0000950129-01-503281.txt : 20011009 0000950129-01-503281.hdr.sgml : 20011009 ACCESSION NUMBER: 0000950129-01-503281 CONFORMED SUBMISSION TYPE: T-3 PUBLIC DOCUMENT COUNT: 26 FILED AS OF DATE: 20011001 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: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587 FILM NUMBER: 1749827 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: KWT INC CENTRAL INDEX KEY: 0001160301 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 223008143 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-01 FILM NUMBER: 1749828 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA STREET 2: SUITE 4300 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: (713) 570-3200 MAIL ADDRESS: STREET 1: 700 LOUISIANA STREET 2: SUITE 4300 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER WATER TECHNOLOGIES INC CENTRAL INDEX KEY: 0001160302 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 760491274 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-02 FILM NUMBER: 1749829 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA STREET 2: SUITE 4300 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: (713) 570-3200 MAIL ADDRESS: STREET 1: 700 LOUISIANA STREET 2: SUITE 4300 CITY: HOUSTON STATE: TX ZIP: 77002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEMWATER NORTH AMERICA CO CENTRAL INDEX KEY: 0001160299 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 952375683 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-03 FILM NUMBER: 1749830 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA STREET 2: SUITE 4300 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: (713) 570-3200 MAIL ADDRESS: STREET 1: 700 LOUISIANA STREET 2: SUITE 4300 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: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-04 FILM NUMBER: 1749831 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 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: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-05 FILM NUMBER: 1749832 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: 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: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-06 FILM NUMBER: 1749833 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: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-07 FILM NUMBER: 1749834 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 CORP OF AMERICA 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: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-08 FILM NUMBER: 1749835 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 FORMER COMPANY: FORMER CONFORMED NAME: PIONEER AMERICAS ACQUISITION CORP DATE OF NAME CHANGE: 19950428 FORMER COMPANY: FORMER CONFORMED NAME: PIONEER AMERICAS INC /TX DATE OF NAME CHANGE: 19990317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIONEER COMPANIES INC CENTRAL INDEX KEY: 0000830141 STANDARD INDUSTRIAL CLASSIFICATION: CHEMICALS & ALLIED PRODUCTS [2800] IRS NUMBER: 061215192 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: T-3 SEC ACT: 1939 Act SEC FILE NUMBER: 022-22587-09 FILM NUMBER: 1749836 BUSINESS ADDRESS: STREET 1: 700 LOUISIANA STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7132253831 MAIL ADDRESS: STREET 1: 700 LOUISIANA STREET 2: STE 4200 CITY: HOUSTON STATE: TX ZIP: 77002 FORMER COMPANY: FORMER CONFORMED NAME: FINEVEST FOODS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: GEV CORP DATE OF NAME CHANGE: 19930902 T-3 1 h90985t-3.txt PCI CHEMICALS CANADA INC./PCI CHIMIE CANADA INC. 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM T-3 FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE TRUST INDENTURE ACT OF 1939 ---------- PCI CHEMICALS CANADA INC./PCI CHIMIE CANADA INC. PIONEER COMPANIES, INC. PIONEER CORPORATION OF AMERICA PIONEER (EAST), INC. PIONEER AMERICAS, INC. PIONEER LICENSING, INC. IMPERIAL WEST CHEMICAL CO. KEMWATER NORTH AMERICA COMPANY PIONEER WATER TECHNOLOGIES, INC. KWT, INC. (Names of Applicants) 630 Rene-Levesque Blvd. W. Suite 3100 Montreal, Quebec H3B 1S6 Canada (Address of Principal Executive Offices) SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED Title of Class Amount -------------- ------ 10% Senior Secured Guaranteed Notes Due 2008 $150,000,000 ---------- Approximate Date of Proposed Public Offering: November 30, 2001 ---------- Kent R. Stephenson, Esq. Pioneer Companies, Inc. 700 Louisiana, Suite 4300 Houston, Texas 77002 ---------- (Name and Address of Agent for Service) With a copy to: Robert C. Feldman, Esq. Weil, Gotshal & Manges LLP 100 Crescent Court, Suite 1300 Dallas, Texas 75201-6950 -------------------------------------------------------------------------------- The Applicants hereby amend this application for qualification on such date or dates as may be necessary to delay its effectiveness until: (i) the 20th day after the filing of a further amendment which specifically states that it shall supercede this amendment, or (ii) such date as the Commission, acting pursuant to Section 307(c) of the Act, may determine upon the written request of the Applicants. 2 FORM T-3 GENERAL ITEM 1. GENERAL INFORMATION. (A) FORM OF ORGANIZATION. Each of PCI Chemicals Canada Inc./PCI Chimie Canada Inc. (the "Issuer"), Pioneer Companies, Inc. ("PCI"), Pioneer Corporation of America ("PCA"), Pioneer (East), Inc. ("PEI"), Pioneer Americas, Inc. ("PAI"), Pioneer Licensing, Inc. ("PLI"), Imperial West Chemical Co. ("IWC"), Kemwater North America Co. ("KNA"), Pioneer Water Technologies, Inc. ("PWT") and KWT, Inc. ("KWT" and, together with PCI, PCA, PEI, PAI, PLI, IWC, KNA and PWT, the "Guarantors") is a corporation. The Issuer and the Guarantors are sometimes hereinafter referred to collectively as the "Applicants." (B) STATE OR OTHER SOVEREIGN POWER UNDER THE LAWS OF WHICH ORGANIZED. The Issuer is a corporation incorporated under the laws of New Brunswick, Canada. Except for IWC, each of the Guarantors is a corporation incorporated under the laws of the State of Delaware. IWC is a corporation incorporated under the laws of the State of Nevada. ITEM 2. SECURITIES ACT EXEMPTION APPLICABLE. The Applicants rely upon Section 1145(a)(1) of the Bankruptcy Reform Act of 1978, as amended, Title 11, United States Code (the "Bankruptcy Code"), as the basis for their claim that registration of the offer and sale to the holders of Allowed PCA U.S. Secured Term and Note Claims and the holders of Allowed Canadian Secured Term and Note Claims (as such terms are defined in the Plan (as defined below)) (such holders collectively referred to as the "Claimholders") in partial satisfaction of their claims against all of the Debtors (as defined below), pursuant to the Plan, of the 10% Senior Secured Guaranteed Notes Due 2008 (the "Notes") to be issued by the Issuer under an indenture (the "Indenture") to be dated as of the effective date of the Plan (the "Effective Date"), among the Issuer, the Guarantors and a trustee (to be named by amendment) (the "Trustee"), is not required under the Securities Act of 1933, as amended (the "Securities Act"). On July 31, 2001, the Issuer and certain affiliates of the Issuer filed petitions for relief under Chapter 11 ("Chapter 11") of the Bankruptcy Code in the United States District Court for the Southern District of Texas, Houston Division (the Issuer and such affiliates, in such capacity, collectively, the "Debtors," and such District Court, the "Bankruptcy Court"). Since such time, the Debtors have continued to operate their businesses and manage their properties as debtors in possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. Pursuant to the Debtors' Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated September 21, 2001 (as it may be altered, amended or modified from time to time, the "Plan"), on the Effective Date, the Notes will be issued to Claimholders in partial satisfaction of their claims against all of the Debtors. Each of the Applicants is a Debtor. In order to ensure that no such Claimholder is an "underwriter" with respect to the Notes within the meaning of Section 1145(b)(1) of the Bankruptcy Code, each such Claimholder will be required, as a condition to receiving Notes without a legend restricting transfers thereof, to represent and agree that such Claimholder is not such an "underwriter." An integral and essential element of the Plan is that the issuance of the Notes pursuant to the Plan shall be exempt from registration under the Securities Act pursuant to Section 1145 of the Bankruptcy Code. AFFILIATIONS ITEM 3. AFFILIATES. Each of the Applicants is an affiliate of the other Applicants. Set forth below is a description of the corporate organization of the Applicants as of October 1, 2001. Pioneer Companies, Inc., the ultimate parent company of the other Applicants, directly owns 100% of the voting securities of the following subsidiaries: 2 3 Pioneer Corporation of America Pioneer Water Technologies, Inc. Pioneer Corporation of America directly owns 100% of the voting securities of the following subsidiaries: PCI Chemicals Canada Inc./PCI Chimie Canada Inc. Pioneer (East), Inc. Pioneer Americas, Inc. Pioneer Licensing, Inc. Imperial West Chemical Co. Pioneer Water Technologies, Inc. directly owns 100% of the voting securities of the following subsidiary: KWT, Inc. Imperial West Chemical Co. directly owns 100% of the voting securities of the following subsidiary: Kemwater North America Company OTHER AFFILIATES As of May 10, 2001, Interlaken Investment Partners, L.P., a Delaware limited partnership ("Interlaken") beneficially owns 34.9% of the voting securities of PCI, the parent company of the Issuer. William R. Berkley, the Chairman of the Board of Directors of PCI, is the sole owner of Interlaken and therefore may be deemed to beneficially own the voting securities held by Interlaken. Together with the voting securities of PCI held by Interlaken, as of May 10, 2001 Mr. Berkley beneficially owns approximately 59.8% of the voting power of PCI. AS OF THE EFFECTIVE DATE (SUCH INFORMATION IS PROVIDED, AS REQUIRED BY FORM T-3, ON THE BASIS OF PRESENT INFORMATION) Pursuant to the Plan, on or before the Effective Date, PCA will be converted into a Delaware limited liability company. After such conversion, PCI will contribute PCA to the Issuer in exchange for a number of the Issuer's preferred shares of equal value. PAI will then be merged with and into PCA, with PCA being the surviving company. Upon the consummation of such merger, PCA will change its name to Pioneer Americas LLC. Each of the Applicants will remain affiliates of the other Applicants, however, pursuant to the terms of the Plan, on or before the Effective Date the corporate structure of the Applicants will be reorganized as follows: As of the Effective Date, Pioneer Companies, Inc. will directly own 100% of the voting securities of the following subsidiaries: PCI Chemicals Canada Company/Societe PCI Chimie Canada Pioneer Water Technologies, Inc. Pioneer (East), Inc. Pioneer Licensing, Inc. Imperial West Chemical Co. As of the Effective Date, PCI Chemicals Canada Inc./PCI Chimie Canada Inc. will directly own 100% of the voting securities of the following subsidiary: Pioneer Americas LLC As of the Effective Date, Pioneer Water Technologies, Inc. will directly own 100% of the voting securities of the following subsidiary: KWT, Inc. As of the Effective Date, Imperial West Chemical Co. will directly own 100% of the voting securities of the following subsidiary: Kemwater North America Company 3 4 Pursuant to the Plan, on the Effective Date, all of the outstanding shares of Series A Common Stock, Series B Common and Series A Preferred Stock of PCI, and all options or warrants to purchase or other rights in any such common stock or preferred stock will be cancelled. Commencing on the Effective Date, PCI will issue 10,000,000 shares of New Common Stock (as such term is defined in the Plan) to certain creditors pursuant to the terms of the Plan. The holders of New Common Stock will be entitled to one vote per share on all matters to be voted upon by the stockholders. Holders of a plurality of the shares voting for the election of directors can elect all of the directors since the holders of the new common stock will not have cumulative voting rights. The identities of any other affiliates of the Issuer as of the Effective Date will be included by amendment. MANAGEMENT AND CONTROL ITEM 4. DIRECTORS AND EXECUTIVE OFFICERS. DIRECTORS AND EXECUTIVE OFFICERS OF EACH OF THE ISSUER AND PAI AS OF OCTOBER 1, 2001
NAME ADDRESS OFFICE/POSITION ---- ------- --------------- Michael J. Ferris c/o Pioneer Companies, Inc. President and Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Philip J. Ablove c/o Pioneer Companies, Inc. Executive Vice President, Chief Financial 700 Louisiana, Suite 4300 Officer and Director Houston, Texas 77002 Kent R. Stephenson c/o Pioneer Companies, Inc. Vice President, General Counsel, Secretary 700 Louisiana, Suite 4300 and Director Houston, Texas 77002 Jerry B. Bradley c/o Pioneer Companies, Inc. Vice President, Human Resources 700 Louisiana, Suite 4300 Houston, Texas 77002 Samuel Z. Chamberlain c/o Pioneer Companies, Inc. Vice President, Environmental, Health and 700 Louisiana, Suite 4300 Safety Houston, Texas 77002 Ronald E. Ciora c/o Pioneer Companies, Inc. Vice President, Western Regional Sales and 700 Louisiana, Suite 4300 Marketing Houston, Texas 77002 James E. Glattly c/o Pioneer Companies, Inc. Vice President, Sales and Marketing 700 Louisiana, Suite 4300 Houston, Texas 77002 John DuManoir c/o Pioneer Companies, Inc. Vice President, Technology 700 Louisiana, Suite 4300 Houston, Texas 77002 Pierre Prud'homme c/o Pioneer Companies, Inc. Vice President and Controller 700 Louisiana, Suite 4300 Houston, Texas 77002 David A. Scholes c/o Pioneer Companies, Inc. Vice President, Manufacturing 700 Louisiana, Suite 4300 Houston, Texas 77002 Roger A. Zampini c/o Pioneer Companies, Inc. Vice President, Supply Chain Management 700 Louisiana, Suite 4300 Houston, Texas 77002 David A. Leslie c/o Pioneer Companies, Inc. Treasurer 700 Louisiana, Suite 4300 Houston, Texas 77002 Eva Clark c/o Pioneer Companies, Inc. Assistant Secretary 700 Louisiana, Suite 4300 Houston, Texas 77002
4 5 DIRECTORS AND EXECUTIVE OFFICERS OF EACH OF PCI AND PCA AS OF OCTOBER 1, 2001
NAME ADDRESS OFFICE/POSITION ---- ------- --------------- Michael J. Ferris c/o Pioneer Companies, Inc. President and Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Philip J. Ablove c/o Pioneer Companies, Inc. Executive Vice President, Chief Financial 700 Louisiana, Suite 4300 Officer and Director Houston, Texas 77002 William R. Berkley c/o Pioneer Companies, Inc. Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Andrew M. Bursky c/o Pioneer Companies, Inc. Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Richard C. Kellogg, Jr. c/o Pioneer Companies, Inc. Director 700 Louisiana, Suite 4300 Houston, Texas 77002 John R. Kennedy c/o Pioneer Companies, Inc. Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Jack H. Nusbaum c/o Pioneer Companies, Inc. Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Kent R. Stephenson c/o Pioneer Companies, Inc. Vice President, General Counsel and 700 Louisiana, Suite 4300 Secretary Houston, Texas 77002 Jerry B. Bradley c/o Pioneer Companies, Inc. Vice President, Human Resources 700 Louisiana, Suite 4300 Houston, Texas 77002 Samuel Z. Chamberlain c/o Pioneer Companies, Inc. Vice President, Environmental, Health and 700 Louisiana, Suite 4300 Safety Houston, Texas 77002 Ronald E. Ciora c/o Pioneer Companies, Inc. Vice President, Western Regional Sales and 700 Louisiana, Suite 4300 Marketing Houston, Texas 77002 James E. Glattly c/o Pioneer Companies, Inc. Vice President, Sales and Marketing 700 Louisiana, Suite 4300 Houston, Texas 77002 John DuManoir c/o Pioneer Companies, Inc. Vice President, Technology 700 Louisiana, Suite 4300 Houston, Texas 77002 Pierre Prud'homme c/o Pioneer Companies, Inc. Vice President and Controller 700 Louisiana, Suite 4300 Houston, Texas 77002 David A. Scholes c/o Pioneer Companies, Inc. Vice President, Manufacturing 700 Louisiana, Suite 4300 Houston, Texas 77002 Roger A. Zampini c/o Pioneer Companies, Inc. Vice President, Supply Chain Management 700 Louisiana, Suite 4300 Houston, Texas 77002 David A. Leslie c/o Pioneer Companies, Inc. Treasurer 700 Louisiana, Suite 4300 Houston, Texas 77002 Eva Clark c/o Pioneer Companies, Inc. Assistant Secretary 700 Louisiana, Suite 4300 Houston, Texas 77002
5 6 DIRECTORS AND EXECUTIVE OFFICERS OF PEI AS OF OCTOBER 1, 2001(1)
NAME ADDRESS OFFICE/POSITION ---- ------- --------------- Kent R. Stephenson c/o Pioneer Companies, Inc. President, Secretary and Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Victoria L. Garrett c/o Pioneer Companies, Inc. Assistant Secretary, Assistant Treasurer and 700 Louisiana, Suite 4300 Director Houston, Texas 77002 David A. Leslie c/o Pioneer Companies, Inc. Treasurer 700 Louisiana, Suite 4300 Houston, Texas 77002 Eva Clark c/o Pioneer Companies, Inc. Assistant Secretary and Assistant Treasurer 700 Louisiana, Suite 4300 Houston, Texas 77002
-------- (1) One seat on the Board of Directors is currently vacant. DIRECTORS AND EXECUTIVE OFFICERS OF PLI AS OF OCTOBER 1, 2001(1)
NAME ADDRESS OFFICE/POSITION ---- ------- --------------- Kent R. Stephenson c/o Pioneer Companies, Inc. President, Secretary and Director 700 Louisiana, Suite 4300 Houston, Texas 77002 John DuManoir c/o Pioneer Companies, Inc. Vice President 700 Louisiana, Suite 4300 Houston, Texas 77002 Victoria L. Garrett c/o Pioneer Companies, Inc. Assistant Secretary, Assistant Treasurer and 700 Louisiana, Suite 4300 Director Houston, Texas 77002 Pierre Prud'homme c/o Pioneer Companies, Inc. Treasurer 700 Louisiana, Suite 4300 Houston, Texas 77002 Eva Clark c/o Pioneer Companies, Inc. Assistant Secretary and Assistant Treasurer 700 Louisiana, Suite 4300 Houston, Texas 77002
---------- (1) One seat on the Board of Directors is currently vacant. 6 7 DIRECTORS AND EXECUTIVE OFFICERS OF KNA AS OF OCTOBER 1, 2001
NAME ADDRESS OFFICE/POSITION ---- ------- --------------- Michael J. Ferris c/o Pioneer Companies, Inc. President and Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Philip J. Ablove c/o Pioneer Companies, Inc. Vice President, Chief Financial Officer and 700 Louisiana, Suite 4300 Director Houston, Texas 77002 Kent R. Stephenson c/o Pioneer Companies, Inc. Vice President, General Counsel, Secretary 700 Louisiana, Suite 4300 and Director Houston, Texas 77002 Jerry B. Bradley c/o Pioneer Companies, Inc. Vice President, Human Resources 700 Louisiana, Suite 4300 Houston, Texas 77002 Samuel Z. Chamberlain c/o Pioneer Companies, Inc. Vice President, Environmental, Health and 700 Louisiana, Suite 4300 Safety Houston, Texas 77002 David A. Leslie c/o Pioneer Companies, Inc. Treasurer and Assistant Secretary 700 Louisiana, Suite 4300 Houston, Texas 77002 Eva Clark c/o Pioneer Companies, Inc. Assistant Secretary 700 Louisiana, Suite 4300 Houston, Texas 77002
DIRECTORS AND EXECUTIVE OFFICERS OF PWT AS OF OCTOBER 1, 2001
NAME ADDRESS OFFICE/POSITION ---- ------- --------------- Michael J. Ferris c/o Pioneer Companies, Inc. President and Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Philip J. Ablove c/o Pioneer Companies, Inc. Vice President, Chief Financial Officer and 700 Louisiana, Suite 4300 Director Houston, Texas 77002 Kent R. Stephenson c/o Pioneer Companies, Inc. Vice President, General Counsel, Secretary 700 Louisiana, Suite 4300 and Director Houston, Texas 77002 David A. Leslie c/o Pioneer Companies, Inc. Treasurer and Assistant Secretary 700 Louisiana, Suite 4300 Houston, Texas 77002 Eva Clark c/o Pioneer Companies, Inc. Assistant Secretary 700 Louisiana, Suite 4300 Houston, Texas 77002
7 8 DIRECTORS AND EXECUTIVE OFFICERS OF EACH KWT AND IWC AS OF OCTOBER 1, 2001
NAME ADDRESS OFFICE/POSITION ---- ------- --------------- Michael J. Ferris c/o Pioneer Companies, Inc. President and Director 700 Louisiana, Suite 4300 Houston, Texas 77002 Philip J. Ablove c/o Pioneer Companies, Inc. Vice President, Chief Financial Officer and 700 Louisiana, Suite 4300 Director Houston, Texas 77002 Kent R. Stephenson c/o Pioneer Companies, Inc. Vice President, General Counsel, Secretary 700 Louisiana, Suite 4300 and Director Houston, Texas 77002 Samuel Z. Chamberlain c/o Pioneer Companies, Inc. Vice President, Environmental, Health and 700 Louisiana, Suite 4300 Safety Houston, Texas 77002 David A. Leslie c/o Pioneer Companies, Inc. Treasurer and Assistant Secretary 700 Louisiana, Suite 4300 Houston, Texas 77002 Eva Clark c/o Pioneer Companies, Inc. Assistant Secretary 700 Louisiana, Suite 4300 Houston, Texas 77002
DIRECTORS AND EXECUTIVE OFFICERS OF THE APPLICANTS AS OF THE EFFECTIVE DATE (SUCH INFORMATION IS PROVIDED, AS REQUIRED BY FORM T-3, ON THE BASIS OF PRESENT INFORMATION) Pursuant to the Plan, on or before the Effective Date the Issuer will be continued from the jurisdiction of New Brunswick, Canada to the jurisdiction of Nova Scotia, Canada and then amalgamated to form an unlimited liability company under the name PCI Chemicals Canada Company/Societe PCI Chimie Canada. The Articles of Association of the Issuer will provide for a minimum of one and a maximum of twenty directors. The exact number of directors of the Issuer initially appointed and the names and mailing addresses of such persons will be provided by amendment. Pursuant to the Plan, on or before the Effective Date PCA will be converted into a Delaware limited liability company. After such conversion, PCI will contribute PCA to the Issuer in exchange for a number of the Issuer's preferred shares of equal value. PAI will then be merged with and into PCA, with PCA being the surviving company. Upon the consummation of such merger, PCA will change its name to Pioneer Americas LLC. Pioneer Americas LLC will have only one member, which member will be the Issuer, and will be member-managed. 8 9 The directors and executive officers of each of the Applicants as of the Effective Date will remain as disclosed above, with the exception of PCA, which will become a one-member limited liability company, and PCI. The executive officers of PCI as of the Effective Date will remain as disclosed above, however, pursuant to the terms of the Plan, the Fourth Amended and Restated Certificate of Incorporation of PCI will provide for a Board of Directors consisting of five members. The names and addresses of such persons and their respective mailing addresses will be provided by amendment. ITEM 5. PRINCIPAL OWNERS OF VOTING SECURITIES. AS OF OCTOBER 1, 2001 I. ISSUER.
-------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned -------------------------------------------------------------------------------------------------------------------- Pioneer Corporation of America Common Shares, no par value 100 100.0% c/o Pioneer Companies, Inc. 700 Louisiana, Suite 4300 Houston, Texas 77002
II. PCI.
-------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned -------------------------------------------------------------------------------------------------------------------- William R. Berkley Class A Common Stock 6,375,335 59.8%(1) 165 Mason Street, par value $0.01 Greenwich, CT 06830
---------- (1) Includes 3,723,850 shares held by Interlaken Investment Partners, L.P., representing 34.9% of the voting power of PCI's capital stock. Mr. Berkley is the sole owner of a company that indirectly controls Interlaken, and so he may be deemed to be the beneficial owner of the shares held by Interlaken. 9 10 III. PCA.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Companies, Inc. Common Stock, par 1,679,614 100.0% 700 Louisiana, Suite 4300 value $.01 per share Houston, Texas 77002
IV. PEI.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Corporation of America Common Stock, $0.01 1,000 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002
V. PAI.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Corporation of America Common Stock, $1.00 1,000 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002
VI. PLI.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Corporation of America Common Stock, $0.01 1,000 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002
10 11 VII. IWC.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Corporation of America Common Stock, $1.00 1,000 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002
VIII. KNA.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Imperial West Chemical Co. Common Stock, $0.10 11,167 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002 Imperial West Chemical Co. Preferred Stock, $1.00 6,965 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002
IX. PWT.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Companies, Inc. Common Stock, $1.00 1,000 100.0% 700 Louisiana, Suite 4300 par value Houston, Texas 77002
X. KWT.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Water Technologies, Inc. Common Stock, $1.00 100 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002
11 12 AS OF THE EFFECTIVE DATE (SUCH INFORMATION IS PROVIDED, AS REQUIRED BY FORM T-3, ON THE BASIS OF PRESENT INFORMATION, AND TO THE EXTENT SUCH INFORMATION IS DIFFERENT THAN THE ABOVE DISCLOSURE) I. ISSUER.(1)
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Companies, Inc. Common Shares 100 100.0% 700 Louisiana, Suite 4300 Houston, Texas 77002 Pioneer Companies, Inc. Class A Preferred Shares(2) -- 100.0% 700 Louisiana, Suite 4300 Houston, Texas 77002
---------- (1) Pursuant to the Plan, on or before the Effective Date the Issuer will have continued from the jurisdiction of New Brunswick, Canada to the jurisdiction of Nova Scotia, Canada and will have amalgamated with a wholly-owned subsidiary to continue as an unlimited liability company under the name PCI Chemicals Canada Company/Societe PCI Chimie Canada. (2) Pursuant to the Plan, on or before the Effective Date, PCI will contribute PCA to the Issuer in exchange for a number of Class A Preferred Shares of equal value. The number of such preferred shares to be issued by the Issuer pursuant to the Plan will be provided in an amendment. II. PCA.(1)(2)
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- PCI Chemicals Canada Company/ Societe PCI Chimie Canada Membership Interest 1 100.0% 630 Rene-Levesque Blvd. W. Suite 3100 Montreal, Quebec H3B 1S6 Canada
---------- (1) This Applicant will also act as a Guarantor of the Notes to be issued by the Issuer. (2) Pursuant to the Plan, on or before the Effective Date PCA will be converted into a Delaware limited liability company. After such conversion, PCI will contribute PCA to the Issuer for a number of the Issuer's preferred shares of equal value. PAI will then be merged with and into PCA, with PCA being the surviving company. Upon the consummation of such merger, PCA will change its name to Pioneer Americas LLC. III. PCI.(1)(2)
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- -- Common Stocks, $0.01 par value -- --
---------- (1) This Applicant will also act as a Guarantor of the Notes to be issued by the Issuer. (2) Pursuant to the Plan, on or before the Effective Date PCI will issue its common stock in exchange for the partial satisfaction of certain claims against the Issuer and PCA. Disclosure with respect to the ownership of PCI at the effective date will be provided by amendment. 12 13 IV. PEI.(1)
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned(1) Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Companies, Inc. Common Stock, $0.01 1,000 100.0% 700 Louisiana, Suite 4300 par value Houston, Texas 77002
---------- (1) This Applicant will also act as a Guarantor of the Notes to be issued by the Issuer. V. PLI.(1)
-------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned(1) Amount Owned Securities Owned -------------------------------------------------------------------------------------------------------------------- Pioneer Companies, Inc. Common Stock, $0.01 1,000 100.0% 700 Louisiana, Suite 4300 par value Houston, Texas 77002
---------- (1) This Applicant will also act as a Guarantor of the Notes to be issued by the Issuer. VI. IWC.(1)
-------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned(1) Amount Owned Securities Owned -------------------------------------------------------------------------------------------------------------------- Pioneer Companies, Inc. Common Stock, $1.00 1,000 100.0% 700 Louisiana, Suite 4300 par value Houston, Texas 77002
---------- (1) This Applicant will also act as a Guarantor of the Notes to be issued by the Issuer. VII. KNA.(1)
-------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned(1) Amount Owned Securities Owned -------------------------------------------------------------------------------------------------------------------- Imperial West Chemical Co. Common Stock, $0.10 11,167 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002 Imperial West Chemical Co. Preferred Stock, $1.00 6,965 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002
---------- (1) This Applicant will also act as a Guarantor of the Notes to be issued by the Issuer. 13 14 VIII. PWT.(1)
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned(1) Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Companies, Inc. Common Stock, $1.00 1,000 100.0% 700 Louisiana, Suite 4300 par value Houston, Texas 77002
---------- (1) This Applicant will also act as a Guarantor of the Notes to be issued by the Issuer. IX. KWT.(1)
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Col. D Percentage of Name and Voting Complete Mailing Address Title of Class Owned(1) Amount Owned Securities Owned --------------------------------------------------------------------------------------------------------------------- Pioneer Water Technologies, Inc. Common Stock, $1.00 100 100.0% c/o Pioneer Companies, Inc. par value 700 Louisiana, Suite 4300 Houston, Texas 77002
---------- (1) This Applicant will also act as a Guarantor of the Notes to be issued by the Issuer. UNDERWRITERS ITEM 6. UNDERWRITERS. (a) None. (b) No underwriter within the meaning of Section 303(4) of the Trust Indenture Act of 1939, as amended (the "1939 Act"), has been proposed with respect to the Notes. CAPITAL SECURITIES ITEM 7. CAPITALIZATION. AS OF OCTOBER 1, 2001 (A) CAPITALIZATION. I. ISSUER.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Shares Unlimited, without par value 100 9 1/4% Senior Secured Notes due 2007 $175,000,000 principal amount $175,000,000 principal amount
14 15 II. PCI.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Class A Common Stock, par value $0.01 46,000,000 10,678,893 Class B Common Stock, par value $0.01 4,000,000 858,831 Series A Convertible Redeemable Preferred Stock, par value $0.01 10,000,000 55,000
III. PCA.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock (voting) 2,500,000 shares, par value $0.01 1,679,614 Common Stock (non-voting) 500,000 shares, par value $0.01 0 Preferred Stock 100,000 shares, par value $100.00 0 9 1/4% Senior Secured Notes due 2007 $200,000,000 principal amount $200,000,000 principal amount
IV. PEI.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock 1,000 shares, par value $0.01 1,000
V. PAI.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock 1,000 shares, par value $1.00 1,000
VI. PLI.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock 1,000 shares, par value $0.01 1,000
VII. IWC.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock 25,000 shares, par value $1.00 1,000
15 16 VIII. KNA.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock 30,000 shares, par value $0.10 11,167 Preferred Stock 50,000 shares, par value $1.00 6,965
IX. PWT.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock 25,000 shares, par value $1.00 1,000
X. KWT.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock 1,000 shares, par value $1.00 100
CAPITALIZATION AS OF THE EFFECTIVE DATE (SUCH INFORMATION IS PROVIDED, AS REQUIRED BY FORM T-3, ON THE BASIS OF PRESENT INFORMATION, AND TO THE EXTENT SUCH INFORMATION IS DIFFERENT THAN THE ABOVE DISCLOSURE)(1) I. ISSUER.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Shares Unlimited, without par value 100 Class A Preferred Shares (1) 150,000,000, without par value -- Class B Preferred Shares 150,000,000, without par value 0 10% Senior Secured Guaranteed Notes due 2008 $150,000,000 $150,000,000
---------- (1) Pursuant to the Plan, on or before the Effective Date PCI will contribute PCA to the Issuer in exchange for a number of the Issuer's Class A Preferred shares of equal value. The number of Class A Preferred Shares to be issued will be provided by amendment. II. PCI.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.01 50,000,000 10,000,000 Preferred Stock 10,000,000 0
16 17 III. PCA.
--------------------------------------------------------------------------------------------------------------------- Col. A Col. B Col. C Title of Class Amount Authorized Amount Outstanding --------------------------------------------------------------------------------------------------------------------- Membership Interest n/a 100
---------- (1) Pursuant to the terms of the Plan, on the basis of present information, the Claimholders will receive their pro rata portion of (A)(i) $150,000,000 in aggregate principal amount of 10% Senior Secured Guaranteed Notes due 2008 issued by the Issuer and guaranteed by the Guarantors and (ii) a new class of common stock, par value $0.01, to be issued by PCI in exchange for, among other claims, (B)(i) all of the Issuer's 9 1/4% Senior Secured Notes due 2007 outstanding and (ii) all of PCA's 9 1/4% Senior Secured Notes due 2007 outstanding. (B) VOTING RIGHTS. I. ISSUER. COMMON SHARES The holders of the outstanding common shares of the Issuer have the right to elect the Board of Directors and to vote on all others matters that may be acted on at any meeting of shareholders. II. PCI. CLASS A COMMON STOCK Each outstanding share of Class A Common Stock, par value $0.01 per share, of PCI has one vote with respect to all matters subject to stockholder vote. The holders of Class A Common Stock, voting together with the holders of Class B Common Stock and Series A Preferred Stock as a single class, have the right to elect the Board of Directors of PCI and to vote on all other matters that may be acted on at any meeting of shareholders of PCI. CLASS B COMMON STOCK Each outstanding share of Class B Common Stock, par value $0.01 per share, of PCI has one-tenth of one vote with respect to all matters subject to stockholder vote. The holders of Class B Common Stock, voting together with the holders of Class A Common Stock and Series A Preferred Stock as a single class, have the right to elect the Board of Directors of PCI and to vote on all others matters that may be acted on at any meeting of shareholders of PCI. SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK Each outstanding share of Series A Convertible Redeemable Preferred Stock, par value $0.01 per share, of PCI, has the right to vote together with the holders of Class A Common Stock and the Class B Common Stock as a single class on other all matters that may be acted on at any meeting of shareholders of PCI. Each share of Series A Convertible Redeemable Preferred Stock will be entitled to such number of votes as are equal to the number of votes which could be cast by the number of shares of Class A Common Stock into which such shares of Series A Convertible Redeemable Preferred Stock is then convertible in accordance with the terms of the Certificate of Designations for such preferred stock. III. PCA AND KNA. COMMON STOCK The holders of outstanding voting common stock of each PCA and KNA, with respect to each such company, have the right to elect the Board of Directors and to vote on all others matters that may be acted on at any meeting of shareholders of such companies. PREFERRED STOCK Except as otherwise provided by applicable law or by determination of the respective Board of Directors of such companies, no shares of preferred stock have any voting power. IV. PEI, PAI, PLI, IWC, PWT AND KWT. 17 18 COMMON STOCK The holders of the common stock of each of PEI, PAI, PLI, IWC, PWT and KWT, have the right, with respect to each such company, to elect the Board of Directors and to vote on all other matters that may be acted on at any meeting of shareholders of such companies. The information set forth above is provided pursuant to the requirements of Form T-3. However, the Applicants are currently under the protection of the Bankruptcy Court and a stockholder that presently holds equity interests in any of the Applicants is subject to the provisions of the Bankruptcy Code. Under the Bankruptcy Code, all actions taken pursuant to the Plan must be approved by order of the Bankruptcy Court. For Applicants incorporated under the laws of the State of Delaware, in accordance with Section 303 of the Delaware General Corporation Law, such actions may then be carried out by each Applicant without further action by the stockholder of such Applicant. VOTING RIGHTS AS OF THE EFFECTIVE DATE (SUCH INFORMATION IS PROVIDED, AS REQUIRED BY FORM T-3, ON THE BASIS OF PRESENT INFORMATION, AND TO THE EXTENT SUCH INFORMATION IS DIFFERENT THAN THE ABOVE DISCLOSURE) I. ISSUER. COMMON SHARES Pursuant to the Articles of Association of the Issuer, each outstanding common share of the Issuer will have one vote with respect to all matters subject to shareholder vote. The holders of such common shares, voting together with the holders of the preferred shares of the Issuer as a single class, have the right to elect the Board of Directors of the Issuer and to vote on all other matters that may be acted on at any meeting of shareholders of the Issuer. PREFERRED SHARES Pursuant to the Articles of Association of the Issuer, each outstanding Class A Preferred Share and Class B Preferred Share of the Issuer will have one-tenth of one vote with respect to all matters subject to shareholder vote. The holders of such preferred shares, voting together with the holders of the common shares of the Issuer as a single class, will have the right to elect the Board of Directors of the Issuer and to vote on all others matters that may be acted on at any meeting of shareholders of the Issuer. II. PCI. Pursuant to the Plan, on the Effective Date all of the outstanding common stock of PCI will be canceled. Shares of New Common Stock (as such term is defined in the Plan) will be issued to certain creditors of the Issuer and PCA in partial exchange for the claims of such creditors against the Issuer and PCA. COMMON STOCK Pursuant to the terms of the Plan and the Fourth Amended and Restated Certificate of Incorporation of PCI, to be filed on the Effective Date, each outstanding share of common stock, par value $0.01 per share, to be issued on the Effective Date will have one vote with respect to all matters subject to stockholder vote. The holders of such common stock will have the right to elect the Board of Directors of PCI and to vote on all other matters that may be acted on at any meeting of shareholders of PCI. PREFERRED STOCK Pursuant to the terms of the Plan and the Fourth Amended and Restated Certificate of Incorporation of PCI, to be filed on the Effective Date, PCI may issue shares of preferred stock from time to time in one or more series, each such series to have such voting and other rights as are fixed by the Board of Directors prior to the issuance of any shares thereof; provided, however, that in compliance with Section 1126 of the Bankruptcy Code, no non-voting securities may be issued. 18 19 III. PCA. Pursuant to the terms of the Plan, PCA will be converted to a Delaware limited liability company consisting of one member, which member will be the Issuer. The Certificate of Conversion of PCA to be filed on the Effective Date will provide for a single-member, member-managed company. INDENTURE SECURITIES ITEM 8. ANALYSIS OF INDENTURE PROVISIONS. The following analysis of provisions of the Indenture required under Section 305(a)(2) of the 1939 Act is a summary and is qualified in its entirety by reference to the Indenture, a copy of the form of which is filed as Exhibit T3C hereto and is incorporated herein by reference. Capitalized terms used in this section and not otherwise defined in this application shall have the meanings given to them in the Indenture. (A) EVENTS OF DEFAULT The Indenture defines an Event of Default as: (a) (i) a default by the Issuer in the payment of any principal of any Note when the same becomes due, whether by acceleration, at maturity, upon redemption, in connection with a Change of Control or an Asset Sale, or otherwise, or (ii) a failure by the Issuer to pay any interest, fee or penalty on any Note, or any other amount payable under the Indenture, within three (3) days after any such interest or other amount becomes due in accordance with the terms of the Indenture; (b) a default by any other obligor in the payment when due of any fee with respect to any Note or any monetary indenture obligation (other than those covered by clause (a) hereof), and such default shall continue unremedied for a period of three (3) days; (c) the failure by obligors (including the Issuer) to observe or perform any covenant, condition or agreement on the part of such obligors to be observed or performed pursuant to certain covenants in the Indenture, or Article Eight (Consolidation, Merger, Conveyance, Transfer or Lease) thereof; (d) the failure by obligors (including the Issuer) to duly observe or perform any other covenant, condition or agreement in, to and under the Indenture or in any other Indenture Document executed by it and such failure continues for a period of thirty (30) days; (e) a denial, disaffirmation or repudiation by any obligor (including the Issuer) of its obligations under the Indenture (including the Guaranties of the Notes), the Notes, or any other Indenture Documents or Transaction Documents to which such obligor is party, or any material provision in the Indenture, such other Indenture Documents or Transaction Documents ceasing to be valid and binding, or any obligor so asserting in writing; (f) a default (i) in the payment when due, whether by acceleration or otherwise, of any amount (including principal, premium or interest) in respect of any Indebtedness of any obligor (including the Issuer), including Indebtedness in respect of the New Tranche A Term Notes (subject only to any applicable grace period pursuant to the terms of such Indebtedness) but not including the Indebtedness described in and covered by clauses (a) and (b) hereof, (ii) a default in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity, or (iii) a default in, or an event of default in connection with, the performance or observance of any obligation or condition of any agreement (including any Transaction Document) to which any obligor (including the Issuer) is party or by which it is bound and such default or event of default could reasonably be expected to have a Material Adverse Effect; (g) a final judgment has been, or final judgments have been, rendered by any court or courts of competent jurisdiction against any obligor (including the Issuer) or any subsidiary of such obligor and such judgment or judgments remain undischarged, unbonded or unstayed for a period of thirty (30) days, provided that the aggregate of all such judgments equals or exceeds $1,000,000 or any such 19 20 individual judgment exceeds $500,000 (other than, in each case, any judgment as to which and only to the extent that, a reputable insurance company has acknowledged coverage of such claim in writing); (h) the issuance of a notice of Lien, levy, assessment, injunction or attachment (other than pursuant to the Security Documents) against the property of any obligor (including the Issuer) having an aggregate value in excess of $1,000,000 which is not stayed or lifted within thirty (30) days; (i) any representation, warranty or certification of any obligor (including the Issuer) made or deemed made under the Indenture or in any other Indenture Document or Transaction Document executed by it or in any other writing or certificate furnished by or on behalf of such obligor (including the Issuer) for the purposes of or in connection with the Indenture or such other Indenture Document or any other Transaction Document is or shall be incorrect when made or deemed made in any material respect; (j) any of the Security Documents ceasing to give the Collateral Agent a valid and perfected Lien of the priority required thereby or the rights, powers and privileges purported to be created thereby (other than in accordance with their respective terms or if released by the Trustee, at the direction of all of the Holders in accordance with the terms of the Indenture), (ii) any of the Security Documents being declared null and void, (iii) the denial by any obligor (including the Issuer) of any of its obligations under any of the Security Documents, (iv) any Collateral becoming subject to any Lien other than the Liens created or permitted by the Security Documents or the Indenture, or (v) any Collateral (or part thereof) being seized or taken by any governmental agency or authority; (k) any obligor (including the Issuer) or any subsidiary of such obligor, pursuant to or within the meaning of any Bankruptcy Law, (i) commencing a voluntary case, (ii) consenting to the entry of an order for relief against it in an involuntary case in which it is a debtor, (iii) consenting to the appointment of a receiver, trustee, assignee, liquidator or similar official of it or for all or substantially all of its property, (iv) making a general assignment for the benefit of its creditors or (v) admitting in writing its inability to pay debts as they become due; (l) the entry of an order or decree by a court of competent jurisdiction under any Bankruptcy Law that (i) is for relief against any obligor (including the Issuer) or any subsidiary of such obligor in an involuntary case in which it is a debtor, (ii) appoints a receiver, trustee, assignee, liquidator or similar official of such obligor or such subsidiary for all or substantially all of their respective property, (iii) orders the liquidation of such obligor or such subsidiary, and such order or decree remains unstayed and in effect for sixty (60) days; (m) any obligor (including the Issuer) or Subsidiary of such obligor committing or suffering to occur a Canadian Act of Bankruptcy; or (n) the Guaranty of any Guarantor for any reason ceasing to be, or being asserted by any Guarantor or the Issuer not to be, in full force and effect or enforceable in accordance with its terms, except to the extent contemplated in the Guaranty. If an Event of Default (other than an Event of Default specified in clauses (k), (l) or (m) above) occurs and is continuing for any reason, whether voluntary or involuntary, then the Trustee by notice to the Issuer, or the Holders of at least 25% of the aggregate principal amount of the Notes at any time outstanding by written notice to the Issuer and the Trustee, may declare the unpaid principal of, premium, if any, and any accrued interest on all the Notes to be immediately due and payable. Upon such declaration the principal of, premium, if any, and interest on the Notes shall become automatically and immediately due and payable, without further notice, demand or presentment. If an Event of Default specified in clauses (k), (l) or (m) above occurs, unpaid principal of, premium, if any, and any accrued interest on all the Notes shall ipso facto automatically be and become immediately due and payable, without any declaration or other act on the part of the Trustee or any Holder, and such amount shall be applied in accordance with the provisions of an intercreditor and collateral agency agreement among the Holders and others. Other than in respect of (i) a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on any Note held by a non-consenting Holder, or (ii) a covenant or provision in the Indenture which under Article Nine (Supplemental Indentures) of the Indenture cannot be modified or amended without the consent of the Holder of each Note then outstanding, or (iii) any 20 21 continuing Default or Event of Default in respect of any matter involving the release of Collateral, which shall not be waived without the consent of the Holder of each then outstanding Note, Holders of a majority of the aggregate principal amount of the Notes then outstanding (or, in the case of the failure to make a Change of Control Offer, two-thirds of the aggregate principal amount of Notes then outstanding) by written notice to the Trustee, may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if (A) the Issuer has paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced by the Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, (ii) all overdue interest on all Notes, (iii) the principal of and premium, if any, on any Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes, and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Notes, and (B) all Events of Default, other than the non-payment of principal of the Notes which have become due solely by such declaration of acceleration, have been cured or waived in accordance with the Indenture. No such rescission shall affect any subsequent default or impair any right consequent thereon. Within thirty (30) days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, notice of such Default under the Indenture known to the Trustee, unless such Default shall have been cured or waived. (B) AUTHENTICATION AND DELIVERY OF THE NOTES UNDER THE INDENTURE; APPLICATION OF THE PROCEEDS THEREOF. The aggregate principal amount of Notes which may be authenticated and delivered under the Indenture is limited to $150,000,000 in principal amount of Notes. The Notes shall be executed on behalf of the Issuer by one of its Chairman of the Board, its President or one of its Vice Presidents under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries, and the Trustee shall authenticate and deliver such Notes as provided in the Indenture and not otherwise. No Note shall be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for in the Indenture duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered under the Indenture. The Notes are to be issued pursuant to the Plan to Claimholders in exchange therefor and, accordingly, no proceeds will be derived from the issuance of the Notes. The Notes will be distributed to the Claimholders as described in Item 2 of this application. (C) RELEASE OR RELEASE AND SUBSTITUTION OF ANY PROPERTY SUBJECT TO THE LIEN OF THE INDENTURE. The Trustee shall not direct the Collateral Agent to release any Collateral subject to the lien of the Indenture and the Security Documents unless such release is in accordance with the provisions of the Security Documents and Section 314(d) of the 1939 Act. The Indenture permits any obligor (including the Issuer) or any subsidiary of such obligor to sell, lease, convey, transfer or otherwise dispose of any of its assets, provided that certain conditions are met (including the application of Net Proceeds in accordance with the Indenture), and provided, further, that if any such assets comprise Collateral, the consent of the Holders of a majority of the aggregate principal amount of the Notes then outstanding is obtained prior to the disposition thereof and cash in an amount equal to the Collateral Proceeds is pledged to the Collateral Agent and deposited in the Intercreditor Collateral Account. Any non-cash consideration permitted by the Indenture received by any such obligor or subsidiary pursuant to such disposition of assets shall be subject to the lien of the Indenture and the Security Documents. 21 22 (D) SATISFACTION AND DISCHARGE OF THE INDENTURE The Indenture shall cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Notes therein expressly provided for) when each of the following are satisfied: (a) either (1) all Notes authenticated and delivered under the Indenture have been delivered to the Trustee for cancellation; or (2) all Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable, (y) shall become due and payable at their Stated Maturity within one year, or (z) are to be called for redemption within one year, and the Issuer or any Guarantor, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in United States dollars sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation; (b) the Issuer or any other obligor has paid or caused to be paid all other sums payable under the Indenture by the Issuer or such other obligor, and has indefeasibly discharged all Indebtedness thereunder; and (c) the Issuer has delivered to the Trustee an officers' certificate and an opinion of counsel stating that (i) all conditions precedent in the Indenture provided for relating to the satisfaction and discharge of the Indenture have been complied with and (ii) such satisfaction and discharge shall not result in a breach or violation of or constitute a default under the Indenture or any other material agreement or instrument to which the Issuer or any other obligor is a party or by which Issuer or such obligor is bound. The Issuer may effect a defeasance (i.e., the discharge of certain obligations of the Issuer under the Indenture, including the Indebtedness represented by such Notes), or a covenant defeasance (i.e., the release of certain covenant obligations of the Issuer and each Guarantor under the Indenture) with respect to the defeased Notes upon the satisfaction of certain conditions, including, (1) the irrevocable deposit by the Issuer with the Trustee in trust, for the benefit of the Holders of such Notes, trust funds which constitute (a) United States dollars in an amount, or (b) U.S. Government Obligations, or (c) a combination thereof, sufficient to pay and discharge (and which shall be applied by the Trustee to pay and discharge) the principal of, interest and premium, if any, on the Defeased Securities on the Stated Maturity of such principal or installment of principal or interest, (2) the delivery to the Trustee of certain prescribed opinions of counsel (including an opinion with respect to certain U.S. Federal income tax and Canadian federal or provincial income tax matters) and the delivery to the Trustee of certain prescribed officers' certificates of the Issuer, (3) that (x) no Default or Event of Default shall have occurred and be continuing on the date of such deposit; or (y) in so far as clauses (k), (l) or (m) specified in paragraph A (Events of Default) above are concerned, at any time during the period ending on 91st day after the date of deposit, or (4) that such defeasance or covenant defeasance shall not have resulted in a breach or violation of, nor constitute a Default under, any material agreement or instrument (other than the Indenture) to which the Issuer or any Guarantor is a party or by which it is bound. (E) THE EVIDENCE REQUIRED TO BE FURNISHED BY THE OBLIGOR UPON THE INDENTURE SECURITIES TO THE TRUSTEE AS TO COMPLIANCE WITH THE CONDITIONS AND COVENANTS PROVIDED FOR IN THE INDENTURE. The Indenture requires: (a) the Issuer to furnish, within (x) 90 days after the end of its fiscal year, and (y) 45 days after the end of the first three quarters of each fiscal year, an officers' certificate stating that a review of the activities of each obligor (including the Issuer) and each subsidiary of each such obligor, has been made under the supervision of the signing officer, with a view to determine whether each such obligor or such subsidiary has kept, observed, performed and fulfilled its obligations under the Indenture and the other Indenture Documents, and further stating, as to each such signing officer, that to the best of such officer's knowledge, each obligor and subsidiary has kept, observed, performed and fulfilled all of its obligations under the Indenture and the other Indenture Documents to which it is a party and is not in default in the performance or observance thereof (or if a Default or Event of Default shall have occurred, describing such Default or Event of Default, and what action is being taken or proposed to be taken in respect thereto); (b) the Issuer to furnish, (x) within ninety (90) days after each fiscal year, a copy of the annual audited financial statements of the Issuer and its parent corporation and their respective subsidiaries, as well as of any of the Guarantors as are required to file their annual financial statements pursuant to the Securities Act or the Exchange Act and the rules and regulations thereunder, certified by an independent certified public accountant satisfactory to the Trustee, together with a certificate from such accountant, to the effect that, in making the examination necessary for the signing of such annual audit report, such accountant has not become aware of any Default or Event of Default that has occurred and is continuing and that relates to financial or other accounting matters or the covenants set forth in the Indenture or, if such accountant has become aware of any such event, describing it, and (y) within forty-five (45) days after the end of each fiscal quarter, a copy of the unaudited financial statements of the Issuer and its parent corporation and their respective subsidiaries, as well as of any of the Guarantors as are required to file their quarterly financial statements pursuant to the Securities Act or the Exchange Act and the rules and regulations thereunder; 22 23 (c) the Issuer to give (A) prompt notice of the occurrence of (i) a Default or an Event of Default or (ii) a default by any obligor (including the Issuer) or any subsidiary of such obligor under any material note, indenture, loan agreement, mortgage, lease, deed or other material similar agreement to which such obligor or subsidiary, as appropriate, is a party or by which it is bound (including any of the Indenture Documents and Transaction Documents), and (B) so long as any of the Notes are outstanding, to deliver to the Trustee, forthwith upon becoming aware of the occurrence of any matters referred to in clauses (A)(i) or (ii) above, an officers' certificate specifying such Default, Event of Default or such other default or event of default and what action the Issuer is taking or proposes to take with respect thereto; and (d) Upon any application or request by any obligor (including the Issuer) to the Trustee to take any action under any provision of the Indenture, such obligor shall furnish to the Trustee (x) an officers' certificate stating that all conditions precedent, if any, provided for in the Indenture (including any covenants compliance with which constitutes a condition precedent) relating to the proposed action have been complied with, (y) an opinion of counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of such application or request as to which the furnishing of such documents, certificates and/or opinions is specifically required by any provision of the Indenture relating to such application or request, no additional certificate or opinion need be furnished. ITEM 9. OTHER OBLIGORS. None. CONTENTS OF APPLICATION FOR QUALIFICATION. THIS APPLICATION FOR QUALIFICATION COMPRISES - (A) Pages number 1 to 32, consecutively. (B) The statement of eligibility and qualification on Form T-1 of Wells Fargo Bank Minnesota, National Association, as Trustee under the indenture to be qualified (filed herewith as Exhibit 25.1). (C) The following exhibits in addition to those filed as part of the statement of eligibility and qualification of the Trustee: Exhibit T3A-1 Articles of Incorporation of PCI Chemicals Canada Inc./PCI Chimie Canada Inc. (formerly known as Chemicals Canada Inc./ Produits Chimiques PCI Canada Inc.), as amended by Articles of Amendment, as in effect on the date of filing hereof (filed herewith). Exhibit T3A-2 Form of Articles of Association of PCI Chemicals Canada Company/Societe PCI Chimie Canada to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-3 Third Restated Certificate of Incorporation of Pioneer Companies, Inc. (formerly known as Finevest Foods, Inc.), as amended by Certificate of Amendment of Third Restated Certificate of Incorporation, and in effect on the date of filing hereof (filed herewith). Exhibit T3A-4 Certificate of Designations of Series A Convertible Redeemable Preferred Stock, par value $0.01 per share, of Pioneer Companies, Inc. (filed herewith). Exhibit T3A-5 Form of Fourth Amended and Restated Certificate of Incorporation of Pioneer Companies, Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-6 Certificate of Incorporation of Pioneer Corporation of America (formerly known as Pioneer Americas Acquisition Corp.), as in effect on the date of filing hereof (filed herewith). Exhibit T3A-7 Form of Certificate of Conversion of Pioneer Corporation of America, to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-8 Certificate of Incorporation of Pioneer (East), Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3A-9 Form of Amended and Restated Certificate of Incorporation of Pioneer (East), Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-10 Certificate of Incorporation of Pioneer Americas, Inc. (formerly known as Atkemix Twenty-Nine Inc.), as in effect on the date of filing hereof (filed herewith). Exhibit T3A-11 Certificate of Incorporation of Pioneer Licensing, Inc., as in effect on the date of filing hereof (filed herewith). 23 24 Exhibit T3A-12 Form of Amended and Restated Certificate of Incorporation of Pioneer Licensing, Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-13 Articles of Incorporation of Imperial West Chemical Co., as in effect on the date of filing hereof (filed herewith). Exhibit T3A-14 Form of Amended and Restated Articles of Incorporation of Imperial West Chemical Co., to be filed with the Secretary of State of the State of Nevada and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-15 Certificate of Incorporation of Kemwater North America Company, as in effect on the date of filing hereof (filed herewith). Exhibit T3A-16 Form of Amended and Restated Certificate of Incorporation of Kemwater North America Company, to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-17 Certificate of Incorporation of Pioneer Water Technologies, Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3A-18 Form of Amended and Restated Certificate of Incorporation of Pioneer Water Technologies, Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-19 Certificate of Incorporation of KWT, Inc. (formerly known as Kemira Water Treatment, Inc.), as in effect on the date of filing hereof (filed herewith). Exhibit T3A-20 Form of Amended and Restated Certificate of Incorporation of KWT, Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3B-1 Bylaws of PCI Chemicals Canada Inc./PCI Chimie Canada Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-2 Form of Memorandum of Association of PCI Chemicals Canada Company/Societe PCI Chimie Canada to become effective as of the Effective Date (to be filed by amendment). Exhibit T3B-3 Bylaws of Pioneer Companies, Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-4 Form of Amended and Restated Bylaws of Pioneer Companies, Inc. to become effective on the Effective Date (to be filed by amendment). Exhibit T3B-5 Bylaws of Pioneer Corporation of America, as in effect on the date of filing hereof (filed herewith). Exhibit T3B-6 Bylaws of Pioneer (East), Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-7 Bylaws of Pioneer Licensing, Inc., as in effect on the date of filing hereof (filed herewith). 24 25 Exhibit T3B-8 Bylaws of Imperial West Chemical Co., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-9 Bylaws of Kemwater North America Company, as in effect on the date of filing hereof (filed herewith). Exhibit T3B-10 Bylaws of Pioneer Water Technologies, Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-11 Bylaws of KWT, Inc. as in effect on the date of filing hereof (filed herewith). Exhibit T3B-12 Bylaws of Pioneer Americas, Inc. as in effect on the date of filing hereof (filed herewith). Exhibit T3C Form of Indenture, to be dated as of the Effective Date, between the Issuer, the Guarantors and Wells Fargo Bank Minnesota, National Association, as Trustee in the form to be qualified, including an itemized table of contents showing the articles, sections and subsections of the Indenture, together with the subject matter thereof and the pages on which they appear (filed herewith). Exhibit T3D Not applicable. Exhibit T3E Amended Joint Disclosure Statement of the Applicants Pursuant to Section 1125 of the Bankruptcy Code dated September 21, 2001 (filed herewith). Exhibit T3F A cross reference sheet showing the location in the Indenture of the provisions inserted therein pursuant to Section 310 through 318(a), inclusive, of the 1939 Act (filed herewith). Exhibit 25.1 Form T-1 qualifying Wells Fargo Bank Minnesota, National Association, as Trustee under the Indenture to be qualified. 25 26 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, each of the Applicants, PCI Chemicals Canada Inc./PCI Chimie Canada Inc., a corporation organized and existing under the laws of New Brunswick, Canada, Pioneer Companies, Inc., a corporation organized and existing under the laws of Delaware, Pioneer Corporation of America, a corporation organized and existing under the laws of Delaware, Pioneer East, Inc., a corporation organized and existing under the laws of Delaware, Pioneer Americas, Inc., a corporation organized and existing under the laws of Delaware, Pioneer Licensing, Inc., a corporation organized and existing under the laws of Delaware, Kemwater North America Company, a corporation organized and existing under the laws of Delaware, Imperial West Chemical Co., a corporation organized and existing under the laws of Nevada, and KWT, Inc., a corporation organized and existing under the laws of Delaware, has duly caused this Application on Form T-3 to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Houston, and State of Texas, as of the 1st day of October, 2001. PCI CHEMICALS CANADA INC./PCI CHIMIE CANADA INC. (SEAL) By: /s/ Michael J. Ferris --------------------------------- Name: Michael J. Ferris Title: President and Chief Executive Officer Attest: /s/ Kent R. Stephenson -------------------------------- Name: Kent R. Stephenson Title: Vice President, General Counsel, and Secretary (SEAL) PIONEER COMPANIES, INC. By: /s/ Michael J. Ferris --------------------------------- Name: Michael J. Ferris Title: President and Chief Executive Officer Attest: /s/ Kent R. Stephenson -------------------------------- Name: Kent R. Stephenson Title: Vice President, General Counsel, and Secretary (SEAL) PIONEER CORPORATION OF AMERICA By: /s/ Michael J. Ferris --------------------------------- Name: Michael J. Ferris Title: President and Chief Executive Officer 26 27 Attest: /s/ Kent R. Stephenson -------------------------------- Name: Kent R. Stephenson Title: Vice President, General Counsel, and Secretary (SEAL) PIONEER (EAST), INC. By: /s/ Kent R. Stephenson --------------------------------- Name: Kent R. Stephenson Title: President Attest: /s/ Eva Clark -------------------------------- Name: Eva Clark Title: Assistant Secretary (SEAL) PIONEER AMERICAS, INC. By: /s/ Michael J. Ferris --------------------------------- Name: Michael J. Ferris Title: President and Chief Executive Officer Attest: /s/ Kent R. Stephenson -------------------------------- Name: Kent R. Stephenson Title: Vice President, General Counsel, and Secretary (SEAL) PIONEER LICENSING, INC. By: /s/ Kent R. Stephenson --------------------------------- Name: Kent R. Stephenson Title: President Attest: /s/ Eva Clark -------------------------------- Name: Eva Clark Title: Assistant Secretary 27 28 (SEAL) IMPERIAL WEST CHEMICAL CO. By: /s/ Michael J. Ferris --------------------------------- Name: Michael J. Ferris Title: President Attest: /s/ Kent R. Stephenson -------------------------------- Name: Kent R. Stephenson Title: Vice President, General Counsel, and Secretary (SEAL) KEMWATER NORTH AMERICA COMPANY By: /s/ Michael J. Ferris --------------------------------- Name: Michael J. Ferris Title: President Attest: /s/ Kent R. Stephenson -------------------------------- Name: Kent R. Stephenson Title: Vice President, General Counsel, and Secretary (SEAL) PIONEER WATER TECHNOLOGIES, INC. By: /s/ Michael J. Ferris --------------------------------- Name: Michael J. Ferris Title: President Attest: /s/ Kent R. Stephenson -------------------------------- Name: Kent R. Stephenson Title: Vice President, General Counsel, and Secretary (SEAL) KWT, INC. By: /s/ Michael J. Ferris --------------------------------- Name: Michael J. Ferris Title: President 28 29 Attest: /s/ Kent R. Stephenson -------------------------------- Name: Kent R. Stephenson Title: Vice President, General Counsel, and Secretary 29 30 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- Exhibit T3A-1 Articles of Incorporation of PCI Chemicals Canada Inc./PCI Chimie Canada Inc. (formerly known as Chemicals Canada Inc./Produits Chimiques PCI Canada Inc.), as amended by Articles of Amendment, as in effect on the date of filing hereof (filed herewith). Exhibit T3A-2 Form of Articles of Association of PCI Chemicals Canada Company/Societe PCI Chimie Canada to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-3 Third Restated Certificate of Incorporation of Pioneer Companies, Inc. (formerly known as Finevest Foods, Inc.), as amended by Certificate of Amendment of Third Restated Certificate of Incorporation, and in effect on the date of filing hereof (filed herewith). Exhibit T3A-4 Certificate of Designations of Series A Convertible Redeemable Preferred Stock, par value $0.01 per share, of Pioneer Companies, Inc. (filed herewith). Exhibit T3A-5 Form of Fourth Amended and Restated Certificate of Incorporation of Pioneer Companies, Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-6 Certificate of Incorporation of Pioneer Corporation of America (formerly known as Pioneer Americas Acquisition Corp.), as in effect on the date of filing hereof (filed herewith). Exhibit T3A-7 Form of Certificate of Conversion of Pioneer Corporation of America, to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-8 Certificate of Incorporation of Pioneer (East), Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3A-9 Form of Amended and Restated Certificate of Incorporation of Pioneer (East), Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-10 Certificate of Incorporation of Pioneer Americas, Inc. (formerly known as Atkemix Twenty-Nine Inc.), as in effect on the date of filing hereof (filed herewith). Exhibit T3A-11 Certificate of Incorporation of Pioneer Licensing, Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3A-12 Form of Amended and Restated Certificate of Incorporation of Pioneer Licensing, Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-13 Articles of Incorporation of Imperial West Chemical Co., as in effect on the date of filing hereof (filed herewith). Exhibit T3A-14 Form of Amended and Restated Articles of Incorporation of Imperial West Chemical Co., to be filed with the Secretary of State of the State of Nevada and to become effective as of the Effective Date (to be filed by amendment).
