or violations which do not and will not materially interfere with the present use, operation or maintenance thereof as now used, operated or maintained. 4.14 PAYMENT OF TAXES, INSURANCE PREMIUMS, ASSESSMENTS; COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS. (a) Unless contested in accordance with the provisions of section 4.14(e) hereof, the Corporation shall pay and discharge or cause to be paid and discharged, from time to time when the same shall become due, all real estate and other taxes, special assessments, levies, permits, inspection and license fees, all premiums for insurance, all water and sewer rents and charges, and all other public charges imposed upon or assessed against the Collateral or any part thereof or upon the revenues, rents, issues, income and profits of the Collateral, including, without limitation, those arising in respect of the occupancy, use or possession thereof. (b) During the continuance of an Event of Default, the Corporation shall deposit with the Collateral Agent, on the first day of each month, an amount reasonably estimated by the Corporation to be equal to one-twelfth (1/12th) of the annual taxes, assessments and other items required to be discharged by the Corporation under section 4.14(a) and amounts reasonably estimated by the Corporation to be necessary to maintain the insurance coverages contemplated in section 4.16 below, which estimates shall not be less than one-twelfth (1/12th) of the annual taxes, assessments, insurance premiums and other items required to be discharged by the Corporation during the year immediately preceding the year during 15 - 15 - which such Event of Default occurred. Such amounts shall be held by the Collateral Agent without interest to the Corporation and applied to the payment of each obligation in respect of which such amounts were deposited, in such order or priority as the Collateral Agent shall determine, on or before the date on which such obligation would become delinquent. If at any time the amounts so deposited by the Corporation shall, in the Collateral Agent's judgment, be insufficient (when added to the instalments anticipated to be paid thereafter) to discharge any of such obligations when due, the Corporation shall, immediately upon demand, deposit with the Collateral Agent such additional amounts as may be requested by the Collateral Agent. Nothing contained in this section 4.14 shall affect any right or remedy of the Collateral Agent under any provision of this Debenture or of any statute or rule of Law to pay any such amount from its own funds (provided, however, that the Collateral Agent shall not in any event be obligated to pay any of such amounts from its own funds) and to add the amount so paid, together with interest at the Rate of Interest, to the obligations, or relieve the Corporation of its obligations to make or provide for the payment of the annual taxes, assessments and other charges required to be discharged by the Corporation under section 4.14(a). All sums held pursuant to this section 4.14 shall form part of the Collateral. During the continuance of any Event of Default, the Collateral Agent may apply all or any part of the sums held pursuant to this section 4.14 to payment and performance of the Obligations in accordance with the provisions of the Intercreditor Agreement. The Corporation shall redeposit with the Collateral Agent an amount equal to all amounts so applied as a condition to the cure, if any, of such Event of Default, in addition to fulfilment of any other required conditions. (c) Unless contested in accordance with the provisions of section 4.14(e), the Corporation shall timely pay (or obtain a bond in the amount of) all lawful claims and demands of mechanics, materialmen, labourers, warehousemen, employees, suppliers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid or not bonded, could result in or permit the creation of a Lien (other than a Permitted Lien) on the Collateral or any part thereof or the Rents arising therefrom, or which might result in forfeiture of all or any part of the Collateral. (d) The Corporation shall maintain, or cause to be maintained, in full force and effect, all permits, certificates, authorizations, consents, approvals, registrations, filings, licenses, franchises or other instruments now or hereafter required by any Governmental Entity to operate or use and occupy the Plants and the Equipment for its intended uses (collectively, the "PERMITS"; each, a "PERMIT"), unless the failure to maintain such Permits would not individually or in the aggregate have a Material Adverse Effect. Unless contested in accordance with the provisions of section 4.14(e), the Corporation shall comply promptly with, or cause prompt compliance with, all requirements set forth in the Permits and all Governmental Requirements applicable to all or any part of the Collateral or the condition, use or occupancy of all or any part thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force unless the compliance therewith would not individually or in the aggregate have a Material Adverse Effect. The Corporation shall not initiate or consent to any change in the zoning, subdivision or any other use classification of the Real Property, if such action could have a material adverse effect on the Security Interest or materially impair the present use and operation of the Collateral or materially impair the Collateral Agent's rights or benefits hereunder, without the prior written consent of the Collateral Agent. 16 - 16 - (e) The Corporation may at its own expense contest the amount or applicability of any of the obligations described in sections 4.14(a), 4.14(c) and 4.14(d) by appropriate legal proceedings, prosecution of which operates to prevent the collection or enforcement thereof or the sale or forfeiture of the Collateral or any part thereof to satisfy such obligations; provided, however, that: (i) any such contest shall be conducted in good faith by appropriate legal proceedings promptly instituted and diligently conducted; and (ii) in connection with such contest, the Corporation shall have made provision for the payment or performance of such contested obligation on the Corporation's books if and to the extent required by generally accepted accounting principles then utilized by the Corporation in the preparation of its financial statements, or shall have deposited with the Collateral Agent a sum sufficient to pay and discharge such obligation and the Collateral Agent's estimate of all interest and penalties related thereto. Notwithstanding the foregoing provisions of this section 4.14(e): (iii) no contest of any such obligations may be pursued by the Corporation if such contest would expose the Collateral Agent, or any of the Administrative Agent, the Trustee, the Noteholders or the Lenders to any possible criminal liability or, unless the Corporation shall have furnished an Additional Undertaking therefor satisfactory to the Collateral Agent in respect of any civil liability for failure to comply with such obligations; and (iv) if at any time payment or performance of any obligation contested by the Corporation pursuant to this section 4.14(e) shall become necessary to prevent the delivery of a tax or similar deed conveying the Collateral or any portion thereof because of nonpayment or nonperformance, the Corporation shall pay or perform the same in sufficient time to prevent the delivery of such tax or similar deed. (f) The Corporation shall not in its use and occupancy of the Plants or the Equipment (including, without limitation, in the making of any Alteration) take any action that would cause the termination, revocation or denial of any insurance coverage required to be maintained under this Debenture or, that pursuant to written notice from any applicable insurer, would be the basis for a defense to any claim under any insurance policy maintained in respect of any of the Plants or the Equipment and the Corporation shall otherwise comply in all material respects with the requirements of any insurer that issues a policy of insurance in respect of any of the Plants or the Equipment. (g) The Corporation shall, promptly upon receipt of any written notice regarding any failure by the Corporation to pay or discharge any of the obligations described in section 4.14(a) or 4.14(f), furnish a copy of such notice to the Collateral Agent. The Corporation shall, promptly upon receipt of any written notice regarding any failure by the Corporation to pay or discharge any of the obligations described in section 4.14(c) or 4.14(d), furnish a copy of such notice to the Collateral Agent, if such failure would have a Material Adverse Effect. 17 - 17 - 4.15 CERTAIN TAX LAW CHANGES. In the event of the passage after the date of this Debenture of any Law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the Laws for the taxation of debentures or debts secured by debentures for federal, provincial, municipal or local purposes or the manner of the collection of any such taxes, and imposing a new tax, either directly or indirectly, on this Debenture or the interest of any of the Collateral Agent, the Administrative Agent, the Trustee, the Lenders and the Noteholders in any Collateral (other than income, franchise or similar taxes imposed on such Person), or in the event that any regulation or regulatory amendment becoming effective after the date hereof imposes any federal or provincial or municipal or local tax on interest income received with respect to any Obligation, the Corporation shall promptly pay the Collateral Agent such amount or amounts as may be necessary from time to time to pay such tax. 4.16 REQUIRED INSURANCE POLICIES. (a) The Corporation shall maintain, or cause to be maintained, as of and from the Closing Date, in full force and effect the following insurance coverages in respect of the Plants and the Equipment: (i) Physical hazard insurance on an "all risk" basis covering hazards commonly covered by fire and extended coverage, lightning, civil commotion, hail, riot, strike, water damage, sprinkler leakage, collapse and malicious mischief, in an amount equal to the full replacement cost of the Buildings and all Equipment, with such deductibles as would be maintained by a prudent operator of property similar in use and configuration to the Plant and located in the locality where such Plant is located. "Full replacement cost" means the cost of construction to replace the Buildings and the Equipment, exclusive of depreciation, excavation, foundation and footings, as determined from time to time by a proper officer of the Corporation in consultation with its insurance company or insurance agent, as appropriate; (ii) Comprehensive general liability insurance against claims for bodily injury, death or property damage occurring on, in or about the any of the Plants and any adjoining streets, sidewalks and passageways and covering any and all claims, including, without limitation, all legal liability, subject to customary exclusions, to the extent insurable, imposed upon the Collateral Agent or any of the Administrative Agent, Trustee, Lenders or Noteholders, and all court costs and attorneys' fees, arising out of or connected with the possession, use, leasing, operation or condition of the Plants, with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and located in the locality where the Plant is located; (iii) Comprehensive boiler and machinery insurance to cover sudden and accidental breakdown, including but not limited to, explosion of any boilers and machinery located on the Plants or comprising any Equipment, with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and 18 - 18 - configuration to the Plant and the Equipment and located in the locality where the Plant is located; (iv) Comprehensive automobile liability insurance policy against claims for bodily injury, death and property damage covering all owned, leased, non-owned and hired motor vehicles, including loading and unloading in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and the Equipment and located in the locality where the Plant is located; (v) Business interruption insurance on an annual basis in amounts not less than the projected gross profit of each of the Plants during the applicable twelve-month period but in no event less than the amount necessary to pay the fixed charges and other expenses of owning, operating and maintaining the Collateral for the same period; (vi) To the extent not otherwise covered by the insurance required under sections 4.16(a)(i) and (4.16)(a)(ii), during the performance of any Alterations, renovations, repairs, restorations or construction, broad form Builders Risk Insurance on an all-risk completed value basis; and (vii) Such other insurance, against such risks and with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plants and located in the localities in which the Plants are located. (b) The Corporation may maintain the coverages required by this section 4.16 under blanket policies covering the Plants and other locations owned or operated by the Corporation if the terms of such blanket policies otherwise comply with the provisions of this section 4.16 and contain specific coverage allocations in respect of each of the Plants determined in accordance with the provisions of this section 4.16. All insurance policies in respect of the coverages required by sections 4.16(a)(i), 4.16(a)(iv), 4.16(a)(vi) and, if applicable, 4.16(a)(vii) shall be in amounts at least sufficient to prevent coinsurance liability and all losses thereunder shall be payable to the Collateral Agent, as loss payee, subject to the terms of the Intercreditor Agreement, pursuant to a standard Canadian Insurance Bureau standard mortgagee clause for use in the Province of Ontario, or any equivalent thereof, and each such policy shall, to the extent obtainable at commercially reasonable costs, (i) include effective waivers (whether under the terms of such policy or otherwise) by the insurer of all claims for insurance premiums against all loss payees and named insureds other than the Corporation and all rights of subrogation against any named insured, and (ii) provide that any losses thereunder shall be payable notwithstanding (I) any act, failure to act, negligence of, or violation or breach of warranties, declarations or conditions contained in such policy by the Corporation or the Collateral Agent or any other named insured or loss payee, (II) the occupation or use of the Plant or the Equipment for purposes more hazardous than permitted by the terms of the policy, (III) any foreclosure or other proceeding or notice of sale relating to the Plant or the Equipment, or (IV) any change in the title to or ownership or possession of the Plant or the Equipment; provided, 19 - 19 - however, that (with respect to items contemplated in clauses (III) and (IV) above) any notice requirements of the applicable policies are satisfied. All insurance policies in respect of the coverages required by sections 4.16(a)(ii), 4.16(a)(v) and, if applicable, 4.16(a)(vii) shall name the Collateral Agent as an additional insured. (c) Each policy of insurance required under this section 4.16 shall provide that: (i) notices of any failure by the Corporation to pay any insurance premium in respect thereof, be furnished to the Collateral Agent contemporaneously with any such notice given to the Corporation and (ii) it may not be cancelled or otherwise terminated without at least twenty (20) days' prior written notice to the Collateral Agent and shall permit the Collateral Agent to pay any premium therefor within twenty (20) days after receipt of any notice stating that such premium has not been paid when due. The policy or policies of such insurance or certificates of insurance evidencing the required coverages and all renewals or extensions thereof shall be delivered to the Collateral Agent upon receipt by the Corporation. Settlement of any claim under any of the insurance policies referred to in this section 4.16 (other than the insurance contemplated in section 4.16(a)(iii) which in the Corporation's reasonable judgment involves loss of $1,000,000 in lawful currency of the United States or more, shall require the prior approval of the Collateral Agent (acting pursuant to the provisions of the Intercreditor Agreement) and the Corporation shall use its best efforts to cause each such insurance policy to contain a provision to such effect. (d) At least fifteen (15) days prior to the expiration of any insurance policy required by this section 4.16, the Corporation shall deliver to the Collateral Agent evidence that such policy or policies shall be renewed or extended and the Corporation shall deliver promptly to the Collateral Agent after receipt thereof the policy or policies renewing or extending such expiring policy or renewal or extension certificates or other evidence of renewal or extension, together with a receipt showing payment of the premium thereof. (e) The Corporation shall not purchase additional policies in respect of the insurance coverages required to be maintained under this section 4.16, unless the Collateral Agent is included thereon as an additional named insured and, if applicable, with loss payable to the Collateral Agent under an endorsement containing the provisions described in section 4.16(b) and the policy evidencing such insurance otherwise complies with the requirements of section 4.16(b). The Corporation immediately shall notify the Collateral Agent whenever any such separate insurance policy is obtained and promptly shall deliver to the Collateral Agent the policy or certificate evidencing such insurance. 4.17 INSPECTION. The Corporation shall permit the Collateral Agent, by its agents, accountants and attorneys, to visit and inspect the Collateral upon reasonable prior notice at such times as may be reasonably requested by the Collateral Agent. 20 - 20 - 4.18 THE CORPORATION TO MAINTAIN IMPROVEMENTS. The Corporation shall not commit any waste on the Plants or with respect to any Equipment or make any change in the use of the Plant or any Equipment. The Corporation represents and warrants that: (a) to the Corporation's knowledge, the Plants are served by all electric, gas, sewer, water facilities and any other utilities required or necessary for the current use thereof and any easements or servitudes necessary to the furnishing of such utility service by the Corporation have been obtained and duly recorded, and (b) the Corporation has access to the Plants from public roads sufficient to allow the Corporation and its tenants and invitees to conduct its and their businesses at the Plants as they are currently conducted. The Corporation shall not materially alter the occupancy or use of the Plant without the prior written consent of the Collateral Agent. Except as otherwise permitted by the Intercreditor Agreement, no Buildings comprising a portion of any of the Plants may be demolished nor shall any Equipment be removed without the prior written consent of the Collateral Agent. 4.19 LEASES. (a) All of the Leases are valid and effective in accordance with their respective terms, except that the enforcement thereof may be subject to: (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors' rights generally, and (ii) general equitable principles. To the Corporation's knowledge, the Corporation is not in material breach of or in default (and to the Corporation's knowledge, no event has occurred which with due notice or lapse of time or both, may constitute such a material breach or default) under any Lease, and no party to any Lease has given the Corporation written notice of or made a claim with respect to any breach or default, the consequences of which, individually or in the aggregate, would have a Material Adverse Effect on the Corporation. (b) The Corporation shall manage and operate the Collateral or cause the Collateral to be managed and operated in a reasonably prudent manner and, except as otherwise permitted under section 4.20, will not enter into any Lease (or any amendment or modification thereof) or other agreement subsequent to the date hereof with any Person which, in the reasonable judgment of the Corporation, individually or in the aggregate, would have a Material Adverse Effect on the value of the property subject thereto. (c) The Corporation shall not: (i) receive or collect, or permit the receipt or collection of, any rental or other payments under any Lease more than one (1) month in advance of the respective period in respect of which they are to accrue, except that (i) in connection with the execution and delivery of any Lease or of any amendment to any Lease, rental payments thereunder may be 21 - 21 - collected and received in advance in an amount not in excess of one (1) month's rent and (ii) the Corporation may receive and collect escalation and other charges in accordance with the terms of each Lease; (ii) assign, transfer, mortgage or grant a security interest in (other than to the Collateral Agent hereunder or as otherwise permitted under section 4.20 of this Debenture) any rental or other payment under any Lease whether then due or to accrue in the future, the interest of the Corporation as lessor under any Lease or the Rents, issues, revenues, profits or other income of the Collateral; (iii) enter into any Lease after the date hereof that does not contain terms to the effect as follows: (I) such Lease and the rights of the tenant thereunder shall be subject and subordinate to the rights of the Collateral Agent under this Debenture; (II) such Lease has been mortgaged or charged by the Corporation, as landlord thereunder, to the Collateral Agent under this Debenture; (III) in the case of any foreclosure, the rights and remedies of the tenant in respect of any obligations of any successor landlord thereunder shall be limited to the equity interest of such successor landlord in the Plant and any successor landlord shall not (a) be liable for any act, omission or default of any prior landlord under the Lease or (b) be required to make or complete any tenant improvements or capital improvements or repair, restore, rebuild or replace the demised premises or any part thereof in the event of damage, casualty or condemnation or (c) be required to pay any amounts to tenant arising under the Lease prior to such successor landlord taking possession; (IV) the tenant's obligation to pay rent and any additional rent shall not be subject to any abatement, deduction, counterclaim or setoff as against the Collateral Agent or any purchaser upon any foreclosure hereunder in respect of any portion of a Plant, and the Collateral Agent or such purchaser will not be bound by any advance payments of rent in excess of one month or any security deposits unless such security was actually received; and (V) the tenant agrees to attorn, at the option of the Collateral Agent or any purchaser of a Plant, to the successor owner upon any foreclosure hereunder in respect of a Plant or the giving or granting of a deed in lieu thereof; and (iv) terminate or permit the termination of any Lease of space, accept surrender of all or any portion of the space demised under any Lease prior to the end of the term thereof or accept assignment of any Lease to the Corporation which, in the reasonable judgment of the Corporation, individually or in the aggregate, would have a Material Adverse Effect or materially impair the Security Interest unless: 22 - 22 - (I) the tenant under such Lease has not paid the equivalent of two months' rent and the Corporation has made reasonable efforts to collect such rent; or (II) the Corporation shall deliver to the Collateral Agent an officer's certificate to the effect that the Corporation has entered into a new Lease (or Leases) for the space covered by the terminated or assigned Lease with a term (or terms) which expire(s) no earlier than the date on which the terminated or assigned Lease was to expire (excluding renewal options), and with a tenant (or tenants) having a creditworthiness (as reasonably determined by the Corporation) sufficient to pay the rent and other charges due under the new Lease (or Leases), and the tenant(s) shall have commenced paying rent, including, without limitation, all operating expenses and other amounts payable under the new Lease (or Leases), without any abatement or concession, in an amount at least equal to the amount which would have then been payable under the terminated or assigned Lease. (d) The Corporation timely shall perform and observe all the terms, covenants and conditions required to be performed and observed by the Corporation under each Lease and will not engage in any conduct in respect of any Lease which would have individually or in the aggregate a Material Adverse Effect or materially impair the Security Interest. The Corporation promptly shall notify the Collateral Agent of the receipt of any notice from any lessee under any Lease claiming that the Corporation is in material default in the performance or observance of any of the terms, covenants or conditions thereof to be performed or observed by the Corporation and will cause a copy of each such notice to be delivered promptly to the Collateral Agent. 4.20 TRANSFER RESTRICTIONS. Except as otherwise permitted by the Intercreditor Agreement, the Corporation shall not, without the prior written consent of the Collateral Agent, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Collateral or suffer any of the foregoing to occur by operation of Law or otherwise (each a "TRANSFER"); provided, however, the Corporation may so encumber the Collateral to the extent such encumbrances are of the kind listed in clause (d) of the definition of "Permitted Liens". Any proceeds of such permitted Transfer shall be deemed Collateral Proceeds (as defined in the Indenture) and are hereby assigned and shall be paid to the Collateral Agent to be held in the Collateral Account (as defined in the Intercreditor Agreement) and disbursed pursuant to the Intercreditor Agreement. 4.21 DESTRUCTION; EXPROPRIATION. (a) If there shall occur any damage to, or loss or destruction of, the Buildings and Equipment, or any part of any thereof (each, a "DESTRUCTION"), the Corporation shall promptly send to the Collateral Agent a notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of any such Destruction are hereby assigned and shall be paid to the Collateral Agent to be held in the Collateral Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, if such proceeds are in an amount less than $1,000,000 in lawful currency of the United States, such proceeds shall be paid directly to the Corporation. All insurance proceeds paid to the Collateral Agent pursuant to this section, less the amount of any expenses incurred in litigating, arbitrating, compromising or settling any claim arising out of such Destruction (the 23 - 23 - "INSURANCE PROCEEDS"), shall constitute Moneys and be applied in accordance with the provisions of sections 4.21(c), 4.21(d) and 4.21(e). (b) If there shall occur any taking of the Collateral or any part thereof, in or by expropriation proceedings pursuant to any Law, general or special, or by reason of the temporary requisition of the use or occupancy of the Collateral or any part thereof, by any Governmental Entity, civil or military (each, a "TAKING"), the Corporation immediately shall notify the Collateral Agent upon receiving notice of such Taking or commencement of proceedings therefor. The Collateral Agent may (but shall not be obligated to) participate in any proceedings or negotiations which might result in any Taking. The Collateral Agent may be represented by counsel satisfactory to it at the expense of the Corporation. The Corporation shall deliver or cause to be delivered to the Collateral Agent all instruments requested by it to permit such participation. The Corporation shall in good faith and with due diligence file and prosecute what would otherwise be the Corporation's claim for any such award or payment and cause the same to be collected and paid over to the Collateral Agent, and hereby irrevocably authorizes and empowers the Collateral Agent, in the name of the Corporation as its true and lawful attorney-in-fact or otherwise, during the continuance of an Event of Default to collect and to receipt for any such award or payment, and, in the event the Corporation fails so to act, to file and prosecute such claim. The Corporation shall pay all costs, fees and expenses incurred by the Collateral Agent in connection with any Taking and seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the Collateral Agent to be held in the Collateral Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, if such proceeds are in an amount less than $1,000,000 in lawful currency of the United States, such proceeds shall be paid directly to the Corporation. The Corporation shall take all steps necessary to notify the condemning authority of such assignment. Such proceeds, award or payment paid to the Collateral Agent, less the amount of any expenses incurred in litigating, arbitrating, compromising or settling any claim arising out of such Taking ("NET AWARD"), shall constitute Moneys and be applied in accordance with the provisions of sections 4.21(c), 4.21(d) and 4.21(e). (c) So long as no Event of Default shall have occurred and be continuing, the Corporation shall have the right, at the Corporation's option, to perform a restoration (a "RESTORATION") of the affected portions of the Plant and the Equipment. In the event the Corporation elects to perform a Restoration, the Corporation shall give written notice ("RESTORATION ELECTION NOTICE") of such election to the Collateral Agent within twenty (20) business days after the date that the Collateral Agent receives the applicable Insurance Proceeds or Net Award, as the case may be. The Corporation shall, within twenty (20) business days following the date of delivery of a Restoration Election Notice, commence and diligently continue to perform the Restoration of that portion or portions of the Plant and Equipment subject to such Destruction or affected by such Taking so that, upon the completion of the Restoration, the Collateral shall be in the same condition and shall be of at least equal utility for its intended purposes as the Collateral was immediately prior to such Destruction or Taking. The Corporation shall so complete such Restoration with its own funds to the extent that the amount of any Net Award or Insurance Proceeds is insufficient for such purpose. In the event the Collateral Agent does not receive a Restoration Election Notice within such twenty (20) business day period, the Collateral Agent shall deal with such Insurance Proceeds or Net Award in accordance with the provisions of the Intercreditor Agreement. 24 - 24 - (d) In the event a Restoration is to be performed under this section 4.21(d), the Collateral Agent shall not release any part of the Net Award or the Insurance Proceeds except in accordance with the provisions of section 4.21(e) and the Corporation shall, prior to commencing any work to effect a Restoration of the Plant and the Equipment, promptly (but in no event later than one-hundred twenty (120) days following any Destruction or Taking) furnish to the Collateral Agent: (i) complete plans and specifications (the "PLANS AND SPECIFICATIONS") for the Restoration; (ii) an officers' certificate stating that all permits and approvals required by Law to commence work in connection with the Restoration have been obtained; (iii) a certificate (an "ARCHITECT'S CERTIFICATE") of an independent, reputable architect or engineer acceptable to the Collateral Agent and licensed in the Province of Ontario (i) stating that the Plans and Specifications have been reviewed and approved by the signatory thereto, (ii) containing such signatory's estimate (an "ESTIMATE") of the costs of completing the Restoration, and (iii) upon completion of such Restoration in accordance with the Plans and Specifications, the utility of the Plant and the Equipment will be equal to or greater than the utility thereof immediately prior to the Destruction or Taking relating to such Restoration; and (iv) if the Estimate exceeds the Insurance Proceeds or the Net Award, as the case may be, by $5,000,000 in lawful currency of the United States or more, an Additional Undertaking in an amount equal to not less than the Estimate less the amount of the Insurance Proceeds or the Net Award, as the case may be, then held by the Collateral Agent for application toward the cost of such Restoration. Upon receipt by the Collateral Agent of each of the items required pursuant to sections 4.21(d)(i) through 4.21(d)(iv) above, the Collateral Agent shall acknowledge receipt of the Plans and Specifications. Promptly upon such acknowledgment of receipt by the Collateral Agent, the Corporation shall commence and diligently continue to perform the Restoration substantially in accordance with such Plans and Specifications and in material compliance with all Governmental Requirements, free and clear of all Liens except Permitted Liens. The Corporation shall so complete such Restoration with its own funds to the extent that the amount of any Net Award or Insurance Proceeds is insufficient for such purpose. (e) In the event the Corporation performs a Restoration of any of the Plants and Equipment as provided in section 4.21(d), the Collateral Agent shall apply any Insurance Proceeds or Net Award held by the Collateral Agent on account of the Destruction or Taking to the payment of the cost of performing such Restoration pursuant to the relevant provisions of the Intercreditor Agreement. In the event there shall be any surplus after application of the Net Award or the Insurance Proceeds to Restoration of the Plants and the Equipment, such surplus shall become Net Proceeds, as defined in the Indenture for application in accordance thereunder; provided, however, that if an Event of Default shall have occurred and be continuing, such surplus shall be applied by the Collateral Agent to the payment of the Obligations, in accordance with Article 6 of the Intercreditor Agreement. Notwithstanding anything to the contrary herein, if a Destruction or Taking of all or substantially all of the Collateral 25 - 25 - occurs on a date which is less than 12 months prior to Maturity, as such term is defined in the Indenture, all Insurance Proceeds and Net Awards shall be applied to the permanent repayment or prepayment of any Secured Obligations then outstanding in accordance with the Intercreditor Agreement. 4.22 ALTERATIONS. The Corporation shall not make any material structural addition, modification or change (each, an "ALTERATION") to any Plant or the Equipment which would materially diminish the utility of the Collateral or impair the Security Interest. Whether or not the Collateral Agent has consented to the making of any Alteration, the Corporation shall (i) complete each Alteration promptly, in a good and workmanlike manner and in material compliance with all applicable local Laws, and (ii) pay when due all claims for labour performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of section 4.14(e). 4.23 HAZARDOUS MATERIAL (a) Except with respect to those matters which would not reasonably be expected to have a Material Adverse Effect, to the best knowledge of the Corporation, the Corporation holds all Permits required to permit the Corporation to conduct its business in the manner now conducted and none of the Corporation's operations are being conducted in a manner that violates in any material respect the terms and conditions under which any such Permit was granted, including without limitation, under any Environmental Laws, except those permits that are expected to be transferred in the ordinary course after the date hereof; to the best of the knowledge of the Corporation all such Permits are valid and in full force and effect; and to the knowledge of the Corporation, no suspension, cancellation, revocation or termination of any such Permit is threatened. (b) Except as set forth in the Term Loan Agreement, there are no material claims, actions, suits, proceedings or investigations pending or to the knowledge of the Corporation, threatened, before any Governmental Entity or before any arbitrator brought by or against the Corporation or with respect to any of the Collateral the basis of which is any Environmental Law. (c) The Corporation shall (or shall cause other parties obligated to do so under or in accordance with contracts with or indemnity to the Corporation): (i) take all commercially reasonable actions to comply with any and all applicable present and future Environmental Laws relating to the Plants; (ii) pay in a timely fashion the cost of any removal, response measure or corrective action relating to any Hazardous Materials required by any Environmental Law or any order, regulation, consent decree or similar agreement or instrument and keep the Collateral free of any Lien imposed pursuant to any Environmental Law; (iii) take all commercially reasonable actions to not Release any Hazardous Materials on, under or from the Collateral in violation of any Environmental Law; 26 - 26 - (iv) apply any insurance proceeds or other sums received by it in respect of the removal of any Hazardous Material or any other corrective action relating to any Hazardous Material to such removal or corrective action; and (v) not take, or fail to take any action required under any Environmental Laws or in connection with any Hazardous Materials that could reasonably be expected to result in the incurrence of any obligation or liability of any of the Collateral Agent, Administrative Agent, Trustee, Lenders or Noteholders. During the continuance of an Event of Default, in the event the Corporation fails to comply with the covenants in the preceding sentence, the Collateral Agent may (upon receipt of an indemnity satisfactory to the Collateral Agent), in addition to any other remedies set forth herein, but shall not be obligated to, as mandatary for and at the Corporation's sole cost and expense cause to be taken, any remediation, removal, response or corrective action relating to Hazardous Materials that is required by Environmental Law and is not being done or contested by the Corporation. Any costs or expenses incurred by the Collateral Agent for such purpose shall be immediately due and payable by the Corporation and shall bear interest at the Rate of Interest. The Corporation shall provide to the Collateral Agent and its agents and employees access to the Collateral to take any action required by Environmental Laws, or in connection with any Hazardous Materials, that could be expected to result in the incurrence of any obligation or liability of any of the Collateral Agent, Administrative Agent, Trustee, Lenders or Noteholders, if the Corporation fails to do so and such action or removal is required under any Environmental Laws as provided above. Upon written request by the Collateral Agent, which shall include a reasonably specific statement of the basis thereof (which shall be specific to the condition of the Collateral and the alleged violation of Environmental Law) and which shall be made not more frequently than once in any twelve-month period or at any time that the Collateral Agent is exercising its remedies under this Debenture, the Collateral Agent shall have the right (upon receipt of an indemnity satisfactory to the Collateral Agent), but shall not be obligated, at the sole cost and expense of the Corporation, to conduct an environmental audit or review of the Collateral relating to the specific items as required in writing or relating to the remedy that the Collateral Agent is exercising under this Debenture by persons or firms appointed by the Collateral Agent, and the Corporation shall cooperate in all reasonable respects in the conduct of such environmental audit or review, including, without limitation, by providing reasonable access to the Collateral and to all records relating thereto. The Corporation shall indemnify and hold each of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders harmless from and against all loss, cost, damage or expense (including, without limitation, attorneys' fees) that any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders may sustain by reason of the assertion against such party of any claim relating to such Hazardous Materials or actions taken with respect thereto as authorized hereunder. Nothing contained herein shall result in any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders being deemed an "owner" or "operator" under applicable Environmental Law. 27 - 27 - (d) The Corporation may at its own expense contest the amount or applicability of any of the obligations described in the first sentence of section 4.23(c) by appropriate legal proceedings, prosecution of which operates to prevent the enforcement thereof; provided, however, that: (i) any such contest shall be conducted in good faith by appropriate legal proceedings promptly instituted and diligently conducted and (ii) in connection with such contest, the Corporation shall have made provision for the payment or performance of such contested obligation on the Corporation's books if and to the extent required by generally accepted accounting principles then utilized by the Corporation in the preparation of its financial statements, or shall have deposited with the Collateral Agent a sum sufficient to pay and discharge such obligation and the Collateral Agent's estimate of all interest and penalties related thereto. Notwithstanding the foregoing provisions of this section 4.23(d), no contest of any such obligations may be pursued by the Corporation if such contest would expose the Collateral Agent, or any of the Administrative Agent, Trustee, Lenders or Noteholders to any possible criminal liability or, unless the Corporation shall have furnished an Additional Undertaking therefor satisfactory to the Collateral Agent or for any civil liability for failure to comply with such obligations. 