30 31 Exhibit T3A-15 Certificate of Incorporation of Kemwater North America Company, as in effect on the date of filing hereof (filed herewith). Exhibit T3A-16 Form of Amended and Restated Certificate of Incorporation of Kemwater North America Company, to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-17 Certificate of Incorporation of Pioneer Water Technologies, Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3A-18 Form of Amended and Restated Certificate of Incorporation of Pioneer Water Technologies, Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3A-19 Certificate of Incorporation of KWT, Inc. (formerly known as Kemira Water Treatment, Inc.), as in effect on the date of filing hereof (filed herewith). Exhibit T3A-20 Form of Amended and Restated Certificate of Incorporation of KWT, Inc., to be filed with the Secretary of State of the State of Delaware and to become effective as of the Effective Date (to be filed by amendment). Exhibit T3B-1 Bylaws of PCI Chemicals Canada Inc./PCI Chimie Canada Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-2 Form of Memorandum of Association of PCI Chemicals Canada Company/Societe PCI Chimie Canada to become effective as of the Effective Date (to be filed by amendment). Exhibit T3B-3 Bylaws of Pioneer Companies, Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-4 Form of Amended and Restated Bylaws of Pioneer Companies, Inc. to become effective on the Effective Date (to be filed by amendment). Exhibit T3B-5 Bylaws of Pioneer Corporation of America, as in effect on the date of filing hereof (filed herewith). Exhibit T3B-6 Bylaws of Pioneer (East), Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-7 Bylaws of Pioneer Licensing, Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-8 Bylaws of Imperial West Chemical Co., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-9 Bylaws of Kemwater North America Company, as in effect on the date of filing hereof (filed herewith).
31 32 Exhibit T3B-10 Bylaws of Pioneer Water Technologies, Inc., as in effect on the date of filing hereof (filed herewith). Exhibit T3B-11 Bylaws of KWT, Inc. as in effect on the date of filing hereof (filed herewith). Exhibit T3B-12 Bylaws of Pioneer Americas, Inc. as in effect on the date of filing hereof (filed herewith). Exhibit T3C Form of Indenture, to be dated as of the Effective Date, between the Issuer, the Guarantors and Wells Fargo Bank Minnesota, National Association, as Trustee in the form to be qualified, including an itemized table of contents showing the articles, sections and subsections of the Indenture, together with the subject matter thereof and the pages on which they appear (filed herewith). Exhibit T3D Not applicable. Exhibit T3E Amended Joint Disclosure Statement of the Applicants Pursuant to Section 1125 of the Bankruptcy Code dated September 21, 2001 (filed herewith). Exhibit T3F A cross reference sheet showing the location in the Indenture of the provisions inserted therein pursuant to Section 310 through 318(a), inclusive, of the 1939 Act (filed herewith). Exhibit 25.1 Form T-1 qualifying Wells Fargo Bank Minnesota, National Association, as Trustee under the Indenture to be qualified.
32 EX-99.T3A1 3 h90985ex99-t3a1.txt ARTICLES OF INCORPORATION 1 EXHIBIT T3A-1 NEW BRUNSWICK NOUVEAU BRUNSWICK BUSINESS CORPORATIONS ACT LOI SUR LES CORPORATIONS COMMERCIALES FORM 1 FORMULE 1 ARTICLES OF INCORPORATION STATUTS CONSTITUTIFS (SECTION 4) (ARTICLE 4) -------------------------------------------------------------------------------- 1-Name of Corporation Raison sociale de la corporation Chemicals Canada Inc./Produits Chimiques PCI Canada Inc. -------------------------------------------------------------------------------- 2-The classes and any maximum number Les categories et le nombre maximal of shares that the corporation is d'actions que la corporation peut authorized to issue and any maximum emettre ainsi que le montant aggregate amount for which shares maximal global pour lequel les may be issued including shares actions peuvent etre emises y without par value and/or with par compris les actions sans valeur au value and the amount of the par pair ou avec valeur au pair ou les value. deux et le montant de la valeur au pair. One class of shares without nominal or par value, unlimited as to number. -------------------------------------------------------------------------------- 3-Restrictions if any on share transfers Restrictions, s'il y en a, au transfert d'actions The shares of the Corporation shall not be transferred without the consent of either (i) the directors evidenced by a resolution passed or signed by them and recorded in the books of the Corporation or (ii) the holders of a majority in number of the outstanding voting shares of the Corporation. -------------------------------------------------------------------------------- 4-Number (or minimum and maximum number) Nombre (ou nombre minimum et of directors maximum) d'administrateurs Minimum of one and a maximum of ten as determined from time to time by resolution of the board of directors. -------------------------------------------------------------------------------- 5-Restrictions if any on business the Restrictions, s'il y en a, a corporation may carry on l'activite que peut exercer la corporation None -------------------------------------------------------------------------------- 6-Other provisions if any D'autres dispositions, le cas echeant The annexed Schedule "I" is incorporated in this form. -------------------------------------------------------------------------------- 7-Incorporators Fondateurs -------------------------------------------------------------------------------- Date Names-Noms Address (include postal code) Signature Addresses (y compris le code postal) ----------- ----------- ------------------------------------- --------------- Sept. Darrell J. P. O. Box 7289, Stn. "A", 44 Chipman 16th, 1997 Stephenson Hill, Saint John, N.B., E2L 4S6 /s/ -------------------------------------------------------------------------------- FOR DEPARTMENT USE ONLY RESERVE A L'USAGE DU MINISTERE -------------------------------------------------------------------------------- Corporation No.-Corporation No. 505548 Filed-Depose Filed/Depose Sep 17 1997 -------------------------------------------------------------------------------- 2 PCI CHEMICALS CANADA INC./PRODUITS CHIMIQUES PCI CANADA INC. (the "Corporation") Schedule "I" to the Foregoing Form 1 Under the Business Corporations Act (New Brunswick) (the "Act") Other provisions applicable to the Corporation and incorporated into the Articles of Incorporation are as set forth below. 1. The number of shareholders of the Corporation is limited to fifty (50), not including persons who are in the employment of the Corporation and persons, who, having been formerly in the employment of the Corporation, were, while in that employment, and have continued after the termination of that employment to be, shareholders of the Corporation, two or more persons holding one or more shares jointly being counted as a single shareholder. 2. Any distribution of securities of the Corporation to the public or any invitation to the public to subscribe for securities of the Corporation is prohibited. 3. The directors of the Corporation may, without authorization of the shareholders: (a) borrow money upon the credit of the Corporation; (b) issue, re-issue, sell or pledge any bonds, debentures, debenture stock or other debt obligations of the Corporation; (c) subject to the Act, give a guarantee on behalf of the Corporation to secure the performance of an obligation of any person; and (d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any moveable or personal, immoveable or real, or other property of the Corporation including book debts, rights, powers, franchises, goodwill and undertaking, owned or subsequently acquired, present or future, to secure any debt or obligation, including contingent obligations, of the Corporation, in such amounts and on such terms and conditions as they deem expedient. The directors may, by resolution or by-law, provide for the delegation of such powers by the directors to such officer or officers or director or directors of the Corporation, to such extent and in such a manner as may be set out in the resolution or by-law, as the case may be. 4. Notwithstanding subsection 87(l) of the Act (as from time to time in force) notice of the time and place of a meeting of shareholders of the Corporation shall be deemed to be properly given if sent not less than five (5) days before the meeting: (a) to each shareholder entitled to vote at the meeting; 2 3 (b) to each director; and (c) to the auditor, if any. 5. Notwithstanding subsections 84(l) and (2) of the Act (as from time to time in force), meetings of shareholders of the Corporation may be held at any place outside of the Province of New Brunswick including, without limitation, the Cities of Montreal and Toronto, Canada and in any location in the United States of America. 6. Meetings of the board of directors of the Corporation may be held at any place within or outside the Province of New Brunswick. 7. Notwithstanding any provision in the Act (as from time to time in force), the Corporation or any corporation with which it is affiliated may, directly or indirectly, give financial assistance by means of a loan, guarantee or otherwise: (a) to any shareholder, director, officer or employee of the Corporation or of an affiliated corporation; or (b) to any associate of a shareholder, director, officer or employee of the Corporation or of an affiliated corporation; even if there are reasonable grounds for believing that (c) the Corporation is, or after giving the financial assistance would be, unable to pay its liabilities as they become due; or (d) the realizable value of the Corporation's assets, excluding the amount of any financial assistance in the form of a loan or in the form of assets pledged or encumbered to secure a guarantee, after giving the financial assistance, would be less than the aggregate of the Corporation's liabilities and stated capital of all classes. 8. (a) Notwithstanding ss.2 of s.27 of the BUSINESS CORPORATIONS ACT as from time to time in force, the holders of equity shares of any class, in the case of the proposed issuance by the Corporation of, or the proposed granting by the Corporation of rights or options to purchase, its equity shares of any class or any shares or other securities convertible into or carrying rights or options to purchase its equity shares of any class, shall not as such, even if the issuance of the equity shares proposed to be issued or issuable upon exercise of such rights or options or upon conversion of such other securities would adversely affect the unlimited dividend rights of such holders, have the right to purchase such shares or other securities. (b) Notwithstanding ss.3 of s.27 of the BUSINESS CORPORATIONS ACT as from time to time in force, the holders of voting shares of any class, in the case of the proposed issuance by the Corporation of, or the proposed granting by the Corporation of rights or options to purchase, its voting shares of 3 4 any class or any shares or other securities convertible into or carrying rights or options to purchase its voting shares of any class, shall not as such, even if the issuance of the voting shares proposed to be issued or issuable upon exercise of such rights or options or upon conversion of such other securities would adversely affect the voting rights of such holders, have the right to purchase such shares or other securities. 4 EX-99.T3A3 4 h90985ex99-t3a3.txt 3RD RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT T3A-3 CERTIFICATE OF AMENDMENT OF THE THIRD RESTATED CERTIFICATE OF INCORPORATION OF PIONEER COMPANIES, INC. ---------- Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware ---------- We, Joshua A. Polan, Vice President, and William L. Mahone, Assistant Secretary of Pioneer Companies, Inc., a corporation existing under the laws of the State of Delaware, do hereby certify as follows: FIRST: That the Board of Directors of said corporation, at a meeting duly held, adopted a resolution proposing and declaring advisable the following amendment to the Third Restated Certificate of Incorporation of said corporation: That Article FOURTH be amended by adding the following paragraphs immediately following paragraph D of Article FOURTH: "E. At 5 p.m. New York City time on the effective date of this amendment (the "Effective Time"), each share of Class A Common Stock issued and outstanding immediately prior to the Effective Time (the "Old Class A Common Stock") shall automatically and without any action on the part of the holder thereof be reclassified as and changed into one-fourth (1/4) of a share of Class A Common Stock (the "New Class A Common Stock"), subject to the treatment of fractional share interests as described below. Such reclassification and change of Old Class A Common Stock into New Class A Common Stock shall not change the par value per share of the shares reclassified and changed, which par value shall remain $.01 per share. Each holder of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Old Class A Common Stock (the "Old Class A Certificates," whether one or more) shall be entitled to receive upon surrender of such Old Class A Certificates to the Corporation's Transfer Agent for cancellation, a certificate or certificates (the "New Class A Certificates," whether one or more) representing the number of whole shares of New Class A Common Stock into which and for which the shares of the Old Class A Common Stock formerly represented by such Old Class A Certificates so surrendered, are reclassified under the terms hereof. From and after the Effective Time, Old Class A 2 Certificates shall represent only the right to receive New Class A Certificates (and, where applicable, cash in lieu of fractional shares, as provided below) pursuant to the provisions hereof. No certificates or scrip representing fractional share interests in New Class A Common Stock will be issued, and no such fractional share interest will entitle the holder thereof to vote, or to any rights of a stockholder of the Corporation. A holder of Old Class A Certificates shall receive, in lieu of any fraction of a share of New Class A Common Stock to which the holder would otherwise be entitled, a cash payment therefor in an amount equal to the product of (a) the number of shares of Old Class A Common Stock that would otherwise be converted into a fractional interest pursuant to the reclassification effected hereby and (b) the average of the high bid and low asked prices of one share of Old Class A Common Stock, as reported on the NASD OTC Bulletin Board, for the ten business days immediately preceding the effective date of this amendment for which transactions in Old Class A Common Stock are reported thereon. If more than one Old Class A Certificate shall be surrendered at one time for the account of the same stockholder, the number of full shares of New Class A Common Stock for which New Class A Certificates shall be issued shall be computed on the basis of the aggregate number of shares represented by the Old Class A Certificates so surrendered. If any New Class A Certificate is to be issued in a name other than that in which the Old Class A Certificates surrendered for exchange are issued, the old Class A Certificates so surrendered shall be properly endorsed and otherwise in proper form for transfer, and the person or persons requesting such exchange shall affix any requisite stock transfer tax stamps to the Old Class A Certificates surrendered, or provide funds for their purchase, or establish to the satisfaction of the Transfer Agent that such taxes are not payable. From and after the Effective Time, the amount of capital represented by the shares of the New Class A Common Stock into which and for which the shares of the Old Class A Common Stock are reclassified under the terms hereof shall be the same as the amount of capital represented by the shares of Old Class A Common Stock so reclassified, until thereafter reduced or increased in accordance with applicable law. F. At the Effective Time, each share of Class B Common Stock issued and outstanding immediately prior to the Effective Time (the "Old Class B Common Stock") shall automatically and without any action on the part of the holder thereof be reclassified as and changed into one-fourth (1/4) of a share of Class B Common Stock (the "New Class B Common Stock"), subject to the treatment of fractional share interests as described below. Such reclassification and change of Old Class B Common Stock into 2 3 New Class B Common Stock shall not change the par value per share of the shares reclassified and changed, which par value shall remain $.01 per share. Each holder of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Old Class B Common Stock (the "Old Class B Certificates," whether one or more) shall be entitled to receive upon surrender of such Old Class B Certificates to the Corporation's Transfer Agent for cancellation, a certificate or certificates (the "New Class B Certificates," whether one or more) representing the number of whole shares of New Class B Common Stock into which and for which the shares of the Old Class B Common Stock formerly represented by such Old Class B Certificates so surrendered, are reclassified under the terms hereof. From and after the Effective Time, Old Class B Certificates shall represent only the right to receive New Class B Certificates (and, where applicable, cash in lieu of fractional shares, as provided below) pursuant to the provisions hereof. No certificates or scrip representing fractional share interests in New Class B Common Stock will be issued, and no such fractional share interest will entitle the holder thereof to vote, or to any rights of a stockholder of the Corporation. A holder of Old Class B Certificates shall receive, in lieu of any fraction of a share of New Class B Common Stock to which the holder would otherwise be entitled, a cash payment therefor in an amount equal to the product of (a) the number of shares of Old Class B Common Stock that would otherwise be converted into a fractional interest pursuant to the reclassification effected hereby and (b) the average of the high bid and low asked prices of one share of Old Class B Common Stock, as reported on the NASD OTC Bulletin Board, for the ten business days immediately preceding the effective date of this amendment for which transactions in Old Class B Common Stock are reported thereon. If more than one Old Class B Certificate shall be surrendered at one time for the account of the same stockholder, the number of full shares of New Class B Common Stock for which New Class B Certificates shall be issued shall be computed on the basis of the aggregate number of shares represented by the Old Class B Certificates so surrendered. If any New Class B Certificate is to be issued in a name other than that in which the Old Class B Certificates surrendered for exchange are issued, the old Class B Certificates so surrendered shall be properly endorsed and otherwise in proper form for transfer, and the person or persons requesting such exchange shall affix any requisite stock transfer tax stamps to the Old Class B Certificates surrendered, or provide funds for their purchase, or establish to the satisfaction of the Transfer Agent that such taxes are not payable. From and after the Effective Time, the amount of capital represented by the shares 3 4 of the New Class B Common Stock into which and for which the shares of the Old Class B Common Stock are reclassified under the terms hereof shall be the same as the amount of capital represented by the shares of Old Class B Common Stock so reclassified, until thereafter reduced or increased in accordance with applicable law." SECOND: That the stockholders of said corporation, at a meeting duly held, have approved said amendment in accordance with the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the corporation has caused this certificate to be signed by its duly authorized officers this 27th day of April, 1995. /s/ Joshua A. Polan --------------------------------------------- Name: Joshua A. Polan Title: Vice President /s/ William L. Mahone --------------------------------------------- Name: William L. Mahone Title: Assistant Secretary 4 5 THIRD RESTATED CERTIFICATE OF INCORPORATION FINEVEST FOODS, INC. Pursuant to Section 245 of the Delaware General Corporation Law Finevest Foods, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows: 1. The name of the Corporation is Finevest Foods, Inc. 2. The Certificate of Incorporation of the Corporation was filed in the office of the Secretary of State of the State of Delaware on October 16, 1987, amended and restated on February 29, 1988 and amended and restated on July 9, 1992 (the "Second Restated Certificate of Incorporation"). 3. This Third Restated Certificate of Incorporation restates and amends the Second Restated Certificate of Incorporation. 4. The Corporation has received payment for its capital stock. 5. At a meeting of the Board of Directors of the Corporation, resolutions were duly adopted setting forth a proposed amendment of the Second Restated Certificate of Incorporation (the "Amendment"), declaring the Amendment to be advisable and calling a meeting of the stockholders of the Corporation for consideration thereof. 6. Thereafter, pursuant to resolution of its Board of Directors, the necessary number of shares as required by statute were voted in favor of the Amendment pursuant to the Annual Meeting of Stockholders of the Corporation in accordance with Section 211 of the General Corporation Law of the State of Delaware Law. 7. The Amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. 8. The text of the Second Restated Certificate of Incorporation is hereby amended by the Amendment and restated to read in full as follows: FIRST: The name of the Corporation is GEV Corporation. SECOND: The address of its registered office in the State of Delaware is No. 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted is: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. 6 FOURTH: A. The aggregate number of shares of capital stock of all classes which the Corporation shall have authority to issue is sixty million (60,000,000) shares, of which fifty million (50,000,000) shares are to be Common Stock (representing forty-six million (46,000,000) shares of Class A Common Stock and four million (4,000,000) shares of Class B Common Stock (the Class A Common Stock and the Class B Common Stock are collectively referred to herein as the "Common Stock")), par value $.01 per share, and ten million (10,000,000) shares are to be Preferred Stock, par value $.01 per share. B. The classes of Preferred Stock and Common Stock shall have the following respective terms: PREFERRED STOCK 1. The Preferred Stock may be issued from time to time in one or more series, each such series to have such distinctive designation or title as may be fixed by the Board of Directors prior to the issuance of any shares thereof. Each such series may differ from every other series already outstanding in such respects as may be determined from time to time by the Board of Directors prior to the issuance of any shares thereof, including but not limited to the following: (a) the rate of dividend (or the method by which such rate may be determined), if any, which the Preferred Stock of any such series shall be entitled to receive, whether the dividends of such series shall be cumulative or non-cumulative and, if such dividends shall be cumulative, the date from which they shall be cumulative; (b) the right or obligation, if any, of the Corporation to redeem shares of Preferred Stock of any series and the amount per share which the Preferred Stock of any such series shall be entitled to receive in case of the redemption thereof, and the right of the Corporation, if any, to reissue any such shares after the same shall have been redeemed; (c) the amount per share which the Preferred Stock of any such series shall be entitled to receive in case of the voluntary liquidation, dissolution or winding up of the Corporation, or in case of the involuntary liquidation, dissolution or winding up of the Corporation; (d) the right, if any, of the holders of Preferred Stock of any such series to convert the same into other classes of stock, and the terms and conditions of such conversion; (e) the voting power, if any, of the holders of Preferred Stock of any series, and the terms and conditions under which they may exercise such voting power; provided, however, that the Corporation shall not issue non-voting equity securities and with respect to any series of Preferred Stock the terms of such stock shall include adequate provisions for the election of directors representing such Preferred Stock in the event of default in the payment of dividends on such Preferred Stock; (f) the terms of the sinking fund or fund of a similar nature, if any, to be provided for the Preferred Stock of any such series; and 2 7 (g) such other preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, which are fixed by resolution or resolutions of the Board of Directors (the "Authorization Resolutions") providing for the issuance of the Preferred Stock of any such series. 2. The description and terms of the Preferred Stock of each series in respect of the foregoing particulars shall be fixed and determined by the Board of Directors by appropriate resolution or resolutions at or prior to the time of the authorization of the issue of the original shares of each such series. 3. In case the stated dividends (to the extent then payable) and the amounts payable on liquidation, dissolution or winding up of the Corporation are not paid in full, the shareholders of all series of the Preferred Stock shall share in the payment of dividends, including accumulations, if any, and in any distribution of assets other than by way of dividends, in accordance with and to the extent permitted by the preferences fixed by the Authorization Resolutions of all series of Preferred Stock then outstanding. 4. The holders of the Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available therefor, preferential dividends in cash at the annual or other rate fixed for each particular series. The holders of the Preferred Stock of each series shall be entitled to receive any additional dividends thereon as may be specified in the Authorization Resolutions of such series. 5. So long as any of the Preferred Stock remains outstanding, in no event shall any dividend whatever, whether in cash or other property (other than in shares of Common Stock), be paid or declared on the Common Stock by the Corporation unless (a) the full dividends of the Preferred Stock for all past dividend periods from the respective date or dates on which they become cumulative shall have been paid and the full dividend thereon for the then current dividend period shall have been paid or declared and a sum set apart sufficient for the payment thereof, and (b) if at any time the Corporation is obligated to retire or redeem shares of any series of the Preferred Stock pursuant to a sinking fund or a fund of a similar nature or otherwise, all arrears, if any, in respect of the retirement or redemption of the Preferred Stock of all such series shall have been made good. Subject to the foregoing provisions, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock in accordance with paragraph 7 of this Article FOURTH from time to time out of the remaining funds of the Corporation legally available therefor, and the Preferred Stock shall not, unless otherwise permitted by the Authorization Resolutions of such series, be entitled to participate in any such dividend, whether payable in cash, stock or otherwise. No limitations, conditions or restrictions whatever are imposed by the provisions of this paragraph 5 upon the purchase or redemption or other acquisitions by the Corporation of any class or classes of any capital stock or other securities of the Corporation. 6. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of the Common Stock, the holders of the Preferred Stock of each series shall be entitled to be paid in cash the applicable liquidation price per share determined in the manner, or in the amount, fixed at the time of the original authorization of issuance of shares of such respective 3 8 series, together with a sum, in the case of each share of the Preferred Stock, computed at the annual dividend rate for the series of which the particular share is a part from the date on which dividends on such share became cumulative to the date fixed for such distribution or payment less the aggregate amount of all dividends theretofore and on such distribution or payment date paid thereon. If such payment shall have been made in full to the holders of the Preferred Stock, the remaining assets and funds of the Corporation shall be distributed among the holders of the Common Stock (as a single class in equal amounts of remaining assets and funds for each share of Class A Common Stock and Class B Common Stock) and the holders of the Preferred Stock of each series, if any, entitled to participate in the remaining assets and funds of the Corporation in accordance with the terms fixed in the Authorization Resolutions of such series. COMMON STOCK 7. The Common Stock shall be comprised of two classes, Class A Common Stock and Class B Common Stock. Each holder of Class A Common Stock shall have one vote in respect of each share held by such holder. Each holder of Class B Common Stock shall have one-tenth of one vote in respect of each share of Class B Common Stock held by such holder. 8. Except as otherwise required by law and except as expressly provided in this Certificate of Incorporation or in any resolution or resolutions adopted by the Board of Directors pursuant to authority expressly vested in it by the foregoing provisions of this Article FOURTH with respect to the Preferred Stock, the holders of Common Stock (a) shall have the exclusive voting rights for the election of directors and for all other purposes, each holder of Class A Common Stock being entitled to one vote for each share thereof held by such holder, and each holder of Class B Common Stock being entitled to one-tenth of one vote for each share thereof held by such holder, and (b) shall be entitled to receive dividends payable in such property or shares of the capital stock of the Corporation when and as declared by the Board of Directors, subject to the following rights and restrictions: (a) No cash dividend or other distribution of property shall be declared or paid on shares of Class A Common Stock or Class B Common Stock unless a cash dividend or other distribution of property in an equal per share amount is simultaneously declared and paid on shares of the Class B Common Stock or Class A Common Stock, respectively. (b) Stock dividends declared on the Class A Common Stock shall be payable solely in shares of Class A Common Stock and stock dividends declared on the Class B Common Stock shall be payable solely in shares of Class B Common stock. No stock dividend shall be declared or paid on shares of the Class A Common Stock or Class B Common Stock unless a stock dividend payable proportionately, on a per share basis, in shares of Class B Common Stock or Class A Common Stock, respectively, is simultaneously declared and paid on the Class B Common Stock or Class A Common Stock, respectively. 9. Purchases. Subject to any applicable provisions of this Article IV, the Corporation may at any time or from time to time purchase or otherwise acquire shares of its Class A Common Stock or Class B Common Stock in any manner now or hereafter permitted by law or pursuant to any agreement. 4 9 10. Subdivision or Combination of Common Stock. The shares of Class A Common Stock or Class B Common Stock shall not be subdivided by a stock split or stock dividend or combined unless, at the same time, the shares of Class B Common Stock or Class A Common Stock, respectively, are proportionately, on a per share basis, subdivided by a stock split or stock dividend or combined. 11. Conversion of Shares of Class B Common Stock into Shares of Class A Common Stock. (a) At any time and from time to time, each record holder of Class B Common Stock will be entitled to convert any or all of such holder's shares of Class B Common Stock into the same number of shares of Class A Common Stock. (b) Each conversion of shares of Class B Common Stock into shares of Class A Common Stock will be effected by the surrender of the certificate or certificates representing the shares to be converted at the principal office of the Corporation (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holder or holders of the Class B Common Stock) at any time during normal business hours, together with a written notice by the holder of such Class B Common Stock stating that such holder desires to convert the shares, or a stated number of the shares, of Class B Common Stock represented by such certificate or certificates into Class A Common Stock. Such conversion will be deemed to have been effected as of the close of business on the date on which such certificate or certificates have been surrendered and such notice has been received, and at such time the rights of the holder of the converted Class B Common Stock as such holder will cease and the person or persons in whose name or names the certificate or certificates for shares of Class A Common Stock are to be issued upon such conversion will be deemed to have become the holder or holders of record of the shares of Class A Common Stock represented thereby. (c) Promptly after such surrender and the receipt of such written notice, the Corporation will issue and deliver in accordance with the surrendering holder's instructions (i) the certificate or certificates for the Class A Common Stock issuable upon such conversion and (ii) a certificate representing any Class B Common Stock which was represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which was not converted. (d) The Corporation will at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock or its treasury shares, solely for the purpose of issue upon the conversion of the Class B Common Stock as provided in this Part B, such number of shares of Class A Common Stock as shall then be issuable upon the conversion of all then outstanding shares of Class B Common Stock. All shares of Class A Common Stock issuable upon conversion of shares of Class B Common Stock shall, when issued, be duly and validly issued, fully paid and non assessable and free and clear of all liens, claims, options, charges, preemptive rights or other security interests or encumbrances. 5 10 (e) The issuance of certificates for Class A Common Stock to any holder of Class B Common Stock upon conversion of Class B Common Stock held by such holder will be made without charge to such holder for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of Class A Common Stock. The Corporation will not close its books against the transfer of Class B Common Stock or of Class A Common Stock issued or issuable upon conversion of Class B Common Stock or against the conversion of Class B Common Stock into Class A Common Stock. (f) Shares of Class B Common Stock acquired by the Corporation by the conversion thereof into shares of Class A Common Stock shall be retired and cancelled promptly after the acquisition thereof. No such cancelled shares shall be reissued. (g) In case of, and as a condition to, any capital reorganization of, or any reclassification of the capital stock of, the Corporation (other than a subdivision or combination of shares of Class A Common Stock or Class B Common Stock into a greater or lesser number of shares (whether with or without par value) or a change in the par value of Class A Common Stock or Class B Common Stock from par value to no par value, or from no par value to par value or in the case of, and as a condition to, the consolidation or merger of the Corporation with or into another company (other than a merger in which the Corporation is the continuing Company and which does not result in any reclassification of outstanding shares of Class A Common Stock or Class B Common Stock), each share of Class B Common Stock shall be entitled to the same consideration as a share of Class A Common Stock, without regard to any differences in voting or other rights set forth herein, and shall be convertible into the number of shares of stock or other securities or property receivable upon such reorganization, reclassification, consolidation or merger by a holder of the number of shares of Class A Common Stock of the Corporation into which such shares of Class B Common Stock were convertible immediately prior to such reorganization, reclassification, consolidation or merger; and, in any such case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions set forth in this Article FOURTH with respect to the rights and interest thereafter of the holders of Class B Common Stock to the end that the provisions set forth in this Article FOURTH (including provisions with respect to the conversion rate) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other securities or property thereafter deliverable upon the conversion of the shares of Class B Common Stock. 12. Shares of Common Stock Identical. Except as otherwise specifically provided herein, all shares of Class A Common Stock and all shares of Class B Common Stock will be identical and will entitle the holders thereof to the same rights and privileges. C. The issuance of any shares of Common Stock or Preferred Stock authorized hereunder and any other actions permitted to be taken by the Board of Directors pursuant to this Article FOURTH must be authorized by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the entire Board of Directors or by a committee of the Board 6 11 of Directors constituted by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the entire Board of Directors. D. Notwithstanding any other provision of this Certificate of Incorporation, (i) the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the shares entitled to vote at an election of directors shall be required to amend, alter, charge or repeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of, Sections B through D of this Article FOURTH, (ii) the provisions of paragraphs B6 through 12 of this Article FOURTH may not be modified, changed or amended without the prior written consent of the holders of not less than 66-2/3% of the outstanding shares of Class B Common Stock, (iii) no other provisions of this Restated Certificate of Incorporation may be modified, changed or amended without the prior written consent of the holders of not less than 66-2/3% of the outstanding shares of Class B Common Stock if such modification, change or amendment would adversely affect any of the powers, preferences or special rights of the shares of Class B Common Stock and (iv) no additional shares of Class B Common Stock shall be issued without the prior written consent of a majority of the outstanding shares of Class B Common Stock. FIFTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-laws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes of the State of Delaware) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the Corporation. Elections of directors need not be written ballot unless the By-laws of the Corporation shall so provide. SIXTH: The Corporation is to have perpetual existence. SEVENTH: No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to section 174 of the GCL or (iv) for any transaction from which the director derived an improper personal benefit. EIGHTH: A. In addition to any affirmative vote required by law or this Certificate of Incorporation or the By-laws of the Corporation, and except as otherwise expressly provided in Section B of this Article EIGHTH, a Business Combination (as hereinafter defined) shall require the affirmative vote of not less than sixty-six and two-thirds percent (66-2/3%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock (as hereinafter defined), voting together as a single class, excluding from such number of outstanding shares, and from such required vote, Voting Stock beneficially owned by any Interested Stockholder (as hereinafter defined). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in an agreement with a national securities exchange or otherwise. 7 12 B. The provisions of Section A of this Article EIGHTH shall not be applicable to a particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or by any other provision of this Certificate of Incorporation or the By-laws of the Corporation or otherwise, if all of the conditions specified in either of the following Paragraphs 1 or 2 are met; provided, however, that in the case of a Business Combination that does not involve the payment of consideration to the holders of the Corporation's outstanding Capital Stock (as hereinafter defined), then the provisions of Section A of this Article EIGHTH must be satisfied unless the conditions specified in the following Paragraph 1 are met: 1. The Business Combination shall have been approved (and such approval shall not have been subsequently rescinded) by a majority of the Continuing Directors (as hereinafter defined), either specifically or as a transaction which is within an approved category of transactions with an Interested Stockholder. Such approval may be given prior to or subsequent to the acquisition of, or announcement or public disclosure of the intention to acquire, beneficial ownership of the Voting Stock that caused the Interested Stockholder to become an Interested Stockholder; provided, however, that approval shall be effective for the purposes of this Paragraph 1 only if obtained at a meeting at which a Continuing Director Quorum (as hereinafter defined) was present; and provided, further, that such approval may be rescinded by a majority of the Continuing Directors at any meeting at which a Continuing Director Quorum is present and which is held prior to consummation of the proposed Business Combination. 2. All of the following conditions, if applicable, shall have been met: a. The Fair Market Value (as hereinafter defined), as of the date of the consummation of the Business Combination (the "Consummation Date"), of the consideration to be received per share by all holders of shares of any class or series of outstanding Capital Stock in connection with such Business Combination shall be at least equal to the amount determined, as applicable, under Paragraph (i) or (ii) below: (i) if the Fair Market Value per share of such class or series of Capital Stock on the date of the first public announcement of the proposed Business Combination (the "Announcement Date") is less than the Fair Market Value per share of such class or series of Capital Stock on the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"), an amount (the "Premium Capital Stock Price") equal to the sum of (A) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date plus (B) the product of the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date multiplied by the highest percentage premium over the closing sale price per share of such class or series of Capital Stock paid on any day by or on behalf of the Interested Stockholder for any shares of such class or series of Capital Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of such class or series of Capital Stock within the 8 13 two-year period immediately prior to the Announcement Date or in the transaction in which it became an Interested Stockholder; provided, however, that if the Premium Capital Stock price as determined above is greater than the highest per share price paid by or on behalf of the Interested Stockholder for any share of such class or series of Capital Stock in connection with the acquisition by the Interested Stockholder of beneficial ownership of shares of such class or series of Capital Stock within the two-year period immediately prior to the Announcement Date, the amount required under this Paragraph (i) shall be the higher of (Y) such highest price paid by or on behalf of the Interested Stockholder, and (Z) the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date. The Fair Market Value and other prices per share of such class or series of Capital Stock referred to in this Paragraph (i) shall be in each case appropriately adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock. (ii) If the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date is greater than or equal to the Fair Market Value per share of such class or series of Capital Stock on the Determination Date, in each case as appropriately adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of Capital Stock, a price per share equal to the Fair Market Value per share of such class or series of Capital Stock on the Announcement Date. (iii) The provisions of Paragraphs (i) and (ii) above shall be required to be met with respect to every class or series of outstanding Capital Stock which is the subject of the Business Combination whether or not the Interested Stockholder has previously acquired beneficial ownership of any shares of a particular class or series of Capital Stock. b. After the Determination Date and prior to the Consummation Date of such Business Combination: (i) except as approved by a majority of the Continuing Directors at a meeting at which a Continuing Director Quorum is present, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding Capital Stock; (ii) there shall have been an increase in the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors at a meeting at which a Continuing Director Quorum is present; and (iii) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Capital Stock except as part of the transaction that results in such Interested Stockholder becoming an Interested Stockholder or except in a transaction that, after giving effect thereto, would not result in any increase in the Interested Stockholder's percentage of beneficial ownership of any class or series of Capital Stock. c. After the Determination Date, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. d. A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (the "Act") (or any subsequent provisions replacing such Act, rules or regulations), shall be mailed to all stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such 9 14 proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). The proxy or information statement shall contain on the first page thereof, in a prominent place, any statement as to the advisability (or inadvisability) of the Business Combination that the Continuing Directors, or any of them, may choose to make and, if deemed advisable by a majority of the Continuing Directors, the opinion of an investment banking firm selected by a majority of the Continuing Directors as to the fairness (or not) of the terms of the Business Combination from a financial point of view to the holders of the outstanding shares of Capital Stock other than the Interested Stockholder and its Affiliates or Associates (as hereinafter defined), such investment banking firm to be paid a reasonable fee for its services by the Corporation. e. Such Interested Stockholder shall not have made any major change in the Corporation's business or equity capital structure without the approval of at least a majority of the Continuing Directors. C. The following definitions shall apply with respect to this Article EIGHTH: 1. The term "Business Combination" shall mean: a. any merger or consolidation of the Corporation or any Major Subsidiary (as hereinafter defined) with, or any sale, lease, exchange, transfer or other disposition of substantially all the assets or outstanding shares of capital stock of the Corporation or any Major Subsidiary with or for the benefit of (i) any Interested Stockholder or (ii) any other company (whether or not itself an Interested Stockholder) which is or after such merger, consolidation or sale, lease, exchange, transfer or other disposition would be an Affiliate or Associate of an Interested Stockholder; or b. any sale, lease, exchange, mortgage, pledge, transfer or other disposition or security arrangement, investment, loan, advance, guarantee, agreement to purchase, agreement to pay, extension of credit, joint venture participation or other arrangement (in one transaction or a series of transactions) with or for the benefit of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder involving any assets, securities or commitments of the Corporation, any Major Subsidiary or any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder having an aggregate Fair Market Value and/or involving aggregate Fair Market Value and/or involving aggregate commitments of ten million dollars ($10,000,000) or more; or c. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries (as hereinafter defined) or any other transaction (whether or not with or otherwise involving an Interested Stockholder) that has the effect, directly or indirectly, of increasing the proportionate share of any class or series of Capital Stock, or any securities convertible into Capital Stock or into equity securities of any Subsidiary, that is beneficially owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or 10 15 d. any agreement, contract or other arrangement providing for any one or more of the actions specified in the foregoing clauses (a) to (c). Notwithstanding anything contained in this Paragraph 1 of Section C to the contrary, no such aforementioned transaction shall be deemed to be a Business Combination subject to this Article EIGHTH if the Announcement Date of such transaction occurs more than eighteen months after the Determination Date with respect to such Interested Stockholder. 2. The term "Capital Stock" shall mean all capital stock of the Corporation authorized to be issued from time to time under Article FOURTH of this Certificate of Incorporation, including, without limitation, the Common Stock, and the term "Voting Stock" shall mean all Capital Stock which by its terms may be voted on all matters submitted to stockholders of the Corporation generally. 3. The term "person" shall mean any individual, firm, company or other entity and shall include any group comprised of any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of Capital Stock. 4. The term "Interested Stockholder" shall mean any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who (a) is, or has announced or publicly disclosed a plan or intention to become, the beneficial owner of Voting Stock representing twenty-five percent (25%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner of Voting Stock representing twenty-five percent (25%) or more of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock. 5. A person shall be a "beneficial owner" of any Capital Stock (a) which such person or any of its Affiliates or Associates beneficially owns directly or indirectly; (b) which such person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote or direct the vote pursuant to any agreement, arrangement or understanding; or (c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Capital Stock. For the purposes of determining whether a person is an Interested Stockholder pursuant to Paragraph 4 of this Section C, the number of shares of Capital Stock deemed to be outstanding shall include shares deemed beneficially owned by such person through application of this Paragraph 5 of Section C, but shall not include any other shares of Capital Stock that may be reserved for issuance or issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 11 16 6. The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Act as in effect on the date that this Article EIGHTH is approved by the Board of Directors (the term "registrant" in said Rule 12b-2 meaning in this case the Corporation); provided, however, that the terms "Affiliate" and "Associate" shall not include any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any trustee of or fiduciary with respect to any such plan when acting in such capacity. 7. The term "Subsidiary" means any company of which a majority of any class of equity security is beneficially owned by the Corporation; provided, however, that for the purposes of the definition of Interested Stockholder set forth in Paragraph 4 of this Section C, the term "Subsidiary" shall mean only a company of which a majority of each class of equity security is beneficially owned by the Corporation. 8. The term "Major Subsidiary" means Land-O-Sun Dairies, Inc., Atlanta Dairies, Inc., SEFCO Holdings, Inc. or Longlife Dairy Products Company, Inc., or any other Subsidiary having assets of ten million dollars ($10,000,000) or more as reflected in the most recent fiscal year-end audited, or if unavailable, unaudited, consolidated balance sheet, prepared in accordance with generally accepted accounting principles. 9. The term "Continuing Director" means any member of the Board of Directors of the Corporation, while such person is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and was a member of the Board of Directors either on the date hereof or prior to the time that the Interested Stockholder became an Interested Stockholder, and any successor of a Continuing Director while such successor is a member of the Board of Directors, who is not an Affiliate or Associate or representative of the Interested Stockholder and is recommended or elected to succeed the Continuing Director by a majority of the Continuing Directors; provided, however, that the term "Continuing Director" shall not include any officer of the Corporation or of any Affiliate or Associate of the Corporation. The term "Fair Market Value" means (a) in the case of cash, the amount of such cash; (b) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (c) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Continuing Directors. 11. The term "Continuing Director Quorum" means at least two (2) Continuing Directors capable of exercising the power conferred upon them under the provisions of the Certificate of Incorporation and By-laws of the Corporation. 12 17 12. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in Paragraph 2 of Section B of this Article EIGHTH shall include the shares of Common Stock and/or the shares of any other class or series of Capital Stock retained by the holders of such shares. D. A majority of the Continuing Directors at a meeting at which a Continuing Director Quorum is present shall have the power and duty to determine the purposes of this Article EIGHTH, on the basis of information known to them after reasonable inquiry, all questions arising under this Article EIGHTH, including, without limitation, (1) whether a person is an Interested Stockholder, (2) the number of shares of Capital Stock or other securities beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of ten million dollars ($10,000,000) or more as provided in Paragraph lb of Section C of this Article EIGHTH, and (5) whether a Subsidiary is a Major Subsidiary. Any such determination made in good faith shall be binding and conclusive on all parties. In the event a Continuing Director Quorum cannot be attained at such meeting, all such determinations shall be made by the Delaware Court of Chancery. E. Nothing contained in this Article EIGHTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. F. The fact that any Business Combination complies with the provisions of Section B of this Article EIGHTH shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the stockholders of the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of or actions and responses taken with respect to such Business Combination. G. Notwithstanding any other provisions of this Certificate of Incorporation or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-laws of the Corporation), the affirmative vote of the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the votes entitled to be cast by the holders of all the then outstanding shares of Voting Stock, voting together as a single class, excluding Voting Stock beneficially owned by any Interested Stockholder, shall be required to amend, alter, change or repeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of this Article EIGHTH; provided, however, that this Section G shall not apply to, and such sixty-six and two-thirds percent (66-2/3%) vote shall not be required for, any amendment, repeal or adoption recommended by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the entire Board of Directors if all of such directors voting for such recommendation are persons who would be eligible to serve as Continuing Directors within the meaning of Section C, Paragraph 9 of this Article EIGHTH. 13 18 NINTH: A. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not more than nine (9) directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. Class I directors shall be elected initially for a one-year term, Class II directors initially for a two-year term and Class III directors initially for a three-year term. At each succeeding annual meeting of stockholders beginning in 1989, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum, or a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article NINTH unless expressly provided by the Authorization Resolutions that set forth the terms of the Preferred Stock. B. Notwithstanding any other provisions of this Certificate of Incorporation or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-laws of the Corporation), the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the shares entitled to vote at an election of directors shall be required to amend, alter, change or repeal, or to adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of, this Article NINTH. TENTH: In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, the Board of Directors shall have the power to adopt, amend, alter or repeal the Corporation's By-laws. The affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the entire Board of Directors shall be required to adopt, amend, alter or repeal the Corporation's By-laws. Notwithstanding any other provisions of this Certificate of Incorporation or the By-laws of the Corporation (and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law, this Certificate of Incorporation or the By-laws of the Corporation), the affirmative vote of the holders of at least sixty-six and 14 19 two-thirds percent (66-2/3%) of the voting power of the shares entitled to vote at an election of directors shall be required to adopt, amend, alter or repeal, or adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of, this Article TENTH. ELEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of the GCL, or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provision of Section 279 of the GCL, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, said compromise or arrangement and said reorganization, if sanctioned by the court to which the said application has been made, shall be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation. TWELFTH: Except as provided in Articles FOURTH, EIGHTH, NINTH and TENTH, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation in any manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. THIRTEENTH: A. Certain Definitions. As used in this Article THIRTEENTH, the following terms have the following respective meanings: "Corporation Securities" means (i) shares of common stock of the Corporation, (ii) shares of preferred stock of the Corporation, (iii) warrants, rights, or options (within the meaning of Treasury Regulation Section 1.382-2T(h)(4)(v)) to purchase stock of the Corporation from the Corporation and (iv) any other interests that would be treated as "stock" of the corporation pursuant to Treasury Regulation Section 1.382-2T(f)(18). "Five-Percent Shareholder" means a Person or group of Persons that is identified as a "five-percent shareholder" of the Corporation pursuant to Treasury Regulation Section 1.382-2T(g)(1). "Percentage Stock Ownership" means percentage stock ownership as determined in accordance with Treasury Regulation Section Section l.382-2T(g), (h), (j) and (k). 15 20 "Person" means an individual, corporation, estate, trust, association, company, partnership, or similar organization. "Prohibited Transfer" means any purported Transfer of Corporation Securities to the extent that such Transfer is prohibited and void under this Article THIRTEENTH. "Restriction Release Date" means December 31, 1995. "Transfer" means any sale, transfer, assignment, conveyance, pledge, or other disposition. "Treasury Regulation Section 1.382-2T" means the temporary income tax regulations promulgated under Section 382 of the Internal Revenue Code of 1986, as amended, and any successor regulations. References to any subsection of such regulations include references to any successor subsection thereof. B. Restrictions. Any attempted Transfer of Corporation Securities prior to the Restriction Release Date, or any attempted Transfer of Corporation Securities pursuant to an agreement entered into prior to the Restriction Release Date shall be prohibited and void ab initio to the extent that, as a result of such Transfer (or any series of Transfers of which such Transfer is a part), either (1) any Person or group of Persons shall become a Five-Percent Shareholder, or (2) the Percentage Stock ownership interest in the Corporation of any Five-Percent Shareholder shall be increased; provided, however, that nothing herein contained shall preclude the settlement of any transaction entered into through the facilities of the over the counter electronic bulletin board of the National Association of Securities Dealers in the Corporation Securities. C. Certain Exceptions. The restrictions set forth in paragraph B of this Article THIRTEENTH shall not apply to: 1. any Transfer which has been approved in advance by the Board of Directors, which approval may be withheld only if, in the judgment of the Board of Directors, such Transfer may result in any limitation on the use of the Corporation's net operating loss carryforwards, tax losses recognized in the future, or other tax attributes; or 2. any Transfer made in compliance with exceptions established from time to time by resolution of the Board of Directors. D. Treatment of Excess Securities. 1. No employee or agent of the Corporation shall record any Prohibited Transfer, and the purported transferee of such a Prohibited Transfer (the "Purported Transferee") shall not be recognized as a shareholder of the Corporation for any purpose whatsoever in respect of the Corporation Securities which are the subject of the Prohibited Transfer (the "Excess Securities"). Until the Excess Securities are acquired by 16 21 another Person in a Transfer that is not a Prohibited Transfer, the Purported Transferee shall not be entitled with respect to such Excess Securities to any rights of shareholders of the Corporation, including without limitation, the right to vote such Excess Securities and to receive dividends or distributions in liquidation in respect thereof, if any. Once the Excess Securities have been acquired in a Transfer that is not a Prohibited Transfer, the Securities shall cease to be Excess Securities. 2. If the Board of Directors determines that a Transfer of Corporation Securities constitutes a Prohibited Transfer then, upon written demand by the Corporation, the Purported Transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the Purported Transferee's possession or control, together with any dividends or other distributions that were received by the Purported Transferee from the Corporation with respect to the Excess Securities ("Prohibited Distributions"), to an agent designated by the Board of Directors which agent shall be the transfer agent for the Corporation Securities (the "Agent"). The Agent shall thereupon sell the Excess Securities transferred to it in an arm's-length transaction. If the Purported Transferee has resold the Excess Shares before receiving the Corporation's demand to surrender the Excess Shares to the Agent, the Purported Transferee shall be deemed to have sold the Excess Shares for the Agent, and shall be required to transfer to the Agent any Prohibited Distributions and the proceeds of such sale, except to the extent that the Agent grants written permission to the Purported Transferee to retain a portion of such sales proceeds not exceeding the amount pursuant to paragraph D.3 of this Article THIRTEENTH if the Agent rather than the Purported Transferee had resold the Excess Shares. 3. The Agent shall apply any proceeds of a sale by it of Excess Shares and, if the Purported Transferee has previously resold the Excess Shares, any amounts received by it from a Purported Transferee as follows: (1) first, such amounts shall be paid to the Agent to the extent necessary to cover its costs and expenses incurred in connection with its duties hereunder; (2) second, any remaining amounts shall be paid to the Purported Transferee, up to the amount paid by the Purported Transferee for the Excess Shares (or the fair market value, calculated on the basis of the closing market price for Corporation Securities on the day before the Transfer of the Excess Shares at the time of the attempted Transfer to the Purported Transferee by gift, inheritance, or similar Transfer), which amount (or fair market value) shall be determined in the discretion of the Board of Directors; and (3) third, any remaining amounts shall be paid in equal shares to the United Way. The recourse of any Purported Transferee in respect of any Prohibited Transfer shall be limited to the amount specified in clause (2) of the preceding sentence. In no event shall the proceeds of any sale of Excess Shares pursuant to this Article THIRTEENTH inure to the benefit of the Corporation. 4. If the Purported Transferee fails to surrender the Excess Shares or the proceeds of a sale thereof to the Agent within thirty business days from the date on which the Corporation makes a demand pursuant to paragraph D.2 of this Article THIRTEENTH, then the Corporation shall institute legal proceedings to compel the surrender. 17 22 5. The Corporation shall make the demand described in paragraph D.2 of this Article THIRTEENTH within thirty days of the date on which the Board of Directors determines that the attempted Transfer would result in Excess Securities; provided, however, that if the Corporation makes such demand at a later date, the provisions of this Article THIRTEENTH shall apply nonetheless. E. By-laws, Legends, Etc. 1. The By-laws of the Corporation shall make appropriate provisions to effectuate the requirements of this Article THIRTEENTH. 