4.24 ASBESTOS. The Corporation shall not install nor permit to be installed in the Collateral friable asbestos or any asbestos-containing material (collectively, "ACM") except in compliance with all applicable Environmental Laws respecting such material. With respect to any ACM currently present in the Collateral, except with respect to matters which would not have a Material Adverse Effect, the Corporation shall comply with all Laws applicable to ACM located on any of the Plants, all at the Corporation's sole cost and expense. If the Corporation shall fail so to comply with such Laws, the Collateral Agent may (upon receipt of an indemnity satisfactory to the Collateral Agent) during the continuance of an Event of Default, but shall not be obligated to, in addition to any other remedies set forth herein, take those steps reasonably necessary to comply with applicable Laws. Any costs or expenses incurred by the Collateral Agent for such purpose shall be immediately due and payable by the Corporation and bear interest at the Rate of Interest. The Corporation shall provide to the Collateral Agent and its agents and employees reasonable access to the Collateral upon reasonable prior notice to remove such ACM if the Corporation fails to do so and removal is required under any Environmental Law as provided for above; provided, however, that nothing contained herein shall obligate the Collateral Agent to exercise any rights under such access. The Corporation shall indemnify and hold each of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders harmless from and against all loss, cost, damage and expense that any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders may sustain as a result of the presence of any ACM and any removal thereof in compliance with any applicable Environmental Law. 4.25 BOOKS AND RECORDS; REPORTS. The Corporation shall keep proper books of record and account, which shall accurately represent the financial condition of the Corporation and the business affairs of the Corporation relating to the Collateral. The Collateral Agent and its authorized representatives shall have the right, from time to time, upon reasonable prior notice to examine the books and records of the Corporation relating to the operation of the Collateral at the office of the Corporation. 28 - 28 - 4.26 NO CLAIMS AGAINST THE COLLATERAL AGENT. Nothing contained in this Debenture shall constitute any consent or request by the Collateral Agent, express or implied, for the performance of any labour or services or the furnishing of any materials or other property in respect of the Plant or any part thereof, nor as giving the Corporation any right, power or authority to contract for or permit the performance of any labour or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Collateral Agent in respect thereof or any claim that any Lien based on the performance of such labour or services or the furnishing of any such materials or other property is ranked in priority to the Security Interest. 4.27 UTILITY SERVICES. The Corporation shall pay, or cause to be paid, when due all charges for all public or private utility services, all public or private rail and highway services, all public or private communication services, all sprinkler systems, and all protective services, any other services of whatever kind or nature at any time rendered to or in connection with the Plants or any part thereof, shall comply in all material respects with all contracts relating to any such services, and shall do all other things reasonably required for the maintenance and continuance of all such services to the extent required to fulfil the obligations set forth in section 4.18. ARTICLE 5 DEFAULT AND ENFORCEMENT 5.1 DEFAULT. The Security Interest shall become enforceable against the Corporation if and only if and when the Corporation shall fail to pay, perform or satisfy any of the Obligations when due and payable or required to be performed or satisfied, as the case may be, but not otherwise (each such failure is an "Event of Default"). Upon the occurrence of an Event of Default, the Obligations shall immediately become due and payable by the Corporation to the Collateral Agent without necessity of any further act or formality and, thereafter, the Corporation shall not be entitled to sell, assign, transfer, exchange, lease or otherwise dispose of or deal with all or any part of the Collateral. 5.2 REMEDIES. Whenever the Security Interest has become enforceable, the Collateral Agent may in its discretion: (a) take possession of all or any part of the Collateral with power to exclude the Corporation and its officers, employees and agents therefrom; (b) take all such steps as the Collateral Agent may consider necessary or desirable for the purposes of preserving, maintaining and completing all or any part of the Collateral and making such replacements thereof and improvements and additions thereto as the Collateral Agent may consider expedient; (c) carry on all or any part of the business of the Corporation relating to the Collateral and use all or any part of the Collateral directly in carrying on the Corporation's business or as security for loans or advances to enable the Collateral Agent to carry on the Corporation's business or otherwise; (d) receive the rents, incomes and profits of any kind whatsoever from the Collateral and pay therefrom: (i) any expenses of preserving, maintaining and completing the Collateral, of making such 29 - 29 - replacements thereof and improvements and additions thereto as the Collateral Agent may consider expedient and of carrying on all or any part of the Corporation's business relating to the Collateral; and (ii) any charges against the Collateral ranking in priority to or pari passu with the Security Interest or the payment of which may be necessary or desirable to preserve or protect all or any part of the Collateral or the interest of the Collateral Agent therein; (e) lease all or any part of the Collateral and renew from time to time all or any of the Leases on such terms and conditions as the Collateral Agent may determine; (f) with or without taking possession, take any action or proceedings to enforce the performance of any covenant contained in any of the Leases; (g) enjoy and exercise all the powers of the Corporation as the Collateral Agent considers necessary or desirable for the exercise of any and all of the remedies of the Collateral Agent provided for herein, including the powers to make any arrangement or compromise on behalf and in the name of the Corporation which the Collateral Agent considers expedient, to purchase on credit and borrow money on behalf and in the name of the Corporation and to advance moneys to the Corporation, all at such rates of interest as the Collateral Agent may consider reasonable, and to enter into contracts and undertake obligations on behalf of and in the name of the Corporation for any and all of the foregoing purposes or which the Collateral Agent considers necessary or desirable for the exercise of any of the rights, powers and remedies of the Collateral Agent provided for herein, all of which borrowings, advances and obligations together with interest thereon shall, at the discretion of the Collateral Agent, be entitled to the security hereof in priority to the payment of the Obligations; (h) sell or otherwise dispose of all or any part of the Collateral; (i) apply to a court for the appointment of a Receiver to take possession of all or such part of the Collateral as the Collateral Agent shall designate, with such duties, powers and obligations as the court making the appointment shall confer; (j) appoint a Receiver of all or any part of the Collateral by instrument in writing executed by the Collateral Agent; (k) institute proceedings in any court of competent jurisdiction for sale or foreclosure of the Collateral; and (l) take any steps or proceedings of any kind permitted by applicable Law or in equity or otherwise to enforce payment of the Obligations or performance of any other covenant or obligation of the Corporation contained herein, and exercise all rights and remedies of a secured party under the PPSA. 5.3 REMEDIES CUMULATIVE AND WAIVER. The rights and remedies hereunder of the Collateral Agent are cumulative and are in addition to and not in substitution for any other rights and remedies provided by law or by equity. Any single or partial exercise by the Collateral Agent of any right or remedy in respect of a default or breach of any term, covenant or condition contained herein shall not be deemed to be a waiver thereof or to alter, affect or prejudice any other right or remedy or other rights 30 - 30 - or remedies to which the Collateral Agent may be lawfully entitled, for such default or breach. The Collateral Agent shall at all times have the right to proceed against all or any portion of the Collateral or any other security in such order and in such manner as it shall determine without waiving any rights, powers or remedies which the Collateral Agent may have with respect to this Debenture or any other security or at law, in equity or otherwise. No delay or omission by the Collateral Agent in exercising any right, power or remedy hereunder or otherwise shall operate as a waiver thereof or of any other right, power or remedy. Any waiver by the Collateral Agent of the strict observance, performance or compliance with any term, covenant, condition or agreement herein contained and any indulgence granted, either expressly or by course of conduct, by the Collateral Agent shall be effective only in the specific instance and for the purpose of which it was given and shall be deemed not to be a waiver of any rights and remedies of the Collateral Agent hereunder as a result of any other default or breach hereunder. No consent or waiver by the Collateral Agent shall be effective unless made in writing and signed by an authorized officer of the Collateral Agent. 5.4 CONCERNING THE RECEIVER. (a) Any Receiver appointed by the Collateral Agent shall be vested with the rights and remedies which could have been exercised by the Collateral Agent in respect of the Corporation or the Collateral and such other powers and discretions as are granted in the instrument of appointment and any instrument or instruments supplemental thereto. The identity of the Receiver, any replacement thereof and any remuneration thereof shall be within the sole and unfettered discretion of the Collateral Agent. (b) Any Receiver appointed by the Collateral Agent shall act as agent for the Collateral Agent for the purposes of taking possession of the Collateral, but otherwise and for all other purposes (except as provided below) as agent for the Corporation. The Receiver may sell, lease, or otherwise dispose of the Collateral as agent for the Corporation or as agent for the Collateral Agent as the Collateral Agent may determine in its discretion. The Receiver shall apply all monies from time to time received by the Receiver in such order or priority, as the Collateral Agent may at their option direct. If there shall be a deficiency, the Corporation shall remain liable for such deficiency and shall pay the amount of such deficiency to the Collateral Agent forthwith. The balance of proceeds realized in respect of the Collateral, if any, remaining after repayment in full of the Obligations shall be paid to the Corporation or such other Person or Persons entitled thereto by applicable Law. The Corporation agrees to ratify and confirm all actions of the Receiver acting as agent for the Corporation, and to release and indemnify the Receiver in respect of all such actions. (c) The Collateral Agent, in appointing or refraining from appointing any Receiver, shall not incur liability to the Receiver, the Corporation or otherwise and shall not be responsible for any misconduct or negligence of such Receiver. 5.5 APPOINTMENT OF ATTORNEY. The Corporation hereby irrevocably appoints the Collateral Agent (and any of its officers) as attorney of the Corporation with full power of substitution to exercise, at any time when the Security Interest shall have become enforceable, in the name of and on behalf of the Corporation any of the Corporation's right, title and interest in and to the Collateral (including the right of disposal, execution, endorsement, delivery and transfer of all or any part of the Collateral). All acts of any such attorney are hereby ratified and approved, and such attorney shall not be liable for any 31 - 31 - act, failure to act or any other matter or thing in connection therewith, except for its own gross negligence or wilful misconduct. 5.6 DEALING WITH THE COLLATERAL AND THE SECURITY INTEREST. (a) The Collateral Agent shall not be obliged to exhaust its recourse against the Corporation or any other Person or Persons or against any other security the Collateral Agent may hold in respect of the Obligations before realizing upon or otherwise dealing with the Collateral in such manner as the Collateral Agent may consider desirable. (b) The Collateral Agent may grant extensions or other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Corporation and with other parties, sureties or securities as the Collateral Agent may see fit without prejudice to the Obligations or the rights of the Collateral Agent in respect of the Collateral. (c) The Collateral Agent shall not be: (i) liable or accountable for any failure to collect, realize or obtain payment in respect of the Collateral; (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Collateral or for the purpose of preserving any rights of the Collateral Agent, the Corporation or any other Person in respect thereof; (iii) responsible for any loss occasioned by any sale or other dealing with the Collateral or by the retention of or failure to sell or otherwise deal therewith; or (iv) bound to protect the Collateral from depreciating in value or becoming worthless. 5.7 STANDARDS OF SALE. Without prejudice to the ability of the Collateral Agent to dispose of the Collateral in any manner which is commercially reasonable, the Corporation acknowledges that a disposition of Collateral by the Collateral Agent which takes place substantially in accordance with the following provisions shall be deemed to be commercially reasonable: (a) Collateral may be disposed of in whole or in part; (b) Collateral may be disposed of by public auction, public tender or private contract, with or without advertising and without any other formality; (c) any purchaser or lessee of such Collateral may be a customer of the Collateral Agent, provided that such transaction is bona fide; (d) a disposition of Collateral may be on such terms and conditions as to credit or otherwise as the Collateral Agent, in its sole discretion, may deem advantageous; and (e) the Collateral Agent may establish an upset or reserve bid or price in respect of the Collateral. 5.8 DEALINGS BY THIRD PARTIES. No Person dealing with any of the Collateral Agent or its agent or a Receiver shall be required: (i) to determine whether the Security Interest has become enforceable; (ii) to determine whether the powers which the Collateral Agent or its agent is purporting 32 - 32 - to exercise have been exercisable; (iii) to determine whether any money remains due to the Collateral Agent by the Corporation; (iv) to determine the necessity or expediency of the stipulations and conditions subject to which any sale or lease shall be made; (v) to determine the propriety or regularity of any sale or any other dealing by the Collateral Agent with the Collateral; or (vi) to see to the application of any money paid to the Collateral Agent. The Security Interest is in addition to and not in substitution for any security now held or hereafter acquired by the Collateral Agent as security for the Obligations. 5.9 CORPORATION LIABLE FOR THE DEFICIENCY. In the case of any judicial or other steps or proceedings to enforce the Security Interest, and without limiting any right of the Collateral Agent to obtain judgment for any greater amount, the Corporation shall remain liable to the Collateral Agent for any amount which may remain due in respect of the Obligations after application to the payment thereof of the proceeds of any sale, lease or other disposition of the Collateral or any part thereof. 5.10 NOTICE OF SALE. Unless required by applicable Law, neither the Collateral Agent nor any Receiver appointed by them shall be required to give the Corporation any notice of any sale, lease or other disposition of the Collateral or any part thereof or the date after which any private disposition of Collateral or any part thereof is to be made. 5.11 PAYMENT OF PRIOR CLAIMS. If the Collateral Agent is at any time or from time to time required to make a payment to defeat or honour the priority or possible priority of any Liens on or in respect of all or any part of the Collateral, any such payment or payments, and the costs, charges and expenses of the Collateral Agent in connection therewith (including legal fees on a solicitor and client basis) shall be payable by the Corporation on demand. ARTICLE 6 GENERAL 6.1 NOTICE. Any and all demands, notices or other communications to be made or given pursuant to this Debenture shall be given and received in the manner and at the addresses specified in Section 11.2 of the Intercreditor Agreement. 6.2 RELEASES. Subject to the provisions of the Term Loan Agreement and the Indenture, the Collateral Agent may in its discretion, from time to time, release any part of the Collateral or any other security held by the Collateral Agent either with or without any sufficient consideration therefor, without responsibility therefor and without thereby releasing any other part of the Collateral or any other security or any Person from the security created by this Debenture or from any of the covenants herein contained. Each and every portion into which the Collateral is or may hereafter be divided does and shall stay charged with the Obligations. No Person shall have the right to require the Obligations to be apportioned and the Collateral Agent shall not be accountable to the Corporation for any moneys except those actually received by the Collateral Agent. 6.3 EXPENSES. The Corporation shall pay to the Collateral Agent on demand all of the costs, charges and expenses of the Collateral Agent (including legal fees on a solicitor and client basis and Receiver's fees) in connection with the preparation, registration or amendment of this Debenture, the perfection or preservation of the Security Interest, the enforcement by any means of any provision hereof 33 - 33 - or, after the occurrence of and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture, or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be) the exercise of any rights, powers or remedies hereunder, including all such costs, charges and expenses in connection with taking possession, maintaining, completing, preserving, protecting, collecting or realizing upon all or any part of the Collateral or carrying on all or any part of the Corporation's business relating to the Collateral. 6.4 DISCHARGE OF DEBENTURE. The Security Interest shall be released and discharged upon full and complete payment, performance and satisfaction of all of the Obligations and at the request and sole cost and expense of the Corporation. The Collateral Agent, the Administrative Agent and the Trustee shall execute and deliver to the Corporation such releases and discharges as the Corporation may reasonably require. 6.5 NO MERGER OF ESTATES. There shall not be deemed to be any merger of this Debenture, nor of the rights and interests of the Collateral Agent hereunder, with the estate in the Real Property or with the reversion or rights and interests of the Corporation or the Collateral Agent under any instrument affecting the Collateral by reason only of the fact that the same Person may own or acquire, directly or indirectly, two or more estates, rights or interests in the Collateral until all Persons having any interest under this Debenture, the estate in the Real Property or the reversion or rights and interests of the Corporation or the Collateral Agent under any instrument affecting the Collateral, by an appropriate instrument, so declare and provide. 6.6 NO OBLIGATION TO ADVANCE. Neither the issue nor delivery of this Debenture shall obligate the Collateral Agent, the Trustee, any Noteholder, the Administrative Agent or any Lender to advance any funds, or otherwise make or continue to make any credit available, to the Corporation. 6.7 EXCLUSION OF IMPLIED COVENANTS. The implied covenants deemed to be included in a charge under subsection 7(1) of the Land Registration Reform Act (Ontario) shall be and are hereby expressly excluded from the terms of this Debenture. 6.8 PERFECTION OF SECURITY. The Corporation shall register, file or record all financing statements and other documents in all offices where, in the opinion of the Collateral Agent, such registration, filing or recording is necessary or desirable to preserve, perfect or otherwise protect the Security Interest and the priority thereof. The Collateral Agent shall have the right to require that the form of this Debenture or any part thereof be amended to reflect any changes in applicable Law whether arising as a result of statutory amendments, court decisions or otherwise, in order to confer upon the Collateral Agent the security interest intended to be created by this Debenture, except that in no event shall the Collateral Agent require that any such amendment be effected if the result thereof would be to grant to the Collateral Agent greater rights than are otherwise contemplated herein. 6.9 ASSIGNMENTS AND PARTICIPATIONS. The Collateral Agent may sell, assign, transfer or otherwise dispose of all or any of the Obligations in accordance with the provisions governing the Obligations and, in such event, each and every immediate and successive assignee, transferee or holder of all or any of the Obligations, shall have, in respect of the rights or obligations sold, assigned, 34 - 34 - transferred or otherwise disposed of, the full benefit hereof to the same extent as if it were an original party to the Obligations or the part thereof so sold, assigned, transferred or otherwise disposed. None of the rights or obligations hereunder of the Corporation may be assigned without the prior written consent of the Collateral Agent, except in accordance with the provisions of the Intercreditor Agreement. 6.10 ENUREMENT. This Debenture shall enure to the benefit of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent and the Lenders, their respective successors and assigns and be binding upon the Corporation and its successors and permitted assigns. 6.11 TIME OF ESSENCE. Time shall be of the essence of this Debenture with respect to the obligations of the Corporation hereunder. 6.12 AMENDMENTS. This Debenture may be amended only by written agreement of the Corporation and the Collateral Agent. 6.13 FURTHER ASSURANCES. The Corporation shall from time to time, whether before or after the Security Interest shall have become enforceable, at its sole cost and expense, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may reasonably require for protecting the Collateral or perfecting the Security Interest and for exercising all powers, authorities and discretions hereby conferred upon the Collateral Agent, and the Corporation shall, from time to time after the Security Interest has become enforceable, at its sole cost and expense, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may require for facilitating the sale of the Collateral in connection with any realization thereof. 6.14 JUDGMENT CURRENCY. If, for the purposes of obtaining judgment in any court, it is necessary to convert any sum due, or owing to the Collateral Agent in any currency (the "Original Currency") into another currency (the "Other Currency"), the Corporation hereby agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Collateral Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which the final judgment is granted. The Obligations of the Corporation in respect of any sum due in the Original Currency from it to the Collateral Agent shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Collateral Agent of any such sum adjudged to be so due or owing in such Other Currency, the Collateral Agent may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due or owing to the Collateral Agent in the Original Currency, the Corporation shall, as a separate obligation and notwithstanding any such judgment, indemnify the Collateral Agent for the benefit of the Trustee, on its own account and on account of each Noteholder, and the Administrative Agent, on its own account and on account of each of the Lenders, against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due or owing to the Collateral Agent in the Original Currency, the Collateral Agent shall remit such excess to the Corporation. 35 6.15 COPY RECEIVED. The Corporation acknowledges receipt of a copy of this Debenture. IN WITNESS WHEREOF the Corporation has executed this Debenture on the date first above written. PCI CHEMICALS CANADA INC. Per: /s/ KENT R. STEPHENSON ---------------------- Authorized Signing Officer c/s EX-4.5B 6 DEMAND DEBENTURE (NOVA SCOTIA) DATED 10/30/97 1 EXHIBIT 4.5(b) DEMAND DEBENTURE (NOVA SCOTIA) U.S. $500,000,000 Date: October 30, 1997 This debenture (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Debenture"), dated as of October 30, 1997, is made by PCI Chemicals Canada Inc., a New Brunswick corporation (the "Corporation"), in favour of United States Trust Company of New York, as collateral agent (together with any successors thereto in such capacity, the "Collateral Agent") for its own benefit and the benefit of the Administrative Agent (as defined below) and of the Lenders (as defined below), and the Trustee (as defined below) and of the holders (the "Noteholders") of Notes (as defined below), pursuant to that certain Intercreditor and Collateral Agency Agreement (the "Intercreditor Agreement") dated the date hereof among the Corporation, the Trustee, the Administrative Agent, the Collateral Agent, Pioneer Americas, Inc. ("PAI") and Pioneer Americas Acquisition Corp. ("PAAC"). W I T N E S S E T H: WHEREAS pursuant to a term loan agreement dated as of October 30, 1997 (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Term Loan Agreement"), among PAI, PAAC, as the parent guarantor, the various financial institutions as are, or may from time to time become, parties thereto (each individually a "Lender" and collectively the "Lenders"), the Collateral Agent, Bank of America National Trust and Savings Association, as administrative agent (together with any successor(s) thereto in such capacity, the "Administrative Agent"), DLJ Capital Funding, Inc., as the Syndication Agent for the Lenders and Salomon Brothers Holding Company Inc., as the Documentation Agent for the Lenders, the Lenders have extended commitments to make Term Loans (as defined therein) to PAI; AND WHEREAS the Corporation has executed a guarantee (the "Guarantee") dated the date hereof in favour of the Administrative Agent, for its own benefit and the benefit of each of the Lenders, of the obligations of PAI under the Term Loan Agreement; AND WHEREAS the Corporation has issued notes ("Notes") pursuant to that certain Indenture (the "Indenture") dated the date hereof among the Corporation, PAAC and the other Guarantors named therein, and United States Trust Company of New York (together with any successor(s) thereto in such capacity, the "Trustee"); AND WHEREAS the Corporation has duly authorized the execution, delivery and performance of this Debenture; 2 - 2 - NOW THEREFORE in consideration of the foregoing and for such other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation hereby covenants and agrees as follows: ARTICLE 1 PROMISE TO PAY 1.1 PROMISE TO PAY. The Corporation, for value received, hereby acknowledges itself indebted and promises to pay to or to the order of the Collateral Agent, at such address or addresses as the Collateral Agent may designate at any time and from time to time by notice in writing to the Corporation, ON DEMAND, the maximum principal amount of five hundred million dollars ($500,000,000) in lawful money of the United States of America, and to pay interest on the principal amount outstanding under or in connection with the Obligations from time to time and on all other amounts owing hereunder to the date of payment in accordance with terms and provisions hereof at a rate of twenty-five (25%) percent per annum; such interest to be calculated daily, not in advance and to be payable in like money on demand, both before and after maturity and default, with interest on overdue interest at the same rate. ARTICLE 2 INTERPRETATION 2.1 DEFINITIONS. "ACM" has the meaning ascribed thereto in section 4.24. "ADDITIONAL UNDERTAKING" means (i) cash or cash equivalents or (ii) a Surety Bond, an Additional Undertaking Guarantee or an Additional Undertaking Letter of Credit which is provided by a Person, whose long-term unsecured debt is rated at least "AA" (or equivalent) by a nationally recognized statistical rating agency and is otherwise satisfactory to the Collateral Agent; Additional Undertakings are addressed directly to the Collateral Agent and name the Collateral Agent as the beneficiary thereof and the party entitled to make claims thereunder. "ADDITIONAL UNDERTAKING GUARANTEE" means the unconditional guarantee of payment of any corporation or partnership organized and existing under the laws of the United States of America or any State or the District of Columbia or Canada or province thereof that has a long-term unsecured debt rating satisfactory to the Collateral Agent at the time such guarantee is delivered, given to the Collateral Agent, accompanied by an opinion of counsel to such guarantor to the effect that such guarantee has been duly authorized, executed and delivered by such guarantor and constitutes the legal, valid and binding obligation of such guarantor enforceable against such guarantor by the Collateral Agent in accordance with its terms, subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such guarantee will be given, such guarantee and accompanying opinion are responsive to the requirements of this Debenture. 3 - 3 - "ADDITIONAL UNDERTAKING LETTER OF CREDIT" means a clean, irrevocable, unconditional letter of credit in favour of the Collateral Agent and entitling the Collateral Agent to draw thereon in the City of New York issued by a bank satisfactory to the Collateral Agent, accompanied by an opinion of counsel to such bank to the effect that such letter of credit has been duly authorized, executed and delivered by such bank and constitutes the legal, valid and binding obligation of such bank enforceable against such bank by the Collateral Agent in accordance with its terms subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such letter of credit will be given, such letter of credit and accompanying opinion are responsive to the requirements of this Debenture. "ADMINISTRATIVE AGENT" has the meaning ascribed to it in the first recital. "ALTERATION" has the meaning ascribed thereto in section 4.22. "ARCHITECT'S CERTIFICATE" has the meaning ascribed thereto in section 4.21(d)(iii). "BUILDINGS" means all of the right, title and interest which the Corporation has from time to time in and to (i) any and all present and future structures and works of a permanent nature located, from time to time in, on or upon the Real Property, including, without limitation, all buildings, structures, facilities, accessories, appurtenances and other improvements (including present and future parking areas) located from time to time in, on or upon the Real Property and (ii) any and all alterations, reconstructions, additions or expansions to and all repairs or replacements of any such property during the term of this Debenture. "BUSINESS DAY" means any day other than a Saturday or a Sunday and any day on which banks situated in the Province of Nova Scotia are authorized or obligated to be closed. "CLOSING DATE" has the meaning ascribed thereto in the Purchase Agreement. "COLLATERAL" has the meaning ascribed thereto in Section 3.1(c). "COLLATERAL AGENT" has the meaning ascribed thereto in the preamble to this Debenture. "COLLATERAL ACCOUNT" has the meaning ascribed thereto in the Intercreditor Agreement. "COLLATERAL PROCEEDS" has the meaning ascribed thereto in the Indenture. "CONTRACTS" has the meaning ascribed thereto in Section 3.1(b). "CORPORATION" means PCI Chemicals Canada Inc./Produits Chimiques PCI Canada Inc. and its successors and assigns. "DESTRUCTION" has the meaning ascribed thereto in section 4.21(a). 4 - 4 - "EXCLUDED ASSETS" means (a) the inventory of the Corporation, including goods held for sale or lease, goods furnished or to be furnished to third parties under contracts of lease, consignment or service, goods which are raw materials or work in process, goods used in or procured for packing and materials used or consumed in the business of the Corporation, (b) accounts due or accruing due and all records entered or recorded by any system of mechanical or electronic data processing or any other information storage device, agreements, books, accounts, invoices, letters, documents and papers recording evidencing or relating thereto, and (c) all contracts, contract rights, chattel paper, documents, instruments, and general intangibles arising from or relating to any of the foregoing. "ENVIRONMENT" means all components of the earth, including, without limitation, air (and all layers of the atmosphere), land (and all surface and subsurface soil, underground spaces and cavities and all land submerged under water) and water (and all surface and underground water), organic and inorganic matter and living organisms, and the interacting natural systems that include components referred to above in this definition of "Environment". "ENVIRONMENTAL LAWS" means all applicable Laws relating to the Environment, Hazardous Substances, pollution or protection of the Environment, including Laws relating to: (i) on site or off-site contamination; (ii) chemical substances or products; (iii) Releases of pollutants, contaminants, chemicals or other industrial, toxic or radioactive substances or Hazardous Substances into the Environment; and (iv) the manufacture, processing, distribution, use, treatment, storage, transport, packaging, labelling, sale, recycling, disposal, destruction, incineration, burial, advertising, display or handling of Hazardous Substances. "EQUIPMENT" has the meaning ascribed thereto in section 3.1(c). "EVENT OF DEFAULT" has the meaning ascribed thereto in section 5.1. "GOVERNMENTAL ENTITY" means any: (i) multinational, federal, provincial, state, regional, municipal, local or other government, governmental or public department, central bank, court, commission, board, bureau, agency or instrumentality, domestic or foreign; (ii) any subdivision, agent, commission, board, or authority of any of the foregoing; or (iii) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing. "GOVERNMENTAL REQUIREMENT" means any law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement, including, without limitation, Environmental Laws, energy regulations and occupational safety and health standards or controls, of any Governmental Entity. "HAZARDOUS SUBSTANCE" means any Substance which is or is deemed to be, alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a deleterious substance, a contaminant or a source of pollution or contamination under any applicable Environmental Laws. 5 - 5 - "INDENTURE" has the meaning ascribed thereto in the third recital hereof. "INSURANCE PROCEEDS" has the meaning ascribed thereto in section 4.21(a). "INTERCREDITOR AGREEMENT" has the meaning ascribed thereto in the preamble. "LAWS" means all statutes, codes, ordinances, decrees, rules, regulations, municipal by-laws, judicial or arbitral or administrative or ministerial or departmental or regulatory judgments, orders, decisions, rulings or awards, policies, guidelines, or any provisions of the foregoing, including general principles of common and civil law and equity, binding on or affecting the Person referred to in the context in which such word is used; and "LAW" means any one of such Laws. "LEASES" means all of the right, title and interest which the Corporation has from time to time in and to any and all present and future leases, offers to lease and other agreements to lease of the whole or any part of the Real Property, Leasehold Property or Buildings and any and all present or future agreements and licences whereby the Corporation gives any other Person the right to use or occupy the whole or any part of the Real Property or Buildings, in each case for the time being in effect, and all revisions, alterations, modifications, amendments, extensions, renewals, replacements or substitutions thereof or therefor which may hereafter be effected or entered into but does not include registered servitudes, rights of superficies, or rights in the nature of a servitude, or a right of superficies. "LEASEHOLD PROPERTY" has the meaning ascribed thereto in Section 3.1(b). "LEASEHOLD PROPERTY CONTRACTS" has the meaning ascribed thereto in Section 3.1(b). "LENDERS" has the meaning ascribed thereto in the first recital hereof. "LICENSES" has the meaning ascribed thereto in Section 3.1(a). "LIEN" means, with respect to any property of any Person, any charge, mortgage, prior claims, pledge, hypothec, security interest, security under the Bank Act (Canada), lien, conditional sales (or other title retention agreement or lease in the nature hereof), lease (where such Person is the lessee of such property), servitudes, assignment, adverse claims, defect of title, restriction, trust, right of set-off or other encumbrance of any kind in respect of such property, whether or not filed, recorded or otherwise perfected under applicable law. "MATERIAL ADVERSE EFFECT" means, as to any Person, asset or property, a material adverse effect on the business, assets, properties, condition (financial or other), operations or results of operations of such Person, asset or property, which effect is not adequately and effectively insured or indemnified against by a financially sound insurance company, and excepting effects arising solely out of general national economic conditions and/or effects arising solely out of matters affecting the industry in which such Person, asset or property conducts business a whole. 6 - 6 - "MONEY" or "MONEYS" means those certain proceeds set forth in sections 4.21(a) and 4.21(b). "NEGOTIABLE COLLATERAL" has the meaning ascribed thereto in Section 3.1(c)(v). "NET AWARD" has the meaning ascribed thereto in section 4.21(b). "NOTEHOLDERS" has the meaning ascribed thereto in the preamble. "NOTES" has the meaning ascribed thereto in the third recital hereof. "OBLIGATIONS" has the meaning ascribed thereto in Section 3.2(a). "PAI" means Pioneer Americas, Inc. "PAAC" means Pioneer Americas Acquisition Corp. "PPSA" means the Personal Property Security Act (Nova Scotia). "PERMITTED LIENS" has the meaning ascribed thereto in the Term Loan Agreement. "PERSON" OR "PERSONS" means a corporation, a legal person, a legal entity, an association, a partnership, an organization, a business, an individual, a government or political subsdivision thereof or a government agency. "PLANT" or "PLANTS" means the Real Property and the Buildings, collectively. "PLANS AND SPECIFICATIONS" has the meaning ascribed thereto in section 4.21(d)(i). "PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as of the 22nd day of September, 1997 between the Corporation, ICI Canada Inc., PCI Carolina Inc., Pioneer Companies Inc., ICI Americas Inc. and Imperial Chemical Industries PLC, as same may be amended from time to time. "RATE OF INTEREST" means the rate of interest of twenty-five percent (25%) per annum. "REAL PROPERTY" has the meaning ascribed thereto in Section 3.1(a). "REAL PROPERTY CONTRACTS" has the meaning ascribed thereto in Section 3.1(a). "RECEIVER" means any of a receiver, manager, receiver-manager and receiver and manager. "RELEASE" when used as a verb includes, spill, leak, emit, deposit, discharge, leach, migrate, dump, issue, empty place, seep, exhaust, abandon, bury, incinerate or dispose into the Environment and "RELEASE" when used as a noun has a correlative meaning. 7 - 7 - "RENTS" means all the right, title and interest the Corporation has from time to time in and to (i) any and all rent, income, revenues and profits and other amounts payable or derived from the Leases or securing obligations thereunder; and (ii) any and all indemnities and insurance proceeds received, which may be received or to which the Corporation is or may become entitled in connection with the Rents. "RESTORATION" has the meaning ascribed thereto in section 4.21(c). "RESTORATION ELECTION NOTICE" has the meaning ascribed thereto in section 4.21(c). "SECURITY INTEREST" has the meaning ascribed thereto in Section 3.2(a). "SUBSTANCE" means any substance, waste, liquid, gaseous or solid matter, fuel, micro-organism, sound, vibration, ray, heat, odour, radiation, energy vector, plasma and organic or inorganic matter. "SURETY BOND" means a clean irrevocable surety bond or credit insurance policy in favour of the Collateral Agent issued by an insurance company the claims paying ability rating of which at the time such surety bond or credit insurance policy is delivered is satisfactory to the Collateral Agent, accompanied by an opinion of counsel to such insurance company to the effect that such surety bond or credit insurance policy has been duly authorized, executed and delivered by such insurance company and constitutes the legal, valid and binding obligation of such insurance company enforceable against such insurance company by the Collateral Agent in accordance with its terms subject to customary exceptions at the time for opinions for such instruments, together with an opinion of counsel to the effect that, taking into account the purpose under this Debenture for which such surety bond will be given, such surety bond and accompanying opinions are responsive to the requirements of this Debenture; "TAKING" has meaning ascribed thereto in section 4.21(b). "TERM LOAN AGREEMENT" has the meaning ascribed thereto in the first recital hereof. 2.2 PPSA DEFINITIONS. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the PPSA are used in this Debenture, including its preamble and recitals, with such meanings. 2.3 INTERPRETATION. This Debenture shall be interpreted in accordance with the following: (a) words denoting the singular include the plural and vice versa and words denoting any gender include all genders; (b) the division of this Debenture into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Debenture; and 8 - 8 - (c) the word "including" shall mean "including without limitation" and "includes" shall mean "includes without limitation". 2.4 SEVERABILITY. If any provision of this Debenture is or becomes illegal, invalid or unenforceable, such provision shall be severed from this Debenture and be ineffective to the extent of such illegality, invalidity or unenforceability. The remaining provisions hereof shall be unaffected by such provision and shall continue to be valid and enforceable. 2.5 STATUTES, ETC.. Unless otherwise specified herein all references to statutes or regulations are to be treated as references to the same as amended, consolidated, revised or re-enacted from time to time, or to any successor or replacement statutes or regulations. 2.6 GOVERNING LAW. This Debenture shall be governed by, and interpreted in accordance with, the Laws of the Province of Nova Scotia and the Laws of Canada applicable therein, without giving effect to any conflicts of laws rules thereof. The Corporation hereby irrevocably attorns and submits to the non-exclusive jurisdiction of the courts of Nova Scotia with respect to any matter arising under or related to this Debenture. 2.7 SCHEDULES. The following schedule attached hereto shall, for all purposes hereof, be incorporated in and form an integral part of this Debenture: Schedule "A" Real Property ARTICLE 3 SECURITY 3.1 GRANT OF SECURITY. (a) Subject to Section 3.4 hereof, the Corporation hereby: (i) grants, mortgages, hypothecates and charges to and in favour of the Collateral Agent, as and by way of a first fixed and specific mortgage, hypothec and charge, all right, title and interest of the Corporation in and to all real property now owned or hereafter acquired by the Corporation, including the real property described in Schedule "A" hereto, including all buildings, erections and improvements of every kind thereon from time to time and fixtures forming a part thereof (collectively, the "Real Property"); and (ii) assigns and transfers to the Collateral Agent by way of a specific assignment and transfer and grants to the Collateral Agent a security interest in: (A) all Leases, all income, revenues and profits derived from Leases and all rents and other sums payable to the Corporation pursuant to the terms of any Leases and all benefits, advantages and powers to be derived under such Leases, with full power and authority to demand, sue for, recover, receive and give receipts for all Rents and all other monies payable thereunder and otherwise to enforce the rights of the Corporation thereunder; (B) all licenses, permits, approvals, certificates and agreements with or from any Governmental Entity relating directly or indirectly to the ownership, use, development, operation and maintenance of the Real Property or the alteration or renovation or construction of improvements on the Real Property, whether heretofore or hereafter issued or executed (collectively, the "Licenses"); and (C) all options, contracts, subcontracts, agreements, service agreements, warranties and purchase orders which have heretofore been or will hereafter be 9 - 9 - executed by or on behalf of the Corporation or which have been assigned to the Corporation, in connection with the use, development, operation and maintenance of the Real Property or the construction of improvements on the Real Property (collectively, the "Real Property Contracts"). (b) Subject to Section 3.4 hereof, the Corporation hereby grants, assigns, mortgages, hypothecates and charges to and in favour of the Collateral Agent as and by way of a fixed and specific mortgage, hypothec and charge and sublease, all right, title and interest of the Corporation in all real property now or hereafter leased by the Corporation, including all buildings, erections and improvements of every kind thereon from time to time and fixtures forming a part thereof (collectively, the "Leasehold Property") and all Leases relating to such Leasehold Property (collectively, the "Leasehold Property Contracts" and, together with the Real Property Contracts, the "Contracts"). (c) Subject to Section 3.4 hereof, the Corporation hereby mortgages, hypothecates and charges to and in favour of the Collateral Agent as and by way of a fixed and specific mortgage, hypothec and charge, pledges to and in favour of the Collateral Agent, assigns and transfers to and in favour of the Collateral Agent as and by way of specific transfer and assignment, and grants to and in favour of the Collateral Agent a security interest in all of the Corporation's right, title and interest in and to all of the following personal property and undertaking of the Corporation now owned or hereafter acquired (collectively, and together with the property described in Sections 3.1(a) and 3.1(b), the "Collateral", and all references thereto herein including any part thereof): (i) all equipment in all of its forms of the Corporation, wherever located, including all parts thereof and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor and all accessories related thereto ("Equipment"); (ii) all contracts, contract rights, chattel paper, documents, instruments, and general intangibles (excluding: (a) tax refunds as they may arise from or relate solely to the sale of inventory including, without limitation, excise, retail sales and goods and services taxes; and (b) excluding any of the foregoing as it may arise from or relate to inventory or accounts receivables) of the Corporation (including without limitation the asset purchase agreement made as of September 22, 1997 between the Corporation, PCI Carolina Inc., Pioneer Companies, Inc., ICI Canada Inc., ICI Americas Inc. and Imperial Chemical Industries PLC as same may be amended from time to time, and all of the rights and benefits of the Corporation thereunder), whether or not arising out of or in connection with the sale or lease of goods, and all rights of the Corporation now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such contracts, contract rights, chattel paper, documents, instruments, and general intangibles; (iii) all Intellectual Property Collateral (as defined in the Subsidiary (Canadian) Security Agreement dated of even date herewith made by the Corporation in favour of the Collateral Agent (the "Security Agreement")) of the Corporation; 10 - 10 - (iv) all books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section 3.1; (v) all of the Corporation's other property and rights of every kind and description and interests therein, including without limitation, all shares, stock, warrants, deeds, debentures, debenture stock and all other documents which constitute evidence of a share, participation or other interest of the Corporation in property or in an enterprise or which constitutes evidence of an obligation of the issuer thereof (excluding any Capital Stock (as defined in the Term Loan Agreement) which is required to be pledged under the Existing Term Loan Agreement or the Existing Senior Secured Note Indenture (in each case as defined in the Term Loan Agreement) until such time as the obligations pursuant to or under such agreements have been paid in full) (collectively, the "Negotiable Collateral"); and (vi) all products, offspring, rents, issues, profits, returns, income and proceeds of and from any and all of the foregoing Collateral (including without limitation proceeds which constitute property of the types described in this Section 3.1, proceeds deposited from time to time in the Collateral Account (as defined in the Security Agreement) and in any lock boxes of the Corporation in respect of the foregoing, and, to the extent not otherwise included, all payments under insurance (whether or not the Collateral Agent, the Trustee or the Administrative Agent is a loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral). Notwithstanding the foregoing, "Collateral" shall not include the Excluded Assets and any general intangibles or other rights arising under any contracts, instruments, licenses or other documents as to which the grant of a security interest would constitute a violation of a valid and enforceable restriction in favour of a third party on such grant, unless and until any required consents shall have been obtained. Upon the request of the Collateral Agent, the Corporation shall use its best commercial efforts to obtain any consent required. (d) In addition, the Corporation hereby charges to and in favour of the Collateral Agent as and by way of a floating charge, all Collateral, both present and future, and every interest therein which the Corporation now has or hereafter acquires (other than property and assets hereby effectively assigned or subjected to a specific mortgage, hypothec and charge, and subject to the exceptions hereinafter contained). 3.2 OBLIGATIONS SECURED. (a) The mortgages, hypothecs, charges, subleases, pledges, transfers, assignments and security interests granted hereby (collectively, the "Security Interest") secure payment to the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent, the Lenders or any of them of the principal amount hereof, interest thereon and all debts, liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or not, and all other amounts from time to time owing 11 - 11 - hereunder pursuant hereto or arising from dealings between the Collateral Agent, the Trustee, the Noteholder, the Administrative Agent, the Lenders or any of them and the Corporation or from any other dealings or proceedings by which the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent, the Lenders or any of them may be or become in any manner whatever a creditor of the Corporation, and wherever incurred and performance and satisfaction by the Corporation of all its obligations hereunder and thereunder, (collectively, and together with the expenses, costs and charges set out in Section 3.2(b), the "Obligations"). (b) All expenses, costs and charges incurred by or on behalf of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders, or any of them, in connection with this Debenture, the Security Interest or the realization of the Collateral, including, after the occurrence and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture, or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be), all legal fees, court costs, Receiver's remuneration and other expenses of taking possession of, repairing, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral shall be added to and form a part of the Obligations. 3.3 ATTACHMENT. (a) The Corporation hereby acknowledges and agrees that: (i) value has been given; (ii) the Corporation has rights in the Collateral (other than Collateral acquired after the date hereof); and (iii) the Corporation has not agreed with any of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders to postpone the time for attachment of the Security Interest which shall attach upon the execution of this Debenture and, in the case of Collateral acquired after the date hereof, when the Corporation has rights therein. (b) The Corporation hereby agrees to execute and deliver at its own cost and expense from time to time amendments to this Debenture or the schedules hereto or additional security or schedules as may be required by the Collateral Agent in order that the Security Interest shall attach to any personal property subsequently acquired by the Corporation or not adequately described herein. 3.4 SCOPE OF SECURITY INTEREST. (a) To the extent that the creation of the Security Interest would constitute a breach or permit the acceleration of any agreement, lease, right, license or permit to which the Corporation is a party, the Security Interest shall not attach thereto but the Corporation shall hold its interest therein in trust for the Collateral Agent and shall assign such agreement, right, license or permit to the Collateral Agent or as the Collateral Agent may direct, forthwith upon obtaining the consent of the other party thereto and the Corporation hereby agrees that it shall, upon the request of the Collateral Agent, use its best commercial efforts to obtain any consent required to permit any such agreement, lease, right, license or permit to be subject to the Security Interest. (b) The Security Interest shall not extend or apply to the last day of any term reserved by any lease, verbal or written, or any agreement therefor, now held or hereafter acquired by the Corporation, 12 - 12 - but the Corporation shall stand possessed of any such reversion in trust to assign and dispose thereof as the Collateral Agent may direct. (c) Neither the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent nor the Lenders will be deemed in any manner to have assumed any obligation of the Corporation under any of the Licenses or Contracts nor shall the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders be liable to any Governmental Entity by reason of any default by any Person under the Licenses or Contracts. The Corporation agrees to indemnify and hold each of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent and the Lenders harmless of and from any and all liability, loss or damage which such persons incur by reason of any claim or demand against it based on its alleged assumption of the Corporation's duty and obligation to perform and discharge the terms, covenants and agreements in the Licenses and Contracts. (d) The Security Interest shall not extend or apply to Excluded Assets. 3.5 CORPORATION'S DEALINGS WITH COLLATERAL. Except as permitted by the Term Loan Agreement and the Indenture, the Corporation shall not: (a) sell, exchange, lease, release or abandon or otherwise dispose of or otherwise deal with the Collateral; or (b) move or transfer the Collateral or any part thereof to a location other than those specified in Schedule A, or, upon 30 days notice to the Collateral Agent, to any location owned or leased by a subsidiary of the Corporation or PAI. ARTICLE 4 REPRESENTATIONS AND COVENANTS OF THE CORPORATION The Corporation hereby represents and covenants to the Collateral Agent that: 4.1 CORPORATE POWER AND AUTHORITY. The Corporation has the full corporate power and authority to enter into this Debenture and to grant the Security Interest without obtaining the waiver, consent or approval of any lessor, sublessor, Governmental Entity or entity or other party whomsoever and whatsoever which has not been obtained except in the case of certain environmental permits and approvals which, by their terms, are not transferable or cannot be transferred without the prior approval of the issuing agency. 4.2 EXECUTION AND DELIVERY. The execution and delivery of this Debenture have been duly authorized by all necessary corporate action. 4.3 BINDING OBLIGATION. This Debenture, when duly executed and delivered, will be a legal, valid and binding obligation of the Corporation enforceable against it in accordance with its terms; provided that such enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors' rights generally. 13 - 13 - 4.4 GOOD TITLE. The Corporation has good and marketable title to the Collateral. The Buildings upon the Real Property are all within the boundary lines of the Real Property and there are no encroachments thereon that would materially impair the use thereof. The Collateral is free and clear of any and all Liens or encumbrances of any nature or kind except for the Permitted Liens. 4.5 ALL PERMITS. The Corporation has all necessary permits, franchises, licenses, rights-of-way, servitudes or other rights or authority needed in connection with the operation and maintenance of the Plants, except where the failure to have the same would not have a Material Adverse Effect; all of the Contracts are presently in full force and effect and no default has occurred or exists thereunder, except where such default would not individually or in the aggregate have a Material Adverse Effect; except for Permitted Liens, the Corporation's grant of the Security Interest in the manner herein provided does not result in the creation or imposition of any other Lien or security interest, adverse claim or option upon any of the Collateral. 4.6 PLACE OF BUSINESS. The Corporation's registered office is located in the City of Saint John, New Brunswick. The Corporation will not change its name, identity or corporate structure or its registered office or chief place of business without notifying the Collateral Agent at least thirty (30) days prior to the effective date of such change. 4.7 DEFENCE OF TITLE. The Corporation will warrant and defend title to the Collateral, subject to Permitted Liens, against the claims and demands of all other Persons whomsoever and will maintain and preserve the Security Interest so long as any of the Obligations secured hereby remain outstanding. Should an adverse claim be made against the title to any material part of the Collateral, the Corporation agrees it will immediately notify the Collateral Agent in writing thereof and defend against such adverse claim to the extent necessary to preserve the Collateral Agent's rights and benefits hereunder, subject to Permitted Liens, and the Corporation further agrees that the Collateral Agent may take such other reasonable action as it deems advisable to protect and preserve its interests in the Collateral, and in such event the Corporation will indemnify the Collateral Agent against any and all costs, reasonable attorney's fees and other expenses which it may incur in defending against any such adverse claim. Such obligations shall be payable on demand and shall bear interest from the date of demand therefor until paid at the Rate of Interest. Any proceeds of any policy of title insurance maintained by the Corporation with respect to the Collateral shall, for the purposes of this Debenture, be paid and applied in the same manner as Insurance Proceeds. 4.8 FIRST-RANKING SECURITY INTEREST. This Debenture is, and always will be maintained as first-ranking Security Interest upon the Collateral, subject to the Permitted Liens, and the Corporation will not create or suffer to be created or permit to exist any Lien, security interest or charge prior or junior to or on parity with the Security Interest upon the Collateral or any part thereof or upon the rents, issues, revenues, profits or other income therefrom, except for the Permitted Liens. 4.9 MAINTENANCE OF COLLATERAL. The Corporation will, at its own expense, do or cause to be done all things necessary to preserve and keep in full repair, working order and efficiency, reasonable wear and tear excepted, all of the Collateral, including, without limitation, all Equipment and, from time to time, will make all the needful and proper repairs, renewals and replacements so that at all times the 14 - 14 - state and condition of the Collateral will be fully preserved and maintained, unless the failure to repair, renew or replace would not materially interfere with the present use or operation of the Collateral. 4.10 PERFORMANCE OF CONTRACTS. The Corporation will promptly pay and discharge all rentals, or other payments and will perform or cause to be performed each and every act, matter or thing required by, each and all of the contracts, instruments or agreements executed in connection with or incident to the ownership and operation of the Plants and being a portion of the Collateral and will do all other things necessary to keep unimpaired the Corporation's rights with respect thereto and to prevent any forfeiture thereof or default thereunder, unless such forfeiture or default shall not individually or in the aggregate have a Material Adverse Effect. The Corporation will operate the facilities comprising the Plants in a good and workmanlike manner and in accordance with the practices of the industry and in compliance in all material respects with all Governmental Requirements affecting ownership and operation of such facilities, including without limitation, Environmental Laws. 4.11 NAME OF CORPORATION. The Corporation does not do business with respect to the Collateral under any name other than PCI Chemicals Canada Inc./Produits Chimiques PCI Canada Inc. 4.12 OPERATION BY THIRD PARTIES. To the extent any of the Collateral is operated by a party or parties other than the Corporation, the Corporation's covenants as expressed hereunder are modified to require that the Corporation use its best efforts (including without limitation the reasonable exercise of all rights and remedies as are available to the Corporation) to obtain compliance with such covenants by the operator or operators of the Collateral. 4.13 COMPLIANCE WITH LAWS. The Plants comply in all material respects with all local land use requirements of Governmental Entities except for possible nonconforming uses or violations which do not and will not materially interfere with the present use, operation or maintenance thereof as now used, operated or maintained. 4.14 PAYMENT OF TAXES, INSURANCE PREMIUMS, ASSESSMENTS; COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS. (a) Unless contested in accordance with the provisions of section 4.14(e) hereof, the Corporation shall pay and discharge or cause to be paid and discharged, from time to time when the same shall become due, all real estate and other taxes, special assessments, levies, permits, inspection and license fees, all premiums for insurance, all water and sewer rents and charges, and all other public charges imposed upon or assessed against the Collateral or any part thereof or upon the revenues, rents, issues, income and profits of the Collateral, including, without limitation, those arising in respect of the occupancy, use or possession thereof. (b) During the continuance of an Event of Default, the Corporation shall deposit with the Collateral Agent, on the first day of each month, an amount reasonably estimated by the Corporation to be equal to one-twelfth (1/12th) of the annual taxes, assessments and other items required to be discharged by the Corporation under section 4.14(a) and amounts reasonably estimated by the Corporation to be necessary to maintain the insurance coverages contemplated in section 4.16 below, which estimates shall not be less than one-twelfth (1/12th) of the annual taxes, assessments, insurance premiums and other items required to be discharged by the Corporation during the year immediately preceding the year during 15 - 15 - which such Event of Default occurred. Such amounts shall be held by the Collateral Agent without interest to the Corporation and applied to the payment of each obligation in respect of which such amounts were deposited, in such order or priority as the Collateral Agent shall determine, on or before the date on which such obligation would become delinquent. If at any time the amounts so deposited by the Corporation shall, in the Collateral Agent's judgment, be insufficient (when added to the instalments anticipated to be paid thereafter) to discharge any of such obligations when due, the Corporation shall, immediately upon demand, deposit with the Collateral Agent such additional amounts as may be requested by the Collateral Agent. Nothing contained in this section 4.14 shall affect any right or remedy of the Collateral Agent under any provision of this Debenture or of any statute or rule of Law to pay any such amount from its own funds (provided, however, that the Collateral Agent shall not in any event be obligated to pay any of such amounts from its own funds) and to add the amount so paid, together with interest at the Rate of Interest, to the obligations, or relieve the Corporation of its obligations to make or provide for the payment of the annual taxes, assessments and other charges required to be discharged by the Corporation under section 4.14(a). All sums held pursuant to this section 4.14 shall form part of the Collateral. During the continuance of any Event of Default, the Collateral Agent may apply all or any part of the sums held pursuant to this section 4.14 to payment and performance of the Obligations in accordance with the provisions of the Intercreditor Agreement. The Corporation shall redeposit with the Collateral Agent an amount equal to all amounts so applied as a condition to the cure, if any, of such Event of Default, in addition to fulfilment of any other required conditions. (c) Unless contested in accordance with the provisions of section 4.14(e), the Corporation shall timely pay (or obtain a bond in the amount of) all lawful claims and demands of mechanics, materialmen, labourers, warehousemen, employees, suppliers, government agencies administering worker's compensation insurance, old age pensions and social security benefits and all other claims, judgments, demands or amounts of any nature which, if unpaid or not bonded, could result in or permit the creation of a Lien (other than a Permitted Lien) on the Collateral or any part thereof or the Rents arising therefrom, or which might result in forfeiture of all or any part of the Collateral. (d) The Corporation shall maintain, or cause to be maintained, in full force and effect, all permits, certificates, authorizations, consents, approvals, registrations, filings, licenses, franchises or other instruments now or hereafter required by any Governmental Entity to operate or use and occupy the Plants and the Equipment for its intended uses (collectively, the "PERMITS"; each, a "PERMIT"), unless the failure to maintain such Permits would not individually or in the aggregate have a Material Adverse Effect. Unless contested in accordance with the provisions of section 4.14(e), the Corporation shall comply promptly with, or cause prompt compliance with, all requirements set forth in the Permits and all Governmental Requirements applicable to all or any part of the Collateral or the condition, use or occupancy of all or any part thereof or any recorded deed of restriction, declaration, covenant running with the land or otherwise, now or hereafter in force unless the compliance therewith would not individually or in the aggregate have a Material Adverse Effect. The Corporation shall not initiate or consent to any change in the zoning, subdivision or any other use classification of the Real Property, if such action could have a material adverse effect on the Security Interest or materially impair the present use and operation of the Collateral or materially impair the Collateral Agent's rights or benefits hereunder, without the prior written consent of the Collateral Agent. 16 - 16 - (e) The Corporation may at its own expense contest the amount or applicability of any of the obligations described in sections 4.14(a), 4.14(c) and 4.14(d) by appropriate legal proceedings, prosecution of which operates to prevent the collection or enforcement thereof or the sale or forfeiture of the Collateral or any part thereof to satisfy such obligations; provided, however, that: (i) any such contest shall be conducted in good faith by appropriate legal proceedings promptly instituted and diligently conducted; and (ii) in connection with such contest, the Corporation shall have made provision for the payment or performance of such contested obligation on the Corporation's books if and to the extent required by generally accepted accounting principles then utilized by the Corporation in the preparation of its financial statements, or shall have deposited with the Collateral Agent a sum sufficient to pay and discharge such obligation and the Collateral Agent's estimate of all interest and penalties related thereto. Notwithstanding the foregoing provisions of this section 4.14(e): (iii) no contest of any such obligations may be pursued by the Corporation if such contest would expose the Collateral Agent, or any of the Administrative Agent, the Trustee, the Noteholders or the Lenders to any possible criminal liability or, unless the Corporation shall have furnished an Additional Undertaking therefor satisfactory to the Collateral Agent in respect of any civil liability for failure to comply with such obligations; and (iv) if at any time payment or performance of any obligation contested by the Corporation pursuant to this section 4.14(e) shall become necessary to prevent the delivery of a tax or similar deed conveying the Collateral or any portion thereof because of nonpayment or nonperformance, the Corporation shall pay or perform the same in sufficient time to prevent the delivery of such tax or similar deed. (f) The Corporation shall not in its use and occupancy of the Plants or the Equipment (including, without limitation, in the making of any Alteration) take any action that would cause the termination, revocation or denial of any insurance coverage required to be maintained under this Debenture or, that pursuant to written notice from any applicable insurer, would be the basis for a defense to any claim under any insurance policy maintained in respect of any of the Plants or the Equipment and the Corporation shall otherwise comply in all material respects with the requirements of any insurer that issues a policy of insurance in respect of any of the Plants or the Equipment. (g) The Corporation shall, promptly upon receipt of any written notice regarding any failure by the Corporation to pay or discharge any of the obligations described in section 4.14(a) or 4.14(f), furnish a copy of such notice to the Collateral Agent. The Corporation shall, promptly upon receipt of any written notice regarding any failure by the Corporation to pay or discharge any of the obligations described in section 4.14(c) or 4.14(d), furnish a copy of such notice to the Collateral Agent, if such failure would have a Material Adverse Effect. 