2. All certificates representing Corporation Securities issued after the effectiveness of this Article THIRTEENTH shall bear a legend to the effect that such Corporation Securities and any Corporation Securities acquired upon exercise or conversion of such Corporation Securities are subject to the restrictions set forth in this Article THIRTEENTH. 3. A majority of the Directors of the Corporation shall have the power to determine all matters necessary to determine compliance with this Article THIRTEENTH, including without limitation (1) whether a new Five-Percent Shareholder would be required to be identified in certain circumstances, (2) whether a Transfer is a Prohibited Transfer, (3) the Percentage Stock Ownership in the Corporation of any Five-Percent Shareholder, (4) whether an instrument constitutes a Corporation Security, (5) the amount (or fair market value) due to a Purported Transferee pursuant to clause (2) of paragraph D.3 of this Article THIRTEENTH, and (6) any other matters which a majority of the Directors determine to be relevant; and the good faith determination of a majority of the Directors on such matters shall be conclusive and binding for all the purposes of this Article THIRTEENTH. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by William R. Berkley, its Chairman of the Board, and Nelson A. Barber, its Assistant Secretary, this 20th day of May, 1993. By: /s/ William R. Berkley ------------------------------ William R. Berkley Chairman of the Board ATTEST: /s/ Nelson A. Barber ------------------------------ Nelson A. Barber Assistant Secretary 18 EX-99.T3A4 5 h90985ex99-t3a4.txt CERTIFICATE OF DESIGNATIONS - SERIES A COVERT. 1 agency or agencies as the case may be, selected by the Company at such time which shall be substituted for S&P Moody's or both, as the case may be. "Rating Date", with respect to any particular Designated Event, shall mean the date which is 121 days prior to the first public notice of the occurrence of that particular Designated Event. A "Rating Decline" shall be deemed to have occurred if a Designated Event shall occur and if (i) one or both Rating Agencies shall have rated the Outstanding Debt as Investment Grade on the Rating Date (established with respect to that particular Designated Event as hereinafter prescribed) and shall either reduce the ruling of the Outstanding Debt or withdraw the ruling of the Outstanding Debt so that at the end of the Evaluation Period the Outstanding Debt shall be rated by both Rating Agencies below Investment Grade or shall not be rated by either Rating Agency, (ii) both Rating Agencies shall have rated the Outstanding Debt below Investment Grade on the Rating Data and shall either (a) reduce the rating of the Outstanding Debt or withdraw the rating of the Outstanding Debt so that at the end of the Evaluation Period the Outstanding Debt shall be rated by both Rating Agencies at least one Full Rating Category below the rating of the Outstanding Debt on the Rating Date or shall not be rated by either Rating Agency or (b) reduce the rating of the Outstanding Debt so that at the end of the Evaluation Period the rating of the Outstanding Debt shall be D(S&P) and C(Moody's) or the equivalent of such ratings by any other substituted Rating Agency as provided herein, or (iii) if neither Rating Agency shall have rated the Outstanding Debt on the Rating Date, the Designated Event shall have a material adverse effect on the credit quality of the Corporation. "Reference Date" means, (x) for any distribution, the day before the earlier of the record date for such distribution or the first date on which the Common Stock trades regular way without the right to receive such distribution, of (y) for any acquisition, the day before the date of such acquisition. "Voting Shares" means the total voting power of all classes of stock then outstanding of the Corporation entitled to vote generally in the election of members of the Board of Directors. 6. Voting Rights. The holders of Series A Preferred Stock shall have the right to vote together with the holders of Common Stock as a single class in any and all matters with respect to which holders of Common Stock have voting or consent rights. Each share of Series A Preferred Stock shall be entitled to cast such number of votes as are equal to the number of votes which could be cast by the number of shares of Common Stock into which such share of Series A Preferred Stock is then convertible. The Conversion Rate to be used in connection with the foregoing shall be the Conversion Rate in effect immediately prior to the date fixed for the determination of holders of Common Stock entitled to vote on such matter. The holders of the Series -10- 2 A Preferred Stock and the holders of Common Stock shall vote as one class except as otherwise provided by law or this Certificate. 7. Priority of Series A Preferred Stock in event of Liquidation, Dissolution or Winding Up. In the event of any Liquidation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of shares of Series A Preferred Stock shall be entitled to receive, out of the remaining net assets of the Corporation, the amount of one hundred dollars ($100.00) (the "Liquidation Preference") in cash for each share of Series A Preferred Stock, before any payment shall be made or any assets distributed to the holders of the Common Stock or any other Junior Securities upon such Liquidation. If upon any Liquidation the amounts payable with respect to the Liquidation Preference of the Series A Preferred Stock and any Parity Securities are not paid in full, the holders of Series A Preferred Stock and of the Parity Securities will share pro rata in the amounts payable and other property distributable with respect to such Liquidation so that the per share amounts to which holders of Series A Preferred Stock and the Parity Securities are entitled will in all cases bear to each other the same ratio that the Liquidation Preferences of the Series A Preferred Stock and the Parity Securities bear to each other. Except as otherwise provided in this Section 7, holders of Series A Preferred Stock shall not be entitled to any distribution in the event of Liquidation. Neither a consolidation, merger or other business combination of the Corporation with or into another corporation or other entity, nor a sale or transfer of all or part of the Corporation's assets for cash, securities or other property shall constitute a Liquidation for purposes of this Section 7. 8. Ranking of Series A Preferred Stock. With regard to rights to receive mandatory redemption payments and distributions upon Liquidation, the Series A Preferred Stock shall rank prior to any other equity securities of the Corporation, including the Common Stock of the Corporation: (i) unless otherwise approved in accordance with Section 12(b) of this Certificate, and (ii) except with respect to Parity Securities. 9. Conversion. (a) The shares of Series A Preferred Stock are convertible, at any time or from time to time prior to the close of business on the Redemption Date, in whole or in part, at the option of the holders thereof ("Optional Conversion"), unless previously redeemed, into shares of Common Stock at a rate of eight shares of Common Stock for each share of Series A Preferred Stock (the "Conversion Rate"), subject to adjustment as set forth below. The right of conversion of any shares of Series A Preferred Stock called for redemption will terminate at the close of business on any Redemption Date with respect to such shares of Series A Preferred Stock. Optional Conversion of shares of Series A Preferred Stock may be effected by delivering the certificates evidencing such shares of Series A Preferred Stock, together with written notice of conversion and proper assignment of such certificates to the Corporation or in blank, to the office of any transfer agent for the Series A Preferred Stock or to any other office or agency maintained by the Corporation for that purpose. Each Optional Conversion shall be deemed to have -11- 3 been effected immediately prior to the close of business on the date on which the foregoing requirements shall have been satisfied and the person or persons entitled to receive the Common Stock deliverable upon conversion of the Series A Preferred Stock shall be treated for all purposes as the record holder or holders of such Common Stock at such time on such date. The Optional Conversion shall be at the Conversion Rate in effect at such time on such date. The Corporation shall, as soon as practicable after the surrender for conversion of certificates evidencing shares of Series A Preferred Stock and compliance with the other conditions herein contained, deliver at the offices of such transfer agent to the person for whom such shares of Series A Preferred Stock are so surrendered, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Common Stock to which such person shall be entitled, together with a cash payment in respect of any fraction of a share of Common Stock as hereinafter provided. (b) The Conversion Rate is subject to adjustment from time to time as provided below in this paragraph (b). (i) If the Corporation shall fix a Determination Date with respect to the payment of, or the making of, a dividend or other distribution with respect to its Common Stock in shares of Common Stock (including by way of reclassification of any shares of its Common Stock), the Conversion Rate in effect at the opening of business on the day following the Determination Date shall be increased by multiplying such Conversion Rate by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding at the close of business on the Determination Date, excluding the effect of such dividend or distribution, plus the total number of shares of Common Stock constituting such dividend or other distribution, and the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the Determination Date, excluding the effect of such dividend or distribution, such increase to become effective at the opening of business on the day following the Determination Date. For the purposes of this clause (i), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation and the number of shares constituting such dividend or other distribution shall include shares represented by cash issued in lieu of fractional shares of Common Stock. (ii) If outstanding shares of Common Stock shall be subdivided or split into a greater number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision or split becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall be combined into a lesser number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective as the opening of business on -12- 4 the day following the day upon which such subdivision or split or combination becomes effective. (iii) If the Corporation shall, after the date hereof, fix a Determination Date with respect to the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Value of the Common Stock on the Determination Date, then in each case the Conversion Rate shall be adjusted by multiplying the Conversion Rate in effect on the Determination Date by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the Determination Date, excluding the effect of such issuance, plus the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants, and the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on the Determination Date, excluding the effect of such issuance, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at such Current Market Value (determined by multiplying such total number of offered shares by the exercise price of such rights or warrants and dividing the product so obtained by such Current Market Value). Shares of Common Stock held by the Corporation or by another company of which a majority of the shares entitled to vote in the election of directors are held, directly or indirectly, by the Corporation shall not be deemed to be outstanding for purposes of such computation. Such adjustment shall become effective at the opening of business on the day next following the Determination Date. To the extent that shares of Common Stock are not delivered by reason of the expiration of any of such rights or warrants without exercise, the Conversion Rate shall be readjusted to the Conversion Rate which would then be in effect had the adjustments made by reason of the issuance of such rights or warrants been made upon the basis of the issuance of rights or warrants in respect of only the number of shares of Common Stock actually delivered. (iv) if the Corporation shall issue shares of Common Stock at a price per share less than the Current Market Value of the Common Stock on the date of such issuance, except for grants or sales of Common Stock to officers, directors, employees and consultants of the Corporation for compensation purposes, then the Conversion Rate shall be adjusted by multiplying the Conversion Rate in effect on such date of issuance by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on such date, excluding the effect of such issuance, plus the number of additional shares of Common Stock issued, and the denominator of which shall be the number of shares of Common Stock outstanding at the close of business on such date, excluding the effect of such issuance, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so issued would purchase at such Current Market Value (determined by multiplying such total number of issued shares by the purchase price for such issued shares and dividing the product so obtained by such Current Market Value). -13- 5 (v) If the Corporation shall fix a Determination Date with respect to the making of a dividend or other distribution on its Common Stock (other than a dividend or distribution(A) referred to in Section 9(b)(i) or (iii), or (B) in connection with a Liquidation) consisting of evidences of its indebtedness, shares of any class of capital stock or other assets (including securities and Extraordinary Cash Dividends, but excluding Regular Cash Dividends) (any of the foregoing, other than any such excluded dividend or distribution, being hereinafter referred to as "Assets"), then, in each such case, unless the Corporation elects to reserve Assets for distribution to the holders of the Series A Preferred Stock upon the conversion thereof so that any holder converting shares of Series A Preferred Stock will receive upon such conversion, in addition to the shares of the Common Stock to which such holder is entitled, the amount and kind of such Assets that such holder would have received if such holder had, immediately prior to the Determination Date, converted its shares of Series A Preferred Stock into Common Stock, the Conversion Rate in effect as of the opening of business on the day following the Determination Date shall be increased by multiplying such Conversion Rate by a fraction (x) the numerator of which shall be the Current Market Value per share of the Common Stock on the Determination Date and (y) the denominator of which shall be the Current Market Value per share of the Common Stock on the Determination Date less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described in a resolution of the Board of Directors) on the Determination Date of the portion of the Assets so distributed applicable to one share of Common Stock; provided, however, that in the event the then fair market value (as so determined) of the portion of the Assets so distributed or distributable applicable to one share of Common Stock is equal in or greater than the Current Market Value per share of the Common Stock on the Determination Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of shares of Series A Preferred Stock shall have the right to receive upon conversion the amount and kind of such Assets that such holder would have received if such holder had, immediately prior to the Determination Date, converted its shares of Series A Preferred Stock into Common Stock. If such dividend or distribution is not so paid or made, the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such Determination Date had not been fixed. If such Assets consist of any rights or warrants (other than those referred to in Section 9(b)(iii)) and such rights or warrants expire and, as a result, a portion of the Assets issuable on exercise thereof will not be delivered, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the Assets actually delivered. To the extent that a distribution of Assets consists of or includes (x) securities and the Board of Directors determines the fair market value thereof by reference to the trading market therefor, the Board of Directors shall, if possible, consider the Closing Price of such securities over the same period and (if appropriate) applying adjustments of the type used in computing the applicable Current Market Value or (y) an Extraordinary Cash Dividend, the fair market value thereof shall be deemed to be the amount of cash constituting such Extraordinary Cash Dividend. -14- 6 (vi) Anything in this Section 9 notwithstanding, the Corporation will be entitled (but shall not be required) to make such upward adjustments in the Conversion Rate, in addition to those set forth in this Section 9, as the Corporation, in its sole discretion, shall determine to be advisable, in order that any stock dividend, subdivision of stock, distribution of rights to purchase stock or securities, or distribution of securities convertible into or exchangeable for stock (or any transaction that could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended, or any successor provision) hereafter made by the Corporation to its stockholders will not be taxable in whole or in part. (vii) All adjustments to the Conversion Rate will be calculated to the nearest 1/100th of a share of Common Stock. No adjustment in the Conversion Rate will be required unless such adjustment would require an increase or decrease of at least one percent in the Conversion Rate; provided, however, that any adjustments which by reason of this subparagraph are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All adjustments to the Conversion Rate shall be made successively. (viii) Prior to taking any action that could result in an adjustment affecting the Conversion Rate such that the conversion price (for purposes of this subparagraph, an amount equal to the Liquidation Preference divided by the Conversion Rate as in effect from time to time) would be below the then par value of the Common Stock, the Corporation will take any corporate action which may, in the opinion of its Board of Directors, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at the Conversion Rate as so adjusted. The Corporation hereby covenants not to take any action which would result in the par value per share of the Common Stock being in excess of an amount equal to the Liquidation Preference divided by the Conversion Rate. (c) Adjustment for Consolidation or Merger. In the event that the Corporation shall enter into any consolidation, merger, share exchange or similar transaction, however named, (other than a merger or consolidation in which the Corporation is the continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation is not exchanged for cash, securities or other property of the Corporation or another corporation) or in the event of any statutory exchange of securities with another corporation (other than in connection with a merger or acquisition), each share of Series A Preferred Stock shall, after consummation of such transaction, be subject to conversion at the option of the holder into the kind and amount of securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock into which such shares of Series A preferred Stock might have been converted immediately prior to consummation of such transaction, assuming that such holder of Common Stock failed to exercise rights of election, if any, as to the kind or amount of securities, cash or other property receivable upon consummation of such transaction (provided, that -15- 7 if the kind or amount of securities, cash or other property receivable upon consummation of such transaction is not the same for each non-electing share of Common Stock, then the kind and amount of securities, cash or other property receivable upon consummation of such transaction for each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The kind and amount of securities into which the Series A Preferred Stock shall be convertible after consummation of such transaction shall be subject to adjustment as described above in Section 9(b) following the date of consummation of such transaction. The Corporation may not become a party to any such transaction unless the terms thereof are consistent with the foregoing. (d) Whenever the Conversion Rate is adjusted as provided in Section 9(b), the Corporation shall: (i) forthwith compute the adjusted Conversion Rate in accordance with this Section 9 and prepare a certificate signed by the Chief Financial Officer, any Vice President, the Treasurer or the Controller of the Corporation setting forth the adjusted Conversion Rate, the method of calculation thereof in reasonable detail and the facts requiring such adjustments and upon which such adjustment is based, and shall file such certificate forthwith with any transfer agent for the Series A Preferred Stock and the Common Stock; and (ii) mail a notice stating that the Conversion Rate has been adjusted, the facts requiring such adjustment and upon which such adjustment is based and setting forth the adjusted Conversion Rate, to the holders of record of the outstanding shares of Series A Preferred Stock, or their last addresses as they shall appear on the stock register of the Corporation, as soon as practicable after such adjustment has been made. (c) In case, at any time while any of the shares of Series A Preferred Stock are outstanding, the Corporation shall authorize any reclassification of the Common Stock (other than a subdivision, split or combination thereof) or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required (except for a merger of the Corporation into one of its subsidiaries solely for the purpose of changing the corporate domicile of the Corporation to another state of the United States and in connection with which there is no substantive change in the rights or privileges of any securities of the Corporation other than changes resulting from differences in the corporate statutes of the state the Corporation was then domiciled in and the new state of domicile), or the sale or transfer of all or substantially all of the assets of the Corporation (except to one or more wholly owned subsidiaries), then the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of the Series A Preferred Stock, and shall cause to be mailed to the holders of record of the outstanding shares of Series A Preferred Stock, at their last addresses as they shall appear on the stock register of the Corporation, at least 10 days before the date hereinafter specified, a notice stating the date on which any such reclassification, consolidation, merger, sale or transfer is expected to become effective, and the date as of which it is expected that holders of Common Stock of record -16- 8 shall be entitled to exchange their Common Stock for securities or other property (including cash), if any, deliverable upon such reclassification, consolidation, merger, sale or transfer. The failure to give or receive the notice required by this paragraph (e) or any defect therein shall not affect the legality or validity of any such action. 10. No Fractional Shares. No fractional shares of Common Stock shall be issued upon the conversion of any Series A Preferred Stock. Upon any Optional Conversion, in lieu of any fractional share of Common Stock issuable in respect of the aggregate number of shares of Series A Preferred Stock of any holder that are converted, such holders shall be entitled to receive an amount in cash (computed to the nearest cent, with one-half cent rounded upward) equal to the same fraction of the Current Market Value of the Common Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion at one time by or for the same holder, the number of full shares of Common Stock issuable upon conversion or redemption thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. 11. Reservation of Common Stock. The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of Series A Preferred Stock as herein provided, free from any preemptive rights, such number of shares of Common Stock as shall from time to time be sufficient to permit the conversion of all the Series A Preferred Stock then outstanding. 12. Class Voting Rights. (a) So long as any shares of the Series A Preferred Stock are outstanding and unless the vote or consent of the holders of a greater number of shares shall then be required by law, the Consent of Requisite Holders shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of this Certificate. Without limiting the generality of the foregoing, such vote or consent is expressly understood not to be required with respect to (i) the creation of any class or series of capital stock as to which no vote or consent is required under Section 12(b) or (c) below and (ii) any merger, consolidation or transfer of substantially all the assets of the Corporation or other transaction involving the Corporation and a third party in which the Corporation is not the survivor and in which the Series A Preferred Stock shall remain outstanding as an equivalent security of the survivor with no adverse change to the designations, rights, preferences or privileges provided for in this Certificate. (b) So long as any shares of the Series A Preferred Stock are outstanding and unless the vote or consent of the holders of a greater number of shares shall then be required by law, the Consent of Requisite Holders shall be required (i) to amend, alter or repeal any provision of the Certificate of Incorporation, as the same may be amended from time to time, so as to affect adversely the relative rights, preferences, qualifications, limitations or restrictions of the Series A Preferred Stock, (ii) to authorize or issue more shares of Series A Preferred Stock than are authorized in Section 1 of this Certificate, or (iii) to create, authorize or issue, or reclassify any authorized stock of the Corporation into, or increase the authorized amount of, any class or series of capital stock -17- 9 ranking senior to the Series A Preferred Stock with respect to rights to receive mandatory redemption payments and distributions upon Liquidation. (c) Nothing herein contained shall be construed to require a class vote or the Consent of Requisite Holders (i) in connection with any increase in the total number of authorized or issued shares of Common Stock, including, without limitation, any shares of Common Stock or options or other rights to acquire shares of Common Stock issued pursuant to any stock option or other incentive plan for directors, officers or employees of the Corporation or any subsidiary of the Corporation, or (ii) in connection with the authorization, increase or issuance of any class or series of Junior Securities. Shares of the Series A Preferred Stock which have been issued and redeemed shall (upon compliance with any applicable provisions of the laws of the state of Delaware) have the status of authorized and unissued shares of the class of preferred stock, undesignated as to series and may be redesignated and reissued as part of any series of the preferred stock, other than the Series A Preferred Stock. Nothing herein contained shall in any way limit the right and power of the Corporation to issue any bonds, notes, mortgages, debentures, and other obligations, or to incur indebtedness to the extent permitted by the Corporation's agreements in effect from time to time. 13. Prior Notice of Certain Events. In the event: (a) the Corporation shall (A) declare any dividend or any other distribution on its Common Stock (other than (x) a dividend or other distribution payable in shares of Common Stock or (y) a Regular Cash Dividend), (B) declare or authorize a redemption or repurchase of in excess of 10% of the then outstanding shares of Common Stock, or (C) authorize the granting to all holders of Common Stock or rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; or (b) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation shall be required, or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; or (c) of a Liquidation; then the Corporation shall cause to be filed with the transfer agent for, and mailed to the holders of record of the outstanding shares of, the Series A Preferred Stock, at their last addresses as they shall appear upon the stock register of the Corporation, at least fifteen days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record (if any) is to be taken for the purpose of such dividend, distribution, redemption, repurchase or granting of rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, repurchase, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, share exchange or -18- 10 Liquidation is expected to become effective, and the date, if any, as of which it is expected that holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, share exchange or Liquidation (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). 14. Miscellaneous (a) Transfer Agent and Registrar. The Corporation may at any time act as its own transfer agent and registrar. The Corporation shall also have the right, by notice in writing to all holders of Series A Preferred Stock at their address for notice appearing on the books and records of the Corporation, to designate an office or agency where shares of Series A Preferred Stock may be presented for registration or transfer. (b) Stockholder Reports. The Corporation will, or will cause any transfer agent to, transmit to the registered holders of shares of the Series A Preferred Stock all reports and communications from the Corporation that are generally mailed to holders of the Common Stock. (c) Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. -19- 11 RESOLVED FURTHER, that the appropriate officers of the Corporation are hereby authorized to execute and acknowledge a certificate setting forth these resolutions and to cause such certificate to be filed and recorded, all in accordance with the requirements of Section 151 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in its name and on its behalf by the officers named below as of this 4th day of June, 1997. PIONEER COMPANIES, INC. By: /s/ KENT R. STEPHENSON --------------------------- Name: Kent R. Stephenson Title: Vice President Attest: By: /s/ EVA MACIAS -------------------------- Name: Eva Macias Title: Assistant Secretary -20- EX-99.T3A6 6 h90985ex99-t3a6.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT T3A-6 CERTIFICATE OF INCORPORATION OF PIONEER AMERICAS ACQUISITION CORP. * * * * * * * * 1. The name of the corporation (the "Corporation") is Pioneer Americas Acquisition Corp. 2. The address of its registered office in the State of Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. 4. The total number of shares of stock which the Corporation shall have authority to issue is 1,000 shares of Common Stock, each of which shall have a par value of $0.01 per share. 5. The name and mailing address of the incorporator is as follows: Jordan B. Savitch, Esq. Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022 6. In furtherance and not in limitation of the powers conferred by statute, the by-laws of the Corporation may be made, 2 altered, amended or repealed by the stockholders or by a majority of the entire board of directors. 7. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and to any reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders -2- 3 or class of stockholders of this Corporation, as the case may be, and also on this Corporation. 8. Elections of directors need not be by written ballot. 9. (a) The Corporation shall indemnify to the fullest extent permitted under and in accordance with the laws of the State of Delaware any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of or in any other capacity with another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. (b) Expenses incurred in defending a civil or criminal action, suit or proceeding shall (in the case of any action, suit or proceeding against a director of the Corporation) or may (in -3- 4 the case of any action, suit or proceeding against an officer, trustee, employee or agent) be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board upon receipt of an undertaking by or on behalf of the indemnified person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. (c) The indemnification and other rights set forth in this paragraph shall not be exclusive of any provisions with respect thereto in the by-laws or any other contract or agreement between the Corporation and any officer, director, employee or agent of the Corporation. (d) Neither the amendment nor repeal of this paragraph 9, subparagraph (a), (b), (c), or (d), nor the adoption of any provision of this Certificate of Incorporation inconsistent with paragraph 9, subparagraph (a), (b), (c), or (d), shall eliminate or reduce the effect of this paragraph 9, subparagraphs (a), (b), (c), and (d), in respect of any matter occurring before such amendment, repeal or adoption of an inconsistent provision or in respect of any cause of action, suit or claim relating to any such matter which would have given rise to a right of indemnification or right to receive expenses pursuant to this paragraph 9, subparagraph (a), (b), (c), or (d), if such provision had not been so amended or repealed or if a provision inconsistent therewith had not been so adopted. -4- 5 (e) No director shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director (i) shall be liable under Section 174 of the General Corporation Law of the State of Delaware or any amendment thereto or successor provision thereto, or (ii) shall be liable by reason that, in addition to any and all other requirements for liability, he: (A) shall have breached his duty of loyalty to the Corporation or its stockholders; (B) shall not have acted in good faith or, in failing to act, shall not have acted in good faith; (C) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law; or (D) shall have derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended after the date hereof to authorize corporate action further eliminating or limiting the personal liability of directors, then liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a Corporation pursuant to the General Corporation Law of the State of Delaware makes this Certificate, hereby declaring and certifying that this is his act -5- 6 and deed and the facts herein stated are true and, accordingly, has hereunto set his hand this 6th day of March, 1995. /s/ Jordan B. Savitch ------------------------------------------- Jordan B. Savitch, Esq. -6- EX-99.T3A8 7 h90985ex99-t3a8.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT T3A-8 CERTIFICATE OF INCORPORATION OF PIONEER (EAST), INC. FIRST: The name of the Corporation is Pioneer (East), Inc. (the "Corporation"). SECOND: The registered office of the Corporation in the State of Delaware is located at 900 Market Street, Suite 200, Wilmington, County of New Castle, Delaware 19801. The registered agent of the Corporation at that address is Griffin Corporate Services, Inc. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware; provided that the Corporation's activities shall be confined to the management and maintenance of its intangible investments and the collection and distribution of the income from such investments or from tangible property physically located outside Delaware, all as defined in, and in such manner to qualify for exemption from income taxation under, Section 1902(b)(8) of Title 30 of the Delaware Code, or under the corresponding provision of any subsequent law. FOURTH: The Corporation shall have authority to issue 1,000 shares of common stock, having a par value of $.01 (one cent) per share. FIFTH: The Corporation shall indemnify directors and officers of the Corporation to the fullest extent permissible by law. SIXTH: The directors of the Corporation shall incur no personal liability to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director; provided, however, that the directors of the Corporation shall continue to be subject to 2 liability (i) for any breach of their duty of loyalty to the Corporation or to stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the directors derived any improper personal benefit. In discharging the duties of their respective positions, the board of directors, committees of the board, individual directors and individual officers may, in considering the best interest of the Corporation, consider the effects of any actions upon employees, suppliers and customers of the Corporation communities in which offices or other establishments of the Corporation are located, and all other pertinent factors. In addition, the personal liability of the directors shall further be limited to the fullest extent permitted by any future amendments to Delaware law. SEVENTH: The business and affairs of the Corporation shall be managed by or under the direction of the board of directors, the number of members of which shall be set forth in the by-laws of the Corporation. The directors need not be elected by ballot unless required by the by-laws of the Corporation. EIGHTH: Meetings of the stockholders will be held within the State of Delaware. The books of the Corporation will be kept (subject to the provisions contained in the General Corporation Law) in the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the Corporation. NINTH: In the furtherance and not in limitation of the objects, purposes and powers prescribed herein and conferred by the laws of the State of Delaware, the board of directors is expressly authorized to make, amend and repeal the by-laws. TENTH: The Corporation reserves the right to amend or repeal any provision contained in the Certificate of Incorporation in the manner now or hereinafter 2 3 prescribed by the laws of the State of Delaware. All rights herein conferred are granted subject to the reservation. ELEVENTH: The Corporation shall have no power and may not be authorized by its stockholders or directors (i) to perform or omit to do any act that would cause the Corporation to lose its status as a corporation exempt from the Delaware Corporation income tax under Section 1902(b)(8) of Title 30 of the Delaware Code, or under the corresponding provision of any subsequent law, or (ii) to conduct any activities outside of Delaware which could result in the Corporation being subject to tax outside of Delaware. TWELFTH: The name and mailing address of the incorporator is Barbara A. Steen, 900 Market Street, Suite 200, Wilmington, Delaware 19801. THIRTEENTH: The powers of the incorporation shall terminate upon election of directors. I, THE UNDERSIGNED, being the incorporator hereinbefore named for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 5th day of June, 1996. /s/ Barbara A. Steen ------------------------------------------ Barbara A. Steen, Incorporator 3 EX-99.T3A10 8 h90985ex99-t3a10.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT T3A-10 CERTIFICATE OF INCORPORATION OF ATKEMIX TWENTY-NINE INC. * * * * * 1. The name of the corporation is: ATKEMIX TWENTY-NINE INC. 2. The address of its registered office in the State of Delaware Concord Pike and New Murphy Road, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is ICI Americas Inc. 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the corporation shall have authority to issue is one thousand (1,000) and the par value of each of such shares is One Dollar ($1.00) amounting in the aggregate to One Thousand Dollars ($1,000.00). 5. The board of directors is authorized to make, alter or repeal the by-laws of the corporation. Election of directors need not be by written ballot. 6. The name and mailing address of the incorporator is: K. L. Husfelt Corporation Trust Center 1209 Orange Street Wilmington, Delaware 19801 I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 15th day of July, 1987. /s/ K. L. Husfelt ------------------------------- K. L. Husfelt EX-99.T3A11 9 h90985ex99-t3a11.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT T3A-11 CERTIFICATE OF INCORPORATION OF PIONEER LICENSING, INC. 1. The name of the corporation is Pioneer Licensing, Inc. 2. The address of its registered office in the State of Delaware is 900 Market, 2nd Floor, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is Delaware Trust Company. 3. The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. 4. The total number of shares of stock which the corporation shall have authority to issue is: One Thousand (1,000) and the par value of such shares one cent ($0.01) amounting in the aggregate to Ten Dollars ($10.00). 5. The board of directors is authorized to make, alter or repeal the by-laws of the corporation. Election of directors need not be by written ballot. 6. The name and mailing address of each incorporator is as follows:
NAME MAILING ADDRESS ---- --------------- S. A. Seraj 811 Dallas Avenue, Houston, Texas
7. A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director expect for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts of or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. 8. The corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware. I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware do make this certificate, hereby declaring certifying that this my act and deed and the facts herein states are true, and according have hereunto set my hand this 15th day of September, 1997. /s/ S. A. Seraj ----------------------------------------- S. A. Seraj, Sole Incorporator EX-99.T3A13 10 h90985ex99-t3a13.txt ARTICLES OF INCORPORATION 1 EXHIBIT T3A-13 ARTICLES OF INCORPORATION OF IMPERIAL WEST CHEMICAL CO. FIRST. The name of the corporation is IMPERIAL WEST CHEMICAL CO. SECOND. Its principal office in the State of Nevada is located at One East First Street, Reno, Washoe County, Nevada 89501. The name and address of its resident agent is The Corporation Trust Company of Nevada, One East First Street, Reno, Nevada 89501. THIRD. The nature of the business, or objects or purposes proposed to be transacted, promoted or carried on are: To engage in any lawful activity and to manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description. To hold, purchase and convey real and personal estate and to mortgage or lease any such real and personal estate with its franchise and to take the same by devise or bequest. To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation. To acquire, hold, use, sell, assign, lease, grant license in respect of, mortgage, or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to or useful in connection with any business of this corporation. To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of the shares of the capital stock of or any bonds, securities or evidence of the indebtedness created by any other corporation or corporations of this state, or any other state or government, and, while owner of such stock, bonds, securities or evidences of indebtedness, to exercise all the rights, powers and privileges of ownership, including the rights of others, if any. To borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or 2 for any other lawful purposes of its incorporation; to issue bonds, promissory notes, bills of exchange, debentures, and other obligations and evidences of indebtedness, payable at specified time or times, or payable upon the happening of a specific event or events, whether secured by mortgage, pledge, or otherwise, or unsecured, for money borrowed, or a payment for property purchased, or acquired, or for any other lawful objects. To purchase, hold, sell and transfer shares of its own capital stock, and use therefor its capital, capital surplus, surplus, or other property or funds; provided it shall not use its funds or property for the purchase of its own share of capital stock when such use would cause any impairment of its capital; and provided further, that shares of its own capital stock belonging to it shall not be voted upon, directly or indirectly, not counted as outstanding, for the purpose of computing any stockholders' quorum or vote. To conduct business, have one or more offices, and hold, purchase, mortgage or convey real and personal property in this sate, and in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia, and in any foreign countries. To do all and everything necessary and proper for the accomplishment of the objects hereinbefore enumerated or necessary or incidental to the protection and benefit of the corporation, and, in general, to carry on any lawful business necessary or incidental to the attainment of the objects of the corporation, whether or not such business is similar in nature to the objects hereinabove set forth. The objects and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in no way limited or restricted by reference to, or inference from, the terms of any other clause in these articles of incorporation, but the objects and purposes specified in each of the foregoing clauses of there articles shall be regarded as independent objects and purposes. FOURTH. The amount of the total authorized capital stock of the corporation is twenty five thousand dollars ($25,000.00) consisting of twenty five thousand (25,000) shares of stock with a par value of one dollar ($1.00) each. FIFTH. The governing board of this corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the by-laws of this corporation, provided that the number of directors shall not be reduced to less than three (3), except that in cases where all the shares of the corporation are 2 3 owned beneficially and of record by either one or two stockholders, the number of directors may be less than three (3) but not less than the number of stockholders. The names and post office addresses of the first board of directors, which shall be four in number, are as follows: George Edward 4312 Hunts Point Road Bellevue, Washington Roy H. Weaver 111 76th NE. Seattle, Washington 98115 James W. Miflin 8001 Sandpoint Way, N.E. Seattle, Washington 98115 D.A. Huckabay 1632 Siskiyou Drive Walnut Creek, California 94596 SIXTH. The capital stock, after the amount of the subscription price, or par value has been paid shall not be subject to assessment to pay the debts of the corporation. SEVENTH. The name and post office address of each of the incorporators signing the articles of incorporation are as follows: Roger W. Pearson 300 Montgomery Street, Suite 930 San Francisco, California 94104 John R. Domingos 300 Montgomery Street, Suite 930 San Francisco, California 94104 David L. Olson Montgomery Street, Suite 930 San Francisco, California 94104 EIGHTH. The corporation is to have perpetual existence. 3 4 NINTH. Meetings of stockholders may be held outside the State of Nevada, if the bylaws so provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Nevada at such place or places as may be designated from time to time by the board of directors or in the bylaws of the corporation. TENTH. This corporation reserves the right to amend, alter, change or repeal any provision contained in the articles of incorporation, in the manner now or hereafter prescribed by statute, or by the articles of incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, each above named first incorporator of this corporation has executed these articles of incorporation. DATED: August 12, 1977 /s/ Roger W. Pearson --------------------------- ROGER W. PEARSON /s/ John R. Domingos --------------------------- JOHN R. DOMINGOS /s/ David L. Olson --------------------------- DAVID L. OLSON EX-99.T3A15 11 h90985ex99-t3a15.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT T3A-15 CERTIFICATE OF INCORPORATION OF KEMWATER NORTH AMERICA COMPANY The undersigned person, acting as sole incorporator of the corporation pursuant to the General Corporation Law of the State of Delaware, does hereby make this Certificate of incorporation far such corporation, declaring and certifying that this is my act and deed and that the facts herein stated are true. FIRST: The name of the corporation is Kemwater North America Company. SECOND: The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle 19801 The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted by the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Laws of the State of Delaware. FOURTH: The total number of shares of stock which the corporation shall have authority to issue is Eighty Thousand (80,000), consisting of Fifty Thousand (50,000) shares of Preferred Stock, $1.00 par value (hereinafter called "Preferred Stock"), and Thirty Thousand (30,000) shares of Common Stock, of the par value of $0.10 per share (hereinafter called "Common Stock"). The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to provide for the issuance of shares of Preferred Stock in series, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of any or ail of the following: (a) The designation of the series, which may be by distinguishing number, letter or title: (b) The number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the creation of the series) increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares then outstanding); (c) Whether dividends, if any, shall be cumulative or noncumulative, the dividend rate of the series and the dates at which dividends, if any, shall be payable; (d) The redemption rights and price or prices, if any, for shares of the series; (e) The terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; 2 (f) The amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation; (g) Whether the shares of the series shall be convertible into or exchangeable for shares of any other class or series of shares, or any other security, of the corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion price or prices or rate or rates of exchange. any adjustments thereof, the date or dates as of which such shares shall be convertible and all other terms and conditions upon which such conversion or exchange may be made; (h) Restrictions on the issuance of shares of the same series or of any other class or series and the right, if any, to subscribe for or purchase any securities of the corporation or any other corporation; (i) The voting rights, if any, of the holders of such series; and (j) Any other relative, participating, optional or other special powers, preferences, rights, qualifications, limitations or restrictions thereof all as determined from time to time by the Board of Directors and stated in the resolutions providing for the issuance of such preferred stock (a "Preferred Stock Designation"). The holders of Common Stock shall be entitled to one vote for each such share upon all questions presented to the stockholders Except as may be provided in this Certificate of Incorporation or by the Board of Directors in a Preferred Stock Designation, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote or consent. The corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the corporation shall have notice thereof; except as expressly provided by applicable laws. FIFTH: The Board of Directors is authorized to adopt, amend or repeal the bylaws of the corporation Election of directors need not be by written ballot. SIXTH: The name and mailing address of the incorporator is: John T. Cabaniss 4200 Texas Commerce Tower 600 Travis Houston, Texas 77002 SEVENTH: The number of directors of the corporation shall be as provided in the bylaws of the corporation, as the same may be amended from time to time The name and address of the person who is to serve as the initial director of the corporation until the first annual meeting of stockholders or until his successor is elected and qualified is: 2 3 Richard C. Kellogg, Jr. 4200 Nationsbank Center 700 Louisiana Houston, Texas 77002 EIGHTH: A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended Any repeal or modification of this paragraph by the stockholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification. NINTH: The corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Delaware (including, without limitation, Section 145 thereof), as amended from time to time, indemnify any officer or director whom it shall have power to indemnify from and against any and all of the expenses, liabilities or other losses of any nature The indemnification provided in this Article NINTH shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity, while holding such office, and shall continue as to a person who has ceased to be a officer or director and shall inure to the benefit of the heirs, executors and administrators of such a person. I, THE UNDERSIGNED, hereunto set my hand this 26th day of January, 1996. /s/ John T. Cabaniss --------------------------- John T. Cabaniss EX-99.T3A17 12 h90985ex99-t3a17.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT T3A-17 CERTIFICATE OF INCORPORATION OF PIONEER WATER TECHNOLOGIES, INC. The undersigned person, acting as sole incorporator of the corporation pursuant to the General Corporation Law of the State of Delaware, does hereby make this Certificate of Incorporation for such corporation, declaring and certifying that this is my act and deed and that the facts herein stated are true. FIRST: The name of the corporation is Pioneer Water Technologies, Inc. SECOND: The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted by the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Laws of the State of Delaware. FOURTH: The total number of shares of stock which the corporation shall have authority to issue is One Thousand (1,000) shares of common stock, $0.10 par value per share. FIFTH: The Board of Directors is authorized to adopt, amend or repeal the bylaws of the corporation. Election of directors need not be by written ballot. SIXTH: The name and mailing address of the incorporator is: John T. Cabaniss 4200 Texas Commerce Tower 600 Travis Houston, Texas 77002 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 03:30 PM 01/30/1996 560029033 - 2587418 1 2 SEVENTH: The number of directors of the corporation shall be as provided in the bylaws of the corporation, as the same may be amended from time to time. The name and address of the person who is to serve as the initial director of the corporation until the first annual meeting of stockholders or until his successor is elected and qualified is: NAME ADDRESS Richard C. Kellogg, Jr. 4200 Nationsbank Center 700 Louisiana Houston, Texas 77002 EIGHTH: A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. Any repeal or modification of this paragraph by the stockholders of the corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification. NINTH: The corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Delaware (including, without limitation, Section 145 thereof), as amended from time to time, indemnify any officer or director who it shall have power to indemnify from and against any and all of the expenses, liabilities or other losses of any nature. The indemnification provided in this Article NINTH shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity, while holding such office, and shall continue as to a person who has ceased to be a officer or director and shall inure to the benefit of the heirs, executors and administrators of such a person. 2 3 I, THE UNDERSIGNED, hereunto set my hand this 30th day of January, 1996. /s/ JOHN T. CABANISS ------------------------------------- John T. Cabaniss 3 EX-99.T3A19 13 h90985ex99-t3a19.txt CERTIFICATE OF INCORPORATION 1 EXHIBIT T3A-19 CERTIFICATE OF INCORPORATION OF KEMIRA WATER TREATMENT, INC. ---------- FIRST. The name of this corporation shall be: KEMIRA WATER TREATMENT, INC. SECOND. Its registered office in the State of Delaware is to be located at 1013 Centre Road, in the City of Wilmington, County of New Castle, 19805, and its registered agent at such address is CORPORATION SERVICE COMPANY. THIRD. The purpose or purposes of the corporation shall be: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares of stock which this corporation is authorized to issue is: One thousand (1,000) shares with a par value of One Dollar ($1.00), amounting to One Thousand Dollars ($1,000.00). FIFTH. The name and address of the incorporator is as follows: Karin L. Dunn Corporation Service Company 1013 Centre Road Wilmington, Delaware 19805 SIXTH, The Board of Directors shall have the power to adopt, amend or repeal the by-laws. IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore named, has executed, signed and acknowledged this certificate of incorporation this seventh day of November A.D. 1989. /s/ Karin L. Dunn --------------------------- Karin L. Dunn Incorporator EX-99.T3B1 14 h90985ex99-t3b1.txt BYLAWS OF PCI CHEMICALS CANADA INC. 1 EXHIBIT T3B-1 PCI CHEMICALS CANADA INC. PRODUITS CHIMIQUES PCI CANADA INC. BY-LAW NO. ONE A by-law relating generally to the regulation of the affairs of PCI CHEMICALS CANADA INC. - PRODUITS CHIMIQUES PCI CANADA INC. BE IT ENACTED AND IT IS HEREBY ENACTED as By-Law No. One of CHEMICALS CANADA INC. - PRODUITS CHIMIQUES PCI CANADA INC. (hereinafter called the "CORPORATION") as follows: DEFINITIONS 1. In this by-law and all other by-laws of the Corporation, unless the context otherwise specifies or requires: (a) "ACT" means the Business Corporations Act, Statutes of New Brunswick, 1981, c. B-9.1, as from time to time amended, and every statute that may be substituted therefor and, in the case of such amendment or substitution, any reference in the by- laws of the Corporation shall be read as referring to the amended or substituted provisions therefor; (b) "ARTICLES" means the articles, as from time to time amended, of the Corporation; (c) "BY-LAW" means any by-law of the Corporation from time to time in force and effect; (d) "DIRECTOR" means an individual occupying the position of director of the Corporation and "directors", "board of directors" and "board" includes a single director; (e) "UNANIMOUS SHAREHOLDER AGREEMENT" means an agreement as described in subsection 99(2) of the Act or a declaration of a shareholder described in subsection 99(3) of the Act; (f) words importing the singular number only shall include the plural and vice versa; words importing the masculine gender shall include the feminine and neuter genders and vice versa; words importing persons shall include bodies corporate, corporations, companies, partnerships, syndicates, trusts and any number or aggregate of individuals; (g) the headings used in any by-law are inserted for reference purposes only and are not to be considered or taken into account in construing the terms or provisions thereof or to be deemed in any way to clarify, modify or explain the effect of any such terms or provisions; and 1 2 (h) any term contained in any by-law which is defined in the Act shall have the meaning given to such term in the Act. REGISTERED OFFICE 2. The Corporation may from time to time by resolution of the board of directors change the location of the registered office of the Corporation to another place within New Brunswick. CORPORATE SEAL 3. The Corporation may have one or more corporate seals which shall be such as the board of directors may adopt by resolution from time to time. DIRECTORS 4. Number and Powers. There shall be a board of directors consisting of such fixed number, or minimum and maximum number, of directors as may be set out in the articles or as may be determined as prescribed by the articles, or failing that, as specified by by-law. Subject to any unanimous shareholder agreement, the directors shall manage the business and affairs of the Corporation and may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation and are not by the Act, the articles, the by-laws, any special resolution of the Corporation, any unanimous shareholder agreement or by statute expressly directed or required to be done in some other manner. 5. Vacancies. If the number of directors is increased, the resulting vacancies shall be filled at a meeting of shareholders duly called for that purpose. Notwithstanding the provisions of paragraph 7 of this by-law and subject to the provisions of the Act, if a vacancy should otherwise occur in the board, the remaining directors, if constituting a quorum, may appoint a qualified person to fill the vacancy for the remainder of the term. In the absence of a quorum the remaining directors shall forthwith call a meeting of shareholders to fill the vacancy pursuant to subsection 69(2) of the Act. Where a vacancy or vacancies exist in the board, the remaining directors may exercise all of the powers of the board so long as a quorum remains in office. 6. Duties. Every director and officer of the Corporation in exercising his powers and discharging his duties shall (a) act honestly and in good faith; and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, in the best interests of the Corporation. 7. Qualification. Every director shall be an individual nineteen (19) or more years of age and no one who is of unsound mind and has been so found by a court in Canada or elsewhere or who has the status of a bankrupt or who has been convicted of an offence under the Criminal 2 3 Code, chapter C-34 of the Revised Statutes of Canada, 1970, as amended from time to time, or the criminal law of any jurisdiction outside of Canada, in connection with the promotion, formation or management of a corporation or involving fraud (unless three (3) years have elapsed since the expiration of the period fixed for suspension of the passing of sentence without sentencing or since a fine was imposed, or unless the term of imprisonment and probation imposed, if any, was concluded, whichever is the latest, but the disability imposed hereby ceases upon a pardon being granted) shall be a director. 8. Term of Office. A director's term of office shall be from the meeting at which he is elected or appointed until the annual meeting next following or until his successor is elected or appointed, or until, if earlier, he dies or resigns, or is removed or disqualified pursuant to the provisions of the Act. 9. Vacation of Office. The office of a director shall ipso facto be vacated if (a) he dies; (b) by notice in writing to the Corporation he resigns his office and such resignation, if not effective immediately, becomes effective in accordance with its terms; (c) he is removed from office in accordance with section 67 of the Act; or (d) he ceases to be qualified to be a director. 10. Election and Removal. (1) Directors shall be elected by the shareholders by ordinary resolution in general meeting on a show of hands unless a poll is demanded and if a poll is demanded such election shall be by ballot. All the directors then in office shall cease to hold office at the close of the meeting of shareholders at which directors are to be elected. A director if qualified, is eligible for re-election. (2) Subject to sections 65 and 67 of the Act, the shareholders of the Corporation may by ordinary resolution at a special meeting remove any director before the expiration of his term of office and may, by a majority of the votes cast at the meeting, elect any person in his stead for the remainder of his term. (3) Each shareholder entitled to vote at an election of directors has the right to cast a number of votes equal to the number of votes attached to the shares held by him multiplied by the number of directors to be elected, and he may cast all such votes in favour of one candidate or distribute them among the candidates in any manner. (4) A separate vote of shareholders shall be taken with respect to each candidate nominated for director unless a resolution is passed unanimously permitting two (2) or more persons to be elected by a single resolution. (5) If a shareholder has voted for more than one candidate without specifying the distribution of his votes among the candidates, he shall be deemed to have distributed his votes equally among the candidates for whom he voted. 3 4 (6) If the number of candidates nominated for director exceeds the number of positions to be filled, the candidates who receive the least number of votes shall be eliminated until the number of candidates remaining equals the number of positions to be filled. (7) A retiring director shall retain office until the adjournment or termination of the meeting at which his successor is elected unless such meeting was called for the purpose of removing him from office as a director in which case the director so removed shall vacate office forthwith upon the passing of the resolution for his removal. 11. Validity of Acts. An act by a director or officer is valid notwithstanding an irregularity in his election or appointment or a defect in his qualification. MEETINGS OF DIRECTORS 12. Place of Meeting. Subject to the articles, meetings of directors may be held at any place within or outside New Brunswick as the directors may from time to time determine or as the person convening the meeting may give notice. A meeting of the directors may be convened by the chairman of the board (if any), the president or any director at any time. The secretary shall upon direction of any of the foregoing officers or director convene a meeting of the directors. 13. Notice. (1) Notice of the time and place for the holding of any such meeting shall be delivered, mailed, telegraphed, cabled, telexed or transmitted by facsimile to each director at his latest address as shown on the records of the Corporation not less than two (2) days (exclusive of the day on which the notice is delivered, mailed, telegraphed, cabled, telexed or transmitted by facsimile but inclusive of the day for which notice is given) before the date of the meeting, provided that meetings of the directors may be held at any time without notice if all the directors have waived notice. (2) For the first meeting of the board of directors to be held immediately following the election of directors at an annual or special meeting of the shareholders, no notice of such meeting need be given to the newly elected or appointed director or directors in order for the meeting to be duly constituted, provided a quorum of the directors is present. (3) A notice of a meeting of directors shall specify any matter referred to in subsection 73(2) of the Act that is to be dealt with at the meeting but, unless a by-law otherwise provides, need not otherwise specify the purpose of or the business to be transacted at the meeting. 14. Waiver of Notice. Notice of any meeting of the directors or any irregularity in any meeting or in the notice thereof may be waived by any director in writing or by telegram, cable, telex or facsimile transmission addressed to the Corporation or in any other manner, and such waiver may be validly given either before or after the meeting to which such waiver relates. The attendance of a director at a meeting of directors is a waiver of notice of the meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. 