17 - 17 - 4.15 CERTAIN TAX LAW CHANGES. In the event of the passage after the date of this Debenture of any Law deducting from the value of real property, for the purpose of taxation, amounts in respect of any Lien thereon or changing in any way the Laws for the taxation of debentures or debts secured by debentures for federal, provincial, municipal or local purposes or the manner of the collection of any such taxes, and imposing a new tax, either directly or indirectly, on this Debenture or the interest of any of the Collateral Agent, the Administrative Agent, the Trustee, the Lenders and the Noteholders in any Collateral (other than income, franchise or similar taxes imposed on such Person), or in the event that any regulation or regulatory amendment becoming effective after the date hereof imposes any federal or provincial or municipal or local tax on interest income received with respect to any Obligation, the Corporation shall promptly pay the Collateral Agent such amount or amounts as may be necessary from time to time to pay such tax. 4.16 REQUIRED INSURANCE POLICIES. (a) The Corporation shall maintain, or cause to be maintained, as of and from the Closing Date, in full force and effect the following insurance coverages in respect of the Plants and the Equipment: (i) Physical hazard insurance on an "all risk" basis covering hazards commonly covered by fire and extended coverage, lightning, civil commotion, hail, riot, strike, water damage, sprinkler leakage, collapse and malicious mischief, in an amount equal to the full replacement cost of the Buildings and all Equipment, with such deductibles as would be maintained by a prudent operator of property similar in use and configuration to the Plant and located in the locality where such Plant is located. "Full replacement cost" means the cost of construction to replace the Buildings and the Equipment, exclusive of depreciation, excavation, foundation and footings, as determined from time to time by a proper officer of the Corporation in consultation with its insurance company or insurance agent, as appropriate; (ii) Comprehensive general liability insurance against claims for bodily injury, death or property damage occurring on, in or about the any of the Plants and any adjoining streets, sidewalks and passageways and covering any and all claims, including, without limitation, all legal liability, subject to customary exclusions, to the extent insurable, imposed upon the Collateral Agent or any of the Administrative Agent, Trustee, Lenders or Noteholders, and all court costs and attorneys' fees, arising out of or connected with the possession, use, leasing, operation or condition of the Plants, with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and located in the locality where the Plant is located; (iii) Comprehensive boiler and machinery insurance to cover sudden and accidental breakdown, including but not limited to, explosion of any boilers and machinery located on the Plants or comprising any Equipment, with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and 18 - 18 - configuration to the Plant and the Equipment and located in the locality where the Plant is located; (iv) Comprehensive automobile liability insurance policy against claims for bodily injury, death and property damage covering all owned, leased, non-owned and hired motor vehicles, including loading and unloading in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plant and the Equipment and located in the locality where the Plant is located; (v) Business interruption insurance on an annual basis in amounts not less than the projected gross profit of each of the Plants during the applicable twelve-month period but in no event less than the amount necessary to pay the fixed charges and other expenses of owning, operating and maintaining the Collateral for the same period; (vi) To the extent not otherwise covered by the insurance required under sections 4.16(a)(i) and (4.16)(a)(ii), during the performance of any Alterations, renovations, repairs, restorations or construction, broad form Builders Risk Insurance on an all-risk completed value basis; and (vii) Such other insurance, against such risks and with policy limits and deductibles in such amounts as would be maintained by a prudent operator of property similar in use and configuration to the Plants and located in the localities in which the Plants are located. (b) The Corporation may maintain the coverages required by this section 4.16 under blanket policies covering the Plants and other locations owned or operated by the Corporation if the terms of such blanket policies otherwise comply with the provisions of this section 4.16 and contain specific coverage allocations in respect of each of the Plants determined in accordance with the provisions of this section 4.16. All insurance policies in respect of the coverages required by sections 4.16(a)(i), 4.16(a)(iv), 4.16(a)(vi) and, if applicable, 4.16(a)(vii) shall be in amounts at least sufficient to prevent coinsurance liability and all losses thereunder shall be payable to the Collateral Agent, as loss payee, subject to the terms of the Intercreditor Agreement, pursuant to a standard Canadian Insurance Bureau standard mortgagee clause for use in the Province of Nova Scotia, or any equivalent thereof, and each such policy shall, to the extent obtainable at commercially reasonable costs, (i) include effective waivers (whether under the terms of such policy or otherwise) by the insurer of all claims for insurance premiums against all loss payees and named insureds other than the Corporation and all rights of subrogation against any named insured, and (ii) provide that any losses thereunder shall be payable notwithstanding (I) any act, failure to act, negligence of, or violation or breach of warranties, declarations or conditions contained in such policy by the Corporation or the Collateral Agent or any other named insured or loss payee, (II) the occupation or use of the Plant or the Equipment for purposes more hazardous than permitted by the terms of the policy, (III) any foreclosure or other proceeding or notice of sale relating to the Plant or the Equipment, or (IV) any change in the title to or ownership or possession of the Plant or the Equipment; provided, 19 - 19 - however, that (with respect to items contemplated in clauses (III) and (IV) above) any notice requirements of the applicable policies are satisfied. All insurance policies in respect of the coverages required by sections 4.16(a)(ii), 4.16(a)(v) and, if applicable, 4.16(a)(vii) shall name the Collateral Agent as an additional insured. (c) Each policy of insurance required under this section 4.16 shall provide that: (i) notices of any failure by the Corporation to pay any insurance premium in respect thereof, be furnished to the Collateral Agent contemporaneously with any such notice given to the Corporation and (ii) it may not be cancelled or otherwise terminated without at least twenty (20) days' prior written notice to the Collateral Agent and shall permit the Collateral Agent to pay any premium therefor within twenty (20) days after receipt of any notice stating that such premium has not been paid when due. The policy or policies of such insurance or certificates of insurance evidencing the required coverages and all renewals or extensions thereof shall be delivered to the Collateral Agent upon receipt by the Corporation. Settlement of any claim under any of the insurance policies referred to in this section 4.16 (other than the insurance contemplated in section 4.16(a)(iii) which in the Corporation's reasonable judgment involves loss of $1,000,000 in lawful currency of the United States or more, shall require the prior approval of the Collateral Agent (acting pursuant to the provisions of the Intercreditor Agreement) and the Corporation shall use its best efforts to cause each such insurance policy to contain a provision to such effect. (d) At least fifteen (15) days prior to the expiration of any insurance policy required by this section 4.16, the Corporation shall deliver to the Collateral Agent evidence that such policy or policies shall be renewed or extended and the Corporation shall deliver promptly to the Collateral Agent after receipt thereof the policy or policies renewing or extending such expiring policy or renewal or extension certificates or other evidence of renewal or extension, together with a receipt showing payment of the premium thereof. (e) The Corporation shall not purchase additional policies in respect of the insurance coverages required to be maintained under this section 4.16, unless the Collateral Agent is included thereon as an additional named insured and, if applicable, with loss payable to the Collateral Agent under an endorsement containing the provisions described in section 4.16(b) and the policy evidencing such insurance otherwise complies with the requirements of section 4.16(b). The Corporation immediately shall notify the Collateral Agent whenever any such separate insurance policy is obtained and promptly shall deliver to the Collateral Agent the policy or certificate evidencing such insurance. 4.17 INSPECTION. The Corporation shall permit the Collateral Agent, by its agents, accountants and attorneys, to visit and inspect the Collateral upon reasonable prior notice at such times as may be reasonably requested by the Collateral Agent. 20 - 20 - 4.18 THE CORPORATION TO MAINTAIN IMPROVEMENTS. The Corporation shall not commit any waste on the Plants or with respect to any Equipment or make any change in the use of the Plant or any Equipment. The Corporation represents and warrants that: (a) to the Corporation's knowledge, the Plants are served by all electric, gas, sewer, water facilities and any other utilities required or necessary for the current use thereof and any easements or servitudes necessary to the furnishing of such utility service by the Corporation have been obtained and duly recorded, and (b) the Corporation has access to the Plants from public roads sufficient to allow the Corporation and its tenants and invitees to conduct its and their businesses at the Plants as they are currently conducted. The Corporation shall not materially alter the occupancy or use of the Plant without the prior written consent of the Collateral Agent. Except as otherwise permitted by the Intercreditor Agreement, no Buildings comprising a portion of any of the Plants may be demolished nor shall any Equipment be removed without the prior written consent of the Collateral Agent. 4.19 LEASES. (a) All of the Leases are valid and effective in accordance with their respective terms, except that the enforcement thereof may be subject to: (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors' rights generally, and (ii) general equitable principles. To the Corporation's knowledge, the Corporation is not in material breach of or in default (and to the Corporation's knowledge, no event has occurred which with due notice or lapse of time or both, may constitute such a material breach or default) under any Lease, and no party to any Lease has given the Corporation written notice of or made a claim with respect to any breach or default, the consequences of which, individually or in the aggregate, would have a Material Adverse Effect on the Corporation. (b) The Corporation shall manage and operate the Collateral or cause the Collateral to be managed and operated in a reasonably prudent manner and, except as otherwise permitted under section 4.20, will not enter into any Lease (or any amendment or modification thereof) or other agreement subsequent to the date hereof with any Person which, in the reasonable judgment of the Corporation, individually or in the aggregate, would have a Material Adverse Effect on the value of the property subject thereto. (c) The Corporation shall not: (i) receive or collect, or permit the receipt or collection of, any rental or other payments under any Lease more than one (1) month in advance of the respective period in respect of which they are to accrue, except that (i) in connection with the execution and delivery of any Lease or of any amendment to any Lease, rental payments thereunder may be 21 - 21 - collected and received in advance in an amount not in excess of one (1) month's rent and (ii) the Corporation may receive and collect escalation and other charges in accordance with the terms of each Lease; (ii) assign, transfer, mortgage or grant a security interest in (other than to the Collateral Agent hereunder or as otherwise permitted under section 4.20 of this Debenture) any rental or other payment under any Lease whether then due or to accrue in the future, the interest of the Corporation as lessor under any Lease or the Rents, issues, revenues, profits or other income of the Collateral; (iii) enter into any Lease after the date hereof that does not contain terms to the effect as follows: (I) such Lease and the rights of the tenant thereunder shall be subject and subordinate to the rights of the Collateral Agent under this Debenture; (II) such Lease has been mortgaged or charged by the Corporation, as landlord thereunder, to the Collateral Agent under this Debenture; (III) in the case of any foreclosure, the rights and remedies of the tenant in respect of any obligations of any successor landlord thereunder shall be limited to the equity interest of such successor landlord in the Plant and any successor landlord shall not (a) be liable for any act, omission or default of any prior landlord under the Lease or (b) be required to make or complete any tenant improvements or capital improvements or repair, restore, rebuild or replace the demised premises or any part thereof in the event of damage, casualty or condemnation or (c) be required to pay any amounts to tenant arising under the Lease prior to such successor landlord taking possession; (IV) the tenant's obligation to pay rent and any additional rent shall not be subject to any abatement, deduction, counterclaim or setoff as against the Collateral Agent or any purchaser upon any foreclosure hereunder in respect of any portion of a Plant, and the Collateral Agent or such purchaser will not be bound by any advance payments of rent in excess of one month or any security deposits unless such security was actually received; and (V) the tenant agrees to attorn, at the option of the Collateral Agent or any purchaser of a Plant, to the successor owner upon any foreclosure hereunder in respect of a Plant or the giving or granting of a deed in lieu thereof; and (iv) terminate or permit the termination of any Lease of space, accept surrender of all or any portion of the space demised under any Lease prior to the end of the term thereof or accept assignment of any Lease to the Corporation which, in the reasonable judgment of the Corporation, individually or in the aggregate, would have a Material Adverse Effect or materially impair the Security Interest unless: 22 - 22 - (I) the tenant under such Lease has not paid the equivalent of two months' rent and the Corporation has made reasonable efforts to collect such rent; or (II) the Corporation shall deliver to the Collateral Agent an officer's certificate to the effect that the Corporation has entered into a new Lease (or Leases) for the space covered by the terminated or assigned Lease with a term (or terms) which expire(s) no earlier than the date on which the terminated or assigned Lease was to expire (excluding renewal options), and with a tenant (or tenants) having a creditworthiness (as reasonably determined by the Corporation) sufficient to pay the rent and other charges due under the new Lease (or Leases), and the tenant(s) shall have commenced paying rent, including, without limitation, all operating expenses and other amounts payable under the new Lease (or Leases), without any abatement or concession, in an amount at least equal to the amount which would have then been payable under the terminated or assigned Lease. (d) The Corporation timely shall perform and observe all the terms, covenants and conditions required to be performed and observed by the Corporation under each Lease and will not engage in any conduct in respect of any Lease which would have individually or in the aggregate a Material Adverse Effect or materially impair the Security Interest. The Corporation promptly shall notify the Collateral Agent of the receipt of any notice from any lessee under any Lease claiming that the Corporation is in material default in the performance or observance of any of the terms, covenants or conditions thereof to be performed or observed by the Corporation and will cause a copy of each such notice to be delivered promptly to the Collateral Agent. 4.20 TRANSFER RESTRICTIONS. Except as otherwise permitted by the Intercreditor Agreement, the Corporation shall not, without the prior written consent of the Collateral Agent, further mortgage, encumber, hypothecate, sell, convey or assign all or any part of the Collateral or suffer any of the foregoing to occur by operation of Law or otherwise (each a "TRANSFER"); provided, however, the Corporation may so encumber the Collateral to the extent such encumbrances are of the kind listed in clause (d) of the definition of "Permitted Liens". Any proceeds of such permitted Transfer shall be deemed Collateral Proceeds (as defined in the Indenture) and are hereby assigned and shall be paid to the Collateral Agent to be held in the Collateral Account (as defined in the Intercreditor Agreement) and disbursed pursuant to the Intercreditor Agreement. 4.21 DESTRUCTION; EXPROPRIATION. (a) If there shall occur any damage to, or loss or destruction of, the Buildings and Equipment, or any part of any thereof (each, a "DESTRUCTION"), the Corporation shall promptly send to the Collateral Agent a notice setting forth the nature and extent of such Destruction. The proceeds of any insurance payable in respect of any such Destruction are hereby assigned and shall be paid to the Collateral Agent to be held in the Collateral Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, if such proceeds are in an amount less than $1,000,000 in lawful currency of the United States, such proceeds shall be paid directly to the Corporation. All insurance proceeds paid to the Collateral Agent pursuant to this section, less the amount of any expenses incurred in litigating, arbitrating, compromising or settling any claim arising out of such Destruction (the 23 - 23 - "INSURANCE PROCEEDS"), shall constitute Moneys and be applied in accordance with the provisions of sections 4.21(c), 4.21(d) and 4.21(e). (b) If there shall occur any taking of the Collateral or any part thereof, in or by expropriation proceedings pursuant to any Law, general or special, or by reason of the temporary requisition of the use or occupancy of the Collateral or any part thereof, by any Governmental Entity, civil or military (each, a "TAKING"), the Corporation immediately shall notify the Collateral Agent upon receiving notice of such Taking or commencement of proceedings therefor. The Collateral Agent may (but shall not be obligated to) participate in any proceedings or negotiations which might result in any Taking. The Collateral Agent may be represented by counsel satisfactory to it at the expense of the Corporation. The Corporation shall deliver or cause to be delivered to the Collateral Agent all instruments requested by it to permit such participation. The Corporation shall in good faith and with due diligence file and prosecute what would otherwise be the Corporation's claim for any such award or payment and cause the same to be collected and paid over to the Collateral Agent, and hereby irrevocably authorizes and empowers the Collateral Agent, in the name of the Corporation as its true and lawful attorney-in-fact or otherwise, during the continuance of an Event of Default to collect and to receipt for any such award or payment, and, in the event the Corporation fails so to act, to file and prosecute such claim. The Corporation shall pay all costs, fees and expenses incurred by the Collateral Agent in connection with any Taking and seeking and obtaining any award or payment on account thereof. Any proceeds, award or payment in respect of any Taking are hereby assigned and shall be paid to the Collateral Agent to be held in the Collateral Account; provided, however, that so long as no Event of Default shall have occurred and be continuing, if such proceeds are in an amount less than $1,000,000 in lawful currency of the United States, such proceeds shall be paid directly to the Corporation. The Corporation shall take all steps necessary to notify the condemning authority of such assignment. Such proceeds, award or payment paid to the Collateral Agent, less the amount of any expenses incurred in litigating, arbitrating, compromising or settling any claim arising out of such Taking ("NET AWARD"), shall constitute Moneys and be applied in accordance with the provisions of sections 4.21(c), 4.21(d) and 4.21(e). (c) So long as no Event of Default shall have occurred and be continuing, the Corporation shall have the right, at the Corporation's option, to perform a restoration (a "RESTORATION") of the affected portions of the Plant and the Equipment. In the event the Corporation elects to perform a Restoration, the Corporation shall give written notice ("RESTORATION ELECTION NOTICE") of such election to the Collateral Agent within twenty (20) business days after the date that the Collateral Agent receives the applicable Insurance Proceeds or Net Award, as the case may be. The Corporation shall, within twenty (20) business days following the date of delivery of a Restoration Election Notice, commence and diligently continue to perform the Restoration of that portion or portions of the Plant and Equipment subject to such Destruction or affected by such Taking so that, upon the completion of the Restoration, the Collateral shall be in the same condition and shall be of at least equal utility for its intended purposes as the Collateral was immediately prior to such Destruction or Taking. The Corporation shall so complete such Restoration with its own funds to the extent that the amount of any Net Award or Insurance Proceeds is insufficient for such purpose. In the event the Collateral Agent does not receive a Restoration Election Notice within such twenty (20) business day period, the Collateral Agent shall deal with such Insurance Proceeds or Net Award in accordance with the provisions of the Intercreditor Agreement. 24 - 24 - (d) In the event a Restoration is to be performed under this section 4.21(d), the Collateral Agent shall not release any part of the Net Award or the Insurance Proceeds except in accordance with the provisions of section 4.21(e) and the Corporation shall, prior to commencing any work to effect a Restoration of the Plant and the Equipment, promptly (but in no event later than one-hundred twenty (120) days following any Destruction or Taking) furnish to the Collateral Agent: (i) complete plans and specifications (the "PLANS AND SPECIFICATIONS") for the Restoration; (ii) an officers' certificate stating that all permits and approvals required by Law to commence work in connection with the Restoration have been obtained; (iii) a certificate (an "ARCHITECT'S CERTIFICATE") of an independent, reputable architect or engineer acceptable to the Collateral Agent and licensed in the Province of Nova Scotia (i) stating that the Plans and Specifications have been reviewed and approved by the signatory thereto, (ii) containing such signatory's estimate (an "ESTIMATE") of the costs of completing the Restoration, and (iii) upon completion of such Restoration in accordance with the Plans and Specifications, the utility of the Plant and the Equipment will be equal to or greater than the utility thereof immediately prior to the Destruction or Taking relating to such Restoration; and (iv) if the Estimate exceeds the Insurance Proceeds or the Net Award, as the case may be, by $5,000,000 in lawful currency of the United States or more, an Additional Undertaking in an amount equal to not less than the Estimate less the amount of the Insurance Proceeds or the Net Award, as the case may be, then held by the Collateral Agent for application toward the cost of such Restoration. Upon receipt by the Collateral Agent of each of the items required pursuant to sections 4.21(d)(i) through 4.21(d)(iv) above, the Collateral Agent shall acknowledge receipt of the Plans and Specifications. Promptly upon such acknowledgment of receipt by the Collateral Agent, the Corporation shall commence and diligently continue to perform the Restoration substantially in accordance with such Plans and Specifications and in material compliance with all Governmental Requirements, free and clear of all Liens except Permitted Liens. The Corporation shall so complete such Restoration with its own funds to the extent that the amount of any Net Award or Insurance Proceeds is insufficient for such purpose. (e) In the event the Corporation performs a Restoration of any of the Plants and Equipment as provided in section 4.21(d), the Collateral Agent shall apply any Insurance Proceeds or Net Award held by the Collateral Agent on account of the Destruction or Taking to the payment of the cost of performing such Restoration pursuant to the relevant provisions of the Intercreditor Agreement. In the event there shall be any surplus after application of the Net Award or the Insurance Proceeds to Restoration of the Plants and the Equipment, such surplus shall become Net Proceeds, as defined in the Indenture for application in accordance thereunder; provided, however, that if an Event of Default shall have occurred and be continuing, such surplus shall be applied by the Collateral Agent to the payment of the Obligations, in accordance with Article 6 of the Intercreditor Agreement. Notwithstanding anything to the contrary herein, if a Destruction or Taking of all or substantially all of the Collateral 25 - 25 - occurs on a date which is less than 12 months prior to Maturity, as such term is defined in the Indenture, all Insurance Proceeds and Net Awards shall be applied to the permanent repayment or prepayment of any Secured Obligations then outstanding in accordance with the Intercreditor Agreement. 4.22 ALTERATIONS. The Corporation shall not make any material structural addition, modification or change (each, an "ALTERATION") to any Plant or the Equipment which would materially diminish the utility of the Collateral or impair the Security Interest. Whether or not the Collateral Agent has consented to the making of any Alteration, the Corporation shall (i) complete each Alteration promptly, in a good and workmanlike manner and in material compliance with all applicable local Laws, and (ii) pay when due all claims for labour performed and materials furnished in connection with such Alteration, unless contested in accordance with the provisions of section 4.14(e). 4.23 HAZARDOUS MATERIAL (a) Except with respect to those matters which would not reasonably be expected to have a Material Adverse Effect, to the best knowledge of the Corporation, the Corporation holds all Permits required to permit the Corporation to conduct its business in the manner now conducted and none of the Corporation's operations are being conducted in a manner that violates in any material respect the terms and conditions under which any such Permit was granted, including without limitation, under any Environmental Laws, except those permits that are expected to be transferred in the ordinary course after the date hereof; to the best of the knowledge of the Corporation all such Permits are valid and in full force and effect; and to the knowledge of the Corporation, no suspension, cancellation, revocation or termination of any such Permit is threatened. (b) Except as set forth in the Term Loan Agreement, there are no material claims, actions, suits, proceedings or investigations pending or to the knowledge of the Corporation, threatened, before any Governmental Entity or before any arbitrator brought by or against the Corporation or with respect to any of the Collateral the basis of which is any Environmental Law. (c) The Corporation shall (or shall cause other parties obligated to do so under or in accordance with contracts with or indemnity to the Corporation): (i) take all commercially reasonable actions to comply with any and all applicable present and future Environmental Laws relating to the Plants; (ii) pay in a timely fashion the cost of any removal, response measure or corrective action relating to any Hazardous Materials required by any Environmental Law or any order, regulation, consent decree or similar agreement or instrument and keep the Collateral free of any Lien imposed pursuant to any Environmental Law; (iii) take all commercially reasonable actions to not Release any Hazardous Materials on, under or from the Collateral in violation of any Environmental Law; 26 - 26 - (iv) apply any insurance proceeds or other sums received by it in respect of the removal of any Hazardous Material or any other corrective action relating to any Hazardous Material to such removal or corrective action; and (v) not take, or fail to take any action required under any Environmental Laws or in connection with any Hazardous Materials that could reasonably be expected to result in the incurrence of any obligation or liability of any of the Collateral Agent, Administrative Agent, Trustee, Lenders or Noteholders. During the continuance of an Event of Default, in the event the Corporation fails to comply with the covenants in the preceding sentence, the Collateral Agent may (upon receipt of an indemnity satisfactory to the Collateral Agent), in addition to any other remedies set forth herein, but shall not be obligated to, as mandatary for and at the Corporation's sole cost and expense cause to be taken, any remediation, removal, response or corrective action relating to Hazardous Materials that is required by Environmental Law and is not being done or contested by the Corporation. Any costs or expenses incurred by the Collateral Agent for such purpose shall be immediately due and payable by the Corporation and shall bear interest at the Rate of Interest. The Corporation shall provide to the Collateral Agent and its agents and employees access to the Collateral to take any action required by Environmental Laws, or in connection with any Hazardous Materials, that could be expected to result in the incurrence of any obligation or liability of any of the Collateral Agent, Administrative Agent, Trustee, Lenders or Noteholders, if the Corporation fails to do so and such action or removal is required under any Environmental Laws as provided above. Upon written request by the Collateral Agent, which shall include a reasonably specific statement of the basis thereof (which shall be specific to the condition of the Collateral and the alleged violation of Environmental Law) and which shall be made not more frequently than once in any twelve-month period or at any time that the Collateral Agent is exercising its remedies under this Debenture, the Collateral Agent shall have the right (upon receipt of an indemnity satisfactory to the Collateral Agent), but shall not be obligated, at the sole cost and expense of the Corporation, to conduct an environmental audit or review of the Collateral relating to the specific items as required in writing or relating to the remedy that the Collateral Agent is exercising under this Debenture by persons or firms appointed by the Collateral Agent, and the Corporation shall cooperate in all reasonable respects in the conduct of such environmental audit or review, including, without limitation, by providing reasonable access to the Collateral and to all records relating thereto. The Corporation shall indemnify and hold each of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders harmless from and against all loss, cost, damage or expense (including, without limitation, attorneys' fees) that any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders may sustain by reason of the assertion against such party of any claim relating to such Hazardous Materials or actions taken with respect thereto as authorized hereunder. Nothing contained herein shall result in any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders being deemed an "owner" or "operator" under applicable Environmental Law. 27 - 27 - (d) The Corporation may at its own expense contest the amount or applicability of any of the obligations described in the first sentence of section 4.23(c) by appropriate legal proceedings, prosecution of which operates to prevent the enforcement thereof; provided, however, that: (i) any such contest shall be conducted in good faith by appropriate legal proceedings promptly instituted and diligently conducted and (ii) in connection with such contest, the Corporation shall have made provision for the payment or performance of such contested obligation on the Corporation's books if and to the extent required by generally accepted accounting principles then utilized by the Corporation in the preparation of its financial statements, or shall have deposited with the Collateral Agent a sum sufficient to pay and discharge such obligation and the Collateral Agent's estimate of all interest and penalties related thereto. Notwithstanding the foregoing provisions of this section 4.23(d), no contest of any such obligations may be pursued by the Corporation if such contest would expose the Collateral Agent, or any of the Administrative Agent, Trustee, Lenders or Noteholders to any possible criminal liability or, unless the Corporation shall have furnished an Additional Undertaking therefor satisfactory to the Collateral Agent or for any civil liability for failure to comply with such obligations. 4.24 ASBESTOS. The Corporation shall not install nor permit to be installed in the Collateral friable asbestos or any asbestos-containing material (collectively, "ACM") except in compliance with all applicable Environmental Laws respecting such material. With respect to any ACM currently present in the Collateral, except with respect to matters which would not have a Material Adverse Effect, the Corporation shall comply with all Laws applicable to ACM located on any of the Plants, all at the Corporation's sole cost and expense. If the Corporation shall fail so to comply with such Laws, the Collateral Agent may (upon receipt of an indemnity satisfactory to the Collateral Agent) during the continuance of an Event of Default, but shall not be obligated to, in addition to any other remedies set forth herein, take those steps reasonably necessary to comply with applicable Laws. Any costs or expenses incurred by the Collateral Agent for such purpose shall be immediately due and payable by the Corporation and bear interest at the Rate of Interest. The Corporation shall provide to the Collateral Agent and its agents and employees reasonable access to the Collateral upon reasonable prior notice to remove such ACM if the Corporation fails to do so and removal is required under any Environmental Law as provided for above; provided, however, that nothing contained herein shall obligate the Collateral Agent to exercise any rights under such access. The Corporation shall indemnify and hold each of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders harmless from and against all loss, cost, damage and expense that any of the Collateral Agent, Administrative Agent, Trustee, Lenders and Noteholders may sustain as a result of the presence of any ACM and any removal thereof in compliance with any applicable Environmental Law. 4.25 BOOKS AND RECORDS; REPORTS. The Corporation shall keep proper books of record and account, which shall accurately represent the financial condition of the Corporation and the business affairs of the Corporation relating to the Collateral. The Collateral Agent and its authorized representatives shall have the right, from time to time, upon reasonable prior notice to examine the books and records of the Corporation relating to the operation of the Collateral at the office of the Corporation. 28 - 28 - 4.26 NO CLAIMS AGAINST THE COLLATERAL AGENT. Nothing contained in this Debenture shall constitute any consent or request by the Collateral Agent, express or implied, for the performance of any labour or services or the furnishing of any materials or other property in respect of the Plant or any part thereof, nor as giving the Corporation any right, power or authority to contract for or permit the performance of any labour or services or the furnishing of any materials or other property in such fashion as would permit the making of any claim against the Collateral Agent in respect thereof or any claim that any Lien based on the performance of such labour or services or the furnishing of any such materials or other property is ranked in priority to the Security Interest. 4.27 UTILITY SERVICES. The Corporation shall pay, or cause to be paid, when due all charges for all public or private utility services, all public or private rail and highway services, all public or private communication services, all sprinkler systems, and all protective services, any other services of whatever kind or nature at any time rendered to or in connection with the Plants or any part thereof, shall comply in all material respects with all contracts relating to any such services, and shall do all other things reasonably required for the maintenance and continuance of all such services to the extent required to fulfil the obligations set forth in section 4.18. ARTICLE 5 DEFAULT AND ENFORCEMENT 5.1 DEFAULT. The Security Interest shall become enforceable against the Corporation if and only if and when the Corporation shall fail to pay, perform or satisfy any of the Obligations when due and payable or required to be performed or satisfied, as the case may be, but not otherwise (each such failure is an "Event of Default"). Upon the occurrence of an Event of Default, the Obligations shall immediately become due and payable by the Corporation to the Collateral Agent without necessity of any further act or formality and, thereafter, the Corporation shall not be entitled to sell, assign, transfer, exchange, lease or otherwise dispose of or deal with all or any part of the Collateral. 5.2 REMEDIES. Whenever the Security Interest has become enforceable, the Collateral Agent may in its discretion: (a) take possession of all or any part of the Collateral with power to exclude the Corporation and its officers, employees and agents therefrom; (b) take all such steps as the Collateral Agent may consider necessary or desirable for the purposes of preserving, maintaining and completing all or any part of the Collateral and making such replacements thereof and improvements and additions thereto as the Collateral Agent may consider expedient; (c) carry on all or any part of the business of the Corporation relating to the Collateral and use all or any part of the Collateral directly in carrying on the Corporation's business or as security for loans or advances to enable the Collateral Agent to carry on the Corporation's business or otherwise; (d) receive the rents, incomes and profits of any kind whatsoever from the Collateral and pay therefrom: (i) any expenses of preserving, maintaining and completing the Collateral, of making such 29 - 29 - replacements thereof and improvements and additions thereto as the Collateral Agent may consider expedient and of carrying on all or any part of the Corporation's business relating to the Collateral; and (ii) any charges against the Collateral ranking in priority to or pari passu with the Security Interest or the payment of which may be necessary or desirable to preserve or protect all or any part of the Collateral or the interest of the Collateral Agent therein; (e) lease all or any part of the Collateral and renew from time to time all or any of the Leases on such terms and conditions as the Collateral Agent may determine; (f) with or without taking possession, take any action or proceedings to enforce the performance of any covenant contained in any of the Leases; (g) enjoy and exercise all the powers of the Corporation as the Collateral Agent considers necessary or desirable for the exercise of any and all of the remedies of the Collateral Agent provided for herein, including the powers to make any arrangement or compromise on behalf and in the name of the Corporation which the Collateral Agent considers expedient, to purchase on credit and borrow money on behalf and in the name of the Corporation and to advance moneys to the Corporation, all at such rates of interest as the Collateral Agent may consider reasonable, and to enter into contracts and undertake obligations on behalf of and in the name of the Corporation for any and all of the foregoing purposes or which the Collateral Agent considers necessary or desirable for the exercise of any of the rights, powers and remedies of the Collateral Agent provided for herein, all of which borrowings, advances and obligations together with interest thereon shall, at the discretion of the Collateral Agent, be entitled to the security hereof in priority to the payment of the Obligations; (h) sell or otherwise dispose of all or any part of the Collateral; (i) apply to a court for the appointment of a Receiver to take possession of all or such part of the Collateral as the Collateral Agent shall designate, with such duties, powers and obligations as the court making the appointment shall confer; (j) appoint a Receiver of all or any part of the Collateral by instrument in writing executed by the Collateral Agent; (k) institute proceedings in any court of competent jurisdiction for sale or foreclosure of the Collateral; and (l) take any steps or proceedings of any kind permitted by applicable Law or in equity or otherwise to enforce payment of the Obligations or performance of any other covenant or obligation of the Corporation contained herein, and exercise all rights and remedies of a secured party under the PPSA. 5.3 REMEDIES CUMULATIVE AND WAIVER. The rights and remedies hereunder of the Collateral Agent are cumulative and are in addition to and not in substitution for any other rights and remedies provided by law or by equity. Any single or partial exercise by the Collateral Agent of any right or remedy in respect of a default or breach of any term, covenant or condition contained herein shall not be deemed to be a waiver thereof or to alter, affect or prejudice any other right or remedy or other rights 30 - 30 - or remedies to which the Collateral Agent may be lawfully entitled, for such default or breach. The Collateral Agent shall at all times have the right to proceed against all or any portion of the Collateral or any other security in such order and in such manner as it shall determine without waiving any rights, powers or remedies which the Collateral Agent may have with respect to this Debenture or any other security or at law, in equity or otherwise. No delay or omission by the Collateral Agent in exercising any right, power or remedy hereunder or otherwise shall operate as a waiver thereof or of any other right, power or remedy. Any waiver by the Collateral Agent of the strict observance, performance or compliance with any term, covenant, condition or agreement herein contained and any indulgence granted, either expressly or by course of conduct, by the Collateral Agent shall be effective only in the specific instance and for the purpose of which it was given and shall be deemed not to be a waiver of any rights and remedies of the Collateral Agent hereunder as a result of any other default or breach hereunder. No consent or waiver by the Collateral Agent shall be effective unless made in writing and signed by an authorized officer of the Collateral Agent. 5.4 CONCERNING THE RECEIVER. (a) Any Receiver appointed by the Collateral Agent shall be vested with the rights and remedies which could have been exercised by the Collateral Agent in respect of the Corporation or the Collateral and such other powers and discretions as are granted in the instrument of appointment and any instrument or instruments supplemental thereto. The identity of the Receiver, any replacement thereof and any remuneration thereof shall be within the sole and unfettered discretion of the Collateral Agent. (b) Any Receiver appointed by the Collateral Agent shall act as agent for the Collateral Agent for the purposes of taking possession of the Collateral, but otherwise and for all other purposes (except as provided below) as agent for the Corporation. The Receiver may sell, lease, or otherwise dispose of the Collateral as agent for the Corporation or as agent for the Collateral Agent as the Collateral Agent may determine in its discretion. The Receiver shall apply all monies from time to time received by the Receiver in such order or priority, as the Collateral Agent may at their option direct. If there shall be a deficiency, the Corporation shall remain liable for such deficiency and shall pay the amount of such deficiency to the Collateral Agent forthwith. The balance of proceeds realized in respect of the Collateral, if any, remaining after repayment in full of the Obligations shall be paid to the Corporation or such other Person or Persons entitled thereto by applicable Law. The Corporation agrees to ratify and confirm all actions of the Receiver acting as agent for the Corporation, and to release and indemnify the Receiver in respect of all such actions. (c) The Collateral Agent, in appointing or refraining from appointing any Receiver, shall not incur liability to the Receiver, the Corporation or otherwise and shall not be responsible for any misconduct or negligence of such Receiver. 5.5 APPOINTMENT OF ATTORNEY. The Corporation hereby irrevocably appoints the Collateral Agent (and any of its officers) as attorney of the Corporation with full power of substitution to exercise, at any time when the Security Interest shall have become enforceable, in the name of and on behalf of the Corporation any of the Corporation's right, title and interest in and to the Collateral (including the right of disposal, execution, endorsement, delivery and transfer of all or any part of the Collateral). All acts of any such attorney are hereby ratified and approved, and such attorney shall not be liable for any 31 - 31 - act, failure to act or any other matter or thing in connection therewith, except for its own gross negligence or wilful misconduct. 5.6 DEALING WITH THE COLLATERAL AND THE SECURITY INTEREST. (a) The Collateral Agent shall not be obliged to exhaust its recourse against the Corporation or any other Person or Persons or against any other security the Collateral Agent may hold in respect of the Obligations before realizing upon or otherwise dealing with the Collateral in such manner as the Collateral Agent may consider desirable. (b) The Collateral Agent may grant extensions or other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Corporation and with other parties, sureties or securities as the Collateral Agent may see fit without prejudice to the Obligations or the rights of the Collateral Agent in respect of the Collateral. (c) The Collateral Agent shall not be: (i) liable or accountable for any failure to collect, realize or obtain payment in respect of the Collateral; (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Collateral or for the purpose of preserving any rights of the Collateral Agent, the Corporation or any other Person in respect thereof; (iii) responsible for any loss occasioned by any sale or other dealing with the Collateral or by the retention of or failure to sell or otherwise deal therewith; or (iv) bound to protect the Collateral from depreciating in value or becoming worthless. 5.7 STANDARDS OF SALE. Without prejudice to the ability of the Collateral Agent to dispose of the Collateral in any manner which is commercially reasonable, the Corporation acknowledges that a disposition of Collateral by the Collateral Agent which takes place substantially in accordance with the following provisions shall be deemed to be commercially reasonable: (a) Collateral may be disposed of in whole or in part; (b) Collateral may be disposed of by public auction, public tender or private contract, with or without advertising and without any other formality; (c) any purchaser or lessee of such Collateral may be a customer of the Collateral Agent, provided that such transaction is bona fide; (d) a disposition of Collateral may be on such terms and conditions as to credit or otherwise as the Collateral Agent, in its sole discretion, may deem advantageous; and (e) the Collateral Agent may establish an upset or reserve bid or price in respect of the Collateral. 5.8 DEALINGS BY THIRD PARTIES. No Person dealing with any of the Collateral Agent or its agent or a Receiver shall be required: (i) to determine whether the Security Interest has become enforceable; (ii) to determine whether the powers which the Collateral Agent or its agent is purporting 32 - 32 - to exercise have been exercisable; (iii) to determine whether any money remains due to the Collateral Agent by the Corporation; (iv) to determine the necessity or expediency of the stipulations and conditions subject to which any sale or lease shall be made; (v) to determine the propriety or regularity of any sale or any other dealing by the Collateral Agent with the Collateral; or (vi) to see to the application of any money paid to the Collateral Agent. The Security Interest is in addition to and not in substitution for any security now held or hereafter acquired by the Collateral Agent as security for the Obligations. 5.9 CORPORATION LIABLE FOR THE DEFICIENCY. In the case of any judicial or other steps or proceedings to enforce the Security Interest, and without limiting any right of the Collateral Agent to obtain judgment for any greater amount, the Corporation shall remain liable to the Collateral Agent for any amount which may remain due in respect of the Obligations after application to the payment thereof of the proceeds of any sale, lease or other disposition of the Collateral or any part thereof. 5.10 NOTICE OF SALE. Unless required by applicable Law, neither the Collateral Agent nor any Receiver appointed by them shall be required to give the Corporation any notice of any sale, lease or other disposition of the Collateral or any part thereof or the date after which any private disposition of Collateral or any part thereof is to be made. 5.11 PAYMENT OF PRIOR CLAIMS. If the Collateral Agent is at any time or from time to time required to make a payment to defeat or honour the priority or possible priority of any Liens on or in respect of all or any part of the Collateral, any such payment or payments, and the costs, charges and expenses of the Collateral Agent in connection therewith (including legal fees on a solicitor and client basis) shall be payable by the Corporation on demand. ARTICLE 6 GENERAL 6.1 NOTICE. Any and all demands, notices or other communications to be made or given pursuant to this Debenture shall be given and received in the manner and at the addresses specified in Section 11.2 of the Intercreditor Agreement. 6.2 RELEASES. Subject to the provisions of the Term Loan Agreement and the Indenture, the Collateral Agent may in its discretion, from time to time, release any part of the Collateral or any other security held by the Collateral Agent either with or without any sufficient consideration therefor, without responsibility therefor and without thereby releasing any other part of the Collateral or any other security or any Person from the security created by this Debenture or from any of the covenants herein contained. Each and every portion into which the Collateral is or may hereafter be divided does and shall stay charged with the Obligations. No Person shall have the right to require the Obligations to be apportioned and the Collateral Agent shall not be accountable to the Corporation for any moneys except those actually received by the Collateral Agent. 6.3 EXPENSES. The Corporation shall pay to the Collateral Agent on demand all of the costs, charges and expenses of the Collateral Agent (including legal fees on a solicitor and client basis and Receiver's fees) in connection with the preparation, registration or amendment of this Debenture, the perfection or preservation of the Security Interest, the enforcement by any means of any provision hereof 33 - 33 - or, after the occurrence of and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture, or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be) the exercise of any rights, powers or remedies hereunder, including all such costs, charges and expenses in connection with taking possession, maintaining, completing, preserving, protecting, collecting or realizing upon all or any part of the Collateral or carrying on all or any part of the Corporation's business relating to the Collateral. 6.4 DISCHARGE OF DEBENTURE. The Security Interest shall be released and discharged upon full and complete payment, performance and satisfaction of all of the Obligations and at the request and sole cost and expense of the Corporation. The Collateral Agent, the Administrative Agent and the Trustee shall execute and deliver to the Corporation such releases and discharges as the Corporation may reasonably require. 6.5 NO MERGER OF ESTATES. There shall not be deemed to be any merger of this Debenture, nor of the rights and interests of the Collateral Agent hereunder, with the estate in the Real Property or with the reversion or rights and interests of the Corporation or the Collateral Agent under any instrument affecting the Collateral by reason only of the fact that the same Person may own or acquire, directly or indirectly, two or more estates, rights or interests in the Collateral until all Persons having any interest under this Debenture, the estate in the Real Property or the reversion or rights and interests of the Corporation or the Collateral Agent under any instrument affecting the Collateral, by an appropriate instrument, so declare and provide. 6.6 NO OBLIGATION TO ADVANCE. Neither the issue nor delivery of this Debenture shall obligate the Collateral Agent, the Trustee, any Noteholder, the Administrative Agent or any Lender to advance any funds, or otherwise make or continue to make any credit available, to the Corporation. 6.7 [THIS SECTION HAS BEEN INTENTIONALLY DELETED.] 6.8 PERFECTION OF SECURITY. The Corporation shall register, file or record all financing statements and other documents in all offices where, in the opinion of the Collateral Agent, such registration, filing or recording is necessary or desirable to preserve, perfect or otherwise protect the Security Interest and the priority thereof. The Collateral Agent shall have the right to require that the form of this Debenture or any part thereof be amended to reflect any changes in applicable Law whether arising as a result of statutory amendments, court decisions or otherwise, in order to confer upon the Collateral Agent the security interest intended to be created by this Debenture, except that in no event shall the Collateral Agent require that any such amendment be effected if the result thereof would be to grant to the Collateral Agent greater rights than are otherwise contemplated herein. 6.9 ASSIGNMENTS AND PARTICIPATIONS. The Collateral Agent may sell, assign, transfer or otherwise dispose of all or any of the Obligations in accordance with the provisions governing the Obligations and, in such event, each and every immediate and successive assignee, transferee or holder of all or any of the Obligations, shall have, in respect of the rights or obligations sold, assigned, transferred or otherwise disposed of, the full benefit hereof to the same extent as if it were an original party to the Obligations or the part thereof so sold, assigned, transferred or otherwise disposed. None 34 - 34 - of the rights or obligations hereunder of the Corporation may be assigned without the prior written consent of the Collateral Agent, except in accordance with the provisions of the Intercreditor Agreement. 6.10 ENUREMENT. This Debenture shall enure to the benefit of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent and the Lenders, their respective successors and assigns and be binding upon the Corporation and its successors and permitted assigns. 6.11 TIME OF ESSENCE. Time shall be of the essence of this Debenture with respect to the obligations of the Corporation hereunder. 6.12 AMENDMENTS. This Debenture may be amended only by written agreement of the Corporation and the Collateral Agent. 6.13 FURTHER ASSURANCES. The Corporation shall from time to time, whether before or after the Security Interest shall have become enforceable, at its sole cost and expense, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may reasonably require for protecting the Collateral or perfecting the Security Interest and for exercising all powers, authorities and discretions hereby conferred upon the Collateral Agent, and the Corporation shall, from time to time after the Security Interest has become enforceable, at its sole cost and expense, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may require for facilitating the sale of the Collateral in connection with any realization thereof. 6.14 JUDGMENT CURRENCY. If, for the purposes of obtaining judgment in any court, it is necessary to convert any sum due, or owing to the Collateral Agent in any currency (the "Original Currency") into another currency (the "Other Currency"), the Corporation hereby agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Collateral Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which the final judgment is granted. The Obligations of the Corporation in respect of any sum due in the Original Currency from it to the Collateral Agent shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Collateral Agent of any such sum adjudged to be so due or owing in such Other Currency, the Collateral Agent may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due or owing to the Collateral Agent in the Original Currency, the Corporation shall, as a separate obligation and notwithstanding any such judgment, indemnify the Collateral Agent for the benefit of the Trustee, on its own account and on account of each Noteholder, and the Administrative Agent, on its own account and on account of each of the Lenders, against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due or owing to the Collateral Agent in the Original Currency, the Collateral Agent shall remit such excess to the Corporation. 35 6.15 COPY RECEIVED. The Corporation acknowledges receipt of a copy of this Debenture. IN WITNESS WHEREOF the Corporation has executed this Debenture on the date first above written. PCI CHEMICALS CANADA INC. Per: /s/ KENT R. STEPHENSON ----------------------------------- Authorized Signing Officer c/s EX-4.6A 7 DEBENTURE PLEDGE AGREEMENT (ONTARIO) - 10/30/97 1 EXHIBIT 4.6(a) DEBENTURE PLEDGE AGREEMENT THIS AGREEMENT is made the 30th day of October, 1997. BY: PCI CHEMICALS CANADA INC. (the "Corporation") IN FAVOUR OF: UNITED STATES TRUST COMPANY OF NEW YORK, as collateral agent for its own benefit and the benefit of the Trustee and each of the Noteholders, and the Administrative Agent and each of the Lenders (in such capacity, the "Collateral Agent") WHEREAS the Corporation is or will become indebted, liable and obligated to the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent and the Lenders; AND WHEREAS the Corporation has agreed to execute and deliver this Agreement to and in favour of the Collateral Agent as continuing collateral security for the due, prompt and complete payment, performance and satisfaction of all Obligations (as defined below). NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the foregoing and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation hereby covenants and agrees as follows: ARTICLE 1 INTERPRETATION 1.1 INTERPRETATION. This Agreement shall be interpreted in accordance with the following: (a) words denoting the singular include the plural and vice versa and words denoting any gender include all genders; (b) the division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this 2 - 2 - Agreement; and (c) the word "including" shall mean "including without limitation" and "includes" shall mean "includes without limitation". 1.2 DEBENTURE DEFINITIONS. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Debenture (as hereinafter defined). 1.3 SEVERABILITY. If any provision of this Agreement is, or becomes, illegal, invalid or unenforceable, such provision shall be severed from this Agreement and be ineffective to the extent of such illegality, invalidity or unenforceability. The remaining provisions hereof shall be unaffected by such provision and shall continue to be valid and enforceable. 1.4 GOVERNING LAW. This Agreement shall be governed by, and interpreted in accordance with, the Laws of the Province of Ontario and the Laws of Canada applicable therein, without giving effect to any conflicts of law rules thereof. The Corporation hereby irrevocably attorns and submits to the non-exclusive jurisdiction of the courts of Ontario with respect to any matter arising under or relating to this Agreement. ARTICLE 2 PLEDGE OF DEBENTURE 2.1 PLEDGE OF DEBENTURE. The Corporation hereby pledges to and deposits with the Collateral Agent the Demand Debenture (Ontario) of even date herewith issued by the Corporation to and in favour of the Collateral Agent, in the principal amount of $500,000,000 in lawful money of the United States of America, together with all renewals thereof, substitutions thereafter and supplements thereto (the "Debenture"), as well as interest thereon and proceeds thereof, to be held by the Collateral Agent in accordance with the provisions hereof as continuing security for the due, prompt and complete payment, performance and satisfaction of all of the Obligations. 3 - 3 - 2.2 OBLIGATIONS SECURED. (a) The pledge granted by this Agreement (the "Pledge") shall be continuing collateral security for the due, prompt and complete payment, performance and satisfaction by the Corporation of all indebtedness, liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or unmatured, at any time due or accruing due, owing by the Corporation to the Collateral Agent, the Administrative Agent and the Lenders pursuant to the Guarantee, and to the Collateral Agent, the Trustee and the Noteholders pursuant to the Indenture, and any ultimate unpaid balance thereof, respectively, and in any currency, and whether incurred prior to, at the time of or subsequent to the execution hereof (collectively, and together with the expenses, costs and charges set out in Section 2.2(b), the "Obligations"). (b) All expenses, costs and charges incurred by or on behalf of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders, or any of them, in connection with this Debenture, the Security Interest or the realization of the Collateral, including, after the occurrence and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture, or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be), all legal fees, court costs, Receiver's remuneration and other expenses of taking possession of, repairing, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral shall be added to and form a part of the Obligations. ARTICLE 3 DEFAULT AND ENFORCEMENT 3.1 DEFAULT. The Pledge shall be and become enforceable against the Corporation if and only if and when the Corporation shall fail to pay, perform or satisfy any of the Obligations when due and payable or required to be performed or satisfied, as the case may be (including pursuant to any acceleration thereof in accordance with the provisions governing the Obligations) but not otherwise. 4 - 4 - 3.2 REALIZATION UPON DEFAULT. Whenever the Pledge has become enforceable, the Collateral Agent may at any time realize upon or otherwise dispose of the Debenture by sale, transfer and/or delivery and/or exercise and/or enforce any and all rights and remedies of a holder of the Debenture as if the Collateral Agent was the absolute owner thereof, without notice to or control by the Corporation (except as may be required by applicable Law) and any such remedy may be exercised separately or in combination and shall be in addition to and not in substitution for any rights the Collateral Agent may have, however created. 3.3 APPLICATION OF PROCEEDS. All proceeds of the Debenture shall be applied by the Collateral Agent may choose in accordance with the provisions governing the Obligations, without prejudice to any claim on the Corporation for any deficiency. 3.4 SATISFACTION OF OBLIGATIONS. Payment of the Obligations from time to time shall be deemed to be payment of the principal and interest from time to time due under the Debenture. Upon satisfaction in full of the Obligations, the Collateral Agent shall, at the request and expense of the Corporation, deliver the Debenture to the Corporation for cancellation or assign the Debenture (without recourse to the Lenders) to such other person or entity as the Corporation may direct. 3.5 DEALING WITH THE DEBENTURE. (a) The Collateral Agent shall not be obliged to exhaust its recourse against the Corporation or any other person or persons or against any other security the Collateral Agent may hold in respect of the Obligations before realizing upon or otherwise dealing with the Debenture in such manner as the Collateral Agent may consider desirable. (b) The Collateral Agent may grant extensions or other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Corporation and with other parties, sureties or securities as the Collateral Agent may see fit without prejudice to the Obligations or the rights of the Collateral Agent in respect of the Debenture. (c) The Collateral Agent shall not be: (i) liable or accountable for any failure to collect, 5 - 5 - realize or obtain payment in respect of the Debenture; (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Debenture or for the purpose of preserving any rights of the Collateral Agent, the Corporation or any other parties in respect thereof; (iii) responsible for any loss occasioned by any sale or other dealing with the Debenture or by the retention of or failure to sell or otherwise deal therewith; or (iv) bound to protect the Debenture from depreciating in value or becoming worthless. ARTICLE 4 MISCELLANEOUS 4.1 NOTICES. Any and all demands, notices or other communications to be made or given pursuant to this Agreement shall be given and received in the manner and at the addresses set forth in Section [11.2] of the Intercreditor Agreement. 4.2 DISCHARGE. The Pledge shall be released and discharged upon the full and complete payment, performance and satisfaction of all of the Obligations and at the request and sole cost and expense of the Corporation. The Collateral Agent shall execute and deliver to the Corporation such releases and discharges as the Corporation may reasonably require. 4.3 WAIVER. No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right; nor shall any waiver of one provision be deemed to constitute a waiver of any other provision (whether or not similar). No waiver of any of the provisions of this Agreement shall be effective unless it is in writing duly executed by the waiving party or parties. 4.4 NON-MERGER. The Debenture shall not operate by way of merger of any of the Obligations and no judgment recovered by the Collateral Agent, or any of them, shall operate by way of merger of or in any way affect the security of the Debenture which is in addition to and not in substitution for any other security now or hereafter held by the Collateral Agent, or any of them, in respect of the Obligations. 6 - 6 - 4.5 ASSIGNMENTS AND PARTICIPATIONS. The Collateral Agent may sell, assign, transfer or otherwise dispose of all or any of the Obligations in accordance with the provisions governing the Obligations and, in such event, each and every immediate and successive assignee, transferee or holder of all or any of the Obligations shall have, in respect of the Obligations sold, assigned, transferred or otherwise disposed of, the full benefit hereof to the same extent as if it were an original party to the Obligations or the part thereof so sold, assigned, transferred or otherwise disposed. None of the rights or obligations hereunder of the Corporation may be assigned without the prior written consent of the Collateral Agent, except in accordance with the provisions of the Intercreditor Agreement. 4.6 ENUREMENT. This Agreement shall enure to the benefit of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent, the Lenders and their respective successors and assigns and be binding upon the Corporation and its successors and permitted assigns. 4.7 CONFLICTS. Notwithstanding any provision of the Debenture, interest thereunder shall accrue and be payable in accordance with the terms governing the Obligations and the principal thereof and interest payable thereunder shall represent liabilities of the Corporation only to the extent of the Obligations. To the extent of any conflict or inconsistency between the terms of this Agreement and the Debenture, this Agreement shall prevail. Notwithstanding the foregoing, if there exists any right or remedy of any of the Collateral Agent set out in the Debenture which is not set out or provided for herein, such additional right or remedy shall not constitute a conflict or inconsistency. 4.8 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement. 4.9 FURTHER ASSURANCES. The Corporation shall from time to time, whether before or after the Collateral Agent shall become entitled to realize upon or otherwise dispose of the Debenture, at the sole cost and expense of the Corporation, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may reasonably require for perfecting the security constituted by the Debenture or exercising all powers, authorities and discretions hereby conferred upon the Collateral Agent and the Corporation shall from time to time after the Collateral Agent shall have become entitled to realize upon or otherwise dispose of the Debenture, at the sole cost 7 - 7 - and expense of the Corporation, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may require for facilitating the sale of the Debenture in connection with any realization thereof. 4.10 AMENDMENT. This Agreement may be amended only by written agreement of the Corporation and the Collateral Agent. 4.11 JUDGMENT CURRENCY. If, for the purposes of obtaining judgment in any court, it is necessary to convert any sum due, or owing to the Collateral Agent in any currency (the "Original Currency") into another currency (the "Other Currency"), the Corporation hereby agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Collateral Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which the final judgment is granted. The Obligations of the Corporation in respect of any sum due in the Original Currency from it to the Collateral Agent shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Collateral Agent of any such sum adjudged to be so due or owing in such Other Currency, the Collateral Agent may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due or owing to the Collateral Agent in the Original Currency, the Corporation shall, as a separate obligation and notwithstanding any such judgment, indemnify the Collateral Agent for the benefit of the Trustee, on its own account and on account of each Noteholder, and the Administrative Agent, on its own account and on account of each of the Lenders, against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due or owing to the Collateral Agent in the Original Currency, the Collateral Agent shall remit such excess to the Corporation. [CONTINUED ON PAGE 8] 8 4.12 COPY RECEIVED. The Corporation acknowledges receipt of a copy of this Agreement. IN WITNESS WHEREOF the Corporation has executed this Agreement on the date first above written. PCI CHEMICALS CANADA INC. Per:/s/ KENT R. STEPHENSON ----------------------------------- (Authorized Signing Officer) EX-4.6B 8 BOND PLEDGE AGREEMENT (NOVA SCOTIA)DATED 10/30/97 1 EXHIBIT 4.6(b) DEBENTURE PLEDGE AGREEMENT THIS AGREEMENT is made the 30th day of October, 1997. BY: PCI CHEMICALS CANADA INC. (the "Corporation") IN FAVOUR OF: UNITED STATES TRUST COMPANY OF NEW YORK, as collateral agent for its own benefit and the benefit of the Trustee and each of the Noteholders, and the Administrative Agent and each of the Lenders (in such capacity, the "Collateral Agent") WHEREAS the Corporation is or will become indebted, liable and obligated to the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent and the Lenders; AND WHEREAS the Corporation has agreed to execute and deliver this Agreement to and in favour of the Collateral Agent as continuing collateral security for the due, prompt and complete payment, performance and satisfaction of all Obligations (as defined below). NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the foregoing and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation hereby covenants and agrees as follows: ARTICLE 1 INTERPRETATION 1.1 INTERPRETATION. This Agreement shall be interpreted in accordance with the following: (a) words denoting the singular include the plural and vice versa and words denoting any gender include all genders; (b) the division of this Agreement into Articles and Sections and the insertion of headings 2 - 2 - are for convenience of reference only and shall not affect the construction or interpretation of this Agreement; and (c) the word "including" shall mean "including without limitation" and "includes" shall mean "includes without limitation". 1.2 DEBENTURE DEFINITIONS. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Debenture (as hereinafter defined). 1.3 SEVERABILITY. If any provision of this Agreement is, or becomes, illegal, invalid or unenforceable, such provision shall be severed from this Agreement and be ineffective to the extent of such illegality, invalidity or unenforceability. The remaining provisions hereof shall be unaffected by such provision and shall continue to be valid and enforceable. 1.4 GOVERNING LAW. This Agreement shall be governed by, and interpreted in accordance with, the Laws of the Province of Nova Scotia and the Laws of Canada applicable therein, without giving effect to any conflicts of law rules thereof. The Corporation hereby irrevocably attorns and submits to the non-exclusive jurisdiction of the courts of Nova Scotia with respect to any matter arising under or relating to this Agreement. ARTICLE 2 PLEDGE OF DEBENTURE 2.1 PLEDGE OF DEBENTURE. The Corporation hereby pledges to and deposits with the Collateral Agent the Demand Debenture (Nova Scotia) of even date herewith issued by the Corporation to and in favour of the Collateral Agent, in the principal amount of $500,000,000 in lawful money of the United States of America, together with all renewals thereof, substitutions thereafter and supplements thereto (the "Debenture"), as well as interest thereon and proceeds thereof, to be held by the Collateral Agent in accordance with the provisions hereof as continuing security for the due, prompt and complete payment, performance and satisfaction of all of the Obligations. 3 - 3 - 2.2 OBLIGATIONS SECURED. (a) The pledge granted by this Agreement (the "Pledge") shall be continuing collateral security for the due, prompt and complete payment, performance and satisfaction by the Corporation of all indebtedness, liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or unmatured, at any time due or accruing due, owing by the Corporation to the Collateral Agent, the Administrative Agent and the Lenders pursuant to the Guarantee, and to the Collateral Agent, the Trustee and the Noteholders pursuant to the Indenture, and any ultimate unpaid balance thereof, respectively, and in any currency, and whether incurred prior to, at the time of or subsequent to the execution hereof (collectively, and together with the expenses, costs and charges set out in Section 2.2(b), the "Obligations"). (b) All expenses, costs and charges incurred by or on behalf of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders, or any of them, in connection with this Debenture, the Security Interest or the realization of the Collateral, including, after the occurrence and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture, or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be), all legal fees, court costs, Receiver's remuneration and other expenses of taking possession of, repairing, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral shall be added to and form a part of the Obligations. ARTICLE 3 DEFAULT AND ENFORCEMENT 3.1 DEFAULT. The Pledge shall be and become enforceable against the Corporation if and only if and when the Corporation shall fail to pay, perform or satisfy any of the Obligations when due and payable or required to be performed or satisfied, as the case may be (including pursuant to any acceleration thereof in accordance with the provisions governing the Obligations) but not otherwise. 4 - 4 - 3.2 REALIZATION UPON DEFAULT. Whenever the Pledge has become enforceable, the Collateral Agent may at any time realize upon or otherwise dispose of the Debenture by sale, transfer and/or delivery and/or exercise and/or enforce any and all rights and remedies of a holder of the Debenture as if the Collateral Agent was the absolute owner thereof, without notice to or control by the Corporation (except as may be required by applicable Law) and any such remedy may be exercised separately or in combination and shall be in addition to and not in substitution for any rights the Collateral Agent may have, however created. 3.3 APPLICATION OF PROCEEDS. All proceeds of the Debenture shall be applied by the Collateral Agent may choose in accordance with the provisions governing the Obligations, without prejudice to any claim on the Corporation for any deficiency. 3.4 SATISFACTION OF OBLIGATIONS. Payment of the Obligations from time to time shall be deemed to be payment of the principal and interest from time to time due under the Debenture. Upon satisfaction in full of the Obligations, the Collateral Agent shall, at the request and expense of the Corporation, deliver the Debenture to the Corporation for cancellation or assign the Debenture (without recourse to the Lenders) to such other person or entity as the Corporation may direct. 3.5 DEALING WITH THE DEBENTURE. (a) The Collateral Agent shall not be obliged to exhaust its recourse against the Corporation or any other person or persons or against any other security the Collateral Agent may hold in respect of the Obligations before realizing upon or otherwise dealing with the Debenture in such manner as the Collateral Agent may consider desirable. (b) The Collateral Agent may grant extensions or other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Corporation and with other parties, sureties or securities as the Collateral Agent may see fit without prejudice to the Obligations or the rights of the Collateral Agent in respect of the Debenture. 5 - 5 - (c) The Collateral Agent shall not be: (i) liable or accountable for any failure to collect, realize or obtain payment in respect of the Debenture; (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Debenture or for the purpose of preserving any rights of the Collateral Agent, the Corporation or any other parties in respect thereof; (iii) responsible for any loss occasioned by any sale or other dealing with the Debenture or by the retention of or failure to sell or otherwise deal therewith; or (iv) bound to protect the Debenture from depreciating in value or becoming worthless. ARTICLE 4 MISCELLANEOUS 4.1 NOTICES. Any and all demands, notices or other communications to be made or given pursuant to this Agreement shall be given and received in the manner and at the addresses set forth in Section [11.2] of the Intercreditor Agreement. 4.2 DISCHARGE. The Pledge shall be released and discharged upon the full and complete payment, performance and satisfaction of all of the Obligations and at the request and sole cost and expense of the Corporation. The Collateral Agent shall execute and deliver to the Corporation such releases and discharges as the Corporation may reasonably require. 4.3 WAIVER. No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right; nor shall any waiver of one provision be deemed to constitute a waiver of any other provision (whether or not similar). No waiver of any of the provisions of this Agreement shall be effective unless it is in writing duly executed by the waiving party or parties. 4.4 NON-MERGER. The Debenture shall not operate by way of merger of any of the Obligations and no judgment recovered by the Collateral Agent, or any of them, shall operate by way of merger of or in any way affect the security of the Debenture which is in addition to and not in substitution for any other security now or hereafter held by the Collateral Agent, or any of them, in respect of the Obligations. 6 - 6 - 4.5 ASSIGNMENTS AND PARTICIPATIONS. The Collateral Agent may sell, assign, transfer or otherwise dispose of all or any of the Obligations in accordance with the provisions governing the Obligations and, in such event, each and every immediate and successive assignee, transferee or holder of all or any of the Obligations shall have, in respect of the Obligations sold, assigned, transferred or otherwise disposed of, the full benefit hereof to the same extent as if it were an original party to the Obligations or the part thereof so sold, assigned, transferred or otherwise disposed. None of the rights or obligations hereunder of the Corporation may be assigned without the prior written consent of the Collateral Agent, except in accordance with the provisions of the Intercreditor Agreement. 4.6 ENUREMENT. This Agreement shall enure to the benefit of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent, the Lenders and their respective successors and assigns and be binding upon the Corporation and its successors and permitted assigns. 4.7 CONFLICTS. Notwithstanding any provision of the Debenture, interest thereunder shall accrue and be payable in accordance with the terms governing the Obligations and the principal thereof and interest payable thereunder shall represent liabilities of the Corporation only to the extent of the Obligations. To the extent of any conflict or inconsistency between the terms of this Agreement and the Debenture, this Agreement shall prevail. Notwithstanding the foregoing, if there exists any right or remedy of any of the Collateral Agent set out in the Debenture which is not set out or provided for herein, such additional right or remedy shall not constitute a conflict or inconsistency. 4.8 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement. 