4 5 15. Telephone Participation. A director may participate in a meeting of directors or of a committee of directors by means of such telephone or other communication facilities that permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means shall be deemed to be present at that meeting. 16. Adjournment. Any meeting of the directors may be adjourned from time to time by the chairman of the meeting, with the consent of the meeting, to a fixed time and place and no notice of the time and place for the continuance of the adjourned meeting need be given to any director if the time and place of the adjourned meeting is announced at the original meeting. Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. The directors who formed a quorum at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. 17. Quorum and Voting. Subject to the articles, a majority of directors shall constitute a quorum for the transaction of business at any meeting of directors. No business shall be transacted by the directors except at a meeting of directors at which a quorum of the board is present. Questions arising at any meeting of the directors shall be decided by a majority of votes cast. Where the Corporation has only one director, that director may constitute a meeting. 18. Resolution in lieu of meeting. A resolution in writing, signed by all the directors or signed counterparts of such resolution by all the directors entitled to vote on that resolution at a meeting of directors or a committee of directors, is as valid as if it had been passed at a meeting of directors or committee of directors duly called, constituted and held. A copy of every such resolution or counterpart thereof shall be kept with the minutes of the proceedings of the directors or such committee of directors. REMUNERATION OF DIRECTORS 19. Subject to the articles or any unanimous shareholder agreement, the remuneration to be paid to the directors shall be such as the board of directors shall from time to time determine and such remuneration shall be in addition to the salary paid to any officer of the Corporation who is also a member of the board of directors. The directors may also by resolution award special remuneration to any director undertaking any special services on the Corporation's behalf other than the routine work ordinarily required of a director by the Corporation. The confirmation of any such resolution or resolutions by the shareholders shall not be required. The directors shall also be entitled to be paid their travelling and other expenses properly incurred by them in connection with the affairs of the Corporation. SUBMISSION OF CONTRACTS OR TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL 20. The directors in their discretion may submit any contract, act or transaction for approval, ratification or confirmation at any annual meeting of the shareholders or at any special meeting 5 6 of the shareholders called for the purpose of considering the same and any contract, act or transaction that shall be approved, ratified or confirmed by resolution passed by a majority of the votes cast at any such meeting (unless any different or additional requirement is imposed by the Act or by the articles or any other by-law) shall be as valid and as binding upon the Corporation and upon all the shareholders as though it had been approved, ratified and/or confirmed by every shareholder of the Corporation. FOR THE PROTECTION OF DIRECTORS AND OFFICERS 21. No director or officer for the time being of the Corporation shall be liable for the acts, receipts, neglects or defaults of any other director or officer or employee of the Corporation or for joining in any receipt or act for conformity or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired by order of the board of directors for or on behalf of the Corporation or for the insufficiency or deficiency of any security in or upon which any of the moneys of or belonging to the Corporation shall be placed out or invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or corporation including any person, firm or corporation with whom or which any moneys, securities or effects of the Corporation shall be lodged or deposited or for any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any moneys, securities or other assets belonging to the Corporation or for any other loss, damage or misfortune whatever which may happen to the Corporation in the execution of the duties of his respective office of trust or in relation thereto, unless the same shall happen by or through his failure to exercise the powers and to discharge the duties of his office honestly, in good faith with a view to the best interests of the Corporation, and in connection therewith to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, provided that nothing herein contained shall relieve a director or officer from the duty to act in accordance with the Act or regulations made thereunder or relieve him from liability for a breach thereof. The directors for the time being of the Corporation shall not be under any duty or responsibility in respect of any contract, act or transaction whether or not made, done or entered into in the name or on behalf of the Corporation, except such as shall have been submitted to and authorized or approved by the board of directors. If any director or officer of the Corporation shall be employed by or shall perform services for the Corporation, the fact of his being a shareholder, director or officer of the Corporation shall not disentitle such director or officer or such firm or body corporate, as the case may be, from receiving proper remuneration for such services. INDEMNITIES TO DIRECTORS AND OTHERS 22. Subject to section 81 of the Act, except in respect of an action by or on behalf of the Corporation or Another Body Corporate (as hereinafter defined) to procure a judgement in its favour, the Corporation shall indemnify each director and officer of the Corporation and each former director and officer of the Corporation and each person who acts or acted at the Corporation's request as a director or officer of Another Body Corporate, and his heirs and legal representatives, against all costs, charges and expenses, including any amount paid to settle an 6 7 action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of the Corporation or Another Body Corporate, as the case may be, if (a) he acted honestly and in good faith with a view to the best interests of the Corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful. "Another Body Corporate" as used herein means a body corporate of which the Corporation is or was a shareholder or creditor. OFFICERS 23. Appointment of Officers. Subject to the articles or any unanimous shareholder agreement, the directors may appoint a chairman of the board, a president and a secretary and, if deemed advisable, may also appoint one or more vice-presidents, a treasurer and one or more assistant secretaries and/or one or more assistant treasurers. None of such officers, except the chairman of the board, need be a director of the Corporation. Any two or more of such offices may be held by the same person. In case and whenever the same person holds the offices of secretary and treasurer he may, but need not, be known as the secretary-treasurer. The directors may from time to time designate such other offices and appoint such other officers, employees and agents as it shall deem necessary who shall have such authority and shall perform such functions and duties as may from time to time be prescribed by resolution of the directors. 24. Remuneration and Removal of Officers. Subject to the articles or any unanimous shareholder agreement, the remuneration of all officers, employees and agents appointed by the directors may be determined from time to time by resolution of the directors. The fact that any officer, employee or agent is a director or shareholder of the Corporation shall not disqualify him from receiving such remuneration as may be so determined. The directors may by resolution remove any officer, employee or agent at any time, with or without cause. 25. Duties of Officers may be Delegated. In case of the absence or inability or refusal to act of any officer of the Corporation or for any other reason that the directors may deem sufficient, the directors may delegate all or any of the powers of such officer to any other officer or to any director for the time being. 26. Chairman of the Board. The chairman of the board (if any) shall, if present, preside at all meetings of the directors. He shall sign such contracts, documents or instruments in writing as require his signature and shall have such other powers and duties as may from time to time be assigned to him by resolution of the directors. 27. President. The president shall be the chief executive officer of the Corporation and shall exercise general supervision over the business and affairs of the Corporation. The president, in 7 8 the absence of the chairman of the board, or if a chairman of the board be not appointed, shall preside at all meetings of the directors, and he shall act as chairman at all meetings of the shareholders of the Corporation; he shall sign such contracts, documents or instruments in writing as require his signature and he shall have such other powers and shall perform such other duties as may from time to time be assigned to him by resolution of the directors or as are incident to his office. 28. Vice-President. The vice-president (if any) or, if more than one, the vice-presidents in order of seniority, shall be vested with all the powers and shall perform all the duties of the president in the absence or inability or refusal to act of the president. The vice-president or, if more than one, the vice-presidents in order of seniority, shall sign such contracts, documents or instruments in writing as require his or their signatures and shall also have such other powers and duties as may from time to time be assigned to him or them by resolution of the directors. 29. Secretary. The secretary shall give or cause to be given notices for all meetings of the directors or committees thereof (if any) and of shareholders when directed to do so, and shall have charge, subject to the provisions of paragraphs 30 and 50 hereof, of the records referred to in section 18 of the Act and of the corporate seal or seals (if any). He shall sign such contracts, documents or instruments in writing as require his signature and shall have such other powers and duties as may from time to time be assigned to him by resolution of the directors or as are incident to his office. 30. Treasurer. Subject to the provisions of any resolution of the directors, the treasurer (if any) shall have the care and custody of all the funds and securities of the Corporation and shall deposit the same in the name of the Corporation in such bank or banks or with such other depositary or depositaries as the directors may by resolution direct. He shall prepare, maintain and keep or cause to be kept adequate books of accounts and accounting records. He shall sign such contracts, documents or instruments in writing as require his signature and shall have such other powers and duties as may from time to time be assigned to him by resolution of the directors or as are incident to his office. He may be required to give such bond for the faithful performance of his duties as the directors in their uncontrolled discretion may require, but no director shall be liable for failure to require any such bond or for the insufficiency of any such bond or for any loss by reason of the failure of the Corporation to receive any indemnity thereby provided. 31. Assistant Secretary and Assistant Treasurer. The assistant secretary or, if more than one, the assistant secretaries in order of seniority, and the assistant treasurer or, if more than one, the assistant treasurers in order of seniority (if any), shall respectively perform all the duties of the secretary and treasurer, respectively, in the absence or inability to act of the secretary or treasurer as the case may be. The assistant secretary or assistant secretaries, if more than one, and the assistant treasurer or assistant treasurers, if more than one, shall sign such contracts, documents or instruments in writing as require his or their signatures respectively and shall have such other powers and duties as may from time to time be assigned to them by resolution of the directors. 8 9 32. Managing Director. The directors may from time to time appoint from their number a managing director and may delegate to him any of the powers of the directors except as provided in subsection 73(2) of the Act. The managing director shall conform to all lawful orders given to him by the directors and shall at all reasonable times give to the directors or any of them all information they may require regarding the affairs of the Corporation. Any agent or employee appointed by the managing director shall be subject to discharge by the directors. 33. Vacancies. If the office of chairman of the board, president, vice-president, secretary, assistant secretary, treasurer, assistant treasurer, or any other office created by the directors pursuant to paragraph 23 hereof, shall be or become vacant by reason of death, resignation, removal or in any other manner whatsoever, the directors may, subject to paragraph 23 hereof, appoint another person to fill such vacancy. COMMITTEES OF DIRECTORS 34. The directors may from time to time appoint from their number one or more committees of directors consisting of one or more individuals and delegate to such committee or committees any of the powers of the directors except as provided in subsection 73(2) of the Act. Unless otherwise ordered by the directors, a committee of directors shall have power to fix its quorum, elect its chairman and regulate its proceedings. All such committees shall report to the directors as required by them. SHAREHOLDERS' MEETING 35. Annual Meeting. Subject to compliance with section 85 of the Act, the annual meeting of the shareholders shall be convened on such day in each year and at such time as the directors may by resolution determine. 36. Special Meetings. (1) Special meetings of the shareholders may be convened by order of the chairman of the board, the president or a vice-president or by the directors, to be held at such time and place as may be specified in such order. (2) Shareholders holding between them not less than ten percent (10%) of the issued shares of the Corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders. Such requisition shall state the business to be transacted at the meeting and shall be sent to each director and the registered office of the Corporation. (3) Except as otherwise provided in subsection 96(3) of the Act, it shall be the duty of the directors on receipt of such requisition, to cause such meeting to be called by the secretary of the Corporation. (4) If the directors do not, within twenty-one (21) days after receiving such requisition call such meeting, any shareholder who signed the requisition may call the meeting. 9 10 37. Place of Meetings. Meetings of shareholders of the Corporation shall be held at the registered office of the Corporation or at such other place within New Brunswick as the directors by resolution may determine. Notwithstanding the foregoing, a meeting of shareholders of the Corporation may be held outside New Brunswick if all the shareholders entitled to vote at that meeting so agree, and a shareholder who attends a meeting of shareholders held outside New Brunswick is deemed to have so agreed except when he attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully held. Notwithstanding either of the foregoing sentences, meetings of shareholders may be held outside New Brunswick at one or more places as specified in the articles. 38. Notice. (1) Subject to the articles or a unanimous shareholder agreement, a printed, written or typewritten notice stating the day, hour, place of meeting, the general nature of the business to be transacted and, if special business is to be transacted thereat, stating (a) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment thereon; and (b) the text of any special resolution to be submitted to the meeting, shall be sent to each person who is entitled to notice of such meeting and who on the record date for notice appears on the records of the Corporation or its transfer agent as a shareholder and to each director of the Corporation and the auditor of the Corporation, if any, personally, by sending such notice by prepaid mail or in such other manner as provided by by-law for the giving of notice, not less than twenty-one (21) days nor more than fifty (50) days before the meeting. If such notice is sent by mail it shall be addressed to the latest address of each such person as shown in the records of the Corporation or its transfer agent, or if no address is shown therein, then to the last address of each such person known to the secretary. (2) The auditor of the Corporation, if any, is entitled to attend any meeting of shareholders of the Corporation and to receive all notices and other communications relating to any such meeting that a shareholder is entitled to receive. 39. Waiver of Notice. A meeting of shareholders may be held for any purpose at any time and, subject to section 84 of the Act, at any place without notice if all the shareholders entitled to notice of such meeting are present in person or represented by proxy at the meeting (except where the shareholder attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called) or if all the shareholders entitled to notice of such meeting and not present in person nor represented by proxy thereat waive notice of the meeting. Notice of any meeting of shareholders or any irregularity in any such meeting or in the notice thereof may be waived by any shareholder, the duly appointed proxy of any shareholder, any directors or the auditor of the Corporation in writing, by telegram, cable, telex or facsimile addressed to the Corporation or by any other manner, and any such waiver may be validly given either before or after the meeting to which such waiver relates. 40. Omission of Notice. The accidental omission to give notice of any meeting to or the non-receipt of any notice by any person shall not invalidate any resolution passed or any proceeding taken at any meeting of shareholders. 10 11 41. Record Date. (1) The directors may by resolution fix in advance a date as the record date for the determination of shareholders (a) entitled to receive payment of a dividend; (b) entitled to participate in a liquidation distribution; or (c) for any other purpose except the right to receive notice of or to vote at a meeting of shareholders, but such record date shall not precede by more than fifty (50) days the particular action to be taken. (2) The directors may by resolution also fix in advance the date as the record date for the determination of shareholders entitled to receive notice of a meeting of shareholders, but such record date shall not precede by more than fifty (50) days or by less than twenty-one (21) days the date on which the meeting is to be held. (3) If no record date is fixed, (a) the record date for the determination of share- holders entitled to receive notice of a meeting of shareholders shall be (i) at the close of business on the day immediately preceding the day on which the notice is given; or (ii) if no notice is given, the day on which the meeting is held; and (b) the record date for the determination of shareholders for any purpose, other than that specified in subparagraph (a) above or to vote, shall be at the close of business on the day on which the directors pass the resolution relating thereto. 42. Voting. (1) Votes at meetings of the shareholders may be given either personally or by proxy. At every meeting at which he is entitled to vote, every shareholder present in person and every proxyholder shall have one (1) vote on a show of hands. Upon a poll at which he is entitled to vote, every shareholder present in person or by proxy shall (subject to the provisions, if any, of the articles) have one (1) vote for every share registered in his name. (2) Voting at a meeting of shareholders shall be by show of hands except where a ballot is demanded by a shareholder or proxyholder entitled to vote at the meeting. A shareholder or proxyholder may demand a ballot either before or after any vote by show of hands. (3) At any meeting, unless a ballot is demanded, a declaration by the chairman of the meeting that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact without proof of the number or proportion of votes recorded in favour of or against the motion. 11 12 (4) In the absence of the chairman of the board, the president and every vice-president, the shareholders present entitled to vote shall choose another director as chairman of the meeting and if no director is present or if all the directors present decline to take the chair then the shareholders or proxyholders present shall choose one of their number to be chairman. (5) If at any meeting a ballot is demanded on the election of a chairman or on the question of adjournment or termination it shall be taken forthwith without adjournment. If a ballot is demanded on any other question or as to the election of directors it shall be taken in such manner and either at once or later at the meeting or at an adjourned meeting as the chairman of the meeting directs. The result of a ballot shall be deemed to be the resolution of the meeting at which the ballot was demanded. A demand for a ballot may be withdrawn. (6) Where a person holds shares as a personal representative, such person or his proxy is the person entitled to vote at all meetings of shareholders in respect of the shares so held by him. (7) Where a person mortgages or hypothecates his shares, such person or his proxy is the person entitled to vote at all meetings of shareholders in respect of such shares unless, in the instrument creating the mortgage or hypothec, he has expressly empowered the person holding the mortgage or hypothec to vote in respect of such shares, in which case, and subject to the articles, such holder or his proxy is the person entitled to vote in respect of the shares. (8) Where two or more persons hold the same share or shares jointly, any one of such persons present at a meeting of shareholders has the right, in the absence of the other or others, to vote in respect of such share or shares, but if more than one of such persons are present or represented by proxy and vote, they shall vote together as one on the share or shares jointly held by them. 43. Proxies. (1) A shareholder, including a shareholder that is a body corporate, entitled to vote at a meeting of shareholders may by means of a proxy appoint a proxyholder or one or more alternate proxyholders, none of whom are required to be a shareholder of the Corporation, which proxyholders shall have all the rights of the shareholder to attend and act at the meeting in the place and stead of the shareholder except to the extent limited by the proxy. (2) An instrument appointing a proxy shall be in writing and shall be executed by the shareholder or by his attorney authorized in writing or, if the shareholder is a body corporate, either under its seal or by an officer or attorney thereof, duly authorized. A proxy is valid only at the meeting in respect of which it is given or any adjournment thereof. (3) Unless the Act requires another form, an instrument appointing a proxyholder may be in the following form: "The undersigned shareholder of hereby appoints of or failing him, of as the proxy of the undersigned to attend and act for and on behalf of the undersigned at the meeting of the shareholders of the said corporation to be held on the day of , 19 , and at any adjournment thereof to the same extent and with the same 12 13 power and authority as if the undersigned were personally present at the said meeting or such adjournment thereof. Dated the day of 19 . Signature of Shareholder NOTE: This form of proxy must be signed by a shareholder or his attorney authorized in writing or, if the shareholder is a body corporate, either under its seal or by an officer or attorney thereof duly authorized." 44. Adjournment. (1) The chairman of the meeting may with the consent of the meeting adjourn any meeting of shareholders from time to time to a fixed time and place. If a meeting of shareholders is adjourned for less than sixty (60) days, it is not necessary to give notice of the adjourned meeting other than by announcement at the earlier meeting that is adjourned. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of sixty (60) days or more, notice of the adjourned meeting shall be given as for an original meeting. (2) Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present at the opening thereat. The persons who formed a quorum at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the opening of the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. Any business may be brought before or dealt with at any adjourned meeting which might have been brought before or dealt with at the original meeting in accordance with the notice calling the same. 45. Quorum. (1) Except as hereinafter provided, a quorum for any meeting of shareholders shall be two (2) or more shareholders or proxyholders holding or representing not less than a majority of the shares entitled to be voted at such meeting. (2) If a quorum is present at the opening of a meeting of shareholders, the shareholders present in person or represented by proxy may proceed with the business of the meeting notwithstanding that a quorum is not present throughout the meeting. (3) If a quorum is not present at the opening of a meeting of shareholders, the shareholders present in person or represented by proxy may adjourn the meeting to a fixed time and place but not transact any other business. (4) Where the Corporation has only one shareholder or only one holder of any class or series of shares, or if only one person is present at a meeting holding or representing sufficient shares to constitute a quorum, the shareholder present in person or by proxy constitutes a meeting. 13 14 46. Resolution in Lieu of meeting. A resolution in writing signed by all the shareholders or signed counterparts of such resolution by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders duly called, constituted and held. A copy of every such resolution or counterpart thereof shall be kept with the minutes of the meetings of shareholders. 47. Telephone Participation. A shareholder may participate in a meeting of shareholders or of a committee of shareholders by means of such telephone or other communication facilities that permit all persons participating in the meeting to hear each other, and a shareholder participating in such a meeting by such means shall be deemed to be present at that meeting. SHARES AND TRANSFERS 48. Issuance. Subject to the articles, any unanimous shareholder agreement and to section 27 of the Act, shares in the Corporation may be issued at such times and to such persons or classes of persons and, subject to sections 23 and 24 of the Act, for such consideration as the directors may determine. 49. Certificates. Share certificates (and the form of stock transfer power on the reverse side thereof) shall (subject to compliance with section 47 of the Act) be in such form and be signed by such director(s) or officer(s) as the directors may from time to time by resolution determine. Such certificates shall be signed manually by at least one director or officer of the Corporation or by or on behalf of a registrar, transfer agent or branch transfer agent of the Corporation, and any additional signatures required on a share certificate may be printed or otherwise mechanically reproduced thereon. If a share certificate contains a printed or mechanically reproduced signature of a person, the Corporation may issue the share certificate notwithstanding that the person has ceased to be a director or an officer of the Corporation, and the share certificate is as valid as if he were a director or an officer at the date of its issue. 50. Registrar and Transfer Agent. The directors may from time to time by resolution appoint or remove one or more registrars and/or branch registrars (which may but need not be the same person) to keep the share register and/or one or more transfer agents and/or branch transfer agents (which may but need not be the same person) to keep the register of transfers, and (subject to section 48 of the Act) may provide for the registration of issues and the registration of transfers of the shares of the Corporation in one or more places and such registrars and/or branch registrars and/or transfer agents and/or branch transfer agents shall keep all necessary books and registers of the Corporation for the registration of the issuance and the registration of transfers of the shares of the Corporation for which they are so appointed. All certificates issued after any such appointment representing shares issued by the Corporation shall be countersigned by or on behalf of one of the said registrars and/or branch registrars and/or transfer agents and/or branch transfer agents, as the case may be. 51. Surrender of Share Certificates. No transfer of a share issued by the Corporation shall be recorded or registered unless or until the certificate representing the share to be transferred has been surrendered and cancelled or, if no certificate has been issued by the Corporation in respect 14 15 of such share, unless or until a duly executed share transfer power in respect thereof has been presented for registration. 52. Defaced, Destroyed, Stolen or Lost Certificates. If the defacement, destruction or apparent destruction, theft, or other wrongful taking or loss of a share certificate is reported by the owner thereof to the Corporation or to a registrar, branch registrar, transfer agent or branch transfer agent of the Corporation (hereinafter, in this paragraph, called the "Corporation's transfer agent") and such owner gives to the Corporation or the Corporation's transfer agent a written statement verified by oath or statutory declaration as to the defacement, destruction or apparent destruction, theft, or other wrongful taking or loss and the circumstances concerning the same, a request for the issuance of a new certificate to replace the one so defaced, destroyed, wrongfully taken or lost and a bond of a surety company (or other security approved by the directors) in such form as is approved by the directors or by the chairman of the board, the president, a vice-president, the secretary or the treasurer of the Corporation, indemnifying the Corporation (and the Corporation's transfer agent, if any), against all loss, damage or expense, which the Corporation and/or the Corporation's transfer agent may suffer or be liable for by reason of the issuance of a new certificate to such shareholder, a new certificate may be issued in replacement of the one defaced, destroyed or apparently destroyed, stolen or otherwise wrongfully taken or lost, if such issuance is ordered and authorized by any one of the chairman of the board, the president, a vice-president, the secretary or the treasurer of the Corporation or by resolution of the directors. DIVIDENDS 53. Declaration and Payment of Dividends. (1) Subject to the following subparagraph (2), the directors may from time to time by resolution declare and the Corporation may pay dividends on its issued shares, subject to the provisions (if any) of the articles. (2) The directors shall not declare and the Corporation shall not pay a dividend if there are reasonable grounds for believing that; (a) the Corporation is, or would after the payment be, unable to pay its liabilities as they become due; or (b) the realizable value of the Corporation's assets would thereby be less than the aggregate of its liabilities and stated capital of all classes. (3) Subject to section 41 of the Act, the Corporation may pay a dividend in money or property or by issuing fully paid shares of the Corporation. 54. Receipt of Dividends by Joint Holders. In case two or more persons are registered as the joint holders of any securities of the Corporation, any one of such persons may give effectual receipts for all dividends and payments on account of dividends, principal, interest and/or redemption payments on redemption of securities (if any) subject to redemption in respect of such securities. 15 16 VOTING SECURITIES IN OTHER BODIES CORPORATE 55. All securities of any other body corporate carrying voting rights held from time to time by the Corporation may be voted at all meetings of shareholders, bondholders, debenture holders or holders of such securities, as the case may be, of such other body corporate in such manner and by such person or persons as the directors of the Corporation shall from time to time determine and authorize by resolution. The duly authorized signing officers of the Corporation may also from time to time execute and deliver for and on behalf of the Corporation proxies and/or arrange for the issuance of voting certificates and/or other evidence of the right to vote in such names as they may determine without the necessity of a resolution or other action by the directors. NOTICE 56. Service. (1) Any notice or other document required to be given or sent by the Corporation to any shareholder, director or auditor of the Corporation shall be delivered personally or sent by prepaid mail or by telegram, telex, cablegram or facsimile addressed to: (a) the shareholder at his latest address as shown on the records of the Corporation or its transfer agent; and (b) the director at his latest address as shown in the records of the Corporation or in the last notice filed under section 64 or 71 of the Act. With respect to every notice or other document sent by prepaid mail it shall be sufficient to prove that the envelope or wrapper containing the notice or other document was properly addressed and put into a post office letter box. (2) If the Corporation sends a notice or document to a shareholder in accordance with the provisions of the foregoing subparagraph (2) and the notice or document is returned on three (3) consecutive occasions because the shareholder cannot be found, the Corporation is not required to send any further notices or documents to the shareholder until he informs the Corporation in writing of his new address. 57. Shares registered in more than one name. All notices or other documents required to be sent to a shareholder by the Act, the regulations under the Act, the articles or the by-laws of the Corporation shall, with respect to any shares in the capital of the Corporation registered in more than one name, be given to whichever of such persons is named first in the records of the Corporation and any notice or other document so given shall be sufficient notice or delivery of such document to all the holders of such shares. 58. Persons becoming entitled by operation of law. Every person who by operation of law, transfer or by any other means whatsoever shall become entitled to any shares in the capital of the Corporation shall be bound by every notice or other document in respect of such shares which prior to his name and address being entered on the records of the Corporation shall have been duly given to the person or persons from whom he derives his title to such shares. 16 17 59. Deceased Shareholder. Any notice or other document delivered or sent by post or left at the address of any shareholder as the same appears in the records of the Corporation shall, notwithstanding that such shareholder be then deceased and whether or not the Corporation has notice of his decease, be deemed to have been duly served in respect of the shares held by such shareholder (whether held solely or with other persons) until some other person be entered in his stead in the records of the Corporation as the holder or one of the holders thereof and such service shall for all purposes be deemed a sufficient service of such notice or other document on his heirs, executors or administrators and all persons (if any) interested with him in such shares. 60. Signatures to Notices. The signature of any director or officer of the Corporation to any notice may be written, stamped, typewritten or printed or partly written, stamped, typewritten or printed. 61. Computation of Time. Where a given number of days' notice or notice extending over any period is required to be given under any provisions of the articles or by-laws of the Corporation, the day of service or posting of the notice shall, unless it is otherwise provided, be counted in such number of days or other period and such notice shall be deemed to have been given or sent on the day of service or posting. 62. Proof of Service. A certificate of any officer of the Corporation in office at the time of the making of the certificate or of a transfer officer of any transfer agent or branch transfer agent of shares of any class of the Corporation as to facts in relation to the mailing or delivery or service of any notice or other documents to any shareholder, director, officer or auditor or publication of any notice or other document shall be conclusive evidence thereof and shall be binding on every shareholder, director, officer or auditor of the Corporation, as the case may be. CHEQUES, DRAFTS, NOTES, ETC. 63. All cheques, drafts or orders for the payment of money and all notes, acceptances and bills of exchange shall be signed by such officer or officers or other person or persons, whether or not officers of the Corporation, and in such manner as the directors may from time to time designate by resolution. CUSTODY OF SECURITIES, 64. (1) All securities (including warrants) owned by the Corporation shall be lodged (in the name of the Corporation) with a chartered bank or a trust company or in a safety deposit box or, if so authorized by resolution of the directors, with such other depositaries or in such other manner as may be determined from time to time by the directors. (2) All securities (including warrants) belonging to the Corporation may be issued and held in the name of a nominee or nominees of the Corporation (and if issued or held in the names of more than one nominee shall be held in the names of the nominees jointly with right of survivorship) and shall be endorsed in blank with endorsement guaranteed in order to enable transfer thereof to be completed and registration thereof to be effected. 17 18 EXECUTION OF CONTRACTS, ETC. 65. (1) Contracts, documents or instruments in writing requiring the signature of the Corporation may be signed by any one of the directors or officers. All contracts, documents or instruments in writing so signed shall be binding upon the Corporation without any further authorization or formality. The directors are authorized from time to time by resolution to appoint any officer or officers or any other person or persons on behalf of the Corporation either to sign contracts, documents or instruments in writing generally or to sign specific contracts, documents or instruments in writing. Where the Corporation has only one director and officer, being the same person, that person may sign all such contracts, documents or other written instruments. (2) The corporate seal (if any) may, when required, be affixed to contracts, documents or instruments in writing signed as aforesaid by an officer or officers, person or persons appointed as aforesaid by resolution of the directors. (3) The term "contracts, documents or instruments in writing" as used in this by-law shall include deeds, mortgages, hypothecs, charges, conveyances, transfers and assignments of property, real or personal, immoveable or moveable, agreements, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of shares, warrants, bonds, debentures or other securities and all paper writings. (4) In particular, without limiting the generality of the foregoing, any one of the directors or officers of the Corporation are hereby authorized to sell, assign, transfer, exchange, convert or convey all shares, bonds, debentures, rights, warrants or other securities owned by or registered in the name of the Corporation and to sign and execute (under the seal of the Corporation or otherwise) all assignments, transfers, conveyances, powers of attorney and other instruments that may be necessary for the purpose of selling, assigning, transferring, exchanging, converting or conveying or enforcing or exercising any voting rights in respect of any such shares, bonds, debentures, rights, warrants or other securities. Where the Corporation has only one director and officer, being the same person, that person may perform the functions and exercise the powers herein contemplated. AUDITOR 66. At each annual meeting of the shareholders of the Corporation an auditor may be appointed for the purpose of auditing and verifying the accounts of the Corporation for the then current year and his report shall be submitted at the next annual meeting of the shareholders. The auditor shall not be a director or an officer of the Corporation. Unless fixed by the meeting of shareholders at which he is appointed, the remuneration of the auditor shall be determined from time to time by the directors. 18 19 FISCAL YEAR 67. The fiscal period of the Corporation shall terminate on such day in each year as the directors may from time to time by resolution determine. BORROWING 68. General Borrowing. The directors may from time to time: (a) borrow money upon the credit of the Corporation; (b) issue, reissue, sell or pledge debt obligations of the Corporation; (c) give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and (d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation, owned or subsequently acquired, to secure any obligation of the Corporation. The directors may from time to time authorize any director or directors, or officer or officers, of the Corporation, to make arrangements with reference to the money borrowed or to be borrowed as aforesaid, and as to the terms and conditions of the loan thereof, and as to the securities to be given therefor, with power to vary or modify such arrangements, terms and conditions and to give such additional securities for any moneys borrowed or remaining due by the Corporation as the directors of the Corporation may authorize, and generally to manage, transact and settle the borrowing of money by the Corporation. 19 20 ************************ ENACTED by the directors of the Corporation as of the 17th day of September, 1997 WITNESS the corporate seal of the Corporation. /s/ --------------------------- Secretary Approved, ratified and confirmed by the sole shareholder of the Corporation as of the 17th day of September, 1997. WITNESS the corporate seal of the Corporation. /s/ --------------------------- Secretary 20 21 PCI CHEMICALS CANADA INC. PCI CHIMIE CANADA INC. INDEX TO BY-LAWS
BY-LAW NO. DESCRIPTION ADOPTED ON RATIFIED ON ---------- ----------- ---------- ----------- ONE Relating generally to the September 17, September 17, transaction of the business 1997 1997 and affairs of the Corporation TWO Respecting the borrowing of September 17, September 17, money by the Corporation - 1997 1997 Bank of Montreal
EX-99.T3B3 15 h90985ex99-t3b3.txt BYLAWS OF PIONEER COMPANIES, INC. 1 ADOPTED: May 20, 1993 EXHIBIT T3B-3 FINEVEST FOODS, INC. Incorporated Under the Law of the State of Delaware BY-LAWS ARTICLE I OFFICES. The registered office of the Corporation in Delaware shall be at 1209 Orange Street, in the City of Wilmington, County of New Castle, in the State of Delaware, and The Corporation Trust Company shall be the resident agent of the corporation in charge thereof. The corporation may also have such other offices at such other places, within or without the State of Delaware, as the Board of Directors may from time to time designate or the business of the corporation may require. ARTICLE II STOCKHOLDERS. Section 1. Annual Meetings. The annual meeting of stockholders for the election of directors and the transaction of any other business shall be held on such date and at such time as the Board of Directors or the Executive Committee may determine by resolution in such city and state and at such time and place as may be designated by the Board of Directors, and set forth in the notice of such meeting. At the annual meeting any business may be transacted and any corporate action may be taken, whether stated in the notice of meeting or not, except as otherwise expressly provided by statute or the Restated Certificate of Incorporation. Section 2. Special Meetings. Special Meetings of the stockholders for any purpose may be called at any time by the Board of Directors, or by the President, and shall be called by the President at the request of the holders of a majority of the outstanding shares of 2 capital stock entitled to vote. Special meetings shall be held at such place or places within or without the State of Delaware as shall from time to time be designated by the Board of Directors and stated in the notice of such meeting. At a special meeting no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting. Section 3. Notice of Meetings. Notice of the time and place of any stockholders' meeting, whether annual or special, shall be given to each stockholder entitled to vote thereat, by personal delivery or by mailing the same to him at his address as the same appears upon the records of the corporation at least ten (10) days' but not more than sixty (60) days' before the day of the meeting. Notice of any adjourned meeting need not be given other than by announcement at the meeting so adjourned, unless otherwise ordered in connection with such adjournment. Such further notice, if any, shall be given as may be required by law. Section 4. Quorum. Any number of stockholders, together holding at least a majority of the voting power of the capital stock of the corporation issued and outstanding and entitled to vote, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of all business, except as otherwise provided by law, by the Restated Certificate of Incorporation or by these By-laws. Section 5. Adjournment. If less than a quorum shall attend at the time for which a meeting shall have been called, the meeting may adjourn from time to time by a majority vote of the stockholders present or represented by proxy and entitled to vote without notice other than by announcement at the meeting until a quorum shall attend. Any meeting at which a quorum is present may also be adjourned in like manner and for such time or upon such call as may be determined by a majority vote of the stockholders present or represented by proxy and entitled to vote. At any adjourned meeting at which a quorum shall be present, any business may 2 3 be transacted and any corporate action may be taken which might have been transacted at the meeting as originally called. Section 6. Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the holders of all classes of the Corporation's capital stock, arranged in alphabetical order and showing the address of each stockholder and the number of shares owned by each stockholder. Such list shall be open at the place where the election is to be held for said ten (10) days, to the examination of any stockholder, and shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present. Section 7. Voting. Each stockholder entitled to vote at any meeting may vote either in person or by proxy, but no proxy shall be voted on after three years from its date, unless said proxy provides for a longer period. Except where the transfer books of the corporation shall have been closed or a date shall have been fixed as a record date for the determination of its stockholders entitled to vote, as hereinafter provided, no share of stock shall be voted on at any stockholders' meeting which shall have been transferred on the books of the corporation within twenty (20) days next preceding the date of such meeting. At all meetings of stockholders all matters, except as otherwise provided by statute or in the Certificate of Incorporation, shall be determined by a majority vote of the stockholders present in person or by proxy and entitled to vote. All voting shall be by ballot. Section 8. Record Date. The Board of Directors is authorized to fix in advance a date not exceeding sixty (60) days nor less than ten (10) days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall 3 4 go into effect, or a date in connection with obtaining the consent of stockholders for any purposes, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and, in such case, such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation, after such record date fixed as aforesaid. Section 9. Action Without a Meeting. Any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS. Section 1. Number. The number of directors which shall constitute the whole Board shall not be more than nine, with the exact number of directors to be determined from time to time by resolution of the Board. 4 5 Section 2. Classes. The directors shall be divided into three classes, designated Class I, Class II and Class III, as provided in the Restated Certificate of Incorporation of the Corporation. Section 3. Election; Term. The election and term of directors shall be as provided in the Restated Certificate of Incorporation of the Corporation, as amended from time to time. Section 4. Removal; Resignation. A director may be removed with cause by the holders of a majority of the shares of capital stock entitled to vote, either by written consent or at any special meeting of the stockholders called for that purpose, and the office of such director shall forthwith become vacant. Any director may resign at any time. Such resignation shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless so specified therein. Section 5. Vacancies. Vacancies in the Board of Directors shall be filled as provided in the Restated Certificate of Incorporation of the Corporation, as amended from time to time. Section 6. Annual Meeting. The Board of Directors shall hold an annual meeting for the purpose of organization and the transaction of any business immediately after the annual meeting of the stockholders, provided a quorum is present. Other regular meetings may be held at such times as may be determined from time to time by resolution of the Board of Directors. 5 6 Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or by the President or by any two directors at any time. Section 8. Place of Meeting. Meetings of the Board of Directors may be held at the principal office of the corporation, or at such place as shall be determined in the notice of such meeting. Notice of any special meeting, and, except as the Board of Directors may otherwise determine by resolution, notice of any regular meeting also, shall be mailed to each director addressed to him at his residence or usual place of business at least two days before the day on which the meeting is to be held, or if sent to him at such place by telegraph or cable, or delivered personally or by telephone, not later than the day before the day on which the meeting is to be held. No notice of the annual meeting of the Board of Directors shall be required if it is held immediately after the annual meeting of the stockholders and if a quorum is present. Section 9. Business Transacted. Any business may be transacted and any corporate action may be taken at any regular or special meeting of the Board of Directors at which a quorum shall be present, whether such business or proposed action be stated in the notice of such meeting or not, unless special notice of such business or proposed action shall be required by statute. Section 10. Quorum. A majority of the Board of Directors at any time in office shall constitute a quorum. At any meeting at which a quorum is present, the vote of a majority of the members present shall be the act of the Board of Directors unless the act of a greater number is specifically required by law or by the Restated Certificate of Incorporation or these By-laws. 6 7 Section 11. Compensation. The directors shall not receive any stated salary for their services as directors, but by resolution of the Board of Directors a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall preclude any director from serving the corporation in any other capacity, as an officer, agent or otherwise, and receiving compensation therefor. Section 12. Action Without A Meeting. The Board of Directors or any committee designated by the Board of Directors shall, except as otherwise provided by law, the Restated Certificate of Incorporation or these By-Laws, have power to act in the following manner: A resolution in writing, signed by all of the members of the Board of Directors, or any committee, shall be deemed to be action by such Board or committee to the effect therein expressed with the same force and effect as if the same had been duly passed by the same vote at a duly convened meeting, and it shall be the duty of the Secretary of the corporation to record any such resolution in the minutes of proceedings of the Board of Directors or committee. Section 13. Telephone Meeting. Members of the Board of Directors, or any committee designated by the Board of Directors, shall, except as otherwise provided by law, the Restated Certificate of Incorporation or these By-Laws, have the power to participate in a meeting of the Board of Directors, or any committee, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting. ARTICLE IV COMMITTEES. Section 1. The Board of Directors may, by resolution passed by a majority of the whole Board, designate two or more of their number to constitute an Executive Committee to 7 8 hold office during the pleasure of the Board, which Committee shall, during the intervals between meetings of the Board of Directors, have and exercise all of the powers of the Board of Directors in the management of the business and affairs of the corporation, subject only to such restrictions or limitations as the Board of Directors may from time to time specify, or as limited by the Delaware Corporation Law, and shall have power to authorize the seal of the corporation to be affixed to all papers which may require it. Any member of the Executive Committee may be removed at any time, with or without cause, by a resolution of a majority of the whole Board of Directors. Any person ceasing to be a director shall cease to be a member of the Executive Committee. Any vacancy in the Executive Committee occurring from any cause whatsoever may be filled from among the directors by a resolution of a majority of the whole Board of Directors. Section 2. Other Committees. Other committees, whose members need not be directors, may be appointed by the Board of Directors or the Executive Committee, which committees shall hold office for such time and have such powers and perform such duties as may from time to time be assigned to them by the Board of Directors or the Executive Committee. Any member of such a committee may be removed at any time, with or without cause, by the Board of Directors or the Executive Committee. Any vacancy in a committee occurring from any cause whatsoever may be filled by the Board of Directors or the Executive Committee. Section 3. Resignation. Any member of a committee may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if 8 9 no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein. Section 4. Quorum. A majority of the members of a committee shall constitute a quorum. The act of a majority of the members of a committee present at any meeting at which a quorum is present shall be the act of such committee. The members of a committee shall act only as a committee, and the individual members thereof shall have no powers as such. Section 5. Books and Records. Each committee shall keep a record of its acts and proceedings, and shall report the same to the Board of Directors when and as required by the Board of Directors. Section 6. Place of Meeting. A committee may hold its meetings at the principal office of the corporation, or at any other place which a majority of the committee may at any time agree upon. Each committee may make such rules as it may deem expedient for the regulation and carrying on of its meetings and proceedings. Unless otherwise ordered by the Executive Committee, any notice of a meeting of such Committee may be given by the Secretary or by the chairman of the Committee and shall be sufficiently given if mailed to each member at his residence or usual place of business at least two days before the day on which the meeting is to be held, or if sent to him at such place by telegraph or cable, or delivered personally or by telephone not later than 24 hours prior to the time at which the meeting is to be held. Section 7. Compensation. The members of any committee shall be entitled to such compensation as may be allowed them by resolution of the Board of Directors. 9 10 ARTICLE V OFFICERS. Section 1. Numbers and Titles. The officers of the corporation shall be a President, one or more Vice Presidents, a Secretary and a Treasurer, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. The Board of Directors in its discretion may also elect a Chairman of the Board of Directors. Section 2. Election; Term of Office; Qualifications. The officers, except as provided in Section 3 of this Article V, shall be chosen annually by the Board of Directors. Each such officer shall, except as herein otherwise provided, hold office until his successor shall have been chosen and shall qualify. The Chairman of the Board of Directors, if any, and the President shall be directors of the corporation, and should either one of them cease to be a director, he shall likewise cease to hold such office. More than two offices may be held by the same person. Section 3. Other Officers. Other officers, including one or more additional vice-presidents, assistant secretaries or assistant treasurers, may from time to time be appointed by the Board of Directors, which other officers shall have such powers and perform such duties as may be assigned to them by the Board of Directors or the officer or committee appointing them. Section 4. Removal. Any officer of the corporation may be removed from office, with or without cause, by a vote of a majority of the Board of Directors. Section 5. Resignation. Any officer of the corporation may resign at any time. Such resignation shall be in writing and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary in order to make it effective, unless so specified therein. 10 11 Section 6. Vacancies. A vacancy in any office shall be filled by the Board of Directors or by the authority appointing the predecessor in such office. Section 7. Compensation. The compensation of the officers shall be fixed by the Board of Directors, or by any committee upon whom power in that regard may be conferred by the Board of Directors. Section 8. Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of the Board of Directors at which he shall be present. Section 9. President. The President shall, when present, preside at all meetings of the stockholders, and, in the absence of the Chairman of the Board of Directors, at meetings of the Board of Directors. He shall have power to call special meetings of the stockholders or of the Board of Directors or of the Executive Committee at any time. He shall be the chief operating officer of the corporation, and shall have the general direction of the business affairs and property of the corporation, and of its several officers, and shall have and exercise all such powers and discharge such duties as usually pertain to the office of President. Section 10. Vice Presidents. The Vice Presidents, or any of them, shall, subject to the direction of the Board of Directors, at the request of the President or in his absence, or in case of his inability to perform his duties from any cause, perform the duties of the President, and, when so acting, shall have all the powers of, and be subject to all restrictions upon, the President. The Vice Presidents shall also perform such other duties as may be assigned to them by the Board of Directors, and the Board of Directors may determine the order of priority among them. 11 12 Section 11. Secretary. The Secretary shall perform such duties as are incident to the office of Secretary, or as may from time to time be assigned to him by the Board of Directors, or as are prescribed by these by-laws. Section 12. Treasurer. The Treasurer shall perform such duties and have powers as are usually incident to the office of Treasurer or which may be assigned to him by the Board of Directors. ARTICLE VI CAPITAL STOCK. Section 1. Certificates of Shares. Certificates of capital stock shall be in such form as shall be approved by the Board of Directors. They shall be numbered in the order of their issue, and shall be signed by the President or one of the Vice-Presidents, and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and the seal of the corporation or a facsimile thereof shall be impressed or affixed or reproduced thereon, provided, however, that where such certificates are signed by a transfer agent or an assistant transfer agent or by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such President, Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer may be facsimile. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificate may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or 12 13 signatures shall have been used thereon have not ceased to be such officer or officers of the corporation. Section 2. Stock Book. The name of each person owning a share of the capital stock of the corporation shall be entered on the books of the corporation together with the number of shares held by him, the numbers of the certificates covering such shares and the dates of issue of such certificates. The shares of stock of the corporation shall be transferable on the books of the corporation by the holders thereof in person, or by their duly authorized attorneys or legal representatives, on surrender and cancellation of certificates for a like number of shares, accompanied by an assignment of power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity of the signature as the corporation or its agents may reasonably require. A record shall be made of each transfer. The Board of Directors may make other and further rules and regulations concerning the transfer and registration of certificates for stock and may appoint a transfer agent or registrar or both and may require all certificates of stock to bear the signature of either or both. Section 3. Lost Certificates. The holder of any stock of the corporation shall immediately notify the corporation of any loss, theft, destruction or mutilation of the certificates therefor. The corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it alleged to have been lost, stolen or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost, stolen or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum not exceeding double the value of the stock and with such surety or sureties as they may require, to indemnify it against any claim that may be made against it by reason of the issue of such new certificate and against all other 13 14 liability in the premises, or may remit such owner to such remedy or remedies as he may have under the laws of the State Delaware. ARTICLE VII DIVIDENDS, SURPLUS, ETC. The Board of Directors shall have power to fix and vary the amount to be set aside or reserved as working capital of the corporation, or as reserves, or for other proper purposes of the corporation, and, subject to the requirements of the Restated Certificate of Incorporation, to determine whether any part of the surplus or net profits of the corporation, if any, shall be declared as dividends and paid to the stockholders, and to fix the date or dates for the payment of dividends. ARTICLE VIII MISCELLANEOUS PROVISIONS. Section 1. Fiscal Year. The fiscal year of the corporation shall commence on the first day of January and end on the thirty-first day of December. Section 2. Seal. The corporate seal shall be in such form as approved by the Board of Directors and may be altered at its pleasure. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 3. Notices. Except as otherwise expressly provided, any notice required by these By-Laws to be given shall be sufficient if given by depositing the same in a post-office or letter box in a sealed postpaid wrapper addressed to the person entitled thereto at his address, as the same appears upon the books of the corporation, or by telegraphing or cabling 14 15 the same to such person at such addresses; and such notice shall be deemed to be given at the time it is mailed, telegraphed or cabled. Section 4. Waiver of Notice. Any stockholder or director may at any time, by writing or by telegraph or by cable, waive any notice required to be given under these by-laws, and if any stockholder or director shall be present at any meeting his presence shall constitute a waiver of such notice. Section 5. Checks; Notes. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation in such manner as shall from time to time be designated by resolution of the Board of Directors. Section 6. Deposit of Funds. All funds of the corporation shall be deposited from time to time to the credit of the corporation in such bank or banks, trust companies or other depositories as the Board of Directors may select, and, for the purpose of such deposit, checks, drafts, warrants and other orders for the payment of money which are payable to the order of the corporation may be endorsed for deposit, assigned and delivered by any officer of the corporation or by such agents of the corporation as the Board of Directors or the President may authorize for that purpose. Section 7. Power to Act. Except as otherwise ordered by the Board of Directors or the Executive Committee, the President or the Treasurer shall have full power and authority on behalf of the Corporation to attend and to act and to vote at any meeting of the stockholders of any corporation of which the corporation is a stockholder and to execute a proxy to any other person to represent the corporation at any such meeting, and at any such meeting the President or the Treasurer or the holder of any such proxy, as the case may be, shall possess and 15 16 may exercise any and all rights and powers incident to ownership of such stock and which, as owner thereof, the corporation might have possessed and exercised if present. The Board of Directors or the Executive Committee may from time to time confer like powers upon any other person or persons. Section 8. Indemnification. The Corporation shall indemnify any and all of its directors or officers, including former directors or officers, and any employee, who shall serve as an officer or director of any corporation at the request of this Corporation, to the fullest extent permitted under and in accordance with the laws of the State of Delaware. ARTICLE IX AMENDMENTS. Section 1. These By-laws may be altered, amended or repealed or new By-laws may be adopted by the stockholders or by the Board of Directors when such power is conferred upon the Board of Directors by the Restated Certificate of Incorporation at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new By-laws is contained in the notice of such special meeting. 16 EX-99.T3B5 16 h90985ex99-t3b5.txt BYLAWS OF PIONEER CORPORATION OF AMERICA 1 EXHIBIT T3B-5 PIONEER AMERICAS ACQUISITION CORP. Incorporated Under the Laws of the State of Delaware BY-LAWS ARTICLE I OFFICES The registered office of the Corporation in Delaware shall be at 1209 Orange Street in the City of Wilmington, County of New Castle, in the State of Delaware, and The Corporation Trust Company shall be the resident agent of this Corporation in charge thereof. The Corporation may also have such other offices at such other places, within or without the State of Delaware, as the Board of Directors may from time to time designate or the business of the Corporation may require. ARTICLE II STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of stockholders for the election of directors and the transaction of any other business shall be held on such date, in such city and state and at such time and place as may be designated by the Board of Directors, and set forth in the notice of such meeting. If said day be a legal holiday, said meeting shall be held on the next succeeding business day. At the annual meeting any business may be transacted and any corporate action may be taken, whether stated in the notice of meeting or not, except as otherwise expressly provided by statute or the Certificate of Incorporation. Section 2. Special Meetings. Special meetings of the stockholders for any purpose may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the request of the holders of a majority of the outstanding shares of capital stock entitled to vote. Special meetings shall be held at such place or places within or without the State of Delaware as shall from time to time be designated by the Board of Directors and stated in the notice of such meeting. At a special meeting no business shall be transacted and no corporate action shall be taken other than that stated in the notice of the meeting. Section 3. Notice of Meetings. Written notice of the time and place of any stockholder's meeting, whether annual or special, shall be given to each stockholder entitled to vote thereat, by personal delivery or by mailing the same to him at his address as the same appears upon the records of the Corporation at least ten (10) days but not more than sixty (60) days before the day of the meeting. Notice of any adjourned meeting need not be given except by announcement at the meeting so adjourned, unless otherwise ordered in connection with such adjournment. Such further notice, if any, shall be given as may be required by law. Section 4. Quorum. Any number of stockholders, together holding at least a majority of the capital stock of the Corporation issued and outstanding and entitled to vote, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum 2 for the transaction of all business, except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws. Section 5. Adjournment of Meetings. If less than a quorum shall attend at the time for which a meeting shall have been called, the meeting may adjourn from time to time by a majority vote of the stockholders present or represented by proxy and entitled to vote without notice other than by announcement at the meeting until a quorum shall attend. Any meeting at which a quorum is present may also be adjourned in like manner and for such time or upon such call as may be determined by a majority vote of the stockholders present or represented by proxy and entitled to vote. At any adjourned meeting at which a quorum shall be present, any business may be transacted and any corporate action may be taken which might have been transacted at the meeting as originally called. Section 6. Voting List. The Secretary shall prepare and make, at least ten days before every election of directors, a complete list of the stockholders entitled to vote, arranged in alphabetical order and showing the address of each stockholder and the number of shares of each stockholder. Such list shall be open at the place where the election is to be held for said ten days, to the examination of any stockholder, and shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present. Section 7. Voting. Each stockholder entitled to vote at any meeting may vote either in person or by proxy, but no proxy shall be voted on or after three years from its date, unless said proxy provides for a longer period. Unless otherwise provided, in the Certificate of Incorporation, each stockholder entitled to vote shall at every meeting of the stockholders be entitled to one vote for each share of stock registered in his name on the record of stockholders. At all meetings of stockholders all matters, except as otherwise provided by statute, shall be determined by the affirmative vote of the majority of shares present in person or by proxy and entitled to vote on the subject matter. Voting at meetings of stockholders need not be by written ballot. Section 8. Record Date of Stockholders. The Board of Directors is authorized to fix in advance a date not exceeding sixty days nor less than ten days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining the consent of stockholders for any purposes including, without limit, the calling of a special meeting of stockholders, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and, in such case, such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation, after such record date fixed as aforesaid. 2 3 Section 9. Action Without Meeting. Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Section 10.Conduct of Meetings. The Chairman of the Board of Directors or, in his absence the President or any Vice President designated by the Chairman of the Board, shall preside at all regular or special meetings of stockholders. To the maximum extent permitted by law, such presiding person shall have the power to set procedural rules, including but not limited to rules respecting the time allotted to stockholders to speak, governing all aspects of the conduct of such meetings. ARTICLE III DIRECTORS Section 1. Number and Qualifications: The board of directors of the Corporation (the "Board of Directors" or the "Board") shall consist initially of six directors, and thereafter shall consist of such number as may be fixed from time to time by resolution of the Board. The directors need not be stockholders. Section 2. Election of Directors: The directors shall be elected by the stockholders at the annual meeting of stockholders. Section 3. Duration of Office: The directors chosen at any annual meeting shall, except as hereinafter provided, hold office until the next annual election and until their successors are elected and qualify. Section 4. Removal and Resignation of Directors: Any director may be removed from the Board of Directors, with or without cause, by the holders of a majority of the shares of capital stock entitled to vote, either by written consent or consents or at any special meeting of the stockholders called for that purpose, and the office of such director shall forthwith become vacant. Any director may resign at any time. Such resignation shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless so specified therein. Section 5. Filling of Vacancies: Any vacancy among the directors, occurring from any cause whatsoever, may be filled by a majority of the remaining directors, though less than a 3 4 quorum; provided, however, that the stockholders removing any director may at the same meeting fill the vacancy caused by such removal; and provided further, that if the directors fail to fill any such vacancy, the stockholders may at any special meeting called for that purpose fill such vacancy. In case of any increase in the number of directors, the additional directors may be elected by the directors in office before such increase. Any person elected to fill a vacancy shall hold office, subject to the right of removal as hereinbefore provided, until the next annual election and until his successor is elected and qualifies. Section 6. Regular Meetings: The Board of Directors shall hold an annual meeting for the purpose of organization and the transaction of any business immediately after the annual meeting of the stockholders, provided a quorum of directors is present. Other regular meetings may be held at such times as may be determined from time to time by resolution of the Board of Directors. Section 7. Special Meetings: Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or by the President. Section 8. Notice and Place of Meetings: Meetings of the Board of Directors may be held at the principal office of the Corporation, or at such other place as shall be stated in the notice of such meeting. Notice of any special meeting, and, except as the Board of Directors may otherwise determine by resolution, notice of any regular meeting, shall be mailed to each director addressed to him at his residence or usual place of business at least two days before the day on which the meeting is to be held, or if sent to him at such place by telegraph, facsimile machine or cable, or delivered personally or by telephone, not later than the day before the day on which the meeting is to be held. No notice of the annual meeting of the Board of Directors shall be required if it is held immediately after the annual meeting of the stockholders and if a quorum is present. Section 9. Business Transacted at Meetings, etc.: Any business may be transacted and any corporate action may be taken at any regular or special meeting of the Board of Directors at which a quorum shall be present, whether such business or proposed action be stated in the notice of such meeting or not, unless special notice of such business or proposed action shall be required by statute. Section 10. Quorum: A majority of the Board of Directors at any time in office shall constitute a quorum. At any meeting at which a quorum is present, the vote of a majority of the members present shall be the act of the Board of Directors unless the act of a greater number is specifically required by law or by the Certificate of Incorporation or these By-laws. The members of the Board shall act only as the Board and the individual members thereof shall not have any powers as such. Section 11. Compensation: The directors shall not receive any stated salary for their services as directors, but, by resolution of the Board of Directors, a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall 4 5 preclude any director from serving the Corporation in any other capacity, as an officer, agent or otherwise, and receiving compensation therefor. Section 12. Action Without a Meeting: Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of the Board or committee. Section 13. Meetings Through Use of Communications Equipment: Members of the Board of Directors, or any committee designated by the Board of Directors, shall, except as otherwise provided by law, the Certificate of Incorporation or these By-laws, have the power to participate in a meeting of the Board of Directors, or any committee, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at the meeting. ARTICLE IV COMMITTEES Section 1. Executive Committee: The Board of Directors may, by resolution passed by a majority of the whole Board, designate two or more of their number to constitute an Executive Committee to hold office at the pleasure of the Board, which Committee shall, during the intervals between meetings of the Board of Directors, have and exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation, subject only to such restrictions or limitations as the Board of Directors may from time to time specify, or as limited by the Delaware Corporation Law, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Any member of the Executive Committee may be removed at any time, with or without cause, by a resolution of a majority of the whole Board of Directors. Any person ceasing to be a director shall ipso facto cease to be a member of the Executive Committee. Any vacancy in the Executive Committee occurring from any cause whatsoever may be filled from among the directors by a resolution of a majority of the whole Board of Directors. Section 2. Other Committees: Other committees, whose members need not be directors, may be appointed by the Board of Directors or the Executive Committee, which committees shall hold office for such time and have such powers and perform such duties as may from time to time be assigned to them by the Board of Directors or the Executive Committee. Any member of such a committee may be removed at any time, with or without cause, by the Board of Directors or the Executive Committee. Any vacancy in a committee occurring from any cause whatsoever may be filled by the Board of Directors or the Executive Committee. 5 6 Section 3. Resignation: Any member of a committee may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein. Section 4. Quorum: A majority of the members of a committee shall constitute a quorum. In the event that the absence or disqualification of a member of any committee results in less than a quorum at any meeting, the member or members present at any meeting and not disqualified from voting may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. The act of a majority of the members of a committee present at any meeting at which a quorum is present shall be the act of such committee. The members of a committee shall act only as a committee, and the individual members thereof shall not have any powers as such. Section 5. Record of Proceedings, etc.: Each committee shall keep a record of its acts and proceedings, and shall report the same to the Board of Directors when and as required by the Board of Directors. Section 6. Organization, Meetings, Notices, etc.: A committee may hold its meetings at the principal office of the Corporation, or at any other place which a majority of the committee may at any time agree upon. Each committee may make such rules as it may deem expedient for the regulation and carrying on of its meetings and proceedings. Unless otherwise ordered by the Executive Committee, any notice of a meeting of such committee may be given by the Secretary of the Corporation or by the chairman of the committee and shall be sufficiently given if mailed to each member at his residence or usual place of business at least two days before the day on which the meeting is to be held, or if sent to him at such place by telegraph or cable, or delivered personally or by telephone not later than 24 hours before the time at which the meeting is to be held. Section 7. Compensation: The members of any committee shall be entitled to such compensation as may be allowed them by resolution of the Board of Directors. ARTICLE V OFFICERS Section 1. Number: The officers of the Corporation shall be a President, one or more Vice-Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer, and one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. The Board of Directors in its discretion may also elect a Chairman of the Board of Directors. Section 2. Election, Term of Office and Qualifications: The officers, except as provided in Section 3 of this Article V, shall be chosen annually by the Board of Directors. Each such officer shall, except as herein otherwise provided, hold office until his successor shall have been chosen and shall qualify. The Chairman of the Board of Directors, if any, and the President shall be directors of the Corporation, and should any one of them cease to be a director, he shall 6 7 ipso facto cease to be such officer. Except as otherwise provided by law, any number of offices may be held by the same person. Section 3. Other Officers Other officers, including one or more additional vice-presidents, assistant secretaries or assistant treasurers, may from time to time be appointed by the Board of Directors, which other officers shall have such powers and perform such duties as may be assigned to them by the Board of Directors or the officer or committee appointing them. Section 4. Removal of Officers: Any officer of the Corporation may be removed from office, with or without cause, by a vote of a majority of the Board of Directors. Section 5. Resignation: Any officer of the Corporation may resign at any time. Such resignation shall be in writing and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary in order to make it effective, unless so specified therein. Section 6. Filling of Vacancies: A vacancy in any office shall be filled by the Board of Directors or by the authority appointing the predecessor in such office. Section 7. Compensation: The compensation of the officers shall be fixed by the Board of Directors, or by any committee upon whom power in that regard may be conferred by the Board of Directors. Section 8. Chairman of the Board of Directors: The Chairman of the Board of Directors shall be a director and shall preside at all meetings of the Board of Directors at which he shall be present, and shall have such power and perform such duties as may from time to time be assigned to him by the Board of Directors. Section 9. President: The President shall, when present, preside at all meetings of the stockholders, and, in the absence of the Chairman of the Board of Directors, at meetings of the Board of Directors. He shall have power to call special meetings of the stockholders or of the Board of Directors or of the Executive Committee at any time. He shall be the chief executive officer of the Corporation, and shall have the general direction of the business, affairs and property of the Corporation, and of its several officers, and shall have and exercise all such powers and discharge such duties as usually pertain to the office of President. Section 10.Vice-Presidents: The Vice-Presidents, or any of them, shall, subject to the direction of the Board of Directors, at the request of the President or in his absence, or in case of his inability to perform his duties from any cause, perform the duties of the President, and, when so acting, shall have all the powers of, and be subject to all restrictions upon, the President. The Vice-Presidents shall also perform such other duties as may be assigned to them by the Board of Directors, and the Board of Directors may determine the order of priority among them. Section 11.Secretary: The Secretary shall perform such duties as are incident to the office of Secretary, or as may from time to time be assigned to him by the Board of Directors, or as are prescribed by these By-laws. 7 8 Section 12.Treasurer: The Treasurer shall perform such duties and have powers as are usually incident to the office of Treasurer or which may be assigned to him by the Board of Directors. ARTICLE VI CAPITAL STOCK Section 1. Issue of Certificates of Stock: Certificates of capital stock shall be in such form as shall be approved by the Board of Directors. They shall be numbered in the order of their issue and shall be signed by the Chairman of the Board of Directors, the President or one of the Vice-Presidents, and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and the seal of the Corporation or a facsimile thereof shall be impressed or affixed or reproduced thereon, provided, however, that where such certificates are signed by a transfer agent or an assistant transfer agent or by a transfer clerk acting on behalf of the Corporation and a registrar, the signature of any such Chairman of the Board of Directors, President, Vice-President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer may be facsimile. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon have not ceased to be such officer or officers of the Corporation. Section 2. Registration and Transfer of Shares: The name of each person owning a share of the capital stock of the Corporation shall be entered on the books of the Corporation together with the number of shares held by him, the numbers of the certificates covering such shares and the dates of issue of such certificates. The shares of stock of the Corporation shall be transferable on the books of the Corporation by the holders thereof in person, or by their duly authorized attorneys or legal representatives, on surrender and cancellation of certificates for a like number of shares, accompanied by an assignment or power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. A record shall be made of each transfer. The Board of Directors may make other and further rules and regulations concerning the transfer and registration of certificates for stock and may appoint a transfer agent or registrar or both and may require all certificates of stock to bear the signature of either or both. Section 3. Lost, Destroyed and Mutilated Certificates: The holder of any stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificates therefor. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it alleged to have been lost, stolen or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost, stolen or destroyed certificate, or his legal representatives, to give the Corporation a bond, in such sum not exceeding double the value of the stock and with such surety or sureties as they may require, to indemnify it against any claim that may be made against it by reason of the issue of such new 8 9 certificate and against all other liability in the premises, or may remit such owner to such remedy or remedies as he may have under the laws of the State of Delaware. ARTICLE VII DIVIDENDS, SURPLUS, ETC. Section 1. General Discretion of Directors: The Board of Directors shall have power to fix and vary the amount to be set aside or reserved as working capital of the Corporation, or as reserves, or for other proper purposes of the Corporation, and, subject to the requirements of the Certificate of Incorporation, to determine whether any, if any, part of the surplus or net profits of the Corporation shall be declared as dividends and paid to the stockholders, and to fix the date or dates for the payment of dividends. ARTICLE VIII MISCELLANEOUS PROVISIONS Section 1. Fiscal Year: The fiscal year of the Corporation shall commence on the first day of January and end on the last day of December. Section 2. Corporate Seal: The corporate seal shall be in such form as approved by the Board of Directors and may be altered at their pleasure. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 3. Notices: Except as otherwise expressly provided, any notice required by these By-laws to be given shall be sufficient if given by depositing the same in a post office or letter box in a sealed postpaid wrapper addressed to the person entitled thereto at his address, as the same appears upon the books of the Corporation, or by telegraphing, faxing or cabling the same to such person at such addresses; and such notice shall be deemed to be given at the time it is mailed, telegraphed, faxed or cabled. Section 4. Waiver of Notice: Any stockholder or director may at any time, by writing or by telegraph, fax or cable, waive any notice required to be given under these By-laws, and if any stockholder or director shall be present at any meeting his presence shall constitute a waiver of such notice. Section 5. Checks, Drafts, etc.: All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner, as shall from time to time be designated by resolution of the Board of Directors. Section 6. Deposits: All funds of the Corporation shall be deposited from time to time to the credit of the Corporation in such bank or banks, trust companies or other depositories as the Board of Directors may select, and, for the purpose of such deposit, checks, drafts, warrants and other orders for the payment of money which are payable to the order of the Corporation, may be endorsed for deposit, assigned and delivered by any officer of the Corporation, or by such agents of the Corporation as the Board of Directors, the President or the Treasurer may authorize for that purpose. 9 10 Section 7. Voting Stock of Other Corporations: Except as otherwise ordered by the Board of Directors or the Executive Committee, the President, the Secretary or the Treasurer shall have full power and authority on behalf of the Corporation to attend and to act and to vote at any meeting of the stockholders of any corporation of which the Corporation is a stockholder and to execute a proxy to any other person to represent the Corporation at any such meeting, and at any such meeting the President, the Secretary or the Treasurer or the holder of any such proxy, as the case may be, shall possess and may exercise any and all rights and powers incident to ownership of such stock and which, as owner thereof, the Corporation might have possessed and exercised if present. The Board of Directors or the Executive Committee may from time to time confer like powers upon any other person or persons. Section 8. Indemnification of Officers and Directors: The Corporation shall indemnify any and all of its directors or officers, including former directors or officers, and any employee, who shall serve as an officer or director of any corporation at the request of this Corporation, to the fullest extent permitted under and in accordance with the laws of the State of Delaware. ARTICLE IX AMENDMENTS The Board of Directors shall have the power to make, rescind, alter, amend and repeal these By-laws, provided, however, that the stockholders shall have power to rescind, alter, amend or repeal any by-laws made by the Board of Directors, and to enact by-laws which if so expressed shall not be rescinded, altered, amended or repealed by the Board of Directors. No change of the time or place for the annual meeting of the stockholders for the election of directors shall be made except in accordance with the laws of the State of Delaware. 10 EX-99.T3B6 17 h90985ex99-t3b6.txt BYLAWS OF PIONEER (EAST), INC. 1 EXHIBIT T3B-6 PIONEER (EAST), INC. BY-LAWS ARTICLE I STOCKHOLDERS Section 1. Annual Meeting. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen (13) months subsequent to the later of the date of incorporation or the last annual meeting of stockholders. Section 2. Special Meetings. Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by the Board of Directors or the chief executive officer and shall be held at such place, on such date, and at such time as they or he or she shall fix. Section 3. Notice of Meetings Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation). 2 When a meeting is adjourned to another place, date, or time, written notice need not be given of the adjourned meeting if the place, date, and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 4. Quorum. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. Where a separate vote by a class or classes is required, a majority of the shares of such class or classes present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time. If a notice of any adjourned special meeting or stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such 2 3 adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting. Section 5. Organization. Such person as the Board of Directors may have designate and/or, in the absence of such a person, the chief executive officer of the Corporation or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the Corporation, the secretary of the meeting shall be such person as the chairman appoints. Section 6. Conduct of Business. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to him or her in order. Section 7. Proxies and Voting. At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting. Each stockholder shall have one (1) vote for every share of stock entitled to vote which is registered in his or her name on the record date for the meeting, except as otherwise provided herein or required by law. All voting, including on the election of directors but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefore 3 4 by a stockholder entitled to vote or by his or her proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast. Section 8. Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder, for any propose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. 4 5 Section 9. Consent of Stockholders in Lieu of Meeting. Any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be made by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be elective to take the corporate action referred to therein unless, within sixty (60) days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in the first paragraph of this Section. 5 6 ARTICLE II BOARD OF DIRECTORS Section 1. Number and Term of Officer. The number of directors who shall constitute the whole Board shall be such number as the Board of Directors shall from time to time have designated, except that in the absence of any such designation, such number shall be three (3). Each director shall be elected for a tern of one year and until his or her successor is elected and qualified, except as otherwise provided herein or required by law. Whenever the authorized number of directors is increased between annual meetings of the stockholders, a majority of the directors then in office shall have the power to elect such new directors for the balance of a term and until their successors are elected and qualified. Any decrease in the authorized number of directors shall not become effective until the expiration of the term of the directors then in office unless, at the time of such decrease, there shall be vacancies on the board which are being eliminated by the decrease. Section 2. Vacancies. If the office of any director becomes vacant by reason of death, resignation, disqualification, removal or other cause, a majority of the directors remaining in office, although less than a quorum, may elect a successor for the unexpired term and until his or her successor is elected and qualified. 6 7 Section 3. Regular Meetings. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required. Section 4. Special Meetings. Special meetings of the Board of Directors may be called by one-third (1/3) of the directors then in office (rounded up to the nearest whole number) or by the chief executive officer and shall be held at such place, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given each director by whom it is not waived by mailing written notice not less than five (5) days before the meeting or by telegraphing or telexing or by facsimile transmission of the same not less than twenty-four (24) hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Section 5. Forum. At any meeting of the Board of Directors, a majority of the total number of the whole Board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date, or time, without further notice or waiver thereof. 7 8 Section 6. Participation in Meetings By Conference Telephone. Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting. Section 7. Conduct of Business. At any meeting of the Board of Directors, business shall be transacted in such order and manner as the Board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Action may be taken by the Board of Directors without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. Section 8. Powers. The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, including, without limiting the generality of the foregoing, the unqualified power: (1) To declare dividends from time to time in accordance with law; (2) To purchase or otherwise acquire any property, rights or privileges on such terms as it shall determine; 8 9 (3) To authorize the creation, making and issuance, in such form as it may determine, or written obligations of every kind, negotiable or non-negotiable, secured or unsecured, and to do all things necessary in connection therewith; (4) To remove any officer of the Corporation with or without cause, and from time to time to confer the powers and duties of any officer upon any other person for the time being; (5) To confer upon any officer of the Corporation the power to appoint, remove and suspend subordinate officers, employees and agents; (6) To adopt from time to time such stock, option, stock purchase, bonus or other compensation plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; (7) To adopt from time to time such insurance, retirement, and other benefit plans for directors, officers, employees and agents of the Corporation and its subsidiaries as it may determine; and, (8) To adopt from time to time regulations, not inconsistent with these By-laws, for the management of the Corporation's business and affairs. ARTICLE III COMMITTEES Section 1. Committees of the Board of Directors. The Board of Directors, by a vote of a majority of the whole Board, may from time to time designate committees of the Board, with such lawfully delegable powers and 9 10 duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Any committee so designated may exercise the power and authority of the Board of Directors to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law if the resolution which designates the committee or a supplemental resolution of the Board of Directors shall so provide. In the absence or disqualification of any member of any committee and any alternate member in his or her place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. Section 2. Conduct of Business. Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third (1/3) of the members shall constitute a quorum unless the committee shall consist of one (1) or two (2) members, in which event, one (1) member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all 10 11 members thereof consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of such committee. ARTICLE IV OFFICERS Section 1. Officers. The officers of the Corporation shall be elected by the Board of Directors, and shall include a President, a Secretary, a Treasurer, and such other officers, employees and agents as appointed, from time to time, in accordance with these By-laws. Additionally, the President shall have the power to appoint such Vice Presidents and other officers equivalent or junior thereto as the President may deem appropriate. Section 2. Term. Each officer of the Corporation shall serve at the pleasure of the Board of Directors, and the Board may remove any officer at any time with or without cause. Any officer, if appointed by the President of the Corporation, may likewise be removed by the President of the Corporation. Section 3. Authority and Duties. All officers and agents of the Corporation shall have such authority and perform such duties in the management of the property and affairs of the Corporation as generally pertain to their respective offices, as well as such authority and duties as may be determined by the Board of Directors. Section 4. Execution of Instruments. Checks, notes, drafts, other commercial instruments, assignments, guarantees of signatures, and contracts (except -is otherwise provided herein or by law) shall be 11 12 executed by the President, any Vice President, the Secretary, the Treasurer, or such officers or employees or agents as the Board of Directors or any of such designated officers may direct. Section 5. Compensation. The Board of Directors shall have power to fix, or to delegate the power to fix, the compensation for services in any capacity of all officers, employees or agents of the Corporation. The Board of Directors shall have the authority to establish, within legal limits, such pension, retirement, stock purchase and stock option plans, and such other hinge benefit plans for the benefit of officers, employees, or agents as it deems to be in the best interest of the Corporation. 12 13 Section 6. Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the President, any Vice President, the Secretary, the Treasurer or any officer of the Corporation authorized by such officers shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE V STOCK Section 1. Certificates of Stock. Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the President or a Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him or her. Any or all of the signatures on the certificate may be by facsimile. Section 2. Transfers of Stock. Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 4 of Article V of these By-Laws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor. 13 14 Section 3. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other action as hereinbefore described; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion, or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. 14 15 In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall be not more than ten (10) days after the date upon which the resolution fixing the record date is adopted. If no record date has been fixed by the Board of Directors and no prior action by the Board of Directors is required by the Delaware General Corporation Law, the record date shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in the manner prescribed by Article I, Section 9 hereof. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Delaware General Corporation Law with respect to the proposed action by written consent of the stockholders, the record date for determining stockholders entitled to consent to corporate action in writing shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. Section 4. Lost, Stolen, or Destroyed Certificates. In the event of the loss, theft, or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft; or destruction and concerning the giving of a satisfactory bond or bonds or indemnity. 15 16 Section 5. Regulations. The issue, transfer, conversion, and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish. ARTICLE VI NOTICES Section 1. Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee, or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof by depositing such notice in the mails, postage paid, or by sending such notice by prepaid telegram or mailgram. Any such notice shall be addressed to such stockholder, director, officer, employee, or agent at his or her last known address as the same appears on the books of the Corporation. The time when such notice is received, if hand-delivered, or dispatched, if delivered through the mails or by telegram or mailgram, shall be the time of the giving of the notice. Section 2. Waivers. A written waiver of any notice, signed by a stockholder, director, officer, employee, or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee, or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver. 16 17 ARTICLE VII MISCELLANEOUS Section 1. Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these By-Laws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof. Section 2. Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer. Section 3. Reliance upon Books, Reports, and Records. Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation. 17 18 Section 4. Fiscal Year. The fiscal year of the Corporation shall be as fixed by the Board of Directors. Section 5. Time Periods. In applying any provision of these By-Laws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer. employee, or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent 18 19 that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes, or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section 3 of this Article VII with respect to proceedings to enforce rights to indemnification, the corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Section 2. Right to Advancement of Expenses. The right to indemnification conferred in Section 1 of this Article VIII shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section 2 or' otherwise. The rights to 19 20 indemnification and to the advancement of expenses conferred in Sections 1 and 2 of this Article VIII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the indemnitee's heirs, executors, and administrators. Section 3. Right of Indemnitee to Bring Suit. If a claim under Section 1 or 2 of this Article VIII is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation ,Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that 20 21 indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VIII or otherwise shall be on the Corporation. Section 4. Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Article VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation's Certificate of Incorporation, By-Laws, agreement, vote of stockholders, or disinterested directors or otherwise. Section 5. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee, or agent of the Corporation or another corporation, partnership, joint venture, trust, or other enterprise against any expense, liability or loss, 21 22 whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. Section 6. Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. ARTICLE IX AMENDMENTS These By-Laws may be amended or repealed by the Board of Directors at any meeting or by the stockholders at any meeting. 22 EX-99.T3B7 18 h90985ex99-t3b7.txt BYLAWS OF PIONEER LICENSING, INC. 1 EXHIBIT T3B-7 BY-LAWS OF PIONEER LICENSING, INC. A DELAWARE CORPORATION ARTICLE I - OFFICES The registered office of the Corporation in the State of Delaware shall be located in the City and State designated in the Certificate of Incorporation. The Corporation may also maintain offices at such other places within or without the State of Delaware as the Board of Directors may, from time to time, determine. ARTICLE II - MEETING OF SHAREHOLDERS Section 1. Annual Meetings: (Section 211) The annual meeting of the shareholders of the Corporation shall be held at the time fixed, from time to time, by the Directors, at the time fixed from time to time by the Directors. Section 2. Special Meetings: (Section 211) Special meetings of the shareholders may be called by the Board of Directors or such person or persons authorized by the Board of Directors shall be held within or without the State of Delaware. Section 3. Court-ordered meeting: (Section 211) The Court of Chancery in this State where the Corporation's principal office is located, or where; the Corporation's registered office is located if its principal office is not located in this state, may after notice to the Corporation, order a meeting to be held on application of any Director or shareholder of the Corporation entitled to vote in an annual meeting if an annual meeting has not been held within any thirteen month period if there is a failure by the Corporation to hold an annual meeting for a period of thirty days after the date designated therefor, or if no date has been designated, for a period of thirteen months after the organization of the Corporation or after its last annual meeting. The court may fix the time and place of the meeting, determine the shares entitled to participate in the meeting, specify a record date for determining shareholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, and enter other orders may be appropriate. * All references to Sections in these By Laws refer to those sections contained in the Delaware General Corporation Law. 2 Section 4. Place of Meetings: (Section 211) Meetings of shareholders shall be held at the registered office of the Corporation, or at such other places, within or without the State of Delaware as the Directors may from time to time fix. If no designation is made, the meeting shall be held at the Corporation's registered office in the state of Delaware. Section 5. Notice of Meetings: (Section 222) Written or printed notice of each meeting of shareholders, whether annual or special, stating the time when and place where it is to be held, shall be served either personally or by first class mail, by or at the direction of the president, the secretary, or the officer or the person calling the meeting, not less than ten or more than sixty days before the date of the meeting, unless the lapse of the prescribed time shall have been waived before or after the taking of such action, upon each shareholder of record entitled to vote at such meeting, and to any other shareholder to whom the giving of notice may be required by law. Notice of a special meeting shall also state the business to be transacted or the purpose or purposes for which the meeting is called, and shall indicate that it is being issued by, or at the direction of, the person or persons calling the meeting. If, at any meeting, action is proposed to be taken that would, if taken, entitle shareholders to dissent and receive payment for their shares pursuant to the Delaware General Corporation Law, the notice of such meeting shall include a statement of that purpose and to that effect. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder as it appears on the share transfer records of the Corporation. Section 6. Shareholders' List: (Section 219) (a) After fixing a record date for a meeting, the officer who has charge of the stock ledger of the Corporation, shall prepare an alphabetical list of the names of all its shareholders entitled to notice of the meeting, arranged by voting group with the address of, and the number, class, and series, if any, of shares held by, each shareholder. The shareholders' list must be available for inspection by any shareholder for a period of ten days before the meeting or such shorter time as exists between the record date and the meeting and continuing through the meeting at the Corporation's principal office, at a place identified in the meeting notice in the city where the meeting will be held, or at the office of the Corporation's transfer agent or registrar. Any shareholder of the Corporation or the shareholder's agent or attorney is entitled on written demand to inspect the shareholders' list during regular business hours and at the shareholder's expense, during the period it is available for inspection. (b) The Corporation shall make the shareholder's list available at the meeting of shareholders, and any shareholder or the shareholder's agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment. 2 3 (c) Upon the willful neglect or refusal of the Directors to produce such a list at any meeting for the election of Directors, such Directors shall be ineligible for election for any office at such meeting. (d) The stock ledger shall be the only evidence as to who are the shareholders entitled to examine the stock ledger, the list required by Section 219 of the Delaware General Corporation Law or the books of the Corporation, or to vote in person or by proxy at any shareholders' meeting. Section 7. Quorum: (Section 216) (a) Except as otherwise provided herein, or by law, or in the Certificate of Incorporation (such Articles and any amendments thereof being hereinafter collectively referred to as the "Certificate of Incorporation"), or for meetings ordered by the Court of Chancery called pursuant to Section 211 of the Delaware General Corporations Law, a quorum shall be present at all meetings of shareholders of the Corporation, if the holders of a majority of the shares entitled to vote on that matter are represented at the meeting in person or by proxy. (b) The subsequent withdrawal of any shareholder from the meeting; after the commencement of a meeting, or the refusal of any shareholder represented in person or by proxy to vote, shall have no effect on the existence of a quorum, after a quorum has been established at such meeting. (c) Despite the absence of a quorum at any meeting of shareholders, the shareholders present may adjourn the meeting. Section 8. Voting: (Section 212 & 216) Except as otherwise provided by law, the Certificate of Incorporation, or these Bylaws, any corporate action, other than the election of Directors, the affirmative vote of the majority of shares entitled to vote on that matter and represented either in person or by proxy at a meeting of shareholders at which a quorum is present shall be the act of the shareholders of the Corporation. (b) Unless otherwise provided for in the Articles of Incorporation of this Corporation, directors will be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present and each shareholder entitled to vote has the right to vote the number of shares owned by him for a many persons as there are Directors to be elected. Unless otherwise provided for in the Certificate of Incorporation of this Corporation, Directors will be elected by a plurality of the votes by the shares, present in person or by proxy, entitled to vote in the election at a meeting at which a quorum is present and each shareholder entitled to vote has the right to vote the number of shares owned by him/her for as many persons as there are Directors to be elected. (c) Except as otherwise provided by statute, the Certificate of Incorporation, or these bylaws, at each meeting of shareholders, each shareholder of the Corporation entitled to vote thereat, shall be entitled to one vote for each share registered in his name on the books of the Corporation. 3 4 Section 9. Proxies: (Section 212) Each shareholder entitled to vote or to express consent or dissent without a meeting, may do so either in person or by proxy, so long as such proxy is executed in writing by the shareholder himself, or by his attorney-in-fact thereunto duly authorized in writing. Every proxy shall be revocable at will unless the proxy conspicuously states that it is irrevocable and the proxy is coupled with an interest. A .telegram, telex, cablegram, or similar transmission by the share-holder, or as a photographic, photostatic, facsimile, shall be treated as a valid proxy, and treated as a substitution of the original proxy, so long as such transmission is a complete reproduction executed by the shareholder. No proxy shall be valid after the expiration of three years from the date of its execution, unless otherwise provided in the proxy. Such instrument shall be exhibited to the Secretary at the meeting and shall be filed with the records of the Corporation. Section 10. Action Without a Meeting: (Section 228) Unless otherwise provided for in the Certificate of Incorporation of the Corporation, any action to be taken at any annual or special shareholders' meeting, may be taken without a meeting, without prior notice and without a vote if a written consent or consents is/are signed by the shareholders of the Corporation having not less than the minimum number of votes necessary to authorize or take such action at a meeting at which all shares entitled to vote thereat were present and voted is delivered by hand or by certified or registered mail, return receipt requested, to the Corporation to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of share-holders' meetings are recorded. Section 11. Inspectors: (Section 231) (a) The Corporation shall appoint one or more inspectors, and one or more alternate inspectors, to act at any shareholder' meeting and make a written report thereof, so long a such inspectors sign an oath to faithfully execute their duties with impartiality and to the best of their ability before such meeting. If no inspector or alternate is able to act a shareholder meeting, the presiding officer shall appoint one or more inspectors to act at the meeting. (b) The inspector shall: (1) ascertain the number of shares entitled to vote and the voting power of each such shareholder; (2) determine the shares represented at a meeting and the validity of proxies and ballots; (3) count all votes and ballots; 4 5 (4) determine and retain for a reasonable time a disposition record of any challenges made to any of the inspectors' determinations; and (5) certify the inspectors' determinations of the number of shares represented at the meeting and their count of all votes and ballots. ARTICLE III - BOARD OF DIRECTORS Section 1. Number Term Election and Qualifications: (Section 141) (a) The first Board of Directors and all subsequent Boards of the Corporation shall consist of _____, unless and until otherwise determined by vote of a majority of the entire Board of Directors. The Board of Directors or shareholders all have the power, in the interim between annual and special meetings of the shareholders, to increase or decrease the number of Directors of the Corporation. A Director need not be a shareholder of the Corporation unless the Certificate of Incorporation of the Corporation or these Bylaws require. (b) Except as may otherwise be provided herein or in the Certificate of Incorporation, the members of the Board of Directors of the Corporation shall be elected at the first annual shareholders' meeting and at each annual meeting thereafter, unless their terms are staggered in the Certificate of Incorporation of the Corporation or these Bylaws, by a majority of the votes cast at a meeting of shareholders, by the holders of shares entitled to vote in the election. (c) The first Board of Directors shall hold office until the first annual meeting of shareholders and until their successors have been duly elected and qualified or until there is a decrease in the number of Directors. Thereinafter, Directors will be elected at the annual meeting of shareholders and shall hold office until the annual meeting of the shareholders next succeeding his election, or until his prior death, resignation or removal. Any Director may resign at any time upon written notice of such resignation to the Corporation. *NOTE: Article II Section 1 Subsection (b) of these Bylaws shall not be used in the Corporation's Bylaws unless the Corporation has one or more classes of voting stock that are: (i) listed on a national exchange; (ii) authorized for quotation on an interdealer quotation system of a registered national securities association; or (iii) held by more than two thousand shareholder of record of the Corporation. Section 2. Duties and Powers: (Section 141) The Board of Directors shall be responsible for the control and management of the business and affairs, property and interests of the Corporation, and may exercise all powers of the Corporation, except such as those stated under Delaware 5 6 state law, are in the Certificate of Incorporation or by these Bylaws, expressly conferred upon or reserved to the shareholders or any other person or persons named therein. Section 3. Regular Meetings; Notice: (a) A regular meeting of the Board of Directors shall be held either within or without the State of Delaware at such time and at such place as the Board shall fix. (b) No notice shall be required of any regular meeting of the Board of Directors and, if given, need not specify the purpose of the meeting; provided, however, that in case the Board of Directors shall fix or change the time or place of any regular meeting when such time and place was fixed before such change, notice of such action shall be given to each director who shall not have been present at the meeting at which such action was taken within the time limited, and in the manner set forth in these Bylaws with respect to special meetings, unless such notice shall be waived in the manner set forth in these Bylaws. Section 4. Special Meetings; Notice: (a) Special meetings of the Board of Directors shall be held at such time and place as may be specified in the respective notices or waivers of notice thereof. (b) Except as otherwise required statute, written notice of special meetings shall be mailed directly to each Director, addressed to him at his residence or usual place of business, or delivered orally, with sufficient time for the convenient assembly of Directors thereat, or shall be sent to him at such place by telegram, radio or cable, or shall be delivered to him personally or given to him orally, not later than the day before the day on which the meeting is to be held. If mailed, the notice of any special meeting shall be deemed to be delivered on the second day after it is deposited in the United States mails, so addressed, with postage prepaid. If notice is given by telegram, it shall be deemed to be delivered when the telegram is delivered to the telegraph company. A notice, or waiver of notice, except as required by these Bylaws, need not specify the business to be transacted at or the purposes or purposes of the meeting. (c) Notice of any special meeting shall not be required to be given to any Director who shall attend such meeting without protesting prior thereto or at its commencement, the lack of notice to him, or who submits a signed waiver of notice, whether before or after the meeting. Notice of any adjourned meeting shall not be required to be given. (d) Unless otherwise stated in the Articles of Incorporation of the Corporation, the Chairperson, President, Treasurer, Secretary or any two or more Directors of the Corporation may call any special meeting of the Board of Directors. 6 7 Section 5. Chairperson: The Chairperson of the Board, if any and if present, shall preside at all meetings of the Board of Directors. If there shall be no Chairperson, or he or she shall be absent, then the President shall preside, and in his absence, any other director chosen by the Board of Directors shall preside. Section 6. Quorum and Adjournments: (Section 141) (a) At all meetings of the Board of Directors, or any committee thereof, the presence of a majority of the entire Board, or such committee thereof, shall constitute a quorum for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation, or these Bylaws. (Note: If the Certificate of Incorporation authorize a quorum to consist of less than a majority, but no fewer than one-third of the prescribed number of Directors as permitted by law except that when a card of one Director is authorized under Section 141 of the Delaware General Corporation Law, then one Director shall constitute a quorum or if the Certificate of Incorporation and/or Bylaws require a greater number than a majority as constituting a quorum then these Bylaws would state that this lesser or greater amount, instead of a majority, will constitute a quorum.) (b) A majority of the directors present at the time and place of any regular or special meeting, although less than a quorum, may adjourn the same from time to time without notice, whether or not a quorum exists. Notice of such adjourned meeting shall be given to Directors not present at time of the adjournment and, unless the time and place of the adjourned meeting are announced at the time of the adjournment, to the other Directors who were present at the adjourned meeting. Section 7. Manner of Acting: (Section 141) (a) At all meetings of the Board of Directors, each director present shall have one vote, irrespective of the number of shares of stock, if any, which he may hold. (b) Except as otherwise provided by law, by the Certificate of Incorporation, or these By Laws, action approved by a majority of the votes of the Directors present at any meeting of the Board or any committee thereof, at which a quorum is present shall be the act of the Board of Directors or any committee thereof. (c) Any action authorized in writing made prior or subsequent to such action, by all of the directors entitled to vote thereon and filed with the minutes of the Corporation shall be the act of the Board of Directors, or any committee thereof, and have the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board or committee for all purposes and may be stated as such in any certificate or document filed with the Secretary of the State of Delaware. (d) Where appropriate communications facilities are reasonably available, any or all directors shall have the right to participate in any Board of Directors 7 8 meeting, or a committee of the Board of Directors meeting, by means of conference telephone or any means of communications by which all persons participating in the meeting are able to hear each other. Section 8. Vacancies: (Section 223) (a) Any vacancy in the Board of Directors occurring by reason of an increase in the number of directors, or by reason of the death, resignation, disqualification, removal or inability to act of any director, or other cause, shall be filled by an affirmative vote of a majority of the remaining directors, though less than a quorum of the Board or by a sole remaining Director, at any regular meeting or special meeting of the Board of Directors called for that purpose except whenever the shareholders of any class or classes or series thereof are entitled to elect one or more Directors by the Certificate of Incorporation of the Corporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the Directors elected by such class or classes or series thereof then in office, or by a sole remaining Director so elected. (b) If at any time, by reason of death or resignation or other cause, the Corporation shall have no Directors in office, then an officer or any shareholder or an executor, administrator, trustee, or guardian of a shareholder, or other fiduciary entrusted with like responsibility for the person or estate of a shareholder, may call a special meeting of shareholders to fill such vacancies or may apply to the Court of Chancery for a decree summarily ordering an election. (c) If the Directors of the Corporation constitute less than a majority of the whole Board, the Court of Chancery may, upon application of any shareholder or shareholders holding at least ten percent of the total number of shares entitled to vote for Directors, order an election to be held to fill any such vacancies or newly created directorships. (d) Unless otherwise provided for by statute, the Certificate of Incorporation or these Bylaws, when one or more directors shall resign from the board and such resignation is effective at a future date, a majority of the directors, then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote otherwise to take effect when such resignation or resignations shall become effective. Section 9. Resignation: The shareholders may, at any meeting, vote to accept the resignation of any Director. 8 9 Section 10. Removal: (Section 141) One or more or all the Directors of the Corporation may be removed with or without cause at any time by the shareholders, at a special meeting of the shareholders called for that purpose, unless the Certificate of Incorporation provide that Directors may only be removed for cause, provided however, such Director shall not be removed if the Corporation's states in its Certificate of Incorporation that its Directors shall be elected by cumulative voting and there are a sufficient number of shares cast against his or her removal, which if cumulatively voted at an election of Directors would be sufficient to elect him or her. If a Director was elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that Director. Section 11. Compensation: (Section 141) The Board of Directors may authorize and establish reasonable compensation of the Directors for services to the Corporation as Directors, including, but not limited to attendance at any annual or special meeting of the Board. Section 12. Committees: (Section 141) The Board of Directors, by resolution adopted by a majority of the entire Board, may from time to time designate from among its members one or more committees, and alternate members thereof, as they deem desirable, each consisting of one or more members, with such powers and authority (to the extent permitted by law and these Bylaws) as may be provided in such resolution. Each such committee shall serve at the pleasure of the Board and, unless otherwise stated by law, the Certificate of Incorporation of the Corporation or these Bylaws, shall be governed by the rules and regulations stated herein regarding the Board of Directors. ARTICLE IV - OFFICERS Section 1. Number, Qualifications, Election and Term of Office: (Section 142) (a) The Corporation's officers shall have such titles and duties as shall be stated in these Bylaws or in a resolution of the Board of Directors which is not inconsistent with these Bylaws. The officers of the Corporation shall consist an officer whose duty is to record proceedings of shareholders' and Directors' meetings and such other officers as the Board of Directors may from time to time deem advisable. Any officer other than the Chairman of the Board of Directors may be, but is not required to be, a Director of the Corporation. Any two or more offices may be held by the same person. (b) The officers of the Corporation shall be elected by the Board of Directors at the regular annual meeting of the Board following the annual meeting of shareholders. 