4.9 FURTHER ASSURANCES. The Corporation shall from time to time, whether before or after the Collateral Agent shall become entitled to realize upon or otherwise dispose of the Debenture, at the sole cost and expense of the Corporation, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may reasonably require for perfecting the security constituted by the Debenture or exercising all powers, authorities and discretions hereby conferred upon the Collateral Agent and the Corporation shall from time to time after the Collateral Agent shall have become entitled to realize upon or otherwise dispose of the Debenture, at the sole cost 7 - 7 - and expense of the Corporation, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may require for facilitating the sale of the Debenture in connection with any realization thereof. 4.10 AMENDMENT. This Agreement may be amended only by written agreement of the Corporation and the Collateral Agent. 4.11 JUDGMENT CURRENCY. If, for the purposes of obtaining judgment in any court, it is necessary to convert any sum due, or owing to the Collateral Agent in any currency (the "Original Currency") into another currency (the "Other Currency"), the Corporation hereby agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Collateral Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which the final judgment is granted. The Obligations of the Corporation in respect of any sum due in the Original Currency from it to the Collateral Agent shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Collateral Agent of any such sum adjudged to be so due or owing in such Other Currency, the Collateral Agent may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due or owing to the Collateral Agent in the Original Currency, the Corporation shall, as a separate obligation and notwithstanding any such judgment, indemnify the Collateral Agent for the benefit of the Trustee, on its own account and on account of each Noteholder, and the Administrative Agent, on its own account and on account of each of the Lenders, against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due or owing to the Collateral Agent in the Original Currency, the Collateral Agent shall remit such excess to the Corporation. [CONTINUED ON PAGE 8] 8 4.12 COPY RECEIVED. The Corporation acknowledges receipt of a copy of this Agreement. IN WITNESS WHEREOF the Corporation has executed this Agreement on the date first above written. PCI CHEMICALS CANADA INC. Per: /s/ PHILIP J. ALBOVE -------------------------------- (Authorized Signing Officer) EX-4.6C 9 DEBENTURE PLEDGE AGREEMENT (NEW BRUNSWICK) 1 EXHIBIT 4.6(c) DEBENTURE PLEDGE AGREEMENT THIS AGREEMENT is made the 30th day of October, 1997. BY: PCI CHEMICALS CANADA INC. (the "Corporation") IN FAVOUR OF: UNITED STATES TRUST COMPANY OF NEW YORK, as collateral agent for its own benefit and the benefit of the Trustee and each of the Noteholders, and the Administrative Agent and each of the Lenders (in such capacity, the "Collateral Agent") WHEREAS the Corporation is or will become indebted, liable and obligated to the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent and the Lenders; AND WHEREAS the Corporation has agreed to execute and deliver this Agreement to and in favour of the Collateral Agent as continuing collateral security for the due, prompt and complete payment, performance and satisfaction of all Obligations (as defined below). NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the foregoing and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Corporation hereby covenants and agrees as follows: ARTICLE 1 INTERPRETATION 1.1 INTERPRETATION. This Agreement shall be interpreted in accordance with the following: (a) words denoting the singular include the plural and vice versa and words denoting any gender include all genders; 2 - 2 - (b) the division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement; and (c) the word "including" shall mean "including without limitation" and "includes" shall mean "includes without limitation". 1.2 DEBENTURE DEFINITIONS. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Debenture (as hereinafter defined). 1.3 SEVERABILITY. If any provision of this Agreement is, or becomes, illegal, invalid or unenforceable, such provision shall be severed from this Agreement and be ineffective to the extent of such illegality, invalidity or unenforceability. The remaining provisions hereof shall be unaffected by such provision and shall continue to be valid and enforceable. 1.4 GOVERNING LAW. This Agreement shall be governed by, and interpreted in accordance with, the Laws of the Province of New Brunswick and the Laws of Canada applicable therein, without giving effect to any conflicts of law rules thereof. The Corporation hereby irrevocably attorns and submits to the non-exclusive jurisdiction of the courts of New Brunswick with respect to any matter arising under or relating to this Agreement. ARTICLE 2 PLEDGE OF DEBENTURE 2.1 PLEDGE OF DEBENTURE. The Corporation hereby pledges to and deposits with the Collateral Agent the Demand Debenture (New Brunswick) of even date herewith issued by the Corporation to and in favour of the Collateral Agent, in the principal amount of $500,000,000 in lawful money of the United States of America, together with all renewals thereof, substitutions thereafter and supplements thereto (the "Debenture"), as well as interest thereon and proceeds thereof, to be held by the Collateral Agent in accordance with the provisions hereof as continuing security for the due, prompt and complete payment, 3 - 3 - performance and satisfaction of all of the Obligations. 2.2 OBLIGATIONS SECURED. (a) The pledge granted by this Agreement (the "Pledge") shall be continuing collateral security for the due, prompt and complete payment, performance and satisfaction by the Corporation of all indebtedness, liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or unmatured, at any time due or accruing due, owing by the Corporation to the Collateral Agent, the Administrative Agent and the Lenders pursuant to the Guarantee, and to the Collateral Agent, the Trustee and the Noteholders pursuant to the Indenture, and any ultimate unpaid balance thereof, respectively, and in any currency, and whether incurred prior to, at the time of or subsequent to the execution hereof (collectively, and together with the expenses, costs and charges set out in Section 2.2(b), the "Obligations"). (b) All expenses, costs and charges incurred by or on behalf of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent or the Lenders, or any of them, in connection with this Debenture, the Security Interest or the realization of the Collateral, including, after the occurrence and during the continuance of a Default (as defined therein) of the nature set forth in Section 8.1.9 of the Term Loan Agreement or a Default (as defined therein) of the nature set forth in Section 501(10) of the Indenture, or an Event of Default (as defined in the Term Loan Agreement or the Indenture, as the case may be), all legal fees, court costs, Receiver's remuneration and other expenses of taking possession of, repairing, protecting, insuring, preparing for disposition, realizing, collecting, selling, transferring, delivering or obtaining payment of the Collateral shall be added to and form a part of the Obligations. ARTICLE 3 DEFAULT AND ENFORCEMENT 3.1 DEFAULT. The Pledge shall be and become enforceable against the Corporation if and only if and when the Corporation shall fail to pay, perform or satisfy any of the Obligations when due and payable or required to be performed or satisfied, as the case may be (including pursuant to any acceleration thereof in accordance with the provisions governing the Obligations) but not otherwise. 4 - 4 - 3.2 REALIZATION UPON DEFAULT. Whenever the Pledge has become enforceable, the Collateral Agent may at any time realize upon or otherwise dispose of the Debenture by sale, transfer and/or delivery and/or exercise and/or enforce any and all rights and remedies of a holder of the Debenture as if the Collateral Agent was the absolute owner thereof, without notice to or control by the Corporation (except as may be required by applicable Law) and any such remedy may be exercised separately or in combination and shall be in addition to and not in substitution for any rights the Collateral Agent may have, however created. 3.3 APPLICATION OF PROCEEDS. All proceeds of the Debenture shall be applied by the Collateral Agent may choose in accordance with the provisions governing the Obligations, without prejudice to any claim on the Corporation for any deficiency. 3.4 SATISFACTION OF OBLIGATIONS. Payment of the Obligations from time to time shall be deemed to be payment of the principal and interest from time to time due under the Debenture. Upon satisfaction in full of the Obligations, the Collateral Agent shall, at the request and expense of the Corporation, deliver the Debenture to the Corporation for cancellation or assign the Debenture (without recourse to the Lenders) to such other person or entity as the Corporation may direct. 3.5 DEALING WITH THE DEBENTURE. (a) The Collateral Agent shall not be obliged to exhaust its recourse against the Corporation or any other person or persons or against any other security the Collateral Agent may hold in respect of the Obligations before realizing upon or otherwise dealing with the Debenture in such manner as the Collateral Agent may consider desirable. (b) The Collateral Agent may grant extensions or other indulgences, take and give up securities, accept compositions, grant releases and discharges and otherwise deal with the Corporation and with other parties, sureties or securities as the Collateral Agent may see fit without prejudice to the Obligations or the rights of the Collateral Agent in respect of the Debenture. 5 - 5 - (c) The Collateral Agent shall not be: (i) liable or accountable for any failure to collect, realize or obtain payment in respect of the Debenture; (ii) bound to institute proceedings for the purpose of collecting, enforcing, realizing or obtaining payment of the Debenture or for the purpose of preserving any rights of the Collateral Agent, the Corporation or any other parties in respect thereof; (iii) responsible for any loss occasioned by any sale or other dealing with the Debenture or by the retention of or failure to sell or otherwise deal therewith; or (iv) bound to protect the Debenture from depreciating in value or becoming worthless. ARTICLE 4 MISCELLANEOUS 4.1 NOTICES. Any and all demands, notices or other communications to be made or given pursuant to this Agreement shall be given and received in the manner and at the addresses set forth in Section [11.2] of the Intercreditor Agreement. 4.2 DISCHARGE. The Pledge shall be released and discharged upon the full and complete payment, performance and satisfaction of all of the Obligations and at the request and sole cost and expense of the Corporation. The Collateral Agent shall execute and deliver to the Corporation such releases and discharges as the Corporation may reasonably require. 4.3 WAIVER. No failure on the part of the Collateral Agent to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right; nor shall any waiver of one provision be deemed to constitute a waiver of any other provision (whether or not similar). No waiver of any of the provisions of this Agreement shall be effective unless it is in writing duly executed by the waiving party or parties. 4.4 NON-MERGER. The Debenture shall not operate by way of merger of any of the Obligations and no judgment recovered by the Collateral Agent, or any of them, shall operate by way of merger of or in any way affect the security of the Debenture which is in addition to and not in substitution for any other security now or hereafter held by the Collateral Agent, or any of them, in respect of the Obligations. 6 - 6 - 4.5 ASSIGNMENTS AND PARTICIPATIONS. The Collateral Agent may sell, assign, transfer or otherwise dispose of all or any of the Obligations in accordance with the provisions governing the Obligations and, in such event, each and every immediate and successive assignee, transferee or holder of all or any of the Obligations shall have, in respect of the Obligations sold, assigned, transferred or otherwise disposed of, the full benefit hereof to the same extent as if it were an original party to the Obligations or the part thereof so sold, assigned, transferred or otherwise disposed. None of the rights or obligations hereunder of the Corporation may be assigned without the prior written consent of the Collateral Agent, except in accordance with the provisions of the Intercreditor Agreement. 4.6 ENUREMENT. This Agreement shall enure to the benefit of the Collateral Agent, the Trustee, the Noteholders, the Administrative Agent, the Lenders and their respective successors and assigns and be binding upon the Corporation and its successors and permitted assigns. 4.7 CONFLICTS. Notwithstanding any provision of the Debenture, interest thereunder shall accrue and be payable in accordance with the terms governing the Obligations and the principal thereof and interest payable thereunder shall represent liabilities of the Corporation only to the extent of the Obligations. To the extent of any conflict or inconsistency between the terms of this Agreement and the Debenture, this Agreement shall prevail. Notwithstanding the foregoing, if there exists any right or remedy of any of the Collateral Agent set out in the Debenture which is not set out or provided for herein, such additional right or remedy shall not constitute a conflict or inconsistency. 4.8 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement. 4.9 FURTHER ASSURANCES. The Corporation shall from time to time, whether before or after the Collateral Agent shall become entitled to realize upon or otherwise dispose of the Debenture, at the sole cost and expense of the Corporation, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may reasonably require for perfecting the security constituted by the Debenture or exercising all powers, authorities and discretions hereby conferred upon the Collateral Agent and the Corporation shall from time to time after the Collateral Agent shall have become entitled to realize upon or otherwise dispose of the Debenture, at the sole cost 7 - 7 - and expense of the Corporation, do all such acts and things and execute and deliver all such deeds, transfers, assignments and instruments as the Collateral Agent may require for facilitating the sale of the Debenture in connection with any realization thereof. 4.10 AMENDMENT. This Agreement may be amended only by written agreement of the Corporation and the Collateral Agent. 4.11 JUDGMENT CURRENCY. If, for the purposes of obtaining judgment in any court, it is necessary to convert any sum due, or owing to the Collateral Agent in any currency (the "Original Currency") into another currency (the "Other Currency"), the Corporation hereby agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Collateral Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which the final judgment is granted. The Obligations of the Corporation in respect of any sum due in the Original Currency from it to the Collateral Agent shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt by the Collateral Agent of any such sum adjudged to be so due or owing in such Other Currency, the Collateral Agent may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the amount of the Original Currency so purchased is less than the sum originally due or owing to the Collateral Agent in the Original Currency, the Corporation shall, as a separate obligation and notwithstanding any such judgment, indemnify the Collateral Agent for the benefit of the Trustee, on its own account and on account of each Noteholder, and the Administrative Agent, on its own account and on account of each of the Lenders, against such loss, and if the amount of the Original Currency so purchased exceeds the sum originally due or owing to the Collateral Agent in the Original Currency, the Collateral Agent shall remit such excess to the Corporation. [CONTINUED ON PAGE 8] 8 4.12 COPY RECEIVED. The Corporation acknowledges receipt of a copy of this Agreement. IN WITNESS WHEREOF the Corporation has executed this Agreement on the date first above written. PCI CHEMICALS CANADA INC. Per: /s/ KENT R. STEPHENSON ------------------------------------ (Authorized Signing Officer) EX-4.7 10 SUBSIDIARY SECURITY AGREEMENT, DATED 10/30/97 1 EXHIBIT 4.7 SUBSIDIARY SECURITY AGREEMENT This SUBSIDIARY SECURITY AGREEMENT (as amended, supplemented, amended and restated or otherwise modified from time to time, this "Security Agreement"), dated as of October 30, 1997, is made by PCI Chemicals Canada Inc./Produits Chimiques PCI Canada Inc., a corporation organized under the laws of the Province of New Brunswick (the "Grantor") in favor of UNITED STATES TRUST COMPANY OF NEW YORK, as collateral agent (together with any successor(s) thereto in such capacity, the "Collateral Agent") under the Intercreditor Agreement (as defined below) for each of the Secured Parties (as defined below). W I T N E S S E T H: WHEREAS, pursuant to a Term Loan Agreement, dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified from time to time, the "Term Loan Agreement"), among Pioneer Americas, Inc., a corporation organized under the laws of Delaware (the "Borrower"), the Parent Guarantor named therein, the various financial institutions as are, or may from time to time become, parties thereto (each, individually, a "Term Loan Lender", and collectively, the "Term Loan Lenders"), the Collateral Agent, DLJ Capital Funding, Inc., as Syndication Agent for the Term Loan Lenders, Salomon Brothers Holding Company Inc, as Documentation Agent for the Term Loan Lenders, Bank of America National Trust and Savings Association, as Administrative Agent for the Term Loan Lenders and United States Trust Company of New York, as Collateral Agent for the Term Loan Lenders (the Syndication Agent, the Documentation Agent, the Administrative Agent and the Collateral Agent are hereinafter collectively referred to as the "Term Loan Agents"), the Term Loan Lenders have extended Term Loan Commitments to make Term Loans to the Borrower, which Term Loans will be evidenced by notes (as amended, supplemented, amended and restated, or otherwise modified from time to time, including all notes issued in exchange or substitution therefor, the "Term Loan Notes") in an aggregate principal amount of up to U.S.$100,000,000; WHEREAS, pursuant to that certain Indenture, dated as of the date hereof (as amended, supplemented, amended and restated, or otherwise modified from time to time, the "Senior Secured Note Indenture"), among the Grantor, the Affiliate Guarantors (as defined therein) and United States Trust Company of New York, as trustee (in such capacity, the "Trustee") for the holders of the Notes (as defined therein) (the "Holders"), the Grantor will issue its 9 1/4% Senior Secured Notes due 2007 (as amended, supplemented, amended and restated, or otherwise modified from time to time, including all notes issued in exchange or substitution therefor upon the registration of such notes pursuant to the United States' Securities Act of 1933 or otherwise, the "Senior Secured Notes") in an aggregate principal amount of U.S.$175,000,000; WHEREAS, as a condition precedent to the making of the Term Loans under the Term Loan Agreement the Grantor has given a guarantee (the "Guarantee") of the obligations of the Borrower under the Term Loan Agreement; 2 WHEREAS, as a condition precedent to the purchase of Senior Secured Notes by the Initial Purchasers (as defined in the Senior Secured Note Indenture) and the making of the Term Loans under the Term Loan Agreement, the Grantor is required to execute and deliver this Security Agreement as collateral security therefor; WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Security Agreement; and WHEREAS, it is in the best interests of the Grantor to execute this Security Agreement inasmuch as the Grantor will derive substantial direct and indirect benefits from the Term Loans made to the Borrower by the Term Loan Lenders pursuant to the Term Loan Agreement and the purchase of the Senior Secured Notes by the Initial Purchasers pursuant to the Senior Secured Note Indenture; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce (i) the Initial Purchasers to purchase the Senior Secured Notes pursuant to the Senior Secured Note Indenture and (ii) the Term Loan Lenders to make Term Loans to the Borrower pursuant to the Term Loan Agreement, the Grantor agrees, for the benefit of each Secured Party, as follows: ARTICLE I DEFINITIONS SECTION 1.1. CERTAIN TERMS. The following terms (whether or not underscored) when used in this Security Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "BORROWER" is defined in the first recital. "COLLATERAL" is defined in Section 2.1. "COLLATERAL ACCOUNT" is defined in Section 4.1.2(b). "COLLATERAL AGENT" is defined in the preamble. "COMPUTER HARDWARE AND SOFTWARE COLLATERAL" means: (a) all computer and other electronic data processing hardware, integrated computer systems, central processing units, memory units, display terminals, printers, features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other related computer hardware; - 2 - 3 (b) all software programs (including both source code, object code and all related applications and data files), whether now owned, licensed or leased or hereafter acquired by the Grantor, designed for use on the computers and electronic data processing hardware described in clause (a) above; (c) all firmware associated therewith; (d) all documentation (including flow charts, logic diagrams, manuals, guides and specifications) with respect to such hardware, software and firmware described in the preceding clauses (a) through (c); and (e) all rights with respect to all of the foregoing, including any and all copyrights, licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications and any substitutions, replacements, additions or model conversions of any of the foregoing. "CONTRACTS" is defined in clause (b) of Section 2.1. "COPYRIGHT COLLATERAL" means all copyrights (including all copyrights for semi-conductor chip product mask works) of the Grantor, whether statutory or common law, registered or unregistered, now or hereafter in force throughout the world including all of the Grantor's right, title and interest in and to all copyrights registered in the United States Copyright Office or anywhere else in the world and also including the copyrights referred to in Item A of Schedule IV attached hereto, and all applications for registration thereof, whether pending or in preparation, all copyright licenses, including each copyright license referred to in Item B of Schedule IV attached hereto, the right to sue for past, present and future infringements of any thereof, all rights corresponding thereto throughout the world, all extensions and renewals of any thereof and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and proceeds of suit. "EXCLUDED ASSETS" means (a) the inventory of the Grantor, including goods held for sale or lease, goods furnished or to be furnished to third parties under contracts of lease, consignment or service, goods which are raw materials or work in process, goods used in or procured for packing and materials used or consumed in the business of the Grantor, (b) accounts due or accruing due and all records entered or recorded by any system of mechanical or electronic data processing or any other information storage device, agreements, books, accounts, invoices, letters, documents and papers recording evidencing or relating thereto, and (c) all contracts, contract rights, chattel paper, documents, instruments, and general intangibles arising from or relating to any of the foregoing. "EQUIPMENT" is defined in clause (a) of Section 2.1. "GRANTOR" is defined in the preamble. - 3 - 4 "GUARANTEE" is defined in the third recital. "HOLDERS" is defined in the second recital. "INTELLECTUAL PROPERTY COLLATERAL" means, collectively, the Computer Hardware and Software Collateral, the Copyright Collateral, the Patent Collateral, the Trademark Collateral and the Trade Secrets Collateral (except to the extent any of the foregoing arises out of or relates to any inventory or accounts receivable). "INTERCREDITOR AGREEMENT" means the Intercreditor and Collateral Agency Agreement, dated as of October 30, 1997, among the Borrower, the Grantor, PCI Carolina Inc., Pioneer Licensing Inc., the Trustee, the Administrative Agent and the Collateral Agent, as amended, supplemented, amended and restated or otherwise modified from time to time. "PATENT COLLATERAL" means: (a) all letters patent and applications for letters patent throughout the world, including all patent applications in preparation for filing anywhere in the world and including each patent and patent application referred to in Item A of Schedule II attached hereto; (b) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described in clause (a); (c) all patent licenses, including each patent license referred to in Item B of Schedule II attached hereto; and (d) all proceeds of, and rights associated with, the foregoing (including license royalties and proceeds of infringement suits), the right to sue third parties for past, present or future infringements of any patent or patent application, including any patent or patent application referred to in Item A of Schedule II attached hereto, and for breach or enforcement of any patent license, including any patent license referred to in Item B of Schedule II attached hereto, and all rights corresponding thereto throughout the world. "PPSA" means the Personal Property Security Act (New Brunswick), as same may be amended from time to time. "RELATED CONTRACTS" is defined in clause (b) of Section 2.1. "SECURED OBLIGATIONS" is defined in Section 2.2. "SECURED PARTIES" means the Collateral Agent, the Trustee, the Holders, the Term Loan Agents, the Term Loan Lenders and any holder of a Term Loan Note. "SECURITY AGREEMENT" is defined in the preamble. - 4 - 5 "SENIOR SECURED NOTE INDENTURE" is defined in the second recital. "SENIOR SECURED NOTES" is defined in the second recital. "TERM LOAN AGREEMENT" is defined in the first recital. "TERM LOAN LENDER" and "TERM LOAN LENDERS" are defined in the first recital. "TERM LOAN NOTES" is defined in the first recital. "TRADEMARK COLLATERAL" means: (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, service marks, certification marks, collective marks, logos, and general intangibles of a like nature (all of the foregoing items in this clause (a) being collectively called a "Trademark"), now existing anywhere in the world or hereafter adopted or acquired, all registrations and recordings thereof and all applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and Trademark Office or in any office or agency of the United States of America or any State thereof or any foreign country, including those referred to in Item A of Schedule III attached hereto; (b) all Trademark licenses, including each Trademark license referred to in Item B of Schedule III attached hereto; (c) all extensions or renewals of any of the items described in clauses (a) and (b); (d) all of the goodwill of the business connected with the use of, and symbolized by the items described in, clauses (a) and (b); and (e) all proceeds of, and rights associated with, the foregoing, including any claim by the Grantor against third parties for past, present or future infringement or dilution of any Trademark, Trademark registration or Trademark license, including any Trademark, Trademark registration or Trademark license referred to in Item A and Item B of Schedule III attached hereto, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license. "TRADE SECRETS COLLATERAL" means all confidential or proprietary information and all know-how obtained by or used in or contemplated at any time for use in the business of the Grantor (all of the foregoing being collectively called a "Trade Secret"), whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses, including each Trade Secret license referred to in Schedule V attached hereto, and including the right to sue for and to enjoin and to collect damages for the actual or threatened - 5 - 6 misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license. "TRUSTEE" is defined in the second recital. SECTION 1.2. INTERCREDITOR AGREEMENT DEFINITIONS. Unless otherwise defined herein or the context otherwise requires, terms used in this Security Agreement, including its preamble and recitals, have the meanings provided in the Intercreditor Agreement. SECTION 1.3. PPSA DEFINITIONS. Unless otherwise defined herein or in the Intercreditor Agreement or the context otherwise requires, terms for which meanings are provided in the PPSA are used in this Security Agreement, including its preamble and recitals, with such meanings. ARTICLE II SECURITY INTEREST SECTION 2.1. GRANT OF SECURITY. The Grantor hereby assigns and pledges to the Collateral Agent, for the ratable benefit of each of the Secured Parties, and hereby grants to the Collateral Agent, for the ratable benefit of each of the Secured Parties, a security interest in all of the following, whether now or hereafter existing or acquired by the Grantor (the "Collateral"): (a) all pipelines, valves, pipes, pumps and equipment in all of its forms of the Grantor, wherever located, including all parts thereof and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor and all accessories related thereto (any and all of the foregoing being the "Equipment"); (b) all contracts, contract rights, chattel paper, documents, instruments, and general intangibles (excluding: (a) tax refunds as they may arise from or relate solely to the sale of inventory including, without limitation, excise, retail sales and goods and services taxes; and (b) any of the foregoing as it may arise from or relate to inventory or accounts receivable) of the Grantor, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, and all rights of the Grantor now or hereafter existing in and to all security agreements, guaranties, leases and other contracts securing or otherwise relating to any such contracts, contract rights, chattel paper, documents, instruments, and general intangibles (any and all such contracts, contract rights, chattel paper, documents, instruments, and general intangibles being the "Contracts", and any and all such security agreements, guaranties, leases and other contracts being the "Related Contracts"); (c) all Intellectual Property Collateral of the Grantor; - 6 - 7 (d) all books, records, writings, data bases, information and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section 2.1; (e) all of the Grantor's other personal property and rights of every kind and description and interests therein (other than the Excluded Assets and excluding any Capital Stock (as defined in the Term Loan Agreement) which is required to be pledged under the Existing Term Loan Agreement or the Existing Senior Secured Note Indenture (in each case as defined in the Term Loan Agreement) until such time as the obligations pursuant to or under such agreements have been paid in full); and (f) all products, offspring, rents, issues, profits, returns, income and proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in clauses (a), (b), (c), (d) and (e), proceeds deposited from time to time in the Collateral Account and in any lock boxes of the Grantor, and, to the extent not otherwise included, all payments under insurance (whether or not the Collateral Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral). Notwithstanding the foregoing, "Collateral" shall not include the Excluded Assets and any general intangibles or other rights arising under any contracts, instruments, licenses or other documents as to which the grant of a security interest would constitute a violation of a valid and enforceable restriction in favor of a third party on such grant, unless and until any required consents shall have been obtained. The Grantor shall, upon the request of the Collateral Agent, use its best commercial efforts to obtain any such required consent. SECTION 2.2. SECURITY FOR OBLIGATIONS. This Security Agreement secures the due, prompt and complete payment, performance and satisfaction by the Grantor of all indebtedness, liabilities and obligations, present or future, direct or indirect, absolute or contingent, matured or unmatured, at any time due or accruing due, owing by the Grantor to the Collateral Agent, the Administrative Agent and the Term Loan Lenders pursuant to the Guarantee, and to the Collateral Agent, the Trustee and the Holders pursuant to the Senior Secured Note Indenture, and any ultimate unpaid balance thereof, respectively, and in any currency, and whether incurred prior to, at the time of or subsequent to the execution hereof (collectively, and together with the expenses, costs and charges set out herein, the "Secured Obligations"). SECTION 2.3. CONTINUING SECURITY INTEREST; TRANSFER OF TERM LOAN NOTES. This Security Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the full and complete payment, performance and satisfaction of all of the Secured Obligations, (b) be binding upon the Grantor, its successors, transferees and assigns, and - 7 - 8 (c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Collateral Agent and each other Secured Party. Without limiting the generality of the foregoing clause (c), any Term Loan Lender may assign or otherwise transfer (in whole or in part) any Term Loan Note or Term Loan held by it to any other Person or entity, and such other Person or entity shall thereupon become vested with all the rights and benefits in respect thereof granted to such Term Loan Lender under any Collateral Document or any Loan Document (including this Security Agreement) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 11.11 and Article X of the Term Loan Agreement. Upon the full and complete payment, performance and satisfaction of all of the Secured Obligations, the security interest granted herein shall terminate and all rights to the Collateral shall revert to the Grantor. Upon any such termination, the Collateral Agent will, at the Grantor's sole expense, execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. Upon any sale or other transfer of Collateral permitted by the terms of the Intercreditor Agreement, the security interest created hereunder in such Collateral (but not in the proceeds thereof) shall be deemed to be automatically released and the Collateral Agent will, at the Grantor's sole expense, execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such release. SECTION 2.4. GRANTOR REMAINS LIABLE. Anything herein to the contrary notwithstanding (a) the Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, and shall perform all of its duties and obligations under such contracts and agreements, (b) the exercise by the Collateral Agent of any of its rights hereunder shall not release the Grantor from any of its duties or obligations under any such contracts or agreements included in the Collateral, and (c) neither the Collateral Agent nor any other Secured Party shall have any obligation or liability under any such contracts or agreements included in the Collateral by reason of this Security Agreement, nor shall the Collateral Agent or any other Secured Party be obligated to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 2.5. SECURITY INTEREST ABSOLUTE. All rights of the Collateral Agent and the security interests granted to the Collateral Agent hereunder, and all obligations of the Grantor hereunder, shall be absolute and unconditional, irrespective of (a) any lack of validity or enforceability of the Intercreditor Agreement, the Senior Secured Note Indenture, the Term Loan Agreement, any Term Loan Note, any Senior Secured Note, any Collateral Document or any other Loan Document; (b) the failure of any Secured Party - 8 - 9 (i) to assert any claim or demand or to enforce any right or remedy against the Borrower or any other Person under the provisions of the Intercreditor Agreement, the Senior Secured Note Indenture, the Term Loan Agreement, any Term Loan Note, any Senior Secured Note, any Collateral Document or any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Secured Obligations; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations or any other extension, compromise or renewal of any Secured Obligations; (d) any reduction, limitation, impairment or termination of any Secured Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Grantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Secured Obligations or otherwise; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of the Intercreditor Agreement, the Senior Secured Note Indenture, the Term Loan Agreement, any Term Loan Note, any Senior Secured Note, any Collateral Document, or any other Loan Document; (f) any addition, exchange, release, surrender or non-perfection of any collateral (including the Collateral), or any amendment to or waiver or release of or addition to or consent to departure from any guaranty, for any of the Secured Obligations; or (g) any other circumstances which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any surety or any guarantor. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants to each Secured Party (a) as to all matters contained in Article VI of the Term Loan Agreement insofar as the representations and warranties contained therein are applicable to the Grantor and its properties, each such representation and warranty set forth in such Article (insofar as applicable as aforesaid) and all other terms of the Term Loan Agreement to which reference is made therein, together with all related definitions and ancillary provisions, being hereby - 9 - 10 incorporated into this Security Agreement by reference as though specifically set forth in this Section and (b) insofar as the representations and warranties contained herein are applicable to the Grantor and its properties, as set forth in this Section. SECTION 3.1.1. LOCATION OF COLLATERAL, ETC. All of the Equipment of the Grantor is located at the places specified in Item A of Schedule I hereto. All of the lock boxes of the Grantor are located at the places specified in Item B of Schedule I hereto. The place(s) of business and chief executive office of the Grantor and the office(s) where the Grantor keeps its records concerning the Contracts, and all originals of all chattel paper which evidence Contracts, are located at the address set forth in Item C of Schedule I hereto. The Grantor has no trade names. The Grantor has not been known by any legal name different from the one set forth on the signature page hereto, nor has the Grantor been the subject of any amalgamation, merger or other corporate reorganization. All Contracts evidenced by a promissory note or other instrument, negotiable document or chattel paper have been duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent and delivered and pledged to the Collateral Agent pursuant to Section 4.1.7. The Grantor is not a party to any federal, state, provincial, municipal or local government contract except as set forth in Item F of Schedule I hereto. SECTION 3.1.2. OWNERSHIP, NO LIENS, ETC. The Grantor owns its Collateral free and clear of any Lien, security interest, charge or encumbrance except for the security interest created by this Security Agreement and except (a) as permitted under Section 7.2.2 of the Term Loan Agreement or (b) for any Permitted Liens (as defined in the Senior Secured Note Indenture). No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed in favor of the Collateral Agent relating to this Security Agreement or as have been filed in connection with Liens permitted pursuant to the Intercreditor Agreement. SECTION 3.1.3. POSSESSION AND CONTROL. The Grantor has exclusive possession and control (subject only to (a) Liens permitted under Section 7.2.2 of the Term Loan Agreement or (b) Permitted Liens (as defined in the Senior Secured Note Indenture) of its Equipment. SECTION 3.1.4. NEGOTIABLE DOCUMENTS, INSTRUMENTS AND CHATTEL PAPER. Subject to the proviso to clause (a) of Section 4.1.7, the Grantor has, contemporaneously herewith, delivered to the Collateral Agent possession of all originals of all negotiable documents, instruments and chattel paper currently owned or held by the Grantor (duly endorsed in blank, if requested by the Collateral Agent). SECTION 3.1.5. INTELLECTUAL PROPERTY COLLATERAL. With respect to any Intellectual Property Collateral the loss, impairment or infringement of which might have a Material Adverse Effect: (a) such Intellectual Property Collateral is subsisting and has not been adjudged invalid or unenforceable, in whole or in part; (b) such Intellectual Property Collateral is valid and enforceable; - 10 - 11 (c) the Grantor has made all necessary filings and recordations to protect its interest in such Intellectual Property Collateral, including recordations of all of its interests in the Patent Collateral and Trademark Collateral in the United States Patent and Trademark Office and in corresponding offices throughout the world and its claims to the Copyright Collateral in the United States Copyright Office and in corresponding offices throughout the world; (d) the Grantor is the exclusive owner of the entire and unencumbered right, title and interest in and to such Intellectual Property Collateral and no claim has been made that the use of such Intellectual Property Collateral does or may violate the asserted rights of any third party; and (e) the Grantor has performed and will continue to perform all acts and has paid and will continue to pay all required fees and taxes to maintain each and every item of Intellectual Property Collateral in full force and effect throughout the world, as applicable. The Grantor owns directly or is entitled to use by license or otherwise, all patents, Trademarks, Trade Secrets, copyrights, mask works, licenses, technology, know-how, processes and rights with respect to any of the foregoing used in, necessary for or of importance to the conduct of the Grantor's business except (a) as permitted under Section 7.2.2 of the Term Loan Agreement or (b) for any Permitted Liens (as defined in the Senior Secured Note Indenture). SECTION 3.1.6. VALIDITY, ETC. Except (a) as permitted under Section 7.2.2 of the Term Loan Agreement or (b) for any Permitted Liens (as defined in the Senior Secured Note Indenture), this Security Agreement creates a valid first priority security interest in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. SECTION 3.1.7. AUTHORIZATION, APPROVAL, ETC. Except as have been obtained or made and are in full force and effect, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (a) for the grant by the Grantor of the security interest granted hereby or for the execution, delivery and performance of this Security Agreement by the Grantor, or (b) for the perfection of or the exercise by the Collateral Agent of its rights and remedies hereunder. SECTION 3.1.8. COMPLIANCE WITH LAWS. The Grantor is in compliance with the requirements of all applicable laws, rules, regulations and orders of every governmental authority, the non-compliance with which would be reasonably likely to have a Material Adverse Effect or materially adversely affect the value of the Collateral or the worth of the Collateral as collateral security. - 11 - 12 ARTICLE IV COVENANTS SECTION 4.1. CERTAIN COVENANTS. The Grantor covenants and agrees that, so long as any portion of the Secured Obligations shall remain unpaid, any Term Loan Lender shall have any outstanding Term Loan Commitment, or any obligations under the Intercreditor Agreement shall remain outstanding, the Grantor will, unless the Collateral Agent (with the consent of the Term Loan Lenders and the Holders as specified in the Intercreditor Agreement) shall otherwise consent in writing, perform, comply with and be bound by (a) all of the agreements, covenants and obligations contained in Article VII of the Term Loan Agreement and in Article Ten of the Senior Secured Note Indenture which are applicable to the Grantor or its properties, each such agreement, covenant and obligation contained in each such Article and all other terms of each of the Term Loan Agreement and the Senior Secured Note Indenture to which reference is made herein, together with all related definitions and ancillary provisions, being hereby incorporated into this Security Agreement by reference as though specifically set forth in this Section and (b) the obligations set forth in this Section. SECTION 4.1.1. AS TO EQUIPMENT. The Grantor hereby agrees that it shall (a) keep all the Equipment at the places therefor specified in Section 3.1.1 or, upon 30 days' prior written notice to the Collateral Agent, at such other places in a jurisdiction where all representations and warranties set forth in Article III (including Section 3.1.6) shall be true and correct, and all action required pursuant to the first sentence of Section 4.1.7 shall have been taken with respect to the Equipment; (b) cause the Equipment to be maintained and preserved in the same condition, repair and working order as when new, ordinary wear and tear excepted, and in accordance with any manufacturer's manual; and forthwith, or in the case of any loss or damage to any of the Equipment, as quickly as practicable after the occurrence thereof, make or cause to be made all repairs, replacements, and other improvements in connection therewith which are necessary or desirable to such end; and promptly furnish to the Collateral Agent a statement respecting any loss or damage to any of the Equipment; and (c) pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Equipment, except to the extent the validity thereof is being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside. SECTION 4.1.2. AS TO CONTRACTS. (a) The Grantor shall keep its place(s) of business and chief executive office and the office(s) where it keeps its records concerning the Contracts, and all originals of all chattel paper which evidences Contracts, located at the address(es) set forth in Item - 12 - 13 D of Schedule I hereto, or, upon 30 days' prior written notice to the Collateral Agent, at such other locations in a jurisdiction where all actions required by the first sentence of Section 4.1.7 shall have been taken with respect to the Contracts; not change its name except upon 30 days' prior written notice to the Collateral Agent; hold and preserve such records and chattel paper; and permit representatives of the Collateral Agent at any time during normal business hours to inspect and make abstracts from such records and chattel paper. (b) Upon written notice by the Collateral Agent to the Grantor pursuant to this Section 4.1.2(b), all proceeds of Collateral received by the Grantor shall be delivered in kind to the Collateral Agent for deposit to a deposit account (the "Collateral Account") of the Grantor maintained with the Collateral Agent, and the Grantor shall not commingle any such proceeds, and shall hold separate and apart from all other property, all such proceeds in express trust for the benefit of the Collateral Agent until delivery thereof is made to the Collateral Agent. The Collateral Agent will not give the notice referred to in the preceding sentence unless there shall have occurred and be continuing a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default. (c) The Collateral Agent shall have the right to apply any amount in the Collateral Account to the payment of any Secured Obligations which are due and payable or payable upon demand, or to the payment of any Secured Obligations at any time that an Event of Default shall exist. SECTION 4.1.3. AS TO COLLATERAL. (a) Until the occurrence and continuance of a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, and such time as the Collateral Agent shall notify the Grantor of the revocation of such power and authority, the Grantor (i) may use and consume, in the ordinary course of its business (except as otherwise permitted under the Intercreditor Agreement), any raw materials, work in process or materials normally held by the Grantor for such purpose, (ii) will, at its own expense, endeavour to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as the Collateral Agent may reasonably request following the occurrence of a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default or, in the absence of such request, as the Grantor may deem advisable,(iii) may grant, in the ordinary course of business (except as otherwise permitted under the Intercreditor Agreement), to any party obligated on any of the Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to such Collateral, and (iv) may commercially exploit the Intellectual Property Collateral, defend it, enforce its rights in it against third parties and - 13 - 14 be entitled to receive any damages with respect to any infringement of it. The Collateral Agent, however, may, at any time following a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, whether before or after any revocation of such power and authority or the maturity of any of the Secured Obligations, notify any parties obligated on any of the Collateral to make payment to the Collateral Agent of any amounts due or to become due thereunder and enforce collection of any of the Collateral by suit or otherwise and surrender, release, or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of the Collateral Agent following a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, the Grantor will, at its own expense, notify any parties obligated on any of the Collateral to make payment to the Collateral Agent of any amounts due or to become due thereunder. (b) The Collateral Agent is authorized to endorse, in the name of the Grantor, any item, howsoever received by the Collateral Agent, representing any payment on or other proceeds of any of the Collateral. SECTION 4.1.4. AS TO INTELLECTUAL PROPERTY COLLATERAL. The Grantor covenants and agrees to comply with the following provisions as such provisions relate to any Intellectual Property Collateral of the Grantor that: (a) the Grantor shall not, unless the Grantor shall either (i) reasonably and in good faith determine (and notice of such determination shall have been delivered to the Collateral Agent) that any of the Patent Collateral is of negligible economic value to the Grantor, or (ii) have a valid business purpose to do otherwise, do any act, or omit to do any act, whereby any of the Patent Collateral may lapse or become abandoned or dedicated to the public or unenforceable. (b) the Grantor shall not, and the Grantor shall not permit any of its licensees to, unless the Grantor shall either (i) reasonably and in good faith determine (and notice of such determination shall have been delivered to the Collateral Agent) that any of the Trademark Collateral is of negligible economic value to the Grantor, or (ii) have a valid business purpose to do otherwise, (i) fail to continue to use any of the Trademark Collateral in order to maintain all of the Trademark Collateral in full force free from any claim of abandonment for non-use, (ii) fail to maintain as in the past the quality of products and services offered under all of the Trademark Collateral, - 14 - 15 (iii) fail to employ all of the Trademark Collateral registered with any federal, state, provincial, municipal, local or foreign authority with an appropriate notice of such registration, (iv) adopt or use any other Trademark which is confusingly similar or a colourable imitation of any of the Trademark Collateral, (v) use any of the Trademark Collateral registered with any federal, state, provincial, municipal, local or foreign authority except for the uses for which registration or application for registration of all of the Trademark Collateral has been made, and (vi) do or permit any act or knowingly omit to do any act whereby any of the Trademark Collateral may lapse or become invalid or unenforceable. (c) the Grantor shall not, unless the Grantor shall either (i) reasonably and in good faith determine (and notice of such determination shall have been delivered to the Collateral Agent) that any of the Copyright Collateral or any of the Trade Secrets Collateral is of negligible economic value to the Grantor, or (ii) have a valid business purpose to do otherwise, do or permit any act or knowingly omit to do any act whereby any of the Copyright Collateral or any of the Trade Secrets Collateral may lapse or become invalid or unenforceable or placed in the public domain except upon expiration of the end of an unrenewable term of a registration thereof. (d) the Grantor shall notify the Collateral Agent immediately if it knows, or has reason to know, that any application or registration relating to any material item of the Intellectual Property Collateral may become abandoned or dedicated to the public or placed in the public domain or invalid or unenforceable, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any foreign counterpart thereof or any court) regarding the Grantor's ownership of any of the Intellectual Property Collateral, its right to register the same or to keep and maintain and enforce the same. (e) in no event shall the Grantor or any of its agents, employees, designees or licensees file an application for the registration of any Intellectual Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, unless it promptly informs the Collateral Agent, and upon request of the Collateral Agent, executes and delivers any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to evidence the Collateral Agent's - 15 - 16 security interest in such Intellectual Property Collateral and the goodwill and general intangibles of the Grantor relating thereto or represented thereby. (f) the Grantor shall take all necessary steps, including in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue any application (and to obtain the relevant registration) filed with respect to, and to maintain any registration of, the Intellectual Property Collateral, including the filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and the payment of fees and taxes (except to the extent that dedication, abandonment or invalidation is permitted under the foregoing clauses (a), (b) and (c)). (g) the Grantor shall, if requested by the Collateral Agent, execute and deliver to the Collateral Agent a Patent Security Agreement, a Trademark Security Agreement and a Copyright Security Agreement in the forms of Exhibit A, Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver to the Collateral Agent any other document required to acknowledge or register or perfect the Collateral Agent's interest in any part of the Intellectual Property Collateral. SECTION 4.1.5. INSURANCE. The Grantor will maintain or cause to be maintained with responsible insurance companies insurance with respect to its business and properties (including the Equipment) against such casualties and contingencies and of such types and in such amounts as is required pursuant to each of the Term Loan Agreement and the Senior Secured Note Indenture, and will, upon the request of the Collateral Agent, furnish a certificate of a reputable insurance broker setting forth the nature and extent of all insurance maintained by the Grantor in accordance with this Section. Without limiting the foregoing, the Grantor further agrees as follows: (a) Each policy for property insurance shall show the Collateral Agent as loss payee. (b) Each policy for liability insurance shall show the Collateral Agent as an additional insured. (c) Each insurance policy shall provide that at least 30 days' prior written notice of cancellation or of lapse shall be given to the Collateral Agent by the insured. (d) The Grantor shall, if so requested by the Collateral Agent, deliver to the Collateral Agent a copy of each insurance policy. (e) All payments in respect of property insurance shall be deposited to the Collateral Account and if there shall be no Collateral Account shall be paid to the Grantor. - 16 - 17 SECTION 4.1.6. TRANSFERS AND OTHER LIENS. The Grantor shall not: (a) sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except as permitted by the Intercreditor Agreement; or (b) create or suffer to exist any Lien or other charge or encumbrance upon or with respect to any of the Collateral to secure Indebtedness of any Person or entity, except for the security interest created by this Security Agreement and except as permitted by the Intercreditor Agreement. SECTION 4.1.7. FURTHER ASSURANCES, ETC. The Grantor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Agent may request, in order to perfect, preserve and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, the Grantor will (a) if any Contract shall be evidenced by a promissory note or other instrument, negotiable document or chattel paper, deliver and pledge to the Collateral Agent hereunder such promissory note, instrument, negotiable document or chattel paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Collateral Agent; provided, however, that unless there shall have occurred and be continuing a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default in the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, (i) no such promissory note, instrument, negotiable document or chattel paper that has a fair market value of less than $500,000 individually, or (ii) such promissory notes, instruments, negotiable documents or chattel paper that collectively have a fair market value in the aggregate of less than $1,000,000, shall be required to be delivered unless otherwise required pursuant to the Term Loan Agreement, any other Loan Document (as such term is defined in the Term Loan Agreement) the Senior Secured Indenture or any other Collateral Document; (b) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices (including any assignment of claim form under or pursuant to the PPSA, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof), as may be necessary or desirable, or as the Collateral Agent may request, in order to perfect and preserve the security interests and other rights granted or purported to be granted to the Collateral Agent hereby; and - 17 - 18 (c) furnish to the Collateral Agent, from time to time at the Collateral Agent's request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail. With respect to the foregoing and the grant of the security interest hereunder, the Grantor hereby authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Grantor where permitted by law. A carbon, photographic or other reproduction of this Security Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. ARTICLE V THE COLLATERAL AGENT SECTION 5.1. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Grantor hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact, with full authority in the place and stead of the Grantor and in the name of the Grantor or otherwise, from time to time in the Collateral Agent's discretion, following the occurrence and continuation of a Default of the nature set forth in Section 8.1.9 of the Term Loan Agreement, a Default of the nature set forth in Clause 10 or 11 of Section 501 of the Senior Secured Note Indenture or an Event of Default, to take any action and to execute any instrument which the Collateral Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement, including: (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (a) above; (c) to file any claims or take any action or institute any proceedings which the Collateral Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Agent with respect to any of the Collateral; and (d) to perform the affirmative obligations of the Grantor hereunder (including all obligations of the Grantor pursuant to Section 4.1.7). The Grantor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest. SECTION 5.2. COLLATERAL AGENT MAY PERFORM. If the Grantor fails to perform any agreement contained herein, the Collateral Agent may itself perform, or cause performance of, - 18 - 19 such agreement, and the expenses of the Collateral Agent incurred in connection therewith shall be payable by the Grantor pursuant to Section 6.2. SECTION 5.3. COLLATERAL AGENT HAS NO DUTY. In addition to, and not in limitation of, Section 2.4, the powers conferred on the Collateral Agent hereunder are solely to protect its interest (on behalf of the Secured Parties) in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. SECTION 5.4. REASONABLE CARE. The Collateral Agent is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession; provided, however, the Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral, if it takes such action for that purpose as the Grantor reasonably requests in writing at times other than upon the occurrence and during the continuance of any Event of Default, but failure of the Collateral Agent to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care. ARTICLE VI REMEDIES SECTION 6.1. CERTAIN REMEDIES. If any Event of Default shall have occurred and be continuing: (a) The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the PPSA (whether or not the PPSA applies to the affected Collateral) and also may (i) require the Grantor to, and the Grantor hereby agrees that it will, at its expense and upon request of the Collateral Agent forthwith, assemble all or part of the Collateral as directed by the Collateral Agent and make it available to the Collateral Agent at a place to be designated by the Collateral Agent which is reasonably convenient to both parties, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. The Grantor agrees that, to the extent notice of sale shall be required by law, at least ten days' prior notice to the Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any - 19 - 20 sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) All cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Collateral Agent, be held by the Collateral Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 6.2) in whole or in part by the Collateral Agent for the ratable benefit of the Secured Parties against, all or any part of the Secured Obligations in such order as the Collateral Agent shall elect. Any surplus of such cash or cash proceeds held by the Collateral Agent and remaining after payment in full in cash of all the Secured Obligations shall be paid over to the Grantor or to whomsoever may be lawfully entitled to receive such surplus. SECTION 6.2. INDEMNITY AND EXPENSES. (a) The Grantor agrees to indemnify the Collateral Agent from and against any and all claims, losses and liabilities arising out of or resulting from this Security Agreement (including enforcement of this Security Agreement), except claims, losses or liabilities resulting from the Collateral Agent's gross negligence or wilful misconduct. (b) The Grantor will upon demand pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Collateral Agent may incur in connection with (i) the administration of this Security Agreement, (ii) the custody, preservation, use or operation of, or, after the occurrence and during the continuance of an Event of Default, the sale of, collection from, or other realization upon, any of the Collateral, and (iii) the exercise or enforcement of any of the rights of the Collateral Agent or the Secured Parties hereunder, or (iv) the failure by the Grantor to perform or observe any of the provisions hereof. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.1. COLLATERAL DOCUMENT. This Security Agreement is a Collateral Document executed pursuant to the Intercreditor Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions of the Intercreditor Agreement. - 20 - 21 SECTION 7.2. AMENDMENTS; ETC. No amendment to or waiver of any provision of this Security Agreement nor consent to any departure by the Grantor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent (on behalf of the Secured Parties), and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 7.3. ADDRESSES FOR NOTICES. All notices and other communications provided for hereunder shall be in writing or by facsimile and, if to the Grantor, addressed, delivered or transmitted to the Grantor in care of the Borrower at the address or facsimile number of the Borrower specified in the Intercreditor Agreement, if to the Collateral Agent, addressed, delivered or transmitted to it at the address or facsimile number of the Collateral Agent specified in the Intercreditor Agreement. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given which transmitted (and electronic confirmation of receipt thereof has been received). SECTION 7.4. SECTION CAPTIONS. Section captions used in this Security Agreement are for convenience of reference only, and shall not affect the construction of this Security Agreement. SECTION 7.5. SEVERABILITY. Wherever possible each provision of this Security Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Security Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Security Agreement. SECTION 7.6. COUNTERPARTS. This Security Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed an original and all of which shall constitute together but one and the same agreement. SECTION 7.7. GOVERNING LAW, ENTIRE AGREEMENT, ETC. THIS SECURITY AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE PROVINCE OF NEW BRUNSWICK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE PROVINCE OF NEW BRUNSWICK. THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. - 21 - 22 IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PCI CHEMICALS CANADA INC./PRODUITS CHIMIQUES PCI CANADA INC., a New Brunswick corporation By: /s/ KENT R. STEPHENSON ------------------------------ Name: Kent R. Stephenson Title: Vice President UNITED STATES TRUST COMPANY OF NEW YORK, as Collateral Agent By: /s/ PATRICIA STERMER ------------------------------ Name: Patricia Stermer Title: Assistant Vice President 23 SCHEDULE I TO SUBSIDIARY SECURITY AGREEMENT ITEM A. LOCATION OF EQUIPMENT DESCRIPTION LOCATION The Equipment of the Grantor is located at the following address: 1. 300 Brookdale Avenue Cornwall, Ontario 2. 2101 Hadwen Road Mississauga, Ontario L5K 2L3 3. Dalhousie, New Brunswick 4. Point Tupper, Nova Scotia ITEM B. LOCATION OF LOCK BOXES Nil
Contact ---------------------------------- Bank Name and Address Account Number Person --------------------- -------------- ------ 1. Nil 2. 3.
ITEM C. PLACE(S) OF BUSINESS AND CHIEF EXECUTIVE OFFICE 1. PCI Chemicals Canada Inc. 630 Rene-Levesque West 31st Floor Montreal, Quebec H3B 1S6 24 2. 675 Alphonse-Deshaies Boulevard Town of Becancourt Quebec, Quebec G0X 1B0 3. 300 Brookdale Avenue Cornwall, Ontario 4. 2101 Hadwen Road Mississauga, Ontario L5K 2L3 5. Dalhousie, New Brunswick ITEM D. TRADE NAMES Nil ITEM E. MERGER OR OTHER CORPORATE REORGANIZATION Nil ITEM F. GOVERNMENT CONTRACTS 1. Purchase Order with City of Windsor November 26, 1996 Public Works Department 2. Energy Supply Agreement between New April 1, 1996 Brunswick Power Corp. and ICI Canada Inc. 3. Energy Supply Agreement with Cornwall January 26, 1993 Street Railway Light and Power Co. Ltd. - 2 - EX-5.1 11 OPINION OF WILLKIE FARR & GALLAGHER 1 Exhibit 5.1 January 8, 1998 PCI Chemicals Canada Inc. c/o Pioneer Americas Acquisition Corp. 4300 NationsBank Center 700 Louisiana Street Houston, Texas 77002 Re: Registration Statement on Form S-4 (File No. 333-41221) Ladies and Gentlemen: We are counsel to PCI Chemicals Canada Inc., a New Brunswick, Canada corporation (the "Company" and, together with Pioneer Americas Acquisition Corp., a Delaware corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers"), and have acted as such in connection with various legal matters relating to the filing of a Registration Statement on Form S-4 (File No. 333-41221) (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), covering up to $175,000,000 in aggregate principal amount of 9-1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes") offered in exchange for up to $175,000,000 in aggregate principal amount of outstanding 9-1/4% Series A Senior Secured Notes due 2007 originally issued and sold in reliance upon an exemption from registration under the Securities Act (the "Original Notes"). The Original Notes were issued under, and the Exchange Notes are to be issued under, an Indenture, dated as of October 30, 1997 (the "Indenture"), by and among the Issuers and the United States Trust Company of New York, as trustee. The exchange will be made pursuant to an exchange offer (the "Exchange Offer") contemplated by the Registration Statement. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Registration Statement. In so acting, we have examined copies of such records of the Issuers and such other certificates and documents as we have deemed relevant and necessary for the opinions hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic originals of all documents submitted to us as certified or reproduced copies. We have also assumed the legal capacity of all persons executing such documents and the truth and correctness of any representations or warranties therein contained. As to various 2 PCI Chemicals Canada Inc. January 8, 1998 Page 2 questions of fact material to such opinions, we have relied upon certificates of officers of the Issuers and of public officials. Based upon the foregoing, we are of the opinion that: 1. PAAC, Pioneer Americas, Inc., Pioneer Chlor Alkali Company, Inc., Pioneer (East), Inc., PCI Carolina, Inc. and Pioneer Licensing, Inc. are duly formed and validly existing under the laws of the State of Delaware. 2. The execution and delivery of the Indenture has been duly authorized by the Issuers, and the Indenture constitutes a legal, valid and binding obligation of the Issuers, enforceable against the Issuers in accordance with the terms thereof, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance and other similar laws affecting the enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 3. The Exchange Notes have been duly authorized and, when duly executed by the proper officers of the Company, duly authenticated by the Trustee and issued by the Company in accordance with the terms of the Indenture and the Exchange Offer, will constitute legal, valid and binding obligations of the Company, will be entitled to the benefits of the Indenture and will be enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance and other similar laws affecting the enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 4. The Guarantees have been duly authorized and, when the Exchange Notes have been duly executed and authenticated, and the Guarantees have been duly executed, in accordance with the terms of the Indenture, and the Exchange Notes have been delivered to the holders as described in the Prospectus, the Guarantees will constitute legal, valid and binding obligations of the Guarantors, will be entitled to the benefits of the Indenture and will be enforceable against the Guarantors in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance and other similar laws affecting the enforcement of creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). 3 PCI Chemicals Canada Inc. January 8, 1998 Page 3 This opinion is limited to the laws of the State of New York, the General Corporation Law of the State of Delaware and the federal laws of the United States of the type typically applicable to transactions contemplated by the Exchange Offer, and we do not express any opinion with respect to the laws of any other country, state or jurisdiction. In rendering our opinions expressed in paragraphs 2, 3 and 4 above, we have relied on the opinions of Stewart McKelvey Stirling Scales, Canadian counsel, and Kent R. Stephenson, Esq., Vice President, General Counsel and Secretary of the Company, in each case addressed to you and of even date herewith, to the extent our opinions relate to due authorization, execution and delivery by corporations not incorporated in the State of Delaware. This opinion letter is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated. This letter speaks only as of the date hereof and is limited to present statutes, regulations and administrative and judicial interpretations. We undertake no responsibility to update or supplement this letter after the date hereof. We consent to being named in the Registration Statement and related Prospectus as counsel who are passing upon the legality of the Exchange Notes and the Guarantees and to the reference to our name under the caption "Legal Matters" in such Prospectus. We also consent to your filing copies of this opinion as an exhibit to the Registration Statement or any amendment thereto. Very truly yours, /s/ Willkie Farr & Gallagher EX-5.2 12 OPINION OF KENT R. STEPHENSON, ESQ. 1 Exhibit 5.2 January 8, 1998 PCI Chemicals Canada Inc. c/o Pioneer Americas Acquisition Corp. 4300 NationsBank Center 700 Louisiana Street Houston, Texas 77002 Re: Registration Statement on Form S-4 (File No. 333-41221) Ladies and Gentlemen: I am Vice President and Secretary of PCI Chemicals Canada Inc., a New Brunswick, Canada corporation (the "Company" and, together with Pioneer Americas Acquisition Corp., a Delaware corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers") and have acted as counsel to the Issuers in connection with various legal matters relating to the filing of a Registration Statement on Form S-4 (File No. 333-41221) (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), covering up to $175,000,000 in aggregate principal amount of 9-1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes") offered in exchange for up to $175,000,000 in aggregate principal amount of 9-1/4% Series A Senior Secured Notes due 2007 in reliance upon an exemption from registration under the Securities Act (the "Original Notes"). The Original Notes were issued under, and the Exchange Notes are to be issued under, an Indenture, dated as of October 30, 1997, by and among the Issuers and the United States Trust Company of New York, as trustee. The exchange will be made pursuant to an exchange offer (the "Exchange Offer") contemplated by the Registration Statement. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Registration Statement. In so acting, I have examined copies of such records of the Issuers and such other certificates and documents as I have deemed relevant and necessary for the opinions hereinafter set forth. In such examination, I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals and the conformity to authentic originals of all documents submitted to me as 2 PCI Chemicals Canada Inc. January 8, 1998 Page 2 certified or reproduced copies. I have also assumed the legal capacity of all persons executing such documents and the truth and correctness of any representations or warranties therein contained. As to various questions of fact material to such opinions, I have relied upon certificates of officers of the Issuers and of public officials. Based upon the foregoing, I am of the opinion that: 1. Imperial West Chemical Co., All-Pure Chemical Co., Black Mountain Power Company, All-Pure Chemical Northwest, Inc., Pioneer Chlor Alkali International, Inc., G.O.W. Corporation, T.C. Holdings, Inc. and T.C. Products, Inc. (collectively, the "Non-Delaware Subsidiaries") are duly formed and validly existing under the laws of their respective jurisdictions of incorporation. 2. The Indenture has been duly authorized, executed and delivered by each of the Non-Delaware Subsidiaries. Each of the Exchange Notes and the Guarantees have been duly authorized by each of the Non-Delaware Subsidiaries. This opinion letter is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated. This opinion letter may be relied upon by Willkie Farr & Gallagher in connection with the Exchange Offer. This letter speaks only as of the date hereof and is limited to present statutes, regulations and administrative and judicial interpretations. I undertake no responsibility to update or supplement this letter after the date hereof. I consent to your filing copies of this opinion as an exhibit to the Registration Statement or any amendment thereto. Sincerely, /s/ Kent R. Stephenson Kent R. Stephenson Vice President and Secretary EX-5.3 13 OPINION OF STEWART MCKELVEY STIRLING SCALES 1 Exhibit 5.3 January 8, 1998 PCI Chemicals Canada Inc. c/o Pioneer Americas Acquisition Corp. 4300 NationsBank Center 700 Louisiana Street Houston, Texas 77002 Re: Registration Statement on Form S-4 (File No. 333-41221) Ladies and Gentlemen: We are counsel to PCI Chemicals Canada Inc., a New Brunswick, Canada corporation (the "Company" and, together with Pioneer Americas Acquisition Corp., a Delaware corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers"), and have acted as such in connection with various legal matters relating to the filing of a Registration Statement on Form S-4 (File No. 333-41221) (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), covering up to $175,000,000 in aggregate principal amount of 9-1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes") offered in exchange for up to $175,000,000 in aggregate principal amount of outstanding 9-1/4% Series A Senior Secured Notes due 2007 originally issued and sold in reliance upon an exemption from registration under the Securities Act (the "Original Notes"). The Original Notes were issued under, and the Exchange Notes are to be issued under, an Indenture, dated as of October 30, 1997 (the "Indenture"), by and among the Issuers and the United States Trust Company of New York, as trustee. The exchange will be made pursuant to an exchange offer (the "Exchange Offer") contemplated by the Registration Statement. In so acting, we have examined copies of such records of the Issuers and such other certificates and documents as we have deemed relevant and necessary for the opinions hereinafter set forth. In such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to authentic originals of all documents submitted to us as certified or reproduced copies. We have also assumed the legal capacity of all persons executing such documents and the truth and correctness of any representations or warranties therein contained. 2 PCI Chemicals Canada Inc. January 8, 1998 Page 2 We have relied upon certificates of officers of the Issuers and of public officials with respect to the accuracy of all factual matters contained therein, all of the contents of which we have assumed continue to be accurate as of the date of this opinion letter. Based upon the foregoing, we are of the opinion that: 1. The Company is duly formed and validly existing under the laws of the province of New Brunswick, Canada. 2. The Indenture has been duly authorized, executed and delivered by the Company. 3. The Exchange Notes have been duly authorized by the Company. This opinion is limited to the laws of the Province of New Brunswick, Canada of the type typically applicable to transactions contemplated by the Exchange Offer, and we do not express any opinion with respect to the laws of any other country, state or jurisdiction. This opinion letter is limited to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated. This opinion letter may be relied upon by Willkie Farr & Gallagher in connection with the Exchange Offer. This letter speaks only as of the date hereof and is limited to present statutes, regulations and administrative and judicial interpretations. We undertake no responsibility to update or supplement this letter after the date hereof. We consent to being named in the Registration Statement and related Prospectus as counsel who are passing upon the legality of the Exchange Notes and the Guarantees and to the reference to our name under the caption "Legal Matters" in such Prospectus. We also consent to your filing copies of this opinion as an exhibit to the Registration Statement or any amendment thereto. Very truly yours, /s/ Stewart McKelvey Stirling Scales EX-8.1 14 OPINION OF WILLKIE FARR & GALLAGHER RE:TAX MATTERS 1 Exhibit 8.1 January 8, 1998 PCI Chemicals Canada Inc. c/o Pioneer Americas Acquisition Corp. 4300 NationsBank Center 700 Louisiana Street Houston, Texas 77002 Re: Registration Statement on Form S-4 (File No. 333-41221) Ladies and Gentlemen: We have acted as counsel to PCI Chemicals Canada Inc., a New Brunswick, Canada corporation (the "Company" and, together with Pioneer Americas Acquisition Corp., a Delaware corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers"), in connection with the filing of a Registration Statement on Form S-4 (File No. 333-41221) (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), covering up to $175,000,000 in aggregate principal amount of 9-1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes") offered in exchange for up to $175,000,000 in aggregate principal amount of outstanding 9-1/4% Series A Senior Secured Notes due 2007 originally issued and sold in reliance upon an exemption from registration under the Securities Act (the "Original Notes"). In that connection, we have prepared the sections entitled "The Exchange Offer -- Federal Income Tax Consequences" and "Certain Tax Consequences -- United States" contained in the Registration Statement. Our opinion is based on the provisions of the Internal Revenue Code of 1986, as amended, regulations under such Code, judicial authority and current administrative rulings and practice, all as of the date of this letter, and all of which may change at any time. Based on the foregoing, it is our opinion that: (i) the exchange of Original Notes for Exchange Notes by holders will not be a taxable exchange for United States federal income tax purposes, and holders should not recognize any taxable gain or loss or any interest income as a result of such exchange; and 2 PCI Chemicals Canada Inc. January 8, 1998 Page 2 (ii) the section entitled "Certain Tax Consequences -- United States," while not purporting to discuss all tax matters relating to the Original Notes or the Exchange Notes, sets forth the material United States federal income tax consequences with respect thereto. In addition, we hereby confirm our opinion set forth in the first paragraph of "Certain Tax Consequences -- United States" in the Registration Statement. We hereby consent to the use of this opinion as Exhibit 8.1 to the Registration Statement and related Prospectus filed with the Securities and Exchange Commission and to the reference to us under the caption "Legal Matters" therein. Very truly yours, /s/ Willkie Farr & Gallagher EX-8.2 15 OPINION OF STIKEMAN, ELLIOT, MONTREAL, QUEBEC 1 Exhibit 8.2 January 8, 1998 PCI Chemicals Canada Inc. c/o Pioneer Americas Acquisition Corp. 4300 NationsBank Center 700 Louisiana Street Houston, Texas 77002 Re: Registration Statement on Form S-4 (File No. 333-41221) We have acted as counsel to PCI Chemicals Canada Inc., a corporation incorporated under the laws of New Brunswick (the "Company" and, together with Pioneer Americas Acquisition Corp., a Delaware corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers"), in connection with the filing of a Registration Statement on Form S-4 (File No. 333-41221) (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), covering up to $175,000,000 in aggregate principal amount of 9-1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes") offered in exchange for up to $175,000,000 in aggregate principal amount of outstanding 9-1/4% Series A Senior Secured Notes due 2007 originally issued and sold in reliance upon an exemption from registration under the Securities Act (the "Original Notes"). In that connection, we have prepared the section entitled "Certain Tax Consequences - -- Canada" contained in the Registration Statement. Our opinion is based on the provisions of the Income Tax Act (Canada) (the "Act"), the regulations thereunder, specific proposals to amend the Act, judicial authority and counsel's understanding of the current administrative practice of Revenue Canada, all as of the date of this letter, and all of which may change at any time. Based on the foregoing, it is our opinion that: (i) The section entitled "Certain Tax Consequences -- Canada", while not purporting to discuss all tax matters relating to the Original Notes or the Exchange Notes, sets forth the principal Canadian federal income tax consequences with respect to holders to whom the summary is addressed. In addition, the exchange of Original Notes for Exchange Notes by such holders will not be a taxable exchange for Canadian federal income tax purposes, and holders should not recognize any taxable gain or loss or any interest income as a result of such exchange. 2 PCI Chemicals Canada Inc. January 8, 1998 Page 2 We hereby consent to the use of this opinion as Exhibit 8.2 to the Registration Statement and related Prospectus filed with the Securities and Exchange Commission and to the reference to us under the caption "Legal Matters" therein. Yours very truly, /s/ Stikeman Elliott, a general partnership EX-99.1 16 FORM OF LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 PCI CHEMICALS CANADA INC. 630 WEST RENE-LEVESQUE BOULEVARD MONTREAL, QUEBEC H3B 1S6 LETTER OF TRANSMITTAL FOR 9 1/4% SERIES A SENIOR SECURED NOTES DUE 2007 EXCHANGE AGENT: UNITED STATES TRUST COMPANY OF NEW YORK By Facsimile: (212) 780-0592 Attention: Customer Service Confirm by telephone: (800) 548-6565 By Registered or Certified Mail: United States Trust Company of New York P.O. Box 844 Cooper Station New York, New York 10276 By Hand: United States Trust Company of New York 111 Broadway New York, New York 10006 Attention: Corporate Trust Operations By Overnight Courier: United States Trust Company of New York 770 Broadway New York, New York 10003 Attention: Corporate Trust Operations THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE. DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated January , 1998 (the "Prospectus") of PCI Chemicals Canada Inc., a New Brunswick, Canada corporation (the "Company" and, together with Pioneer Americas Acquisition Corp., a Delaware corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers") and this Letter of Transmittal for 9 1/4% Series A Senior Secured Notes due 2007 which may be amended from time to time (this "Letter"), which together constitute the Issuers' offer (the "Exchange Offer") to exchange, for each $1,000 in principal amount of its outstanding 9 1/4% Series A Senior Secured Notes due 2007 issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the "Original Notes"), $1,000 in principal amount of 9 1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes"). The undersigned has completed, executed and delivered this Letter to indicate the action he or she desires to take with respect to the Exchange Offer. All holders of Original Notes who wish to tender their Original Notes must, prior to the Expiration Date: (1) complete, sign, date and mail or otherwise deliver this Letter to the Exchange Agent, in person or to the address set forth above; and (2) tender his or her Original Notes or, if a tender of Original Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility"), confirm such book-entry transfer (a "Book-Entry Confirmation"), in each case in accordance with the procedures for tendering described in the Instructions to this Letter. Holders of Original Notes whose certificates are not immediately available, or who are unable to deliver their certificates or Book-Entry Confirmation and all other documents required by this Letter to be delivered to the Exchange Agent on or prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth under the caption "The Exchange Offer -- How to Tender" in the Prospectus. (See Instruction 1). The Instructions included with this Letter must be followed in their entirety. Questions and requests for assistance or for additional copies of the Prospectus or this Letter may be directed to the Exchange Agent, at the address listed above, or Kent R. Stephenson, Esq., General Counsel and Secretary of PAAC, at (713) 225-3831, PCI Chemicals Canada Inc., c/o Pioneer Americas Acquisition Corp., 4300 NationsBank Center, 700 Louisiana Street, Houston, TX 77002. 2 PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE INSTRUCTIONS TO THIS LETTER, CAREFULLY BEFORE CHECKING ANY BOX BELOW Capitalized terms used in this Letter and not defined herein shall have the respective meanings ascribed to them in the Prospectus. List in Box 1 below the Original Notes of which you are the holder. If the space provided in Box 1 is inadequate, list the certificate numbers and principal amount of Original Notes on a separate signed schedule and affix that schedule to this Letter. BOX 1 TO BE COMPLETED BY ALL TENDERING HOLDERS - ------------------------------------------------------------------------------------------------------------------------------ PRINCIPAL AMOUNT NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE PRINCIPAL AMOUNT OF ORIGINAL (PLEASE FILL IN IF BLANK) NUMBER(S)(1) OF ORIGINAL NOTES NOTES TENDERED(2) - ------------------------------------------------------------------------------------------------------------------------------ --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- TOTALS - ------------------------------------------------------------------------------------------------------------------------------ * Need not be completed if Original Notes are being tendered by book-entry transfer. ** Unless otherwise indicated, the entire principal amount of Original Notes represented by a certificate or Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have been tendered. - ------------------------------------------------------------------------------------------------------------------------------
2 3 Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned tenders to the Issuers the principal amount of Original Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Original Notes tendered with this Letter, the undersigned exchanges, assigns and transfers to, or upon the order of, the Issuers all right, title and interest in and to the Original Notes tendered. The undersigned constitutes and appoints the Exchange Agent as his or her agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Issuers) with respect to the tendered Original Notes, with full power of substitution, to: (a) deliver certificates for such Original Notes; (b) deliver Original Notes and all accompanying evidence of transfer and authenticity to or upon the order of the Issuers upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the undersigned is entitled upon the acceptance by the Issuers of the Original Notes tendered under the Exchange Offer; and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of the Original Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that he or she has full power and authority to tender, exchange, assign and transfer the Original Notes tendered hereby and that the Issuers will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuers to be necessary or desirable to complete the assignment and transfer of the Original Notes tendered. The undersigned agrees that acceptance of any tendered Original Notes by the Issuers and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Issuers of their obligations under the Registration Rights Agreement (as defined in the Prospectus) and that, upon the issuance of the Exchange Notes, the Issuers will have no further obligations or liabilities thereunder (except in certain limited circumstances). By tendering Original Notes, the undersigned certifies (a) that it is not an "affiliate" of the Issuers within the meaning of Rule 405 under the Securities Act, that it is not a broker-dealer that owns Original Notes acquired directly from the Issuers or an affiliate of the Issuers, that it is acquiring the Exchange Notes in the ordinary course of the undersigned's business and that the undersigned has no arrangement with any person to participate in the distribution of the Exchange Notes or (b) that it is an "affiliate" (as so defined) of the Issuers or of the initial purchasers in the original offering of the Original Notes, and that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable to it. The undersigned acknowledges that, if it is a broker-dealer that will receive Exchange Notes for its own account, it will deliver a prospectus in connection with any resale of such Exchange Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned understands that the Issuers may accept the undersigned's tender by delivering written notice of acceptance to the Exchange Agent, at which time the undersigned's right to withdraw such tender will terminate. All authority conferred or agreed to be conferred by this Letter shall survive the death or incapacity of the undersigned, and every obligation of the undersigned under this Letter shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. Tenders may be withdrawn only in accordance with the procedures set forth in the Instructions contained in this Letter. Unless otherwise indicated under "Special Delivery Instructions" below, the Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate for any Original Notes not tendered but represented by a certificate also encompassing Original Notes which are tendered) to the undersigned at the address set forth in Box 1. The undersigned acknowledges that the Exchange Offer is subject to the more detailed terms set forth in the Prospectus and, in case of any conflict between the terms of the Prospectus and this Letter, the Prospectus shall prevail. [ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: ----------------------------------------------------------------------------- Account Number: ----------------------------------------------------------------------------- Transaction Code Number: ----------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s): ----------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: -------------------------------------------------------------- Window Ticket Number (if available): ----------------------------------------------------------------------------- Name of Institution which Guaranteed Delivery: ------------------------------------------------------------------- 3 4 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY BOX 2 PLEASE SIGN HERE WHETHER OR NOT ORIGINAL NOTES ARE BEING PHYSICALLY TENDERED HEREBY X - -------------------------------------------------------------------------------- - --------------------------- X - -------------------------------------------------------------------------------- - --------------------------- Signature(s) of Owner(s) or Authorized Signatory Date Area Code and Telephone Number: - -------------------------------------------------------------------------------- This box must be signed by registered holder(s) of Original Notes as their name(s) appear(s) on certificate(s) for Original Notes, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Letter. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. (See Instruction 3) Name(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Capacity - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- (Include Zip Code) Signature(s) Guaranteed by an Eligible Institution: - ---------------------------------------------------------------- (If required by Instruction 3) (Authorized Signature) - -------------------------------------------------------------------------------- (Title) - -------------------------------------------------------------------------------- (Name of Firm) 4 5 BOX 3 - -------------------------------------------------------------------------------- TO BE COMPLETED BY ALL TENDERING HOLDERS - -------------------------------------------------------------------------------- PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK - -------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX SOCIAL SECURITY NUMBER FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING DEPARTMENT OF THE BELOW. OR -------------------------------------------- TREASURY INTERNAL EMPLOYER IDENTIFICATION NUMBER REVENUE SERVICE --------------------------------------------------------------------------------------------- PART 2 -- CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACK-UP WITHHOLDING UNDER THE PROVISIONS PAYOR'S REQUEST OF SECTION 2406(A)(1)(C) OF THE INTERNAL REVENUE CODE BECAUSE (1) YOU HAVE NOT BEEN NOTIFIED FOR TAXPAYER THAT YOU ARE SUBJECT TO BACK-UP WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL INTEREST OR IDENTIFICATION DIVIDENDS OR (2) THE INTERNAL REVENUE SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER SUBJECT NUMBER (TIN) TO BACK-UP WITHHOLDING. [ ] --------------------------------------------------------------------------------------------- CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT PART 3 -- THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND CHECK IF COMPLETE. AWAITING TIN [ ] SIGNATURE --------------------------------------- DATE ------- - -------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------- BOX 4 SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Original Notes in a principal amount not exchanged, or Exchange Notes, are to be issued in the name of someone other than the person whose signature appears in Box 2, or if Original Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue and deliver: (check appropriate boxes) [ ] Original Notes not tendered [ ] Exchange Notes, to: Name ------------------------------------------------- (Please Print) Address ---------------------------------------------- Please complete the Substitute Form W-9 at Box 3 Tax I.D. or Social Security Number: ------------------ - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- BOX 5 SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Original Notes in a principal amount not exchanged, or Exchange Notes, are to be sent to someone other than the person whose signature appears in Box 2 or to an address other than that shown in Box 1. Deliver: (check appropriate boxes) [ ] Original Notes not tendered [ ] Exchange Notes, to: Name -------------------------------------------------- (Please Print) Address ----------------------------------------------- - ------------------------------------------------------- 5 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Original Notes or a Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed copy of this Letter and any other documents required by this Letter, must be received by the Exchange Agent at one of its addresses set forth herein on or before the Expiration Date. The method of delivery of this Letter, certificates for Original Notes or a Book-Entry Confirmation, as the case may be, and any other required documents is at the election and risk of the tendering holder, but except as otherwise provided below, the delivery will be deemed made when actually received by the Exchange Agent. If delivery is by mail, the use of registered mail with return receipt requested, properly insured, is suggested. Holders whose Original Notes are not immediately available or who cannot deliver their Original Notes or a Book-Entry Confirmation, as the case may be, and all other required documents to the Exchange Agent on or before the Expiration Date may tender their Original Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedure: (i) tender must be made by or through an Eligible Institution (as defined in the Prospectus under the caption "The Exchange Offer"); (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by telegram, telex, facsimile transmission, mail or hand delivery) (x) setting forth the name and address of the holder, the description of the Original Notes and the principal amount of Original Notes tendered, (y) stating that the tender is being made thereby and (z) guaranteeing that, within five New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, this Letter together with the certificates representing the Original Notes or a Book-Entry Confirmation, as the case may be, and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent; and (iii) the certificates for all tendered Original Notes or a Book-Entry Confirmation, as the case may be, as well as all other documents required by this Letter, must be received by the Exchange Agent within five New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in the Prospectus under the caption "The Exchange Offer -- How to Tender." All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Original Notes will be determined by the Issuers, whose determination will be final and binding. The Issuers reserve the absolute right to reject any or all tenders that are not in proper form or the acceptance of which, in the opinion of the Issuers' counsel, would be unlawful. The Issuers also reserve the right to waive any irregularities or conditions of tender as to particular Original Notes. All tendering holders, by execution of this Letter, waive any right to receive notice of acceptance of their Original Notes. Neither the Issuers, the Exchange Agent nor any other person shall be obligated to give notice of defects or irregularities in any tender, nor shall any of them incur any liability for failure to give any such notice. 2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of any Senior Note evidenced by a submitted certificate or by a Book-Entry Confirmation is tendered, the tendering holder must fill in the principal amount tendered in the fourth column of Box 1 above. All of the Original Notes represented by a certificate or by a Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. A certificate for Original Notes not tendered will be sent to the holder, unless otherwise provided in Box 5, as soon as practicable after the Expiration Date, in the event that less than the entire principal amount of Original Notes represented by a submitted certificate is tendered (or, in the case of Original Notes tendered by book-entry transfer, such non-exchanged Original Notes will be credited to an account maintained by the holder with the Book-Entry Transfer Facility). If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to 5:00 p.m., Eastern Standard time, on the Expiration Date. To be effective with respect to the tender of Original Notes, a notice of withdrawal must: (i) be received by the Exchange Agent before the Company notifies the Exchange Agent that it has accepted the tender of Original Notes pursuant to the Exchange Offer; (ii) specify the name of the person who tendered the Original Notes; (iii) contain a description of the Original Notes to be withdrawn, the certificate numbers shown on the particular certificates evidencing such Original Notes and the principal amount of Original Notes represented by such certificates; and (iv) be signed by the holder in the same manner as the original signature on this Letter (including any required signature guarantee). 3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this Letter is signed by the holder(s) of Original Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificate(s) for such Original Notes, without alteration, enlargement or any change whatsoever. If any of the Original Notes tendered hereby are owned by two or more joint owners, all owners must sign this Letter. If any tendered Original Notes are held in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are names in which certificates are held. If this Letter is signed by the holder of record and (i) the entire principal amount of the holder's Original Notes are tendered; and/or (ii) untendered Original Notes, if any, are to be issued to the holder of record, then the holder of record need not endorse any certificates for tendered Original Notes, nor provide a separate bond power. If any other case, the holder of record must transmit a separate bond power with this Letter. If this Letter or any certificate or assignment is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and proper evidence satisfactory to the Issuer of their authority to so act must be submitted, unless waived by the Issuers. 6 7 Signatures on this Letter must be guaranteed by an Eligible Institution, unless Original Notes are tendered: (i) by a holder who has not completed the Box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter; or (ii) for the account of an Eligible Institution. In the event that the signatures in this Letter or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of The Securities Transfer Agents Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature Program (MSP) or The Stock Exchanges Medallion Program (SEMP) (collectively, "Eligible Institutions"). If Original Notes are registered in the name of a person other than the signer of this Letter, the Original Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuers, in their sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in Box 4 or 5, as applicable, the name and address to which the Exchange Notes or certificates for Original Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Original Notes by book-entry transfer may request that Original Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder may designate. 5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder whose tendered Original Notes are accepted for exchange must provide the Exchange Agent (as payor) with his or her correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is his or her social security number. If the Exchange Agent is not provided with the correct TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to the holder of the Exchange Notes pursuant to the Exchange Offer may be subject to back-up withholding. (If withholding results in overpayment of taxes, a refund may be obtained.) Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these back-up withholding and reporting requirements. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. Under federal income tax laws, payments that may be made by the Issuers on account of Exchange Notes issued pursuant to the Exchange Offer may be subject to back-up withholding at a rate of 31%. In order to prevent back-up withholding, each tendering holder must provide his or her correct TIN by completing the "Substitute Form W-9" referred to above, certifying that the TIN provided is correct (or that the holder is awaiting a TIN) and that: (i) the holder has not been notified by the Internal Revenue Service that he or she is subject to back-up withholding as a result of failure to report all interest or dividends; or (ii) the Internal Revenue Service has notified the holder that he or she is no longer subject to back-up withholding; or (iii) certify in accordance with the Guidelines that such holder is exempt from back-up withholding. If the Original Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for information on which TIN to report. 6. TRANSFER TAXES. The Issuers will pay all transfer taxes, if any, applicable to the transfer of Original Notes to it or its order pursuant to the Exchange Offer. If, however, the Exchange Notes or certificates for Original Notes not exchanged are to be delivered to, or are to be issued in the name of, any person other than the record holder, or if tendered certificates are recorded in the name of any person other than the person signing this Letter, or if a transfer tax is imposed by any reason other than the transfer of Original Notes to the Company or its order pursuant to the Exchange Offer, then the amount of such transfer taxes (whether imposed on the record holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of taxes or exemption from taxes is not submitted with this Letter, the amount of transfer taxes will be billed directly to the tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter. 7. WAIVER OF CONDITIONS. The Issuers reserve the absolute right to amend or waive any of the specified conditions in the Exchange Offer in the case of any Original Notes tendered. 8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose certificates for Original Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above, for further instructions. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus or this Letter, may be directed to the Exchange Agent. IMPORTANT: This Letter (together with certificates representing tendered Original Notes or a Book-Entry Confirmation and all other required documents) must be received by the Exchange Agent on or before the Expiration Date (as defined in the Prospectus). 7 EX-99.2 17 FORM OF NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT 99.2 PCI CHEMICALS CANADA INC. EXCHANGE OFFER TO HOLDERS OF ITS 9 1/4% SERIES A SENIOR SECURED NOTES DUE 2007 NOTICE OF GUARANTEED DELIVERY As set forth in the Prospectus dated January , 1998 (the "Prospectus") of PCI Chemicals Canada Inc. (the "Company" and, together with Pioneer Americas Acquisition Corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers") under "The Exchange Offer -- How to Tender" and in the Letter of Transmittal (the "Letter of Transmittal") relating to the offer (the "Exchange Offer") by the Issuers to exchange up to $175,000,000 in principal amount of its 9 1/4% Series A Senior Secured Notes due 2007 issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the "Original Notes"), for $175,000,000 in principal amount of its 9 1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes"), this form or one substantially equivalent hereto must be used to accept the Exchange Offer of the Issuers if: (i) certificates for the Original Notes are not immediately available; or (ii) time will not permit all required documents to reach the Exchange Agent (as defined below) on or prior to the Expiration Date (as defined in the Prospectus) of the Exchange Offer. Such form may be delivered by hand or transmitted by telegram, telex, facsimile transmission or letter to the Exchange Agent. TO: UNITED STATES TRUST COMPANY OF NEW YORK (the "Exchange Agent") By Facsimile: (212) 780-0592 Attention: Customer Service Confirm by telephone: (800) 548-6565 By Registered or Certified Mail: United States Trust Company of New York P.O. Box 844 Cooper Station New York, New York 10276 By Hand: United States Trust Company of New York 111 Broadway New York, New York 10006 Attention: Corporate Trust Operations By Overnight Courier: United States Trust Company of New York 770 Broadway New York, New York 10003 Attention: Corporate Trust Operations DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMITTAL OF THIS INSTRUMENT TO A FACSIMILE OR TELEX NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. 2 Ladies and Gentlemen: The undersigned hereby tenders to the Issuers, upon the terms and conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the principal amount of Original Notes set forth below pursuant to the guaranteed delivery procedure described in the Prospectus and the Letter of Transmittal. SIGN HERE Principal Amount of Original Notes Tendered ------------------------------------------- Signature(s) --------------------------------------- ----------------------------------------------------- Certificate Nos. Please Print the Following Information (if available) --------------------------------------- Name(s) ------------------------------------------- ----------------------------------------------------- Total Principal Amount Address -------------------------------------------- Represented by Original Notes Certificate(s) ---------------------------------------- ----------------------------------------------------- Area Code and Tel. No(s). ------------------------ ----------------------------------------------------- Account Number ---------------------------------- Dated: ------------------ , 1998
2 3 GUARANTEE The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17A(d)-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees that delivery to the Exchange Agent of certificates tendered hereby, in proper form for transfer, or delivery of such certificates pursuant to the procedure for book-entry transfer, in either case with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other required documents, is being made within five trading days after the date of execution of a Notice of Guaranteed Delivery of the above-named person. - -------------------------------------------------------------------------------- Name of Firm - -------------------------------------------------------------------------------- Authorized Signature - -------------------------------------------------------------------------------- Number and Street or P.O. Box - -------------------------------------------------------------------------------- City State Zip Code - -------------------------------------------------------------------------------- Area Code and Tel. No. Dated: , 1998 3 EX-99.3 18 FORM OF LETTER TO CLIENTS 1 EXHIBIT 99.3 PCI CHEMICALS CANADA INC. OFFER TO EXCHANGE UP TO $175,000,000 IN PRINCIPAL AMOUNT OF 9 1/4% SERIES A SENIOR SECURED NOTES DUE 2007 ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED FOR $175,000,000 IN PRINCIPAL AMOUNT OF 9 1/4% SERIES B SENIOR SECURED NOTES DUE 2007 To Our Clients: Enclosed for your consideration is a Prospectus dated January , 1998 (as the same may be amended or supplemented from time to time, the "Prospectus") and a form of Letter of Transmittal (the "Letter of Transmittal") relating to the offer (the "Exchange Offer") by PCI Chemicals Canada Inc. (the "Company" and, together with Pioneer Americas Acquisition Corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers") to exchange up to $175,000,000 in principal amount of its 9 1/4% Series A Senior Secured Notes due 2007 issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the "Original Notes"), for $175,000,000 in principal amount of its 9 1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes"). The material is being forwarded to you as the beneficial owner of Original Notes carried by us for your account or benefit but not registered in your name. A tender of any Original Notes may be made only by us as the registered holder and pursuant to your instructions. Therefore, the Issuers urge beneficial owners of Original Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if they wish to tender Original Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender any or all Original Notes, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender your Original Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Original Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., Eastern Standard Time, on , , 1998, unless extended (the "Expiration Date"). Original Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date. If you wish to have us tender any or all of your Original Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Original Notes held by us and registered in our name for your account or benefit. 2 INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of Pioneer Americas Acquisition Corp. THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF ORIGINAL NOTES INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED, PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. Box 1 [ ] Please tender my Original Notes held by you for my account or benefit. I have identified on a signed schedule attached hereto the principal mount of Original Notes to be tendered if I wish to tender less than all of my Original Notes. Box 2 [ ] Please do not tender any Original Notes held by you for my account or benefit. Date: , 1998 ---------------------------------------- ---------------------------------------- Signature(s) ---------------------------------------- ---------------------------------------- Please print name(s) here Unless a specific contrary instruction is given in a signed Schedule attached hereto, your signature(s) hereon shall constitute an instruction to us to tender all of your Original Notes. 2 EX-99.4 19 FORM OF LETTER TO NOMINEES 1 EXHIBIT 99.4 PCI CHEMICALS CANADA INC. OFFER TO EXCHANGE UP TO $175,000,000 IN PRINCIPAL AMOUNT OF 9 1/4% SERIES A SENIOR SECURED NOTES DUE 2007 ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED FOR $175,000,000 IN PRINCIPAL AMOUNT OF 9 1/4% SERIES B SENIOR SECURED NOTES DUE 2007 To Securities Dealers, Commercial Banks Trust Companies and Other Nominees: Enclosed for your consideration is a Prospectus dated January , 1998 (as the same may be amended or supplemented from time to time, the "Prospectus") and a form of Letter of Transmittal (the "Letter of Transmittal") relating to the offer (the "Exchange Offer") by PCI Chemicals Canada Inc. (the "Company" and, together with Pioneer Americas Acquisition Corporation ("PAAC") and the other subsidiaries of PAAC, the "Issuers") to exchange up to $175,000,000 in principal amount of its 9 1/4% Series A Senior Secured Notes due 2007 issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the "Original Notes"), for $175,000,000 in principal amount of its 9 1/4% Series B Senior Secured Notes due 2007 (the "Exchange Notes"). We are asking you to contact your clients for whom you hold Original Notes registered in your name or in the name of your nominee. In addition, we ask you to contact your clients who, to your knowledge, hold Original Notes registered in their own name. The Issuers will not pay any fees or commissions to any broker, dealer or other person in connection with the solicitation of tenders pursuant to the Exchange Offer. You will, however, be reimbursed by the Issuers for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Issuers will pay all transfer taxes, if any, applicable to the tender of Original Notes to it or its order, except as otherwise provided in the Prospectus and the Letter of Transmittal. Enclosed are copies of the following documents: 1. The Prospectus; 2. A Letter of Transmittal for your use in connection with the tender of Original Notes and for the Information of your clients; 3. A form of letter that may be sent to your clients for whose accounts you hold Original Notes registered in your name or the name of your nominee, with space provided for obtaining the clients' instructions with regard to the Exchange Offer; 4. A form of Notice of Guaranteed Delivery; and 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., Eastern Standard Time, on , , 1998, unless extended (the "Expiration Date"). Original Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date. 2 To tender Original Notes, certificates for Original Notes or a Book-Entry Confirmation, a duly executed and properly completed Letter of Transmittal or a facsimile thereof, and any other required documents, must be received by the Exchange Agent as provided in the Prospectus and the Letter of Transmittal. Additional copies of the enclosed material may be obtained from United States Trust Company of New York, the Exchange Agent, by calling (800) 548-6565. NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE ISSUERS OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. 2 -----END PRIVACY-ENHANCED MESSAGE-----