9 10 (c) Each officer shall hold office until the annual meeting of the Board of Directors next succeeding his election, and until his successor shall have been duly elected and qualified, subject to earlier termination by his or her death, resignation or removal. Section 2. Resignation: (Section 142) Any officer may resign at any time by giving written notice of such resignation to the Corporation. Section 3. Removal: (Section 142) Any officer elected by the Board of Directors may be removed, either with or without cause, and a successor elected by the Board at any time, and any officer or assistant officer, if appointed by another officer, may likewise be removed by such officer. Section 4. Vacancies: (Section 142) A vacancy, however caused, occurring in the Board and any newly created Directorships resulting from an increase in the authorized number of Directors may be filled by the Board of Directors. Section 5. Bonds: (Section 142) The Corporation may require any or all of its officers or Agents to post a bond, or otherwise, to the Corporation for the faithful performance of their positions or duties. Section 6. Compensation: The compensation of the officers of the Corporation shall be fixed from time to time by the Board of Directors. ARTICLE V - SHARES OF STOCK Section 1. Certificate of Stock: (a) The shares of the Corporation shall be represented by certificates or shall be uncertificated shares. (b) Certificated shares of the Corporation shall be signed, (either manually or by facsimile), by the Chairperson, Vice-Chairperson, President or Vice-President and Secretary or an Assistant Secretary or the Treasurer or Assistant Treasurer or any other Officer designated by the Board of Directors, certifying that the number of shares owned by him or her in the Corporation, provided however that where such certificate is signed by a transfer agent or an assistant transfer agent or by a transfer clerk 10 11 acting on behalf of the Corporation and a registrar, any such signature may be a facsimile thereof. In case any officer who has signed or whose facsimile signature has been placed upon such certificate, shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. (c) Certificates shall be issued in such form not inconsistent with the Certificate of Incorporation and as shall be approved by the Board of Directors. Such certificates shall be numbered and registered on the books of the Corporation in the order in which they were issued. (d) Except as otherwise provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical. Section 2. Lost or Destroyed Certificates: The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed if the owner: (a) so requests before the Corporation has notice that the shares have been acquired by a bona fide purchaser, (b) files with the Corporation a sufficient indemnity bond; and (c) satisfies such other requirements, including evidence of such loss, theft or destruction, as may be imposed by the Corporation. Section 3. Transfers of Shares: (Section 201) (a) Transfers or registration of transfers of shares of the Corporation shall be made on the stock transfer books of the Corporation by the registered holder thereof, or by his attorney duly authorized by a written power of attorney; and in the case of shares represented by certificates, only after the surrender to the Corporation of the certificates representing such shares with such shares properly endorsed, with such evidence of the authenticity of such endorsement, transfer, authorization and other matters as the Corporation may reasonably require, and the payment of all stock transfer taxes due thereon. (b) The Corporation shall be entitled to treat the holder of record of any share or shares as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law. 11 12 Section 4. Record Date: (Section 213) (a) The Board of Directors may fix, in advance, which shall not be more than sixty, nor less than ten days before the meeting or action requiring a determination of shareholders, as the record date for the determination of shareholders entitled to receive notice of, or to vote at, any meeting of shareholders, or to consent to any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividends, or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for shareholders entitled to notice of meeting shall be at the close of business on the day preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held, or if notice is waived, at the close of business on the day before the day on which the meeting is held. (b) The Board of Directors may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted for shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights of shareholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, provided that such record date shall not be more than sixty days before such action. (c) The Board of Directors may fix, in advance, a date which shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date is fixed and no prior action is required by the Board, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery by hand or by certified or registered mail, return receipt requested, to its registered office in this State, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of shareholders are recorded. If no record date is fixed by the Board of Directors and prior action is required by law, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (d) A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting. ARTICLE VI - DIVIDENDS (Section 173) Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amounts, and at such time or times as the Board of Directors may determine. 12 13 ARTICLE VII - FISCAL YEAR The fiscal year of the Corporation shall be fixed, and shall be subject to change by the Board of Directors from time to time, subject to applicable law. ARTICLE VIII - CORPORATE SEAL [Section 607.0302(2)] The corporate seal, if any, shall be in such form as shall be prescribed and altered, from time to time, by the Board of Directors. ARTICLE IX - AMENDMENTS Section 1. Initial Bylaws: The initial Bylaws of the Corporation shall be adopted by the Board of Directors at its organizational meeting. Section 2. By Shareholders: All by-laws of the Corporation shall be subject to alteration or repeal, and new by-laws may be made, by a majority vote of the shareholders at the time entitled to vote in the election of directors even though these Bylaws may also be altered, amended or repealed by the Board of Directors. Section 3. By Directors: The Board of Directors shall have power to make, adopt, alter, amend and repeal, from time to time, by-laws of the Corporation; however, Bylaws made by the Board may be altered or repealed, and new Bylaws made by the shareholders. ARTICLE X - WAIVER OF NOTICE: (Section 229) Whenever any notice is required to be given by law, the Certificate of Incorporation or these Bylaws of any these Bylaws, meeting of shareholders, Board of Directors, or committee thereof, or attendance at the meeting by any person, shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of shareholders, Directors or committee thereof need be specified in any written waiver of notice. ARTICLE XI - INTERESTED DIRECTORS: (Section 144) No contract or transaction shall be void or voidable if such contract or transaction is between the corporation and one or more of its Directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its Directors or officers, are directors or officers, or have a financial interest, when such Director or officer is present at or participates in the 13 14 meeting of the Board of committee which authorizes the contract or transaction or his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (b) the material facts as to his, her or their relationship or relationships or interest or interests and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee or the shareholders. Such interested Directors may be counted when determining the presence of a quorum at the Board of Directors' or committee meeting authorizing the contract or transaction. ARTICLE XII - FORM OF RECORDS: (Section 224) Any records maintained by the Corporation in its regular course of business, including, but not limited to, its stock ledger, books of account and minute book, may be kept on, or be in the form of punch cards, magnetic tape, photographs, micro-photographs or any other information storage device, provided that the records so kept may be converted into clearly legible written form within a reasonable time. The Corporation shall so convert any of such records so kept upon the request of any person entitled to inspect the same. 14 EX-99.T3B8 19 h90985ex99-t3b8.txt BYLAWS OF IMPERIAL WEST CHEMICAL CO. 1 EXHIBIT T3B-8 BYLAWS Bylaws for the regulation, except as otherwise provided by statute or its Articles of Incorporation of IMPERIAL WEST CHEMICAL CO., a Nevada Corporation ARTICLE I. OFFICES Section 1. Principal Executive Office. The principal executive office of the corporation is hereby fixed and located at: One East First Street, Reno, Washoe County, Nevada 89501. The Board of Directors (herein called the "Board") is hereby granted full power and authority to change said principal executive office from one location to another. Any such change shall be noted on the Bylaws opposite this Section, or this Section may be amended to state the new location. Section 2. Other Offices. Branch or subordinate offices may at any time be established by the Board at any place or places. ARTICLE II. SHAREHOLDERS Section 1. Place of Meetings. Meetings of shareholders shall be held either at the principal executive office of the corporation or at any other place within or without the State of Nevada which may be designated either by the Board or by the written consent of all persons entitled to vote thereat, given either before or after the meeting and filed with the Secretary. Section 2. Annual Meetings. The annual meetings of shareholders shall be held on the second Tuesday of December of each year, at 10:00 a.m., local time, or such other date or such other time as may be fixed by the Board; provided, however, that should said day fall upon a Saturday, Sunday, or legal holiday observed by the corporation at its principal executive office, then any such annual meeting of shareholders shall be held at the same time and place on the next day thereafter ensuing which is a full business day. At such meetings directors shall be elected and any other proper business may be transacted. Section 3. Special Meetings. Special meetings of the shareholders may be called at any tine by the Board, the Chairman of the Board, the President, or by the holders of shares entitled to cast not less than 10 percent of the votes at such meeting. Upon request in writing to the Chairman of the Board, the President, any Vice President or the Secretary by any person (other than the Board) entitled to call a special meeting of shareholders, the officer forthwith shall cause notice to be given to the shareholders 2 entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than 35 nor more than 60 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice. Section 4. Notice of Annual or Special Meeting. Written notice of each annual or special meeting of shareholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each shareholder entitled to vote thereat and signed by the President, Vice-President or Secretary. Such notice shall state the place, date, and hour of the meeting and (i) in the case of a special meeting the general nature of the business to be transacted, and no other business may be transacted, or (ii) in the case of the annual meeting, those matters which the Board, at the time of the mailing of the notice, intends to present for action by the shareholder, but, subject to the provisions of applicable law, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by management for election. Notice of a shareholders meeting shall be given either personally or by mail or by other means of written communication, addressed to the shareholder at the address of such shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice: or, if no such address appears or is given, at the place where the principal executive office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mails, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient. Whenever all persons entitled to vote at any meeting, consent either by: (a) a writing on the records of the meeting or filed with the secretary; (b) presence at such meeting and oral consent entered on the inter or (c) taking part in the deliberations at such meeting without objection; the doings of such meeting shall be as valid as if had at a meeting regularly called noticed. Section 5. Quorum. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Section 6. Adjourned Meeting and Notice Thereof. Any shareholders' meeting, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or 2 3 represented by proxy thereat, but in the absence of a quorum (except as provided in Section 5 of this Article) no other business may be transacted at such meeting. It shall not be necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted thereat, other than by announcement at the meeting at which such adjournment is taken; provided, however, when any shareholders' meeting is adjourned for more than 45 days or, if after adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of an original meeting. Section 7. Voting. The shareholders entitled to notice of any meeting or to vote at any such meeting shall be only persons in whose name shares stand on the stock records of the corporation on the record date determined in accordance with Section 8 of this Article. Voting shall in all cases be subject to the provisions of the Nevada General Corporation Law and to the following provisions: (a) Subject to clause (g), shares held by an administrator, executor, guardian, conservator or custodian may be voted by such holder either in person or by proxy, without a transfer of such shares into the holder's name; and shares standing in the name of a trustee may be voted by the trustee, either in person or by proxy, but no trustee shall be entitled to vote shares held by such trustee without a transfer of such shares into the trustee's name. (b) Shares standing in the name of a receiver may be voted by such receiver; and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the receiver's name if authority to do so is contained in the order of the court by which such receiver was appointed. (c) Except where otherwise agreed in writing between the parties, a shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. (d) Shares standing in the name of a minor may be voted and the corporation may treat all, rights incident thereto as exercisable by the minor, in person or by proxy, whether or not the corporation has notice, actual or constructive, of the nonage, unless a guardian of the minor's property has been appointed and written notice of such appointment given to the corporation. (e) Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxyholder as the bylaws of such other corporation may prescribe or, in the absence of such provision, as the Board of Directors of such other corporation may determine or, in the absence of such determination, by the 3 4 chairman of the board, president or any vice president of such other corporation, or by any other person authorized to do so by the board, president or any vice president of such other corporation. Shares which are purported to be voted or any proxy purported to be executed in the name of a corporation (whether or not any title of the person signing is indicated) shall be presumed to be voted or the proxy executed in accordance with the provisions of this subdivision, unless the contrary is shown. (f) Shares of the corporation owned by any subsidiary shall not be entitled to vote on any matter. (g) Shares held by the corporation in a fiduciary capacity, and shares of the corporation held in a fiduciary capacity by any subsidiary, shall not be entitled to vote on any matter, except to the extent that the settlor or beneficial owner possesses and exercises a right to vote or to give the corporation binding instructions as to how to vote such shares. (h) If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, husband and wife as community property, tenants by the entirety, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise, or if two or more persons (including proxyholders) have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) If only one votes, such act binds all: (ii) If more than one vote, the act of the majority so voting binds all; (iii) If more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately. If the instrument so filed or the registration of the shares shows that any such tenancy is held in unequal interests, a majority or even split for the purpose of this section shall be a majority or even split in interest. Elections need not be by ballot; provided however, that all elections for directors must be by ballot upon demand made by a shareholder at the meeting and before the voting begins. In any election of directors, the candidates receiving the highest number of votes of the shares entitled to be voted for them up to the number of directors to be elected by such shares are elected. 4 5 Section 8. Record Date. The Board may fix, in advance, a record date for the determination of the shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution, or any allotment of rights, or to exercise rights in respect of any other lawful action. The record date so fixed shall be not more than 60 nor less than 10 days prior to any other action. When a record date is so fixed, only shareholders of record on that date are entitled to notice of and to vote at the meeting or to receive the dividend, distribution, or allotment of rights, or to exercise of the rights, as the case may be, notwithstanding any transfer of shares on the books of the corporation after the record date. A determination of shareholders of record entitled to notice of or to vote at the meeting unless the Board fixes a new record date for the adjourned meeting. The Board shall fix a new record date if the meeting is adjourned for more than 45 days. If no record date is fixed by the Board, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. The record date for determining shareholders for any purpose other than set forth in this Section 8 or Section 10 of this Article shall be at the close of business on the day on which the Board adopts the resolution relating thereto, or the sixtieth day prior to the date of such other action, whichever is later. Section 9. Consent of Absentees. The transactions of any meeting of shareholders, however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of the meeting or an approval of the minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of shareholders need be specified in any written waiver of notice. Section 10. Action Without Meeting. Any action except for the election of directors, which might be takes at any annual or special meeting of shareholders, may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Unless a record date for voting purposes be fixed as provided in Section 8 of this Article, the record date for determining shareholders entitled to give consent pursuant to this Section 10, when no prior action by the Board has been taken, shall be the day on which the first written consent is given. 5 6 Section 11. Proxies. Every person entitled to vote shares has the right to do so either in person or by one or more persons authorized by a written proxy executed by such shareholder and filed with the Secretary. Any proxy duly executed is not revoked and continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by, or by attendance at the meeting and voting in person by, the person executing the proxy; provided, however, that no proxy shall be valid after the expiration of 11 months from the date of its execution unless otherwise provided in the proxy. ARTICLE III. DIRECTORS Section 1. Powers. Subject to limitations of the Articles, of these Bylaws, and of the California General Corporation Law relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board. The Board may delegate the management of the day-to-day operation of the business of the corporation to a management company or other person provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Board shall have the following powers in addition to the other powers enumerated in these Bylaws: (a) To select and remove all the other officers, agents, and employees of the corporation, prescribe the powers and duties for them as may not be inconsistent with law, or with the Articles or these Bylaws, fix their compensation, and require from them security for faithful service. (b) To conduct, manage, and control the affairs and business of the corporation and to make such rules and regulations therefor not inconsistent with law, or with the Articles or these Bylaws, as they may deem best. (c) To adopt, make, and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time as in their judgment they may deem best. (d) To authorize the issuance of shares of stock of the corporation from time to time, upon such terms and for such consideration as may be lawful. (e) To borrow money and incur indebtedness for the purposes of the corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations, or other evidences of debt and securities therefor. 6 7 Section 2. Number. The number of directors shall be the number elected at each annual shareholders' meeting (or at a special meeting of shareholders called for such purpose) provided that the number of directors elected should be at least three (3) except that in cases where all of the shares of the corporation are owned beneficially and of record by either one or two shareholders, the number of directors may be less than three (3) but not less than the number of shareholders. Section 3. Election and Term of Office. The directors shall be elected at each annual meeting of shareholders by a plurality of the votes cast at such election but if any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose. Each director shall hold office until the next annual meeting and until a successor has been elected and qualified. Section 4. Vacancies. Any director may resign effective upon giving written notice to the Chairman of the Board, the President, Secretary, or the Board, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is at a future time, a successor may be elected to take office when the resignation becomes effective. Vacancies in the Board, including those existing as a result of a removal of a director, may be filled by a majority of the remaining director's, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until the next annual meeting and until such director's successor has been elected and qualified. A vacancy or vacancies in the Board shall be deemed to exist in case of the death, resignation, or removal of any director, or if the authorized number of directors be increased, or if the shareholders fail, at any annual or special meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at that meeting. The Board may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. Any such election by written consent requires the consent of a majority of the outstanding shares entitled to vote. If the Board accepts the resignation of a director tendered to take effect at a future time, the Board or the shareholders shall have power to elect a successor to take office when the resignation is to become effective. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of the director's term of office. 7 8 Section 5. Place of Meeting. Regular or special meetings of the Board shall be held at any place within or without the State of Nevada which has been designated from time to time by the Board. In the absence of such designation regular meetings shall be held at the principal executive office of the corporation. Section 6. Regular Meetings. Immediately following each annual meeting of shareholders the Board shall hold a regular meeting for the purpose of organization, election of officers, and the transaction of other business. Section 7. Special Meetings. Special meetings of the Board for any purpose or purposes may be called at any time by the Chairman of the Board, the President, or the Secretary of by any two directors. Special meetings of the Board shall be held upon four days written notice or 48 hours notice given personally or by telephone, telegraph, telex, or other similar means of communication. Any such notice shall be addressed or delivered to each director at such director's address as it is shown upon the records of the corporation or as may have been given to the corporation by the director for purposes of notice or, if such address is not shown on such records or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. Notice by mail shall be deemed to have been given at the time a written notice is deposited in the United States mails, postage prepaid. Any other written notice shall be deemed to have been given at the time it is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient. Oral notice shall be deemed to have been given at the time it is communicated,. in person or by telephone or wireless, to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient. Section 8. Quorum. A majority of the authorized number of directors constitutes a quorum of the Board for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board, unless a greater number be required by law or by the Articles. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. Section 9. Participation in Meetings by Conference Telephone. Members of the Board may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. 8 9 Section 10. Waiver of Notice. The transactions of any meeting of the Board, however called and noticed or wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum be present, and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding such meeting or an approval of the minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Section 11. Adjournment. A majority of the directors present, whether or not a quorum is present, may adjourn any directors' meeting to another time and place. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned. If the meeting is adjourned for more than 24 hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment. Section 12. Fees and Compensation. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by the Board. Section 13. Action Without Meeting. Any action required or permitted to be taken by the Board may be taken without a meeting if all members of the Board shall individually or collectively consent in writing to such action. Such consent or consents shall have the same effect as a unanimous vote of the Board and shall be filed with the minutes of the proceedings of the Board. Section 14. Committees. The Board may appoint one or more committees, each consisting of one or more directors, and delegate to such committees any of the authority of the Board in the management of the business and affairs of the corporation and may have power to authorize the seal of the corporation to be affixed to all papers on which the corporation desires to place a seal. ARTICLE IV. OFFICERS Section 1. Officers. The officers of the corporation shall be a president, a secretary, and a treasurer. The corporation may also have, at the discretion of the Board, a chairman of the board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be elected or appointed in accordance with the provisions of Section 3 of this Article. Section 2. Election. The officers of the corporation; except such officers as may be elected or appointed in accordance with the provisions of Section 3 or Section 5 of this Article, shall be chosen annually by, and shall serve at the pleasure of the Board and shall hold their respective offices until their resignation, removal, or other disqualification from service, or until their respective successors shall be elected. 9 10 Section 3. Subordinate Officers. The Board may elect, and may empower the President to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board may from time to time determine. Section 4. Removal and Resignation. Any officer may be removed, either with or without cause, by the Board of Directors at any time, or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board. Any such removal shall be without prejudice to the rights, if any, of the officer under any contract of employment of the officer. Any officer may resign at any time by giving written notice to the corporation, but without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Vacancies. A vacancy in any. office because of death, resignation, removal, disqualification, or any other cause shall be filled in the manner prescribed in these Bylaws for regular election or appointment to such office. Section 6. Chairman of the Board. The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board and exercise and perform such other powers and duties as may be from. time to time assigned by the Board. Section 7. President. Subject to such powers, if any, as may be given by the Board to the Chairman of the Board, if there be such an officer, the President is the general manager and chief executive officer of the corporation and has, subject to the control of the Board, general supervision, direction, and control of the business and officers of the corporation. The President shall preside at all meetings of the shareholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board. The President has the general powers and duties of management usually vested in the office of president and general manager of a corporation and such other powers and duties as may be prescribed by the Board. Section 8. Vice Presidents. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board or, if not ranked, the Vice President designated by the Board, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board. Section 9. Secretary. The Secretary shall keep or cause to be kept, at the principal executive office and such other place as the Board may order, a book of minutes 10 11 of all meetings of shareholders, the Board, and its committees, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at board and committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof. The Secretary shall keep, or cause to be kept, a copy of the Bylaws of the corporation at the principal executive office or business office in accordance with Section 78.105 of the Nevada Revised Statutes. The Secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation's transfer agent or registrar, if one be appointed, a share register, or a duplicate share register, showing the names of the shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board and of any committees thereof required by these Bylaws or by law to be given, shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board. Section 10. Treasurer. The Treasurer is the chief financial officer of the corporation and shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, and shall send or cause to be sent to the shareholders of the corporation such financial statements and reports as are bylaw or these Bylaws required to be sent to them. The Books of account shall at all times be open to inspection by any director. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board, shall render to the President and directors, whenever they request it, an account of all transactions as Treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board. 11 EX-99.T3B9 20 h90985ex99-t3b9.txt BYLAWS OF KEMWATER NORTH AMERICA CO. 1 EXHIBIT T3B-9 BYLAWS OF KEMWATER NORTH AMERICA COMPANY DATED EFFECTIVE AS OF: JANUARY 31, 1996 2 TABLE OF CONTENTS
Page ---- ARTICLE I Offices................................................................................................1 Section 1.1 Principal Office............................................................................1 Section 1.2 Registered Office...........................................................................1 Section 1.3 Other Offices...............................................................................1 ARTICLE II Stockholders' Meetings................................................................................1 Section 2.1 Annual Meeting..............................................................................1 Section 2.2 Special Meetings............................................................................1 Section 2.3 Notice of Meetings and Adjourned Meetings...................................................1 Section 2.4 Voting Lists................................................................................2 Section 2.5 Quorum......................................................................................2 Section 2.6 Organization................................................................................2 Section 2.7 Voting......................................................................................2 Section 2.8 Stockholders Entitled to Vote...............................................................3 Section 2.9 Order of Business...........................................................................3 Section 2.10 Action by Written Consent..................................................................3 Section 2.11 Authorization of Proxies...................................................................3 ARTICLE III Directors............................................................................................4 Section 3.1 Management..................................................................................4 Section 3.2 Number and Term.............................................................................4 Section 3.3 Quorum and Manner of Action.................................................................4 Section 3.4 Vacancies...................................................................................5 Section 3.5 Resignations................................................................................5 Section 3.6 Removals....................................................................................5 Section 3.7 Regular Meetings............................................................................5 Section 3.8 Special Meetings............................................................................5 Section 3.9 Organization of Meetings....................................................................6 Section 3.10 Place of Meetings..........................................................................6 Section 3.11 Compensation of Directors..................................................................6 Section 3.12 Action by Unanimous Written Consent........................................................6 Section 3.13 Participation in Meetings by Telephone.....................................................6 ARTICLE IV Committees of the Board...............................................................................6 Section 4.1 Membership and Authorities..................................................................6
i 3 TABLE OF CONTENTS (Continued)
Page ---- Section 4.2 Minutes.....................................................................................7 Section 4.3 Vacancies...................................................................................7 Section 4.4 Telephone Meetings..........................................................................7 Section 4.5 Action Without Meeting......................................................................7 ARTICLE V Officers...............................................................................................7 Section 5.1 Number and Title............................................................................7 Section 5.2 Term of Office; Vacancies...................................................................7 Section 5.3 Removal of Elected Officers.................................................................8 Section 5.4 Resignations................................................................................8 Section 5.5 The Chairman of the Board...................................................................8 Section 5.6 President...................................................................................8 Section 5.7 Vice Presidents.............................................................................8 Section 5.8 Secretary...................................................................................8 Section 5.9 Assistant Secretaries.......................................................................9 Section 5.10 Treasurer..................................................................................9 Section 5.11 Assistant Treasurers.......................................................................9 Section 5.12 Subordinate Officers.......................................................................9 Section 5.13 Salaries and Compensation..................................................................9 ARTICLE VI Indemnification......................................................................................10 Section 6.1 Indemnification of Directors and Officers..................................................10 ARTICLE VII Capital Stock.......................................................................................12 Section 7.1 Certificates of Stock......................................................................12 Section 7.2 Lost Certificates..........................................................................12 Section 7.3 Fixing Date for Determination of Stockholders of Record for Certain Purposes...............13 Section 7.4 Dividends..................................................................................13 Section 7.5 Registered Stockholders....................................................................13 Section 7.6 Transfer of Stock..........................................................................13 ARTICLE VIII Miscellaneous Provisions...........................................................................14 Section 8.1 Corporate Seal.............................................................................14 Section 8.2 Fiscal Year................................................................................14 Section 8.3 Checks, Drafts, Notes......................................................................14
ii 4 TABLE OF CONTENTS (Continued)
Page ---- Section 8.4 Notice and Waiver of Notice................................................................14 Section 8.5 Examination of Books and Records...........................................................14 Section 8.6 Voting Upon Shares Held by the Corporation.................................................15 ARTICLE IX Amendments...........................................................................................15 Section 9.1 Amendment..................................................................................15
iii 5 KEMWATER NORTH AMERICA COMPANY BYLAWS ARTICLE I OFFICES SECTION 1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be in the City of Houston, Texas. SECTION 1.2 REGISTERED OFFICE. The registered office of the Corporation required to be maintained in the State of Delaware by the General Corporation Laws of the State of Delaware, may be, but need not be, identical with the Corporation's principal office, and the address of the registered office may be changed from time to time by the Board of Directors. SECTION 1.3 OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS SECTION 2.1 ANNUAL MEETING. The annual meeting of the holders of shares of each class or series of stock as are entitled to notice thereof and to vote thereat pursuant to applicable law and the Corporation's Certificate of Incorporation for the purpose of electing directors and transacting such other proper business as may come before it shall be held in each year, at such time, on such day and at such place, within or without the State of Delaware, as may be designated by the Board of Directors. SECTION 2.2 SPECIAL MEETINGS. In addition to such special meetings as are provided by law or the Corporation's Certificate of Incorporation, special meetings of the holders of any class or series or of all classes or series of the Corporation's stock for any purpose or purposes, may be called at any time by the Board of Directors and may be held on such day, at such time and at such place, within or without the State of Delaware, as shall be designated by the Board of Directors. SECTION 2.3 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Except as otherwise provided by law, written notice of any meeting of Stockholders (i) shall be given either by personal delivery or by mail to each Stockholder of record entitled to vote thereat, (ii) shall be in such form as is approved by the Board of Directors, and (iii) shall state the date, place and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, such written notice shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting. Except when a Stockholder attends a meeting for the express purpose of objecting, at the beginning of the 6 meeting, to the transaction of any business on the grounds that the meeting is not lawfully called or convened, presence in person or by proxy of a Stockholder shall constitute a waiver of notice of such meeting. Further, a written waiver of any notice required by law or by these Bylaws, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Except as otherwise provided by law, the business that may be transacted at any such meeting shall be limited to and consist of the purpose or purposes stated in such notice. If a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting. SECTION 2.4 VOTING LISTS. The officer or agent having charge of the stock transfer books for shares of the Corporation shall keep a complete list of Stockholders entitled to vote at meetings or any adjournments thereof, arranged in alphabetical order, in accordance with applicable law and shall make same available prior to and during each Stockholders' meeting for inspection by the Corporation's Stockholders as required by law. The Corporation's original stock transfer books shall be prima facie evidence as to who are the Stockholders entitled to examine such list or transfer books or to vote at any meeting of Stockholders. SECTION 2.5 QUORUM. Except as otherwise provided by law or by the Corporation's Certificate of Incorporation, the holders of a majority of the Corporation's stock issued and outstanding and entitled to vote at a meeting, present in person or represented by proxy, without regard to class or series, shall constitute a quorum at all meetings of the Stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the Stockholders, the holders of a majority of such shares of stock, present in person or represented by proxy, may adjourn any meeting from time to time without notice other than announcement at the meeting, except as otherwise required by these Bylaws, until a quorum shall be present or represented. At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 2.6 ORGANIZATION. Meetings of the Stockholders shall be presided over by the Chairman of the Board of Directors, if one shall be elected, or in his absence, by the President or by any Vice President, or, in the absence of any of such officers, by a chairman to be chosen by a majority of the Stockholders entitled to vote at the meeting who are present in person or by proxy. The Secretary, or, in his absence, any Assistant Secretary or any person appointed by the individual presiding over the meeting, shall act as secretary at meetings of the Stockholders. SECTION 2.7 VOTING. Each Stockholder of record, as determined pursuant to Section 2.8, who is entitled to vote in accordance with the terms of the Corporation's Certificate of Incorporation and in accordance with the provisions of these Bylaws, shall be entitled to one vote, in person or by proxy, for each share of stock registered in his name on the books of the Corporation. Every Stockholder entitled to vote at any Stockholders' meeting may authorize another person or persons to act for him by proxy pursuant to Section 2.11, provided that no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a 2 7 longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A Stockholder's attendance at any meeting shall not have the effect of revoking a previously granted proxy unless such Stockholder shall in writing so notify the Secretary of the meeting prior to the voting of the proxy. Unless otherwise provided by law, no vote on the election of directors or any question brought before the meeting need be by ballot unless the chairman of the meeting shall determine that it shall be by ballot or the holders of a majority of the shares of stock present in person or by proxy and entitled to participate in such vote shall so demand. In a vote by ballot, each ballot shall state the number of shares voted and the name of the Stockholder or proxy voting. Except as otherwise provided by law, by the Corporation's Certificate of Incorporation or these Bylaws, all elections of directors and all other matters before the Stockholders shall be decided by the vote of the holders of a majority of the shares of stock present in person or by proxy at the meeting and entitled to vote in the election or on the question. In the election of directors, votes may not be cumulated. SECTION 2.8 STOCKHOLDERS ENTITLED TO VOTE. The Board of Directors may fix a date not more than sixty (60) days nor less than ten (10) days prior to the date of any meeting of Stockholders, or, in the case of corporate action by written consent in accordance with the terms of Section 2.10, not more than sixty (60) days prior to such action, as a record date for the determination of the Stockholders entitled to notice of and to vote at such meeting and any adjournment thereof, or to act by written consent, and in such case such Stockholders and only such Stockholders as shall be Stockholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting and any adjournment thereof, or to act by written consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after such record date is fixed as aforesaid. SECTION 2.9 ORDER OF BUSINESS. The order of business at all meetings of Stockholders shall be as determined by the chairman of the meeting or as is otherwise determined by the vote of the holders of a majority of the shares of stock present in person or by proxy and entitled to vote without regard to class or series at the meeting. SECTION 2.10 ACTION BY WRITTEN CONSENT. Unless otherwise provided by law or the Corporation's Certificate of Incorporation, any action required or permitted to be taken by the Stockholders of the Corporation may be taken without prior notice and an actual meeting if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Except as provided above, no action shall be taken by the Stockholders by written consent. Prompt notice of the taking of any corporate action without a meeting by less than unanimous written consent shall be given to those Stockholders who have not consented in writing. SECTION 2.11 AUTHORIZATION OF PROXIES. Without limiting the manner in which a Stockholder may authorize another person or persons to act for him as proxy, the following are valid means of granting such authority. A Stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the Stockholder or his authorized officer, director, employee or agent signing. such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by 3 8 facsimile signature. A Stockholder may also authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telecopy, telegram, cablegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telecopy, telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telecopy, telegram, cablegram or other electronic transmission was authorized by the Stockholder. If it is determined that such telecopies, telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. ARTICLE III DIRECTORS SECTION 3.1 MANAGEMENT. The property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all powers of the Corporation and do all lawful acts and things as are not by law, by the Corporation's Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders. SECTION 3.2 NUMBER AND TERM. The number of directors may be fixed from time to time by resolution of the Board of Directors adopted by the affirmative vote of a majority of the members of the entire Board of Directors, but shall consist of not less than one (1) member who shall be elected annually by the Stockholders except as provided in Section 3.4. Directors need not be Stockholders. No decrease in the number of directors shall have the effect of shortening the term of office of any incumbent director. SECTION 3.3 QUORUM AND MANNER OF ACTION. At all meetings of the Board of Directors a majority of the total number of directors holding office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law, by the Certificate of Incorporation or by these Bylaws. When the Board of Directors consists of one director, the one director shall constitute a majority and a quorum. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at such adjourned meeting. Attendance by a director at a meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. 4 9 SECTION 3.4 VACANCIES. Except as otherwise provided by law and the Certificate of Incorporation, in the case of any increase in the authorized number of directors or of any vacancy in the Board of Directors, however created, the additional director or directors may be elected, or, as the case may be, the vacancy or vacancies may be filled by majority vote of the directors remaining on the whole Board of Directors although less than a quorum, or by a sole remaining director. In the event one or more directors shall resign, effective at a future date, such vacancy or vacancies shall be filled by a majority of the directors who will remain on the whole Board of Directors, although less than a quorum, or by a sole remaining director. Any director elected or chosen as provided herein shall serve until the sooner of (i) the unexpired term of the directorship to which he is appointed; or (ii) until his successor is elected and qualified; or (iii) until his earlier resignation or removal. SECTION 3.5 RESIGNATIONS. A director may resign at any time upon written notice of resignation to the Corporation, delivered to the Secretary. Any resignation shall be effective immediately unless a certain effective date is specified therein, in which event it will be effective upon such date and acceptance of any resignation shall not be necessary to make it effective. SECTION 3.6 REMOVALS. Any director or the entire Board of Directors may be removed only for cause, and another person or persons may be elected to serve for the remainder of his or their term, by the holders of a majority of the shares of the Corporation entitled to vote in the election of directors. Stockholders may not remove any director without cause. In case any vacancy so created shall not be filled by the Stockholders at such meeting, such vacancy may be filled by the directors as provided in Section 3.4. Section 3.7 Annual Meetings. The annual meeting of the Board of Directors shall be held, if a quorum be present, immediately following each annual meeting of the Stockholders at the place such meeting of Stockholders took place, for the purpose of organization and transaction of any other business that might be transacted at a regular meeting thereof, and no notice of such meeting shall be necessary. If a quorum is not present, such annual meeting may be held at any other time or place that may be specified in a notice given in the manner provided in Section 3.9 for special meetings of the Board of Directors or in a waiver of notice thereof. SECTION 3.7 REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such places and times as shall be determined from time to time by resolution of the Board of Directors. Except as otherwise provided by law, any business may be transacted at any regular meeting of the Board of Directors. SECTION 3.8 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the President or by the Secretary on the written request of one-third of the members of the whole Board of Directors stating the purpose or purposes of such meeting. Notices of special meetings, if mailed, shall be mailed to each director not later than two days before the day the meeting is to be held or if otherwise given in the manner permitted by the Bylaws, not later than the day before such meeting. Neither the business to be transacted at, nor the purpose of, any special meeting need be specified in any notice or written waiver of notice unless so required by the Certificate of Incorporation or by the Bylaws and, unless limited by law, the Certificate of Incorporation or by these Bylaws, any and all business may be transacted at a special meeting. 5 10 SECTION 3.9 ORGANIZATION OF MEETINGS. At any meeting of the Board of Directors, business shall be transacted in such order and manner as such Board of Directors may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present at any meeting at which there is a quorum, except as otherwise provided by these Bylaws or required by law. SECTION 3.10 PLACE OF MEETINGS. The Board of Directors may hold their meetings and have one or more offices, and keep the books of the Corporation, outside the State of Delaware, at any office or offices of the Corporation, or at any other place as they may from time to time by resolution determine. SECTION 3.11 COMPENSATION OF DIRECTORS. Directors shall not receive any stated salary for their services as directors, but by resolution of the Board of Directors a fixed honorarium or fees and expenses, if any, of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3.12 ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise restricted by law, the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if prior to such action all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing and the writing or writings are fled with the minutes of proceedings of the Board of Directors or the committee. SECTION 3.13 PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or of any committee thereof may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting in such manner shall constitute presence in person at such meeting. ARTICLE IV COMMITTEES OF THE BOARD SECTION 4.1 MEMBERSHIP AND AUTHORITIES. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board of Directors, designate one or more Directors to constitute an Executive Committee and such other committees as the Board of Directors may determine, each of which committees to the extent provided in said resolution or resolutions or in these Bylaws, shall have and may exercise all the powers of the Board of Directors in the management of the business and affair's of the Corporation, except in those cases where the authority of the Board of Directors is specifically denied to the Executive Committee or such other committee or committees by law, the Certificate of Incorporation or these Bylaws, and may authorize the seal of the Corporation to be affixed to all papers that may require it. The designation of an Executive Committee or other committee and the delegation thereto of 6 11 authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. SECTION 4.2 MINUTES. Each committee designated by the Board of Directors shall keep regular minutes of its proceedings and shall provide a report of its proceedings to the Board of Directors when required or requested by the Board of Directors. SECTION 4.3 VACANCIES. The Board of Directors may designate one or more of its members as alternate members of any committee who may replace any absent or disqualified member at any meeting of such committee. If no alternate members have been appointed, the committee member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to dissolve, any committee. SECTION 4.4 TELEPHONE MEETINGS. Members of any committee designated by the Board of Directors may participate in or hold a meeting by use of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 4.4 shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 4.5 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of any committee designated by the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the committee and filed with the minutes of the committee proceedings. Such consent shall have the same force and effect as a unanimous vote at a meeting. ARTICLE V OFFICERS SECTION 5.1 NUMBER AND TITLE. The elected officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, who must be a member of the Board of Directors, and one or more Vice Presidents (including one or more Senior Vice Presidents), Assistant Secretaries and/or Assistant Treasurers. One person may hold any two or more of these offices. SECTION 5.2 TERM OF OFFICE; VACANCIES. So far as is practicable, all elected officers shall be elected by the Board of Directors at the annual meeting of the Board of Directors in each year, and except as otherwise provided in this Article V, shall hold office until the next such meeting of the Board of Directors in the subsequent year and until their respective successors are elected and qualified or until their earlier resignation or removal. All appointed officers shall hold office at the pleasure of the Board of Directors. If any vacancy shall occur in any office, the 7 12 Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term. SECTION 5.3 REMOVAL OF ELECTED OFFICERS. Any elected officer may be removed at any time, with or without cause, by affirmative vote of a majority of the whole Board of Directors, at any regular meeting or at any special meeting called for such purpose. SECTION 5.4 RESIGNATIONS. Any officer may resign at any time upon written notice of resignation to the President, Secretary or Board of Directors of the Corporation. Any resignation shall be effective immediately unless a date certain is specified for it to take effect, in which event it shall be effective upon such date, and acceptance of any resignation shall not be necessary to make it effective, irrespective of whether the resignation is tendered subject to such acceptance. SECTION 5.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall be elected, shall preside at all meetings of the Stockholders and Board of Directors. In addition, the Chairman of the Board shall perform whatever duties and shall exercise all powers that are given to him by the Board of Directors. SECTION 5.6 PRESIDENT. The President shall be the chief executive officer of the Corporation; shall (in the absence of the Chairman of the Board, if one be elected) preside at meetings of the Stockholders and Board of Directors; shall be ex officio a member of all standing committees; shall have general and active management of business of the corporation; shall implement the general directives, plans and policies formulated by the Board of Directors; and shall further have such duties, responsibilities and authorities as may be assigned to him by the Board of Directors. The President may sign, with any other proper officer, certificates for shares of the Corporation and any deeds, bonds, mortgages, contracts and other documents which the Board of Directors has authorized to be executed, except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors or these Bylaws, to some other officer or agent of the Corporation. In the absence of the President, his duties shall be performed and his authority may be exercised by a Vice President of the Corporation as may have been designated by the President with the right reserved to the Board of Directors to designate or supersede any designation so made. SECTION 5.7 VICE PRESIDENTS. The several Vice Presidents, which may include one or more persons designated as Senior Vice Presidents, shall have such powers and duties as may be assigned to them by these Bylaws and as may from time to time be assigned to them by the Board of Directors or President and may sign, with any other proper officer, certificates for shares of the Corporation. SECTION 5.8 SECRETARY. The Secretary, if available, shall attend all meetings of the Board of Directors and all meetings of the Stockholders and record the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for any committee of the Board of Directors as the Board of Directors or such committee shall designate him to serve. The Secretary shall give, or cause to be given, notice of all meetings of the Stockholders and meetings of the Board of Directors and committees thereof and shall perform such other duties 8 13 incident to the office of secretary or as may be prescribed by the Board of Directors or the President, under whose supervision he shall be. The Secretary shall have custody of the corporate seal of the Corporation and he, or any Assistant Secretary, or any other person whom the Board of Directors may designate, shall have authority to affix the same to any instrument requiring it, and when so affixed it may be attested by his signature or by the signature of any Assistant Secretary or by the signature of such other person so affixing such seal. SECTION 5.9 ASSISTANT SECRETARIES. Each Assistant Secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the Board of Directors, the President or the Secretary. The Assistant Secretary or such other person as may be designated by the President shall exercise the powers of the Secretary during that officer's absence or inability to act. SECTION 5.10 TREASURER. The Treasurer shall have the custody of and be responsible for the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in the books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation and he shall perform all other duties incident to the position of Treasurer, or as may be prescribed by the Board of Directors or the President. If required by the Board of Directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. SECTION 5.11 ASSISTANT TREASURERS. Each Assistant Treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the Board of Directors, the President or the Treasurer. The Assistant Treasurer or such other person designated by the President shall exercise the power of the Treasurer during that officer's absence or inability to act. SECTION 5.12 SUBORDINATE OFFICERS. The Board of Directors may (a) appoint such other subordinate officers and agents as it shall deem necessary who shall hold their offices for such terms, have such authority and perform such duties as the Board of Directors may from time to time determine, or (b) delegate to any committee or officer the power to appoint any such subordinate officers or agents. SECTION 5.13 SALARIES AND COMPENSATION. The salary or other compensation of officers shall be fixed from time to time by the Board of Directors. The Board of Directors may delegate to any committee or officer the power to fix from time to time the salary or other compensation of subordinate officers and agents appointed in accordance with the provisions of Section 5.12. 9 14 ARTICLE VI INDEMNIFICATION SECTION 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) The Corporation (i) shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, a director or officer of the Corporation, or is or was, at any time prior to or during which this Article VI is in effect, serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan and (ii) upon a determination by the Board of Directors that indemnification is appropriate, the Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, an employee or agent of the Corporation or at the request of the Corporation was serving as an employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, in the case of (i) and (ii) against reasonable expenses (including attorneys' fees), judgments, fines, penalties, amounts paid in settlement and other liabilities actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that such person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Corporation (i) shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, a director or officer of the Corporation, or is or was, at any time prior to or during which this Article VI is in effect, serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise and (ii) upon a determination by the Board of Directors that indemnification is appropriate, the Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, an employee or agent of the Corporation or at the request of the Corporation was serving as an employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, in the case of (i) and (ii) against expenses (including attorneys' fees), 10 15 actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; provided, that no indemnification shall be made under this subsection (b) in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery, or other court of appropriate jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity of such expenses which the Delaware Court of Chancery, or other court of appropriate jurisdiction, shall deem proper. (c) Any indemnification under sub-sections (a) or (b) (unless ordered by the Delaware Court of Chancery or other court of appropriate jurisdiction) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of such person is proper in the circumstances because he has met the applicable standard of conduct set forth in sub-sections (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors not parties to such action, suit or proceeding; or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel, in written opinion, selected by the Board of Directors; or (3) by the Stockholders. In the event a determination is made under this sub-section (c) that the director, officer, employee or agent has met the applicable standard of conduct as to some matters but not as to others, amounts to be indemnified may be reasonably prorated. (d) Expenses incurred by a person who is or was a director or officer of the Corporation in appearing at, participating in or defending any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, shall be paid by the Corporation at reasonable intervals in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized by this Article VI. In addition, the Corporation shall pay or reimburse expenses incurred by any person who is or was a director or officer of the Corporation in connection with such person's appearance as a witness or other participant in a proceeding in which such person or the Corporation is not a named party to such proceeding, provided that such appearance or participation is on behalf of the Corporation or by reason of his capacity, as a director or officer, or former director or officer of the Corporation. (e) If, in a suit or proceeding for indemnification required under this Article VI of a director or officer, or former director or officer, of the Corporation or any of its affiliates, a court of competent jurisdiction determines that such person is entitled to indemnification under this Article VI, the court shall award, and the Corporation shall pay, to such person the expenses incurred in securing such judicial determination. (f) It is the intention of the Corporation to indemnify the persons referred to in this Article VI to the fullest extent permitted by law and with respect to any action, suit or proceeding arising from events which occur at any time prior to or during which this Article VI is in effect. The indemnification and advancement of expenses provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or 11 16 advancement of expenses may be or become entitled under any law, the Certificate of Incorporation, these Bylaws, agreement, the vote of Stockholders or disinterested directors or otherwise, or under any policy or policies of insurance purchased and maintained by the Corporation, on behalf of any such person, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. (g) The indemnification provided by this Article VI shall be subject to all valid and applicable laws, and, in the event this Article VI or any of the provisions hereof or the indemnification contemplated hereby are found to be inconsistent with or contrary to any such valid laws, the latter shall be deemed to control and this Article VI shall be regarded as modified accordingly, and, as so modified, to continue in full force and effect. ARTICLE VII CAPITAL STOCK SECTION 7.1 CERTIFICATES OF STOCK. Certificates of stock shall be issued to each Stockholder certifying the number of shares owned by him in the Corporation and shall be in a form not inconsistent with the Certificate of Incorporation and as approved by the Board of Directors. The certificates shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer and may be sealed with the seal of the Corporation or a facsimile thereof. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. If the Corporation shall be authorized to issue more than one (1) class of stock or more than one (1) series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided by statute, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each Stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 7.2 LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the owner of such certificate, or his legal representative. When authorizing the issuance of a new certificate, the 12 17 Board of Directors may in its discretion, as a condition precedent to the issuance thereof, require the owner, or his legal representative, to give a bond in such form and substance with such surety as it may direct, to indemnify the Corporation against any claim that may be made on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate. SECTION 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD FOR CERTAIN PURPOSES. (a) In order that the Corporation may determine the Stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of capital stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days prior to the date of payment of such dividend or other distribution or allotment of such rights or the date when any such rights in respect of any change, conversion or exchange of stock may be exercised or the date of such other action. In such a case, only Stockholders of record on the date so fixed shall be entitled to receive any such dividend or other distribution or allotment of rights or to exercise such rights or for any other purpose, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. (b) If no record date is fixed, the record date for determining Stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. SECTION 7.4 DIVIDENDS. Subject to the provisions of the Certificate of Incorporation, if any, and except as otherwise provided by law, the directors may declare dividends upon the capital stock of the Corporation as and when they deem it to be expedient. Such dividends may be paid in cash, in property or in shares of the Corporation's capital stock. Before declaring any dividend the directors may set apart out of the funds of the Corporation available for dividends such sum or sums as the directors from time to time in their discretion think proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends, or for such other purposes as the directors shall determine to be conducive to the interests of the Corporation and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 7.5 REGISTERED STOCKHOLDERS. Except as expressly provided by law, the Certificate of Incorporation and these Bylaws, the Corporation shall be entitled to treat registered Stockholders as the only holders and owners in fact of the shares standing in their respective names and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, regardless of whether it shall have express or other notice thereof. SECTION 7.6 TRANSFER OF STOCK. Transfers of shares of the capital stock of the Corporation shall be made only on the books of the Corporation by the registered owners thereof, or by their legal representatives or their duly authorized attorneys. Upon any such transfers the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock transfer books and ledgers, by whom they shall be cancelled and new certificates shall thereupon be issued. 13 18 ARTICLE VIII MISCELLANEOUS PROVISIONS SECTION 8.1 CORPORATE SEAL. If one be adopted, the corporate seal shall have inscribed thereon the name of the Corporation and shall be in such form as may be approved by the Board of Directors. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. SECTION 8.2 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 8.3 CHECKS, DRAFTS, NOTES. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner as shall from time to time be determined by resolution (whether general or special) of the Board of Directors or may be prescribed by any officer or officers, or any officer and agent jointly, thereunto duly authorized by the Board of Directors. SECTION 8.4 NOTICE AND WAIVER OF NOTICE. Whenever notice is required to be given to any director or Stockholder under the provisions of applicable law, the Certificate of Incorporation or of these Bylaws it shall not be construed to only mean personal notice, rather, such notice may also be given in writing, by mail, addressed to such director or Stockholder at his address as it appears on the records of the Corporation, with postage thereon prepaid (unless prior to the mailing of such notice he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address in which case, such notice shall be mailed to the address designated in the request), and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, cable or other form of recorded communication, by personal delivery or by telephone. Whenever notice is required to be given under any provision of law, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, by telegraph, cable or other form of recorded communication, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. SECTION 8.5 EXAMINATION OF BOOKS AND RECORDS. The Board of Directors shall determine from time to time whether, and if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically opened to inspection) or any of them shall be open to inspection by the Stockholders, and the Stockholders' rights in this respect are and shall be restricted and limited accordingly. 14 19 SECTION 8.6 VOTING UPON SHARES HELD BY THE CORPORATION. Unless otherwise provided by law or by the Board of Directors, the Chairman of the Board of Directors, if one shall be elected, or the President, if a Chairman of the Board of Directors shall not be elected, acting on behalf of the Corporation, shall have full power and authority to attend and to act and to vote at any meeting of Stockholders of any corporation in which the Corporation may hold stock and, at any such meeting, shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock which, as the owner thereof, the Corporation might have possessed and exercised, if present. The Board of Directors by resolution from time to time may confer like powers upon any person or persons. ARTICLE IX AMENDMENTS SECTION 9.1 AMENDMENT. Except as otherwise expressly provided in the Certificate of Incorporation, the directors, by the affirmative vote of a majority of the entire Board of Directors and without the assent or vote of the Stockholders, may at any meeting, provided the substance of the proposed amendment shall have been stated in the notice of the meeting, make, repeal, alter, amend or rescind any of these Bylaws. The Stockholders shall not make, repeal, alter, amend or rescind any of the provisions of these Bylaws except by the holders of not less than 80% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for purposes of this Article IX as one class. 15 EX-99.T3B10 21 h90985ex99-t3b10.txt BYLAWS OF PIONEER WATER TECHNOLOGIES, INC. 1 EXHIBIT T3B-10 BYLAWS OF PIONEER WATER TECHNOLOGIES, INC. DATED EFFECTIVE AS OF: JANUARY 31, 1996 2 TABLE OF CONTENTS
Page ---- ARTICLE I Offices...................................................................................1 Section 1.1 Principal Office.............................................................1 Section 1.2 Registered Office............................................................1 Section 1.3 Other Offices................................................................1 ARTICLE II Stockholders' Meetings....................................................................1 Section 2.1 Annual Meeting...............................................................1 Section 2.2 Special Meetings.............................................................1 Section 2.3 Notice of Meetings and Adjourned Meetings....................................1 Section 2.4 Voting Lists.................................................................2 Section 2.5 Quorum.......................................................................2 Section 2.6 Organization.................................................................2 Section 2.7 Voting.......................................................................3 Section 2.8 Stockholders Entitled to Vote................................................3 Section 2.9 Order of Business............................................................3 Section 2.10 Action by Written Consent....................................................3 Section 2.11 Authorization of Proxies.....................................................4 ARTICLE III Directors.................................................................................4 Section 3.1 Management...................................................................4 Section 3.2 Number and Term..............................................................4 Section 3.3 Quorum and Manner of Action..................................................5 Section 3.4 Vacancies....................................................................5 Section 3.5 Resignations.................................................................5 Section 3.6 Removals.....................................................................5 Section 3.7 Annual Meetings..............................................................6 Section 3.8 Regular Meetings.............................................................6 Section 3.9 Special Meetings.............................................................6 Section 3.10 Organization of Meetings.....................................................6 Section 3.11 Place of Meetings............................................................6 Section 3.12 Compensation of Directors....................................................6 Section 3.13 Action by Unanimous Written Consent..........................................6 Section 3.14 Participation in Meetings by Telephone.......................................7 ARTICLE IV Committees of the Board...................................................................7
i 3 Section 4.1 Membership and Authorities...................................................7 Section 4.2 Minutes......................................................................7 Section 4.3 Vacancies....................................................................7 Section 4.4 Telephone Meetings...........................................................8 Section 4.5 Action Without Meeting.......................................................8 ARTICLE V Officers..................................................................................8 Section 5.1 Number and Title.............................................................8 Section 5.2 Term of Office; Vacancies....................................................8 Section 5.3 Removal of Elected Officers..................................................8 Section 5.4 Resignations.................................................................8 Section 5.5 The Chairman of the Board....................................................9 Section 5.6 President....................................................................9 Section 5.7 Vice Presidents..............................................................9 Section 5.8 Secretary....................................................................9 Section 5.9 Assistant Secretaries........................................................9 Section 5.10 Treasurer...................................................................10 Section 5.11 Assistant Treasurers........................................................10 Section 5.12 Subordinate Officers........................................................10 Section 5.13 Salaries and Compensation...................................................10 ARTICLE VI Indemnification..........................................................................11 Section 6.1 Indemnification of Directors and Officers...................................11 ARTICLE VII Capital Stock............................................................................13 Section 7.1 Certificates of Stock.......................................................13 Section 7.2 Lost Certificates...........................................................14 Section 7.3 Fixing Date for Determination of Stockholders of Record for Certain Purposes........................................................14 Section 7.4 Dividends...................................................................14 Section 7.5 Registered Stockholders.....................................................14 Section 7.6 Transfer of Stock...........................................................15 ARTICLE VIII Miscellaneous Provisions.................................................................15 Section 8.1 Corporate Seal..............................................................15 Section 8.2 Fiscal Year.................................................................15
ii 4 Section 8.3 Checks, Drafts, Notes.......................................................15 Section 8.4 Notice and Waiver of Notice.................................................15 Section 8.5 Examination of Books and Records............................................16 Section 8.6 Voting Upon Shares Held by the Corporation..................................16 ARTICLE IX Amendments...............................................................................16 Section 9.1 Amendment...................................................................16
iii 5 PIONEER WATER TECHNOLOGIES, INC. BYLAWS ARTICLE I OFFICES SECTION 1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be in the City of Houston, Texas. SECTION 1.2 REGISTERED OFFICE. The registered office of the Corporation required to be maintained in the State of Delaware by the General Corporation Laws of the State of Delaware, may be, but need not be, identical with the Corporation's principal office, and the address of the registered office may be changed from time to time by the Board of Directors. SECTION 1.3 OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS SECTION 2.1 ANNUAL MEETING. The annual meeting of the holders of shares of each class or series of stock as are entitled to notice thereof and to vote thereat pursuant to applicable law and the Corporation's Certificate of Incorporation for the purpose of electing directors and transacting such other proper business as may come before it shall be held in each year, at such time, on such day and at such place, within or without the State of Delaware, as may be designated by the Board of Directors. SECTION 2.2 SPECIAL MEETINGS. In addition to such special meetings as are provided by law or the Corporation's Certificate of Incorporation, special meetings of the holders of any class or series or of all classes or series of the Corporation's stock for any purpose or purposes, may be called at any time by the Board of Directors and may be held on such day, at such time and at such place, within or without the State of Delaware, as shall be designated by the Board of Directors. SECTION 2.3 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Except as otherwise provided by law, written notice of any meeting of Stockholders (i) shall be given either by personal delivery or by mail to each Stockholder of record entitled to vote thereat, (ii) shall be in such form as is approved by the Board of Directors, and (iii) shall state the date, place and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, 6 such written notice shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting. Except when a Stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting is not lawfully called or convened, presence in person or by proxy of a Stockholder shall constitute a waiver of notice of such meeting. Further, a written waiver of any notice required by law or by these Bylaws, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Except as otherwise provided by law, the business that may be transacted at any such meeting shall be limited to and consist of the purpose or purposes stated in such notice. If a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder of record entitled to vote at the meeting. SECTION 2.4 VOTING LISTS. The officer or agent having charge of the stock transfer books for shares of the Corporation shall keep a complete list of Stockholders entitled to vote at meetings or any adjournments thereof, arranged in alphabetical order, in accordance with applicable law and shall make same available prior to and during each Stockholders' meeting for inspection by the Corporation's Stockholders as required by law. The Corporation's original stock transfer books shall be prima facie evidence as to who are the Stockholders entitled to examine such list or transfer books or to vote at any meeting of Stockholders. SECTION 2.5 QUORUM. Except as otherwise provided by law or by the Corporation's Certificate of Incorporation, the holders of a majority of the Corporation's stock issued and outstanding and entitled to vote at a meeting, present in person or represented by proxy, without regard to class or series, shall constitute a quorum at all meetings of the Stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the Stockholders, the holders of a majority of such shares of stock, present in person or represented by proxy, may adjourn any meeting from time to time without notice other than announcement at the meeting, except as otherwise required by these Bylaws, until a quorum shall be present or represented. At any such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 2.6 ORGANIZATION. Meetings of the Stockholders shall be presided over by the Chairman of the Board of Directors, if one shall be elected, or in his absence, by the President or by any Vice President, or, in the absence of any of such officers, by a chairman to be chosen by a majority of the Stockholders entitled to vote at the meeting who are present in person or by proxy. The Secretary, or, in his absence, any Assistant Secretary or any person appointed by the individual presiding over the meeting, shall act as secretary at meetings of the Stockholders. 2 7 SECTION 2.7 VOTING. Each Stockholder of record, as determined pursuant to Section 2.8, who is entitled to vote in accordance with the terms of the Corporation's Certificate of Incorporation and in accordance with the provisions of these Bylaws, shall be entitled to one vote, in person or by proxy, for each share of stock registered in his name on the books of the Corporation. Every Stockholder entitled to vote at any Stockholders' meeting may authorize another person or persons to act for him by proxy pursuant to Section 2.11, provided that no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only so long as, it is coupled with an interest sufficient in law to support an irrevocable power. A Stockholder's attendance at any meeting shall not have the effect of revoking a previously granted proxy unless such Stockholder shall in writing so notify the Secretary of the meeting prior to the voting of the proxy. Unless otherwise provided by law, no vote on the election of directors or any question brought before the meeting need be by ballot unless the chairman of the meeting shall determine that it shall be by ballot or the holders of a majority of the shares of stock present in person or by proxy and entitled to participate in such vote shall so demand. In a vote by ballot, each ballot shall state the number of shares voted and the name of the Stockholder or proxy voting. Except as otherwise provided by law, by the Corporation's Certificate of Incorporation or these Bylaws, all elections of directors and all other matters before the Stockholders shall be decided by the vote of the holders of a majority of the shares of stock present in person or by proxy at the meeting and entitled to vote in the election or on the question. In the election of directors, votes may not be cumulated. SECTION 2.8 STOCKHOLDERS ENTITLED TO VOTE. The Board of Directors may fix a date not more than sixty (60) days nor less than ten (10) days prior to the date of any meeting of Stockholders, or, in the case of corporate action by written consent in accordance with the terms of Section 2.10, not more than sixty (60) days prior to such action, as a record date for the determination of the Stockholders entitled to notice of and to vote at such meeting and any adjournment thereof, or to act by written consent, and in such case such Stockholders and only such Stockholders as shall be Stockholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting and any adjournment thereof, or to act by written consent, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after such record date is fixed as aforesaid. SECTION 2.9 ORDER OF BUSINESS. The order of business at all meetings of Stockholders shall be as determined by the chairman of the meeting or as is otherwise determined by the vote of the holders of a majority of the shares of stock present in person or by proxy and entitled to vote without regard to class or series at the meeting. SECTION 2.10 ACTION BY WRITTEN CONSENT. Unless otherwise provided by law or the Corporation's Certificate of Incorporation, any action required or permitted to be taken by the Stockholders of the Corporation may be taken without prior notice and an actual meeting if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that 3 8 would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Except as provided above, no action shall be taken by the Stockholders by written consent. Prompt notice of the taking of any corporate action without a meeting by less than unanimous written consent shall be given to those Stockholders who have not consented in writing. SECTION 2.11 AUTHORIZATION OF PROXIES. Without limiting the manner in which a Stockholder may authorize another person or persons to act for him as proxy, the following are valid means of granting such authority. A Stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the Stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature. A Stockholder may also authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telecopy, telegram, cablegram or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telecopy, telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telecopy, telegram, cablegram or other electronic transmission was authorized by the Stockholder. If it is determined that such telecopies, telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. ARTICLE III DIRECTORS SECTION 3.1 MANAGEMENT. The property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all powers of the Corporation and do all lawful acts and things as are not by law, by the Corporation's Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the Stockholders. SECTION 3.2 NUMBER AND TERM. The number of directors may be fixed from time to time by resolution of the Board of Directors adopted by the affirmative vote of a majority of the members of the entire Board of Directors, but shall consist of not less than one (1) member who shall be elected annually by the Stockholders except as provided in 4 9 Section 3.4. Directors need not be Stockholders. No decrease in the number of directors shall have the effect of shortening the term of office of any incumbent director. SECTION 3.3 QUORUM AND MANNER OF ACTION. At all meetings of the Board of Directors a majority of the total number of directors holding office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law, by the Certificate of Incorporation or by these Bylaws. When the Board of Directors consists of one director, the one director shall constitute a majority and a quorum. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at such adjourned meeting. Attendance by a director at a meeting shall constitute a waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 3.4 VACANCIES. Except as otherwise provided by law and the Certificate of Incorporation, in the case of any increase in the authorized number of directors or of any vacancy in the Board of Directors, however created, the additional director or directors may be elected, or, as the case may be, the vacancy or vacancies may be filled by majority vote of the directors remaining on the whole Board of Directors although less than a quorum, or by a sole remaining director. In the event one or more directors shall resign, effective at a future date, such vacancy or vacancies shall be filled by a majority of the directors who will remain on the whole Board of Directors, although less than a quorum, or by a sole remaining director. Any director elected or chosen as provided herein shall serve until the sooner of (i) the unexpired term of the directorship to which he is appointed; or (ii) until his successor is elected and qualified; or (iii) until his earlier resignation or removal. SECTION 3.5 RESIGNATIONS. A director may resign at any time upon written notice of resignation to the Corporation, delivered to the Secretary. Any resignation shall be effective immediately unless a certain effective date is specified therein, in which event it will be effective upon such date and acceptance of any resignation shall not be necessary to make it effective. SECTION 3.6 REMOVALS. Any director or the entire Board of Directors may be removed only for cause, and another person or persons may be elected to serve for the remainder of his or their term, by the holders of a majority of the shares of the Corporation entitled to vote in the election of directors. Stockholders may not remove any director without cause. In case any vacancy so created shall not be filled by the Stockholders at such meeting, such vacancy may be filled by the directors as provided in Section 3.4. 5 10 SECTION 3.7 ANNUAL MEETINGS. The annual meeting of the Board of Directors shall be held, if a quorum be present, immediately following each annual meeting of the Stockholders at the place such meeting of Stockholders took place, for the purpose of organization and transaction of any other business that might be transacted at a regular meeting thereof, and no notice of such meeting shall be necessary. If a quorum is not present, such annual meeting may be held at any other time or place that may be specified in a notice given in the manner provided in Section 3.9 for special meetings of the Board of Directors or in a waiver of notice thereof SECTION 3.8 REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such places and times as shall be determined from time to time by resolution of the Board of Directors. Except as otherwise provided by law, any business may be transacted at any regular meeting of the Board of Directors. SECTION 3.9 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the President or by the Secretary on the written request of one-third of the members of the whole Board of Directors stating the purpose or purposes of such meeting. Notices of special meetings, if mailed, shall be mailed to each director not later than two days before the day the meeting is to be held or if otherwise given in the manner permitted by the Bylaws, not later than the day before such meeting. Neither the business to be transacted at, nor the purpose of, any special meeting need be specified in any notice or written waiver of notice unless so required by the Certificate of Incorporation or by the Bylaws and, unless limited by law, the Certificate of Incorporation or by these Bylaws, any and all business may be transacted at a special meeting. SECTION 3.10 ORGANIZATION OF MEETINGS. At any meeting of the Board of Directors, business shall be transacted in such order and manner as such Board of Directors may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present at any meeting at which there is a quorum, except as otherwise provided by these Bylaws or required by law. SECTION 3.11 PLACE OF MEETINGS. The Board of Directors may hold their meetings and have one or more offices, and keep the books of the Corporation, outside the State of Delaware, at any office or offices of the Corporation, or at any other place as they may from time to time by resolution determine. SECTION 3.12 COMPENSATION OF DIRECTORS. Directors shall not receive any stated salary for their services as directors, but by resolution of the Board of Directors a fixed honorarium or fees and expenses, if any, of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3.13 ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise restricted by law, the Certificate of Incorporation or these Bylaws, any action required or 6 11 permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if prior to such action all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors or the committee. SECTION 3.14 PARTICIPATION IN MEETINGS BY TELEPHONE. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or of any committee thereof may participate in a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting in such manner shall constitute presence in person at such meeting. ARTICLE IV COMMITTEES OF THE BOARD SECTION 4.1 MEMBERSHIP AND AUTHORITIES. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board of Directors, designate one or more Directors to constitute an Executive Committee and such other committees as the Board of Directors may determine, each of which committees to the extent provided in said resolution or resolutions or in these Bylaws, shall have and may exercise all the powers of the Board of Directors in the management of the business and affairs of the Corporation, except in those cases where the authority of the Board of Directors is specifically denied to the Executive Committee or such other committee or committees by law, the Certificate of Incorporation or these Bylaws, and may authorize the seal of the Corporation to be affixed to all papers that may require it. The designation of an Executive Committee or other committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. SECTION 4.2 MINUTES. Each committee designated by the Board of Directors shall keep regular minutes of its proceedings and shall provide a report of its proceedings to the Board of Directors when required or requested by the Board of Directors. SECTION 4.3 VACANCIES. The Board of Directors may designate one or more of its members as alternate members of any committee who may replace any absent or disqualified member at any meeting of such committee. If no alternate members have been appointed, the committee member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. The Board of Directors shall have the power at any time to fill vacancies in, to change the membership of, and to dissolve, any committee. 7 12 SECTION 4.4 TELEPHONE MEETINGS. Members of any committee designated by the Board of Directors may participate in or hold a meeting by use of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section 4.4 shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 4.5 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of any committee designated by the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the committee and filed with the minutes of the committee proceedings. Such consent shall have the same force and effect as a unanimous vote at a meeting. ARTICLE V OFFICERS SECTION 5.1 NUMBER AND TITLE. The elected officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors may also choose a Chairman of the Board, who must be a member of the Board of Directors, and one or more Vice Presidents (including one or more Senior Vice Presidents), Assistant Secretaries and/or Assistant Treasurers. One person may hold any two or more of these offices. SECTION 5.2 TERM OF OFFICE; VACANCIES. So far as is practicable, all elected officers shall be elected by the Board of Directors at the annual meeting of the Board of Directors in each year, and except as otherwise provided in this Article V, shall hold office until the next such meeting of the Board of Directors in the subsequent year and until their respective successors are elected and qualified or until their earlier resignation or removal. All appointed officers shall hold office at the pleasure of the Board of Directors. If any vacancy shall occur in any office, the Board of Directors may elect or appoint a successor to fill such vacancy for the remainder of the term. SECTION 5.3 REMOVAL OF ELECTED OFFICERS. Any elected officer may be removed at any time, with or without cause, by affirmative vote of a majority of the whole Board of Directors, at any regular meeting or at any special meeting called for such purpose. SECTION 5.4 RESIGNATIONS. Any officer may resign at any time upon written notice of resignation to the President, Secretary or Board of Directors of the Corporation. Any resignation shall be effective immediately unless a date certain is specified for it to take effect, in which event it shall be effective upon such date, and acceptance of any resignation shall not be necessary to make it effective, irrespective of whether the resignation is tendered subject to such acceptance. 8 13 SECTION 5.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall be elected, shall preside at all meetings of the Stockholders and Board of Directors. In addition, the Chairman of the Board shall perform whatever duties and shall exercise all powers that are given to him by the Board of Directors. SECTION 5.6 PRESIDENT. The President shall be the chief executive officer of the Corporation; shall (in the absence of the Chairman of the Board, if one be elected) preside at meetings of the Stockholders and Board of Directors; shall be ex officio a member of all standing committees; shall have general and active management of business of the corporation; shall implement the general directives, plans and policies formulated by the Board of Directors; and shall further have such duties, responsibilities and authorities as may be assigned to him by the Board of Directors. The President may sign, with any other proper officer, certificates for shares of the Corporation and any deeds, bonds, mortgages, contracts and other documents which the Board of Directors has authorized to be executed, except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors or these Bylaws, to some other officer or agent of the Corporation. In the absence of the President, his duties shall be performed and his authority may be exercised by a Vice President of the Corporation as may have been designated by the President with the right reserved to the Board of Directors to designate or supersede any designation so made. SECTION 5.7 VICE PRESIDENTS. The several Vice Presidents, which may include one or more persons designated as Senior Vice Presidents, shall have such powers and duties as may be assigned to them by these Bylaws and as may from time to time be assigned to them by the Board of Directors or President and may sign, with any other proper officer, certificates for shares of the Corporation. SECTION 5.8 SECRETARY. The Secretary, if available, shall attend all meetings of the Board of Directors and all meetings of the Stockholders and record the proceedings of the meetings in a book to be kept for that purpose and shall perform like duties for any committee of the Board of Directors as the Board of Directors or such committee shall designate him to serve. The Secretary shall give, or cause to be given, notice of all meetings of the Stockholders and meetings of the Board of Directors and committees thereof and shall perform such other duties incident to the office of secretary or as may be prescribed by the Board of Directors or the President, under whose supervision he shall be. The Secretary shall have custody of the corporate seal of the Corporation and he, or any Assistant Secretary, or any other person whom the Board of Directors may designate, shall have authority to affix the same to any instrument requiring it, and when so affixed it may be attested by his signature or by the signature of any Assistant Secretary or by the signature of such other person so affixing such seal. SECTION 5.9 ASSISTANT SECRETARIES. Each Assistant Secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the Board of Directors, the President or the Secretary. The Assistant Secretary or such other person as may be designated by the 9 14 President shall exercise the powers of the Secretary during that officer's absence or inability to act. SECTION 5.10 TREASURER. The Treasurer shall have the custody of and be responsible for the corporate funds and securities, shall keep full and accurate accounts of receipts and disbursements in the books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation and he shall perform all other duties incident to the position of Treasurer, or as may be prescribed by the Board of Directors or the President. If required by the Board of Directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. SECTION 5.11 ASSISTANT TREASURERS. Each Assistant Treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as may be assigned to him by the Board of Directors, the President or the Treasurer. The Assistant Treasurer or such other person designated by the President shall exercise the power of the Treasurer during that officer's absence or inability to act. SECTION 5.12 SUBORDINATE OFFICERS. The Board of Directors may (a) appoint such other subordinate officers and agents as it shall deem necessary who shall hold their offices for such terms, have such authority and perform such duties as the Board of Directors may from time to time determine, or (b) delegate to any committee or officer the power to appoint any such subordinate officers or agents. SECTION 5.13 SALARIES AND COMPENSATION. The salary or other compensation of officers shall be fixed from time to time by the Board of Directors. The Board of Directors may delegate to any committee or officer the power to fix from time to time the salary or other compensation of subordinate officers and agents appointed in accordance with the provisions of Section 5.12. 10 15 ARTICLE VI INDEMNIFICATION SECTION 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) The Corporation (i) shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, a director or officer of the Corporation, or is or was, at any time prior to or during which this Article VI is in effect, serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan and (ii) upon a determination by the Board of Directors that indemnification is appropriate, the Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, an employee or agent of the Corporation or at the request of the Corporation was serving as an employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, in the case of (i) and (ii) against reasonable expenses (including attorneys' fees), judgments, fines, penalties, amounts paid in settlement and other liabilities actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that such person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) The Corporation (i) shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, a director or officer of the Corporation, or is or was, at any time prior to or during which this Article VI is in effect, serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise and (ii) upon a determination by the Board of Directors that indemnification is appropriate, the Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was, at any time prior to or during which this Article VI is in effect, an employee or agent of the Corporation or at the request of the Corporation was serving as an employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, in the case of (i) and (ii) against expenses (including attorneys' fees), actually and reasonably incurred by such person in connection with the 11 16 defense or settlement of such action or suit if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; provided, that no indemnification shall be made under this sub-section (b) in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery, or other court of appropriate jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity of such expenses which the Delaware Court of Chancery, or other court of appropriate jurisdiction, shall deem proper. (c) Any indemnification under sub-sections (a) or (b) (unless ordered by the Delaware Court of Chancery or other court of appropriate jurisdiction) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of such person is proper in the circumstances because he has met the applicable standard of conduct set forth in sub-sections (a) and (b). Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors not parties to such action, suit or proceeding; or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel, in written opinion, selected by the Board of Directors; or (3) by the Stockholders. In the event a determination is made under this sub-section (c) that the director, officer, employee or agent has met the applicable standard of conduct as to some matters but not as to others, amounts to be indemnified may be reasonably prorated. (d) Expenses incurred by a person who is or was a director or officer of the Corporation in appearing at, participating in or defending any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, shall be paid by the Corporation at reasonable intervals in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized by this Article VI. In addition, the Corporation shall pay or reimburse expenses incurred by any person who is or was a director or officer of the Corporation in connection with such person's appearance as a witness or other participant in a proceeding in which such person or the Corporation is not a named party to such proceeding, provided that such appearance or participation is on behalf of the Corporation or by reason of his capacity as a director or officer, or former director or officer of the Corporation. (e) If, in a suit or proceeding for indemnification required under this Article VI of a director or officer, or former director or officer, of the Corporation or any of its affiliates, a court of competent jurisdiction determines that such person is entitled to indemnification under this Article VI, the court shall award, and the Corporation shall pay, to such person the expenses incurred in securing such judicial determination. (f) It is the intention of the Corporation to indemnify the persons referred to in this Article VI to the fullest extent permitted by law and with respect to any 12 17 action, suit or proceeding arising from events which occur at any time prior to or during which this Article VI is in effect. The indemnification and advancement of expenses provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be or become entitled under any law, the Certificate of Incorporation, these Bylaws, agreement, the vote of Stockholders or disinterested directors or otherwise, or under any policy or policies of insurance purchased and maintained by the Corporation on behalf of any such person, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. (g) The indemnification provided by this Article VI shall be subject to all valid and applicable laws, and, in the event this Article VI or any of the provisions hereof or the indemnification contemplated hereby are found to be inconsistent with or contrary to any such valid laws, the latter shall be deemed to control and this Article VI shall be regarded as modified accordingly, and, as so modified, to continue in full force and effect. ARTICLE VII CAPITAL STOCK SECTION 7.1 CERTIFICATES OF STOCK. Certificates of stock shall be issued to each Stockholder certifying the number of shares owned by him in the Corporation and shall be in a form not inconsistent with the Certificate of Incorporation and as approved by the Board of Directors. The certificates shall be signed by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer and may be sealed with the seal of the Corporation or a facsimile thereof. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. If the Corporation shall be authorized to issue more than one (1) class of stock or more than one (1) series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided by statute, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each Stockholder who so requests the powers, designations, preferences and relative, 13 18 participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. SECTION 7.2 LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the owner of such certificate, or his legal representative. When authorizing the issuance of a new certificate, the Board of Directors may in its discretion, as a condition precedent to the issuance thereof require the owner, or his legal representative, to give a bond in such form and substance with such surety as it may direct, to indemnify the Corporation against any claim that may be made on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate. SECTION 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD FOR CERTAIN PURPOSES. (a) In order that the Corporation may determine the Stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of capital stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days prior to the date of payment of such dividend or other distribution or allotment of such rights or the date when any such rights in respect of any change, conversion or exchange of stock may be exercised or the date of such other action. In such a case, only Stockholders of record on the date so fixed shall be entitled to receive any such dividend or other distribution or allotment of rights or to exercise such rights or for any other purpose, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. (b) If no record date is fixed, the record date for determining Stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. SECTION 7.4 DIVIDENDS. Subject to the provisions of the Certificate of Incorporation, if any, and except as otherwise provided by law, the directors may declare dividends upon the capital stock of the Corporation as and when they deem it to be expedient. Such dividends may be paid in cash, in property or in shares of the Corporation's capital stock. Before declaring any dividend the directors may set apart out of the funds of the Corporation available for dividends such sum or sums as the directors from time to time in their discretion think proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends, or for such other purposes as the directors shall determine to be conducive to the interests of the Corporation and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 7.5 REGISTERED STOCKHOLDERS. Except as expressly provided by law, the Certificate of Incorporation and these Bylaws, the Corporation shall be entitled to 14 19 treat registered Stockholders as the only holders and owners in fact of the shares standing in their respective names and the Corporation shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, regardless of whether it shall have express or other notice thereof. SECTION 7.6 TRANSFER OF STOCK. Transfers of shares of the capital stock of the Corporation shall be made only on the books of the Corporation by the registered owners thereof, or by their legal representatives or their duly authorized attorneys. Upon any such transfers the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock transfer books and ledgers, by whom they shall be cancelled and new certificates shall thereupon be issued. ARTICLE VIII MISCELLANEOUS PROVISIONS SECTION 8.1 CORPORATE SEAL. If one be adopted, the corporate seal shall have inscribed thereon the name of the Corporation and shall be in such form as may be approved by the Board of Directors. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. SECTION 8.2 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 8.3 CHECKS, DRAFTS, NOTES. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner as shall from time to time be determined by resolution (whether general or special) of the Board of Directors or may be prescribed by any officer or officers, or any officer and agent jointly, thereunto duly authorized by the Board of Directors. SECTION 8.4 NOTICE AND WAIVER OF NOTICE. Whenever notice is required to be given to any director or Stockholder under the provisions of applicable law, the Certificate of Incorporation or of these Bylaws it shall not be construed to only mean personal notice, rather, such notice may also be given in writing, by mail, addressed to such director or Stockholder at his address as it appears on the records of the Corporation, with postage thereon prepaid (unless prior to the mailing of such notice he shall have filed with the Secretary of the Corporation a written request that notices intended for him be mailed to some other address in which case, such notice shall be mailed to the address designated in the request), and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram, cable or other form of recorded communication, by personal delivery or by telephone. Whenever notice is required to be given under any provision of law, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, by telegraph, cable or other form of recorded communication, signed by the person or persons entitled 15 20 to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. SECTION 8.5 EXAMINATION OF BOOKS AND RECORDS. The Board of Directors shall determine from time to time whether, and if allowed, when and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically opened to inspection) or any of them shall be open to inspection by the Stockholders, and the Stockholders' rights in this respect are and shall be restricted and limited accordingly. SECTION 8.6 VOTING UPON SHARES HELD BY THE CORPORATION. Unless otherwise provided by law or by the Board of Directors, the Chairman of the Board of Directors, if one shall be elected, or the President, if a Chairman of the Board of Directors shall not be elected, acting on behalf of the Corporation, shall have full power and authority to attend and to act and to vote at any meeting of Stockholders of any corporation in which the Corporation may hold stock and, at any such meeting, shall possess and may exercise any and all of the rights and powers incident to the ownership of such stock which, as the owner thereof, the Corporation might have possessed and exercised, if present. The Board of Directors by resolution from time to time may confer like powers upon any person or persons. ARTICLE IX AMENDMENTS SECTION 9.1 AMENDMENT. Except as otherwise expressly provided in the Certificate of Incorporation, the directors, by the affirmative vote of a majority of the entire Board of Directors and without the assent or vote of the Stockholders, may at any meeting, provided the substance of the proposed amendment shall have been stated in the notice of the meeting, make, repeal, alter, amend or rescind any of these Bylaws. The Stockholders shall not make, repeal, alter, amend or rescind any of the provisions of these Bylaws except by the holders of not less than 80% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for purposes of this Article IX as one class. 16 21 EXHIBIT B SEAL 22 EXHIBIT C FORM OF STOCK CERTIFICATE EX-99.T3B11 22 h90985ex99-t3b11.txt BYLAWS OF KWT, INC. 1 EXHIBIT T3B-11 BYLAWS OF KEMIRA WATER TREATMENT, INCORPORATED ARTICLE I GENERAL These Bylaws are intended to supplement and implement applicable provisions of law and of the Certificate of Incorporation of this Corporation with respect to the regulation of the affairs of this Corporation. ARTICLE II MEETINGS OF STOCKHOLDERS. Section 1. Place of Meeting: Stockholders' meetings shall be held at the principal office of this Corporation or at such other place, either within or without the State of Delaware, as shall be designated in the notice of meeting. Section 2. Annual Meeting: The Annual Meeting of the Stockholders shall be held in JUNE of each year at the place, on the day and at the hour designated in the call therefor. At such meeting, the stockholders shall elect the Board of Directors for the ensuing year, and shall transact such other business as shall properly come before them. Section 3. Special Meetings: Special meetings may be called at any time by the President or Board of Directors and shall be called by the President upon written request of the holders of not less than 10% percent of the voting power of all shares entitled to vote at the meeting. Section 4. Notice of Meetings: Written notice of the date, time and place of each Annual and Special meeting (a notice of a Special Meeting shall also contain the general purpose or purposes for such meeting) shall be mailed or delivered, at least ten (10) days prior to the date of such meeting but not more than sixty (60) days before such meeting, to each stockholder entitled to vote at such meeting at his residence or usual place of business as shown on the records of this Corporation, provided that any one or more of such stockholders, as to himself or themselves, may waive such notice in writing or by attendance without protest at such meeting. Section 5. Quorum: The holders of a majority of the shares of the issued and outstanding stock entitled to vote at a meeting, present either in person or by proxy, shall constitute a quorum for the transaction of business at such meeting of the stockholders. If a quorum be not present at such meeting, the stockholders present in person or by proxy may adjourn to such future time as shall be agreed upon by them and notice of such adjournment shall be given to the stockholders not present or represented at the meeting. Section 6. Stockholders' Action Without Meeting: Any action which, under any provision of the Delaware General Corporation Law, may be taken at a meeting of stockholders, may be taken without such a meeting if consent in writing, setting forth the action so taken or to 2 be taken, is signed severally or collectively by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Every such consent shall bear the date of signature of each stockholder who signs the consent. The Secretary of the Corporation shall file such consent or consents with the minutes of the meetings of the stockholders. Prompt notice of the taking of any corporate action without a meeting by less than unanimous consent shall be given to those stockholders who have not consented in writing. ARTICLE III SHARES Section 1. Share Certificates: Share certificates shall be in a form adopted by the Board of Directors and shall be signed by the President and by the Secretary. Such certificates shall bear the seal of the Corporation, the name of the person to whom issued, and the number of shares which such certificate represents. The consideration for which the shares were issued and the date of issue shall be entered on the Corporation's books. Section 2. Transfer of Shares: Shares shall be transferred only on the books of the Corporation by the holder thereof in person or by his attorney. ARTICLE IV DIRECTORS Section 1. Number, Election and Term of Office: A Board of not less than one (1) nor more than seven (7) directors shall be chosen annually by the stockholders entitled to vote at the Annual Meeting of Stockholders; except that, as long as all of the issued and outstanding shares are owned beneficially and of record by less than three (3) stockholders and until the stockholders vote to increase the number of positions on the Board of Directors, the number of Directors may be less than three (3) but not less than the number of stockholders. The number of positions on the Board of Directors to be filled for any year shall be the number fixed by resolution of the stockholders or Board of Directors, or, in the absence of such resolution, shall be the number of Directors elected at the preceding Annual Meeting of Stockholders. The number of positions on the Board of Directors for any year, as fixed in accordance with the foregoing (hereinafter referred to as the "number of directorships"), may be increased or decreased at any time as provided by law. Section 2. Removal of Directors: Any Director may be removed from office at any time, with or without cause, by concurrent vote of the holders of not less than a majority of the issued and outstanding shares entitled to vote, at any meeting of stockholders called for that purpose. Section 3. Vacancies: Vacancies created by an increase in the number of directorships shall be filled for the unexpired term by action of stockholders. Vacancies occurring by reason other than by increase in the number of directorships shall be filled for the unexpired term by the concurring vote of a majority of the Directors remaining in office, even 2 3 though such remaining Directors may be less than a majority of the number of directorships (as fixed for the current year in accordance with Article IV, Section 1). If such remaining Directors fail to fill a vacancy, then such vacancy shall be filled by action of stockholders. Section 4. Powers: The property, business and affairs of the Corporation shall be managed by or under the direction of the Directors who may exercise all power and do all the things which may be exercised or done by the Corporation subject to provisions of law, the statutes of the State of Delaware, the Certificate of Incorporation, these Bylaws, and any vote of the stockholders. ARTICLE V MEETINGS OF DIRECTORS Section 1. Annual Meetings: A regular meeting of the Board of Directors shall be held without notice immediately after the Annual Meeting of Stockholders, or as soon thereafter as convenient. At such meeting the Board of Directors shall choose and appoint the officers of the Corporation who shall hold their offices, subject to prior removal by the Board of Directors, until the next annual meeting or until their successors are chosen and qualify. Section 2. Regular Meetings: All other regular meetings of the Board of Directors may be held without notice at such date, time and place as the Board of Directors may determine and fix by resolution. Section 3. Special Meetings: Special meetings of the Board of Directors may be held upon call of the President, or upon call of any one or more Directors. Section 4. Notice: Written or oral notice of the date, time and place of all special meetings of the Board of Directors shall be given to each Director personally or mailed to his residence or usual place of business at least two (2) days prior to the date of the meeting, provided that any one or more Directors, as to himself or themselves, may waive such notice in writing or by attendance without protest at such meeting. Section 5. Quorum: Directors holding a majority of the number of directorships shall constitute a quorum. Except as otherwise provided by law or these Bylaws, all questions shall be decided by a vote of a majority of the Directors present at any meeting of the Board of Directors at which a quorum is present. Section 6. Director Participation in Meeting by Telephone: A Director may participate in a meeting of the Board of Directors by means of conference telephone or similar communications equipment enabling all Directors participating in the meeting to hear one another, and participation in a meeting pursuant to this section shall constitute presence in person at such meetings. Section 7. Directors' Action Without Meeting: If all the Directors severally or collectively consent in writing to any action taken or to be taken by the Corporation, such action shall be as valid as though it had been authorized at a meeting of the Board of Directors. The 3 4 Secretary of the Corporation shall file such consent or consents with the minutes of the meetings of the Board of Directors. ARTICLE VI OFFICERS Section 1. Titles, Duties and Removal: The Directors shall appoint a President, Secretary, Treasurer and such other officers as the Directors from time to time deem appropriate. The duties of the officers of the Corporation shall be such as are specified below and such as usually pertain to such offices, as well as such as may be prescribed from time to time by the Board of Directors. Any officer elected or appointed by the Board may be removed with or without cause at any time by the Board. Section 2. Chairman of the Board: The Chairman of the Board shall preside at all meetings of the Board of Directors. Section 3. President: The President shall preside at all meetings of the stockholders, shall have general charge and direction of the business of the Corporation and shall perform such other duties as are properly required of him by the Board of Directors. Section 4. Secretary: The Secretary shall keep the minutes of the meetings of stockholders and the Board of Directors and shall give notice of all such meetings as required by these Bylaws. He shall have custody of such minutes, the seal of the Corporation and the stock certificate records of the Corporation, except to the extent some other person is authorized to have custody and possession thereof by a resolution of the Board of Directors. Section 5. Controller/Treasurer: The Treasurer shall keep the fiscal accounts of the Corporation, including an account of all moneys received or disbursed. Section 6. Vacancies: If an office becomes vacant for any reason, the Board of Directors shall fill such vacancy. Any officer so appointed or elected by the Board shall serve only until such time as the unexpired term of his predecessor shall have expired unless reelected by the Board. ARTICLE VII SEAL The corporate seal shall consist of a circular disc with the name of the Corporation and the words "Delaware" and "Seal" thereon. 4 5 ARTICLE VIII INDEMNIFICATION The Corporation shall indemnify any person who incurs expense by reason of such person acting as an officer, director, employee or agent of this Corporation. Such indemnification shall be mandatory in all circumstances in which indemnification is permitted by law. ARTICLE IX COMMITTEES Section 1. The Board of Directors, by resolution adopted by the affirmative vote of Directors holding a majority of the number of directorships, may, at a meeting at which a quorum is present, designate two or more Directors to constitute an executive committee or other committees, which committees shall have and may exercise all such authority of the Board of Directors as shall be provided in such resolution. Section 2. A majority of the committee shall have the power to act. Committees shall keep full records of their proceedings and shall report the same to the Board of Directors. ARTICLE X AMENDMENTS These Bylaws may be altered, amended, added to, or repealed by the affirmative vote of the holders of a majority of the voting power of shares entitled to vote thereon or by an affirmative vote of Directors holding a majority of the number of directorships. Any notice of a meeting of stockholders or of the Board of Directors at which these Bylaws are proposed to be altered, amended, added to, or repealed shall include notice of such proposed action. 5 EX-99.T3B12 23 h90985ex99-t3b12.txt BYLAWS OF PIONEER AMERICAS, INC. 1 EXHIBIT T3B-12 PIONEER CHLOR ALKALI COMPANY, INC. BY-LAWS ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the Corporation in the State of Delaware shall be established and maintained at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, and The Corporation Trust Company shall be constituted and appointed the registered agent of the Corporation at the address of its registered office. SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. ANNUAL MEETING. The annual meeting of stockholders for the election of Directors and such other business as may properly be brought before the meeting shall be held at such place within or without the State of Delaware and at such date and time as shall be designated by the Board of Directors and state din the notice of the meeting or in a duly executed waiver of notice thereof. In the event the Board of Directors fails to so determine the time, date, and place of meeting, the annual meeting of stockholders shall be held at the registered office of the Corporation in Delaware on the last Thursday of March. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes may be called by the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning not less than 10% of all the shares entitled to vote at the meetings. A request for a special meeting shall state the purpose or purposes of the proposed meeting and business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. SECTION 3. NOTICE. Written notice stating the place, day, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) or more than fifty (50) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officers or persons calling the meeting, to each stockholder of record entitled to vote at such meeting. Attendance at a meeting shall constitute a waiver of notice, except where the person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called. 2 SECTION 4. RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, the Board of Directors may in advance establish a record date which must be at least ten (10) but not more than fifty (50) days prior to such meeting. If the Board of Directors fail to establish a record date, the record date shall be the date on which notice of the meeting is mailed. SECTION 5. VOTING LIST. (a) The officer or agent having charge of the stock transfer books for shares of the Corporation shall make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or ant adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the Corporation or at the place where such meeting is to be held, and shall be subject to inspection by any stockholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. The original stock transfer book shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer books or to vote at any meeting of stockholders. (b) Failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting. (c) Any officer or agent having charge of the stock transfer books who shall fail to prepare the list of stockholders or keep the same on file for a period of ten (10) days, or produce and keep open for inspection as provided in this section, shall be liable to any stockholder suffering damage on account of such failure, to the extent of such damage. In the event that such officer or agent does not receive notice of a meeting of stockholders sufficiently in advance of the date of such meeting reasonably to enable him to comply with the duties prescribed by these By-laws, the Corporation, but not such officer or agent, shall be liable to any stockholder suffering damage on account of such failure, to the extent of such damage. SECTION 6. QUORUM OF STOCKHOLDERS. The holders of a majority of the shares issued and outstanding and entitled to vote thereat, present in person, or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person, or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting, provided a quorum shall be present or represented thereat, any business may be transacted which might have been transacted if the meeting had been held in accordance with the original notice thereof. SECTION 7. WITHDRAWAL OF QUORUM. If a quorum is present at any meeting, the vote of the holders of a majority of the shares entitled to vote, present in person, or represented by proxy, shall decide any question brought before such meeting, unless the question 2 3 is one upon which a different vote is required by express provision of the statutes or by the Certificate of Incorporation or these By-laws. The stockholders present at a meeting at which a quorum is present may continue to transact business until adjournment, despite the withdrawal of stockholders after the commencement of the meeting, which withdrawal leaves less than a quorum remaining at the meeting. SECTION 8. METHOD OF VOTING. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class or classes are limited or denied by the Certificate of Incorporation. A stockholder may vote either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. Each proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law. SECTION 9. ACTION WITHOUT MEETINGS. Any action required or which may be taken at a meeting of the stockholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the stockholders entitled to vote with respect to the subject matter thereof and such consent shall have the same force and effect as a unanimous vote of the stockholders. ARTICLE III DIRECTORS SECTION 1. POWERS. The business and affairs of the Corporation and all corporate powers shall be managed by the Board of Directors, subject to any limitation imposed by statute, the Certificate of Incorporation or these By-Laws as to action which requires authorization or approval by the stockholders. SECTION 2. NUMBER/QUALIFICATIONS. The number of Directors which shall constitute the whole Board shall be not less than one or more than nine as determined by the stockholders, none of whom need be residents of the State of Delaware or stockholders of the Corporation. SECTION 3. ELECTION. The Directors shall be elected at the annual meeting of the stockholders, and each Director elected shall serve until his successor shall have been elected and qualified. SECTION 4. VOTING. Every stockholder entitled to vote shall have the right to: vote the number of voting shares owned by him for as many persons as there are directors to be elected and for whose election he has the right to vote; or unless cumulative voting is prohibited by the Certificate of Incorporation, to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principal among any number of such candidates. Any stockholder who intends to cumulate his votes if herein authorized shall given written notice of his intention to the Secretary of the Corporation on or before the day preceding the election at 3 4 which such stockholder intends to cumulate his votes. All stockholders may cumulate their votes if any stockholder gives the written notice provided for herein. SECTION 5. REMOVAL OF DIRECTORS. (a) At any meeting of stockholders called expressly for the purpose of removing a Director, any Director or the entire Board of Directors may be removed, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of Directors. (b) Unless cumulative voting is prohibited by the Certificate of Incorporation, if less than the entire Board is removed, no one of the Directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors. SECTION 6. VACANCIES. Any vacancy in the Board of Directors caused by death, resignation, removal or otherwise shall be filled by a majority of the remaining Directors though less than a quorum of the Board of Directors. A Director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. SECTION 7. INCREASE OR DECREASE IN NUMBER. The number of Directors may be increased or decreased from time to time by amendment to these By-laws but no decrease shall have the effect of shortening the term of any incumbent Director. Any directorship to be filled by reason of an increase in the number of Directors shall be filled by election at an annual or special meeting of stockholders. ARTICLE IV MEETINGS OF THE BOARD OF DIRECTORS SECTION 1. PLACE. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Delaware. SECTION 2. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held upon notice, or without notice unless notice is required under these By-laws and at such time and at such place as shall from time to time be determined by the Board. SECTION 3. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or the President and shall be called by the Secretary on the written request of two Directors. Notice of each special meeting of the Board of Directors shall be given to each Director at least five (5) days before the date of the meeting. SECTION 4. NOTICE AND WAIVER OF NOTICE. Attendance of a Director at any meeting shall constitute a waiver of notice of such meeting, except where a Director attends for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Except as may be otherwise provided by law or by the Certificate of Incorporation or by these By-laws, neither the business to be transacted at, nor 4 5 the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. SECTION 5. QUORUM OF DIRECTORS. At all meetings of the Board of Directors a majority of the Directors shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 6. ACTION WITHOUT MEETINGS. Any action required or permitted to be taken at a meeting of the Board of Directors or any committee may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the Board of Directors or committee, as the case may be. SECTION 7. TELEPHONE MEETINGS. The Directors may participate in and hold a meeting of the Board of Directors by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to this section shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 8. COMMITTEES. The Board of Directors may from time to time designate members of the Board to constitute committees, including an Executive Committee, which shall in each case consist of such number of Directors, not less than two, and shall have and may exercise such power, as the Board may determine and specify in the respective resolutions appointing them. A majority of all the members of any such committee may determine its action and fix the time and place of its meeting, unless the board of Directors shall otherwise provide. The Board of Directors shall have power at any time to change the number, subject as aforesaid, and members of any such committee, to fill vacancies and to discharge any such committee. SECTION 9. COMPENSATION. Directors shall receive such compensation for their services as Director as may be determined by resolution by the Board of Directors. The receipt of such compensation shall not preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE V OFFICERS SECTION 1. ELECTION, NUMBER, QUALIFICATION, TERM, COMPENSATION. The officers of the Corporation shall be elected by the Board of Directors and shall consist of a President, a Vice-President, a Secretary and a Treasurer. The Board of Directors may also elect a Chairman of the Board, additional Vice Presidents, one or more Assistant Secretaries and Assistant Treasurers, and such other officers and assistant officers and agent as it shall deem necessary, who shall hold their offices for such terms and shall have such 5 6 authority and exercise such powers and perform such duties as shall be determined from time to time by the Board of resolution not inconsistent with these By-Laws. Two or more offices may be held by the same person, except that the offices of President and Secretary may not be held by the same person. None of the officers need be Directors. The Board of Directors shall have the power to enter into contracts for the employment and compensation of officers for such terms as the Board deems advisable. The salaries of all officers and agents of the Corporation shall be fixed by the Board of Directors. SECTION 2. REMOVAL. The officers of the Corporation shall hold office until their successors are elected or appointed and qualify, or until their death or until their resignation or removal from office. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board whenever in its judgment the best interests of the Corporation will be served thereby. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer shall not of itself create contract rights. SECTION 3. VACANCIES. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors. SECTION 4. AUTHORITY. Officers and agents shall have such authority and perform such duties in the management of the Corporation as may be provided in these By-laws or as may be determined by the Board of Directors, not inconsistent with these By-laws. SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is elected, shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be prescribed by the Board of Directors upon written directions given to him pursuant to resolutions duly adopted by the Board of Directors. SECTION 6. PRESIDENT. The President shall be the chief executive officer of the Corporation, shall have general and active management of their business and affairs of the Corporation, and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless a Chairman of the Board has been elected in which event the President shall preside at meetings of the Board of Directors in the absence or disability of the Chairman of the Board. SECTION 7. VICE PRESIDENTS. The Vice Presidents, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and have the authority and exercise the powers of the President. They shall perform such other duties and have such other authority and powers as the Board of Directors may from time to time prescribe or as the President may from time to time delegate. SECTION 8. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all of the proceedings of the meetings of the Board of Directors and of the stockholders in a minute book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to 6 7 be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, shall affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of an Assistant Secretary or of the Treasurer. SECTION 9. TREASURER. (a) The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts and records of receipts, disbursements and other transactions in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the same and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. (b) The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render the President and the Board of Directors, at its regular meetings, or when the President or Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. (c) If required by the Board of Directors, the Treasurer shall give the Corporation a bond of such type, character, and amount as the Board of Directors may require. SECTION 10. ASSISTANT SECRETARY AND ASSISTANT TREASURER. In the absence of the Secretary or Treasurer, an Assistant Secretary or Assistant Treasurer, whether one or more, respectively shall perform the duties of the Secretary or Treasurer, Assistant Treasurers may be required to give the bond as referenced in SECTION 9(c) of this ARTICLE V. The Assistant Secretary and Assistant Treasurer, in general, shall have such powers and perform such duties as the Treasurer or Secretary, respectively, or the Board of Directors or President may prescribe. SECTION 11. OTHER OFFICERS. The Board of Directors may also establish such other offices as said Board of Directors deems appropriate for the Corporations. ARTICLE VI CERTIFICATES REPRESENTING SHARES SECTION 1. CERTIFICATES. The shares of the Corporation shall be represented by certificates signed by the President or a Vice-President and the Secretary or an Assistant Secretary of the Corporation, and may be sealed with the seal of the Corporation or a facsimile thereof. The signatures of the President or Vice President and the Secretary or Assistant Secretary upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the Corporation itself or an employee of the Corporation. The certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued. Each certificate shall state on the face thereof the holder's name, the number and class of shares, and the par value of such shares or a statement that such shares are without par value. 7 8 SECTION 2. PAYMENT, ISSUANCE. Shares may be issued for such consideration, not less than the par value thereof, as may be fixed from time to time by the Board of Directors. The consideration for the payment of shares shall consist of money paid, labor done, or property actually received. Shares may not be issued until the full amount of the consideration fixed therefor has been paid. SECTION 3. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Board of Directors may direct a new Certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed upon the making of an affidavit of the fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, prescribe such indemnities as it deems adequate to protect the Corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. SECTION 4. REGISTRATION OF TRANSFER. Shares of stock shall be transferable only on the books of the Corporation by the holder thereof in person or by his duly authorized attorney. Upon surrender to the Corporation or the Transfer Agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, a new certificate shall be issued to the person entitled thereto and the older certificate canceled and the transaction recorded upon the books of the Corporation. SECTION 5. REGISTERED OWNER. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE VII DIVIDENDS SECTION 1. DECLARATION AND PAYMENT. Subject to statute and the Certificate of Incorporation, dividends may be declared by the Board of Directors, in its discretion, at any regular or special meeting, pursuant to law and may be paid in cash, in property, or in the Corporation's own shares. SECTION 2. RESERVES. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Directors from time to time, in their absolute discretion, think proper as a reserve fund for meeting contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. 8 9 ARTICLE VIII INDEMNIFICATION AND INSURANCE SECTION 1. GENERAL INDEMNIFICATION. Subject to the provisions of SECTION 3 of this ARTICLE VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. Subject to the provisions of SECTION 3 of this ARTICLE VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect to any claim, issue, or matter as to which such person shall have been adjudged to be liable (i) for any breach of his duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involved intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which he derived an improper personal benefit unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. SECTION 3. DETERMINATION OF STANDARD OF CONDUCT. Any indemnification under SECTIONS 1 and 2 of this ARTICLE VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because he had met the applicable standard of conduct set forth in said SECTIONS 1 and 2. Such determination 9 10 shall be made (1) by the Board of Directors, by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable or, even if obtainable and a quorum of disinterested directors so directs, by independent legal counsel (who may be counsel to the Corporation) in a written opinion, or (3) by the stockholders. SECTION 4. SUCCESSFUL DEFENSE. If a Director or officer of the Corporation has been successful on the merits or otherwise as a party to any action, suit, or proceeding referred to in SECTIONS 1 and 2 of this ARTICLE VIII, or with respect to any claim, issue, or matter therein (to the extent that a portion of his expenses can be reasonably allocated thereto), he shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him in connection therewith. SECTION 5. EXPENSES DURING PROCEEDINGS. Expenses incurred in defending a civil, criminal, administrative, or investigative action, suit or proceeding, or threat thereof, may be paid by the Corporation in advance of the final disposition of such action suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to whom or on whose behalf any such amount is paid to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this ARTICLE VIII. SECTION 6. EXCLUSIVITY. The indemnification provided by this ARTICLE VIII shall not be deemed exclusive of any other rights to which any person indemnified may be entitled under any other By-law, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors, and administrators of such a person. SECTION 7. INSURANCE. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this ARTICLE VII or of Section 145 of the General Corporation Law of the State of Delaware. SECTION 8. DEFINITIONS. For the purposes of this ARTICLE VIII, references to "the Corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director or officer of such a constituent corporation or is or was serving at the request of such constituent corporation as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise shall stand in the same position under the provisions of this ARTICLE VIII with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity. For purposes of this ARTICLE VIII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to 10 11 "serving at the request of the corporation" shall include any service as a director, officer, employee, or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this ARTICLE VIII. ARTICLE IX GENERAL PROVISIONS SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SECTION 2. SEAL. The corporate seal shall be in such form as may be prescribed by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. SECTION 3. MINUTES. The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its stockholders and Board of Directors, and shall keep at is registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders and the number and class of the shares held by each. SECTION 4. AMENDMENT. These By-laws may be altered, amended or repealed and new By-laws may be adopted by the Board of Directors at which a quorum is present, provided notice of the proposed alteration, amendment, or repeal is contained in the notice of the meeting. SECTION 5. NOTICE. Any notice to Directors or stockholders shall be in writing and shall be delivered personally or mailed to the Directors or stockholders at their respective addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when the same shall be deposited in the United States mail, postage prepaid. Notice to Directors may also be given by facsimile telecommunication. Whenever any notice is required to be given under the provisions of applicable statutes or of the Certificate of Incorporation or of these By-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the given of such notice. ARTICLE X RESTRICTIONS ON TRANSFER OF SHARES The Stockholders may adopt such agreements restricting the sale, assignment, transfer, or other hypothecation of the Corporation's shares of stock as may be permitted by the statutes or by the Certificate of Incorporation. Copies of such agreements shall be filed with the Secretary of the Corporation. 11 EX-99.T3C 24 h90985ex99-t3c.txt FORM OF INDENTURE 1 DRAFT FORM OF INDENTURE Exhibit T3C PCI CHEMICALS CANADA COMPANY/SOCIETE PCI CHIMIE CANADA, as the Issuer PIONEER COMPANIES, INC. IMPERIAL WEST CHEMICAL CO., KEMWATER NORTH AMERICA CO., PIONEER AMERICAS LLC, PIONEER (EAST), INC., PIONEER WATER TECHNOLOGIES, INC., PIONEER LICENSING, INC., and KWT, INC., as Guarantors and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee ------------------------ INDENTURE Dated as of [*], 2001 ----------------------- $150,000,000 10% Senior Secured Guaranteed Notes due 2008 2 TABLE OF CONTENTS
Page ---- ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions.................................................................... 2 "Act"...................................................................................... 2 "Additional Amounts"....................................................................... 3 "Adjusted Net Assets"...................................................................... 3 "Administrative Agent"..................................................................... 3 "Affiliate"................................................................................ 3 "Agent Members"............................................................................ 3 "Allowed Other Secured Claim".............................................................. 3 "Allowed Secured Tax Claim"................................................................ 3 "Asset Sale"............................................................................... 3 "Asset Sale Offer"......................................................................... 4 "Asset Sale Offer Amount".................................................................. 4 "Asset Sale Offer Period".................................................................. 4 "Asset Sale Purchase Date"................................................................. 4 "Asset Sale Purchase Price"................................................................ 4 "Attributable Indebtedness"................................................................ 4 "Bankruptcy Code".......................................................................... 5 "Bankruptcy Court"......................................................................... 5 "Bankruptcy Law"........................................................................... 5 "Board of Directors"....................................................................... 5 "Board Resolution"......................................................................... 5 "Business Day"............................................................................. 5 "Canadian Act of Bankruptcy"............................................................... 5 "Canadian Bankruptcy Law".................................................................. 6 "Canadian Security Agreements"............................................................. 6 "Capital Stock"............................................................................ 6 "Capitalized Lease Obligation"............................................................. 7 "Cash Equivalents"......................................................................... 7 "Change of Control"........................................................................ 7 "Change of Control Date"................................................................... 8 "Change of Control Offer".................................................................. 8 "Change of Control Payment Date"........................................................... 8 "Change of Control Purchase Price"......................................................... 8 "Chapter 11 Cases"......................................................................... 8 "Closing Date"............................................................................. 8 "Code"..................................................................................... 8 "Collateral"............................................................................... 8
i 3 "Collateral Agent"......................................................................... 8 "Collateral Proceeds"...................................................................... 8 "Commencement Date"........................................................................ 8 "Commission"............................................................................... 8 "Common Security and Intercreditor Agreement".............................................. 9 "Company".................................................................................. 9 "Company Request".......................................................................... 9 "Confirmation Order"....................................................................... 9 ["Consolidated Cash Flow Available for Fixed Charges"...................................... 9 ["Consolidated Fixed Charge Coverage Ratio"................................................ 9 ["Consolidated Income Tax Expense"......................................................... 10 ["Consolidated Interest Expense"........................................................... 10 ["Consolidated Net Income"................................................................. 10 "Consolidated Net Worth"................................................................... 10 "Corporate Trust Office"................................................................... 11 "covenant defeasance"...................................................................... 11 "Custodian"................................................................................ 11 "Default".................................................................................. 11 "Defaulted Interest"....................................................................... 11 "defeasance"............................................................................... 11 "Defeasance Redemption Date"............................................................... 11 "Defeased Securities"...................................................................... 11 "Depositary"............................................................................... 11 "Direction"................................................................................ 11 "Effective Plan Date"...................................................................... 11 "Eligible Investments"..................................................................... 11 "Environmental Claim"...................................................................... 12 "Environmental Law"........................................................................ 12 "Event of Default"......................................................................... 12 "Exchange Act"............................................................................. 12 "Excluded Holder".......................................................................... 12 "Existing Indebtedness".................................................................... 12 "Exit Facility"............................................................................ 12 "Exit Facility Provider"................................................................... 12 "Fair Market Value"........................................................................ 13 "Final Order".............................................................................. 13 "Fiscal Year".............................................................................. 13 "Funding Guarantor"........................................................................ 13 "GAAP"..................................................................................... 13 "Global Security".......................................................................... 13 "Guaranties"............................................................................... 13 "Guarantor"................................................................................ 13 "Guaranty"................................................................................. 13 "Guaranteed Obligations"................................................................... 13 "Hazardous Materials"...................................................................... 14 "Hedging Obligations"...................................................................... 14
ii 4 "Holder"................................................................................... 14 "including"................................................................................ 14 "incur".................................................................................... 14 "Indebtedness"............................................................................. 14 "Indenture Documents"...................................................................... 15 "Indenture Obligations".................................................................... 15 "Indenture Obligor"........................................................................ 16 "Independent Director"..................................................................... 16 "Insurance Proceeds"....................................................................... 16 "Intercreditor Collateral Account"......................................................... 16 "Interest Payment Date".................................................................... 16 "Investment"............................................................................... 16 "judgment currency"........................................................................ 16 "Lenders".................................................................................. 16 "Lien"..................................................................................... 16 "Loan Documents"........................................................................... 17 "Material Adverse Effect".................................................................. 17 "Maturity"................................................................................. 17 "MEIP"..................................................................................... 17 "Moody's".................................................................................. 17 "Mortgage"................................................................................. 17 "Mortgaged Property"....................................................................... 17 "Net Award"................................................................................ 17 "Net Income"............................................................................... 18 "Net Proceeds"............................................................................. 18 "New Common Stock"......................................................................... 18 "New Debt"................................................................................. 18 "New Other Secured Notes".................................................................. 18 "New Other Secured Notes And Claims"....................................................... 18 "New Tranche A Term Notes"................................................................. 18 "Obligor".................................................................................. 18 "Obligor Subsidiary"....................................................................... 18 "Officers' Certificate".................................................................... 18 "Old Debt"................................................................................. 19 "Opinion of Counsel"....................................................................... 19 "Opinion of Independent Counsel"........................................................... 19 "Organizational Documents"................................................................. 19 "Outstanding".............................................................................. 19 "Paying Agent"............................................................................. 20 "PCI"...................................................................................... 20 "Permitted Investments".................................................................... 20 "Permitted Issuance"....................................................................... 21 "Permitted Liens".......................................................................... 21 "Person"................................................................................... 22 "Physical Securities"...................................................................... 22 "Pioneer Companies"........................................................................ 22
iii 5 "Plan of Reorganization"................................................................... 22 "Post Petition Interest"................................................................... 23 "Power of Attorney"........................................................................ 23 "Predecessor Security"..................................................................... 23 "Qualified Equity Offering"................................................................ 23 "Quebec Mortgage and Security Agreement"................................................... 23 "Redemption Date".......................................................................... 23 "Redemption Price"......................................................................... 23 "Refinancing".............................................................................. 23 "Refinancing Indebtedness"................................................................. 23 "Regular Record Date"...................................................................... 23 "Related Business"......................................................................... 23 "Release".................................................................................. 24 "Restoration".............................................................................. 24 "Restricted Payment"....................................................................... 24 "S&P"...................................................................................... 24 "Safety and Health Laws"................................................................... 24 "Sale and Leaseback Transaction"........................................................... 24 "Securities"............................................................................... 24 "Securities Act"........................................................................... 24 "Security Documents"....................................................................... 24 "Security Register"........................................................................ 24 "Security Registrar"....................................................................... 24 "Senior Indebtedness"...................................................................... 24 "Special Record Date"...................................................................... 24 "Stated Maturity".......................................................................... 24 "Stock Pledge Agreement"................................................................... 25 "Subordinated Indebtedness"................................................................ 25 "Subordinated Obligations"................................................................. 25 "Subsidiary"............................................................................... 25 "Taxes".................................................................................... 26 "Term Loan Agreement"...................................................................... 26 "Term Loan Borrower"....................................................................... 26 "Transaction Documents".................................................................... 26 "Trust Indenture Act"...................................................................... 26 "Trust Moneys"............................................................................. 26 "Trustee".................................................................................. 27 "U.S. Government Obligations".............................................................. 27 "Voting Stock"............................................................................. 27 "Wholly-Owned Subsidiary".................................................................. 27 Section 102. [Intentionally omitted]............................................................. 27 Section 103. Compliance Certificates and Opinions................................................ 27 Section 104. Form of Documents Delivered to Trustee.............................................. 28 Section 105. Acts of Holders..................................................................... 28
iv 6 Section 106. Notices, etc., to Trustee, the Company and any Indenture Obligor or Obligor Subsidiary. ................................................. 30 Section 107. Notice to Holders; Waiver........................................................... 31 Section 108. Conflict with Trust Indenture Act................................................... 31 Section 109. Effect of Headings and Table of Contents............................................ 31 Section 110. Successors and Assigns.............................................................. 31 Section 111. Separability Clause................................................................. 32 Section 112. Benefits of Indenture............................................................... 32 Section 113. Governing Law....................................................................... 32 Section 114. Legal Holidays...................................................................... 32 Section 115. Schedules and Exhibits.............................................................. 32 Section 116. Counterparts........................................................................ 32 Section 117. Communication by Holders with other Holders......................................... 32 Section 118. No Recourse against Others.......................................................... 33 ARTICLE TWO SECURITY FORMS Section 201. Forms Generally..................................................................... 33 Section 202. Legends............................................................................. 33 Section 203. Form of Face of Security............................................................ 34 Section 204. Form of Reverse of Securities....................................................... 36 Section 205. Form of Trustee's Certificate of Authentication..................................... 42 Section 206. Form of Guaranty of Each of the Guarantors.......................................... 42 ARTICLE THREE THE SECURITIES Section 301. Title and Terms..................................................................... 44 Section 302. Denominations....................................................................... 45 Section 303. Execution, Authentication, Delivery and Dating...................................... 45 Section 304. Temporary Securities................................................................ 46 Section 305. Registration of Transfer and Exchange............................................... 47 Section 306. Book-Entry Provisions for Global Security........................................... 48 Section 307. [Intentionally omitted.]............................................................ 49 Section 308. Mutilated, Destroyed, Lost and Stolen Securities.................................... 49 Section 309. Payment of Interest; Interest Rights Preserved...................................... 50 Section 310. Persons Deemed Owners............................................................... 51 Section 311. Cancellation........................................................................ 51 Section 312. Computation of Interest; Interest Act (Canada)...................................... 51 Section 313. Deposit of Moneys................................................................... 52 Section 314. CUSIP Number........................................................................ 52
v 7 ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE Section 401. Company's Option to Effect Defeasance or Covenant Defeasance........................ 52 Section 402. Defeasance and Discharge............................................................ 52 Section 403. Covenant Defeasance................................................................. 53 Section 404. Conditions to Defeasance or Covenant Defeasance..................................... 53 Section 405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. ...................................... 55 Section 406. Reinstatement....................................................................... 56 Section 407. Repayment of the Company............................................................ 56 Article Five REMEDIES Section 501. Events of Default................................................................... 57 Section 502. Acceleration........................................................................ 59 Section 503. Other Remedies...................................................................... 60 Section 504. Waiver of Past Defaults............................................................. 61 Section 505. Control by Majority................................................................. 61 Section 506. Limitation on Suits................................................................. 61 Section 507. Rights of Holders to Receive Payment................................................ 62 Section 508. Collection Suit by Trustee.......................................................... 62 Section 509. Trustee May File Proofs of Claim.................................................... 63 Section 510. Priorities.......................................................................... 63 Section 511. Undertaking for Costs............................................................... 64 Section 512. Waiver of Stay, Extension or Usury Laws............................................. 64 ARTICLE SIX THE TRUSTEE Section 601. Notice of Defaults.................................................................. 65 Section 602. Certain Rights of Trustee........................................................... 65 Section 603. Trustee Not Responsible for Recitals, Dispositions of Securities or Application of Proceeds Thereof. ............................................ 66 Section 604. Trustee and Agents May Hold Securities; Collections; etc............................ 66 Section 605. Money Held in Trust................................................................. 67 Section 606. Compensation and Indemnification of Trustee and Its Prior Claim..................... 67 Section 607. Conflicting Interests............................................................... 68 Section 608. Corporate Trustee Required; Eligibility............................................. 68 Section 609. Resignation and Removal; Appointment of Successor Trustee........................... 68 Section 610. Acceptance of Appointment by Successor.............................................. 70
vi 8 Section 611. Merger, Conversion, Consolidation or Succession to Business......................... 71 Section 612. Preferential Collection of Claims Against Company................................... 71 Section 613. Certain Duties and Responsibilities................................................. 71 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Company to Furnish Trustee Names and Addresses of Holders.......................... 72 Section 702. Preservation of Information; Disclosure of Names and Addresses of Holders.......... 72 Section 703. Reports by Trustee................................................................. 73 Section 704. Reports by Company and Guarantors.................................................. 73 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. When Indenture Obligors May Merge, Etc............................................. 75 Section 802. Successor Substituted.............................................................. 76 ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures and Agreements without Consent of Holders.................. 77 Section 902. Supplemental Indentures and Agreements with Consent of Holders..................... 79 Section 903. Execution of Supplemental Indentures and Agreements................................ 81 Section 904. Revocation Effect of Supplemental Indentures....................................... 81 Section 905. Conformity with Trust Indenture Act................................................ 81 Section 906. Reference in Securities to Supplemental Indentures................................. 82 ARTICLE TEN COVENANTS Section 1001. Payment of Principal, Premium and Interest......................................... 82 Section 1002. Maintenance of Office or Agency.................................................... 82 Section 1003. Compliance Certificate............................................................. 82 Section 1004. Taxes.............................................................................. 83 Section 1005. Jurisdiction, Service of Process and Venue Immunity; Judgment Currency............. 84 Section 1006. Limitation on Restricted Payments.................................................. 86 Section 1007. Limitations on Payment Restrictions Affecting Subsidiaries......................... 86 Section 1008. Limitations on Indebtedness........................................................ 87
vii 9 Section 1009. Asset Sales........................................................................ 90 Section 1010. Limitation on Sale and Leaseback Transactions...................................... 92 Section 1011. Limitation on Transactions With Affiliates......................................... 93 Section 1012. Limitation on Liens................................................................ 94 Section 1013. Corporate Existence; Corporate Separateness........................................ 95 Section 1014. Change of Control.................................................................. 95 Section 1015. Maintenance of Properties.......................................................... 98 Section 1016. Maintenance of Insurance........................................................... 98 Section 1017. Stock Pledge Agreements............................................................ 98 Section 1018. Money for Security Payments to be Held in Trust.................................... 99 Section 1019. [Redemption of Securities with proceeds of Qualified Equity Offering............... 100 Section 1020. Limitation on Ownership of Wholly-Owned Subsidiary Stock........................... 101 Section 1021. Impairment of Security Interest.................................................... 101 Section 1022. Amendment to Certain Agreements.................................................... 101 Section 1023. Plan of Reorganization............................................................. 102 Section 1024. Nature of Business, Organizational Documents and Capital Structure and New Subsidiaries; Books and Records. ............................ 102 Section 1025. Compliance with Laws and Environmental and Safety and Health Matters............... 103 Section 1026. [Intentionally omitted]............................................................ 103 Section 1027. Authorizations; Performance of Obligations......................................... 103 Section 1028. Further Assurances................................................................. 103 Section 1029. Fiscal Year........................................................................ 104 Section 1030. Additional Amounts................................................................. 104 Section 1031. Pension Transfer Agreement......................................................... 105 ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 1101. Rights of Redemption............................................................... 105 Section 1102. Applicability of Article........................................................... 106 Section 1103. Election to Redeem; Notice to Trustee.............................................. 106 Section 1104. Selection by Trustee of Securities to Be Redeemed.................................. 106 Section 1105. Notice of Redemption............................................................... 107 Section 1106. Deposit of Redemption Price........................................................ 108 Section 1107. Securities Payable on Redemption Date.............................................. 108 Section 1108. Securities Redeemed or Purchased in Part........................................... 108 Section 1109. Asset Sale Offers.................................................................. 109 ARTICLE TWELVE SATISFACTION AND DISCHARGE Section 1201. Satisfaction and Discharge of Indenture............................................ 111 Section 1202. Application of Trust Money......................................................... 112
viii 10 ARTICLE THIRTEEN GUARANTY Section 1301. Guaranty; Limitation of Liability.................................................. 113 Section 1302. Guaranty Absolute.................................................................. 114 Section 1303. Right to Demand Full Performance................................................... 115 Section 1304. Waivers and Acknowledgments........................................................ 115 Section 1305. The Guarantors Remain Obligated in Event the Company is No Longer Obligated to Discharge Indenture Obligations. .......................... 116 Section 1306. Subrogation........................................................................ 117 Section 1307. Subordination...................................................................... 117 Section 1308. Continuing Guaranty; Assignments................................................... 119 Section 1309. Guaranty Is in Addition to Other Security.......................................... 119 Section 1310. Contribution....................................................................... 119 Section 1311. Trustee's Duties; Notice to Trustee................................................ 119 Section 1312. Release of Guaranty................................................................ 120 Section 1313. Execution of Guaranty.............................................................. 120 Section 1314. Payment Permitted by Each of the Guarantors if no Default.......................... 120 Section 1315. Notice to Trustee by Each of the Guarantors........................................ 121 Section 1316. Article Applicable to Paying Agents................................................ 121 Section 1317. Additional Guaranties.............................................................. 121 Section 1318. No Suspension of Remedies.......................................................... 122 ARTICLE FOURTEEN CONDITIONS TO EFFECTIVENESS OF INDENTURE Section 1401. Conditions Precedent to the Effectiveness of the Plan of Reorganization, etc....... 122 Section 1402. Implementation of Plan of Reorganization........................................... 122 ARTICLE FIFTEEN SECURITY Section 1501. Security........................................................................... 122 Section 1502. Recording; Priority; Opinions, Etc................................................. 123 Section 1503. Release of Collateral.............................................................. 124 Section 1504. Trust Indenture Act Requirements................................................... 124 Section 1505. Suits to Protect Collateral........................................................ 124 Section 1506. Determinations Relating to Collateral.............................................. 125 Section 1507. Trust Moneys....................................................................... 125 Section 1508. Power of Attorney for Collateral in Quebec......................................... 126
SCHEDULE 1 Existing Indebtedness SCHEDULE 2 Existing Investments
ix 11 EXHIBIT A Form of Mortgage EXHIBIT B Form of Common Security and Intercreditor Agreement EXHIBIT C Form of Stock Pledge Agreement
x 12 Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of [*], 2001
Trust Indenture Indenture Act Section Section ----------- ------- Section 310(a)(1) .......... 608 (a)(2) .............. 608 (a)(3) .............. N.A. (a)(4) .............. N.A. (a)(5) .............. 607 (b) ................. 607, 609 (c) ................. N.A. Section 311(a) ............. 612 (b) ................. 612 (c) ................. N.A. Section 312(a) ............. 701, 702 (b) ................. 117, 702 (c) ................. 117, 702 Section 313(a) ............. 703 (b)(1) .............. 703 (b)(2) .............. 703 (c) ................. 703 (d) ................. 703 Section 314(a) ............. 704, 1003 [(b) ................ N.A.] (c)(1) .............. 103 (c)(2) .............. 103 (c)(3) .............. N.A. (d) ................. 103, 1503, 1504, 1507 (e) ................. 103 (f) ................. N.A. Section 315(a) ............. 602, 613, 903 (b) ................. 601, 602, 903 (c) ................. 602, 903 (d) ................. 602, 903 (e) ................. 511 Section 316(a)(last sentence) 101 ("Outstanding") (a)(1)(A) .................. 502, 505 (a)(1)(B) ........... 504 (a)(2) .............. N.A. (b) ................. 507 (c) ................. 105 Section 317(a)(1) .......... 508 (a)(2) .............. 509 (b) ................. 1018 Section 318(a) ............. 310
N.A. means not applicable.________________________________ Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of this Indenture. 13 INDENTURE, dated as of [*], 2001, (the "Indenture") among PCI Chemicals Canada Company/Societe PCI Chimie Canada, an unlimited liability company organized and existing under the laws of the province of Nova Scotia, Canada (the "Company"), each Guarantor (as hereinafter defined) from time to time a party hereto (the Company and the Guarantors party to this Indenture, and their respective assigns and affiliates, shall be referred to herein as the "Pioneer Companies") and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as trustee (the "Trustee"). RECITALS OF THE COMPANY 1. The Pioneer Companies are successors to the debtors that commenced the Chapter 11 Cases (as hereinafter defined) and the initial Holders of the Securities on the date hereof (as each such term is hereinafter defined), prior to the effectiveness of the Plan of Reorganization (as hereinafter defined), together beneficially hold the Old Debt (as hereinafter defined). 2. Pursuant to the Plan of Reorganization and the implementation thereof and upon the Plan of Reorganization becoming effective, the applicable Pioneer Companies are willing and required (among other things) to remain indebted to certain holders of the Old Debt by accepting the New Debt and to issue the New Common Stock (as each such term is hereinafter defined) in exchange for the cancellation and the extinguishment of the Old Debt by such holders. 3. Such holders of the Old Debt are willing and required to accept the New Debt and the New Common Stock upon such cancellation and extinguishment. 4. The New Debt comprises indebtedness represented by the New Tranche A Term Notes (as hereinafter defined) and the Securities, and the Pioneer Companies and the Trustee, on behalf of the holders of the Old Debt, wish to enter into this Indenture to consummate that part of the exchange of Old Debt for New Debt that relates to the issuance by the Company of the Securities (guaranteed by the Guarantors jointly and severally) and to govern (for the benefit of such Holders or any other Holders) the indebtedness assumed and incurred hereby. 5. In accordance with the Plan of Reorganization and the implementation thereof, the Company has duly authorized the creation of an issue of 10% Senior Secured Guaranteed Notes due 2008 (the "Securities"), of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture and the Securities. The Securities are referred to in the Plan of Reorganization as the New Tranche B Notes. 6. Each Guarantor has duly authorized the issuance of its Guaranty (as hereinafter defined) of the Securities, of substantially the tenor hereinafter set forth, and to provide therefor, each Guarantor has duly authorized the execution and delivery of this Indenture and its Guaranty. 14 7. This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act (as hereinafter defined) that are required to be part of and to govern indentures qualified under the Trust Indenture Act. 8. All things necessary have been done to make (i) the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, (ii) their respective Guaranties (as hereinafter defined), when executed and delivered by each of the Guarantors, the valid obligation of such Guarantor, and (iii) this Indenture a valid agreement of the Company and each of the Guarantors in accordance with the terms of this Indenture. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is covenanted and agreed, for the benefit of each other and for the equal and proportionate benefit of the Holders of the Securities issued under this Indenture, as follows: Article One DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (e) all references to $, US$, dollars or United States dollars shall refer to the lawful currency of the United States of America. "Act" is defined in Section 105 hereof. 2 15 "Additional Amounts" is defined in Section 1030 hereof. "Adjusted Net Assets" means, with respect to any Guarantor, at any date, the lesser of the amount by which (x) the Fair Market Value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date, but excluding liabilities under the Guaranty), of such Guarantor at such date and (y) the present Fair Market Value of assets of such Guarantor at such date exceeds the amount that shall be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date but excluding debt in respect of its Guaranty), as they become absolute and matured. "Administrative Agent" means [*], as the administrative agent under the Term Loan Agreement, including each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to the Term Loan Agreement. "Affiliate" means, with respect to any specified Person, (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, (ii) any director or controlling shareholder of such other Person, or (iii) any senior officer of such specified Person or such other Person. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided, however, that beneficial ownership of [*]% or more of the voting equity securities (or of warrants or other rights to acquire such voting equity securities) of a Person shall be deemed to be control. "Agent Members" is defined in Section 306 hereof. "Allowed Other Secured Claim" has the meaning given to it in the Plan of Reorganization. "Allowed Secured Tax Claim" has the meaning given to it in the Plan of Reorganization. "Asset Sale" means, with respect to any Obligor or any Obligor Subsidiary, the sale, lease, conveyance, transfer or other disposition (including, without limitation, by way of merger or consolidation, and whether indirectly or directly or by operation of law or otherwise) to any Person, other than any Obligor or any Obligor Subsidiary, of any of such Obligor's or such Obligor Subsidiary's assets (including, without limitation, (x) any sale, lease, conveyance, transfer or other disposition of Capital Stock of any Obligor Subsidiary, and (y) any sale, lease, conveyance, transfer or other disposition of any non-cash consideration received by any Obligor or any Obligor Subsidiary from any prior transaction or series of related transactions that constituted an 3 16 Asset Sale hereunder), whether owned on the date hereof or subsequently acquired, in one transaction or a series of related transactions; provided, however, that the following will not constitute an Asset Sale: (i) transactions (other than transactions described in clause (y) above) in any calendar year with aggregate cash and/or Fair Market Value of any other consideration received (including, without limitation, the unconditional assumption of Indebtedness) of less than $1,000,000; (ii) a transaction or series of related transactions that results in a Change of Control; (iii) any sale of assets of any Obligor or any Obligor Subsidiary or merger permitted pursuant to Article Eight hereof; (iv) any sale or other disposition of inventory, property (whether real, personal or mixed) or equipment that has become worn out, obsolete or damaged or otherwise unsuitable or no longer needed for use in connection with the business of any Obligor or any Obligor Subsidiary, as the case may be, in the good faith determination of the Boards of Directors of PCI and the Company and so certified to the Trustee; (v) any sale of inventory to customers in the ordinary and customary course of business; (vi) sales of cash and cash equivalents in the ordinary course of business, (vii) sales of assets Net Proceeds from which are used within 180 days of such sale to purchase assets of similar value and quality and business utility to those assets sold, provided that the aggregate amount of Net Proceeds outstanding and pending reinvestment pursuant to this clause (vii) shall not exceed $10,000,000 at any time; (viii) transfers resulting from any casualty or condemnation of property or assets; and (ix) the sale or discount of overdue accounts receivable in the ordinary course of business, in connection with the compromise or collection thereof. "Asset Sale Offer" is defined in Section 1009 hereof. "Asset Sale Offer Amount" is defined in Section 1109 hereof. "Asset Sale Offer Period" is defined in Section 1109 hereof. "Asset Sale Purchase Date" is defined in Section 1109 hereof. "Asset Sale Purchase Price" is defined in Section 1009 hereof. "Attributable Indebtedness" means, with respect to any Sale and Leaseback Transaction, as at the time of determination, the greater of (i) the Fair Market Value of the property subject to such transaction, and (ii) the present value (discounted at a rate equivalent to the Company's then current weighted average cost of funds for borrowed money, compounded on a semi-annual basis) of the total net obligations of the lessee for rental payments during the remaining term of the lease (or the lease back in the case of a lease and leaseback transaction) included in such arrangement (including any period for which such lease has been extended). As used in the preceding sentence, the "total net obligations of the lessee for rental payments" under any lease (or any lease back in the case of a lease and leaseback transaction) for any such period means the sum of rental and other payments required to be paid (including any step-up in interest rate of any financing) with respect to such period by the lessee thereunder excluding any amounts required to be paid by such lessee on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges. In the case of any lease (or 4 17 any lease back in the case of a lease and leaseback transaction) which is terminable by the lessee upon payment of a penalty, such net amount of rent also includes the amount of such penalty, but no rent will be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. "Bankruptcy Code" means Title 11 of the United States Code, as amended, or any similar United States federal or state law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law. "Bankruptcy Court" means the United States Bankruptcy Court for the Southern District of Texas, Houston Division, having jurisdiction over the Chapter 11 Cases, or if such court ceases to exercise jurisdiction over the Chapter 11 Cases, such other court or adjunct thereof that exercises jurisdiction over the Chapter 11 Cases in lieu of the United States Bankruptcy Court for such district. "Bankruptcy Law" means the Bankruptcy Code, Canadian Bankruptcy Law or any law of any other country or jurisdiction relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors. "Board of Directors" means, in respect of any Person, its Board of Directors or equivalent body or any committee thereof duly authorized to act on behalf of such Board of Directors or equivalent body in respect of such matters as are referred to herein as requiring such action on behalf of such Board of Directors or equivalent body. "Board Resolution" of any corporation or entity means a copy of a resolution certified by the Secretary or an Assistant Secretary or equivalent officer of such corporation or entity to have been duly adopted by the Board of Directors of such corporation or entity and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means any day which is neither a Saturday or Sunday nor a legal holiday on which banking institutions in The City of New York or the city in which the Corporate Trust Office is located are authorized or required by law or executive order to be closed. "Canadian Act of Bankruptcy" means, with respect to any Person: (1) an admission in writing by such Person of its inability to pay its debts generally as they become due; (2) a general assignment by such Person for the benefit of its creditors pursuant to the Bankruptcy and Insolvency Act (Canada); (3) such Person becoming subject to any bankruptcy proceedings in Canada which it is not contesting in good faith, diligently and by appropriate means or which continue undischarged, unstayed or undismissed for a period of 30 days; 5 18 (4) any application under any Canadian Bankruptcy Law to any tribunal or authority for the purpose of suspending payment or performance of any of the liabilities of such Person; (5) a petition or application by such Person under any Canadian Bankruptcy Law to any tribunal or authority for the appointment of an administrator, receiver, trustee or intervenor for it or for any substantial part of such Person's property; (6) the commencement against such Person of any proceedings (including a notice of intention or a proposal under the Bankruptcy and Insolvency Act (Canada)) or any Canadian Bankruptcy Law, statute, regulation or decree whether now or hereafter in effect in Canada, relating to it or its debt, or to any reorganization, arrangement, adjustment, dissolution or liquidation involving such Person, which proceedings are not being contested in good faith, diligently and by appropriate means or which continue undischarged, unstayed or undismissed for a period of 30 days; (7) the bankruptcy of such Person within the meaning of the Bankruptcy and Insolvency Act (Canada), or any successor or equivalent legislation; or (8) any act by such Person signifying its consent to, approval of, or acquiescence in any bankruptcy, reorganization or insolvency proceeding in Canada under any law relating to bankruptcy, insolvency or relief of debtors or any proceeding for the appointment of a receiver or trustee for itself or for any substantial part of its property where such receiver or trustee remains undischarged for a period of 30 days. "Canadian Bankruptcy Law" means the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada), the Winding-Up and Restructuring Act (Canada), or any similar Canadian federal or provincial law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization or relief of debtors, each as amended or changed. "Canadian Security Agreements" means a general security agreement and deed of hypothec charging all of the personal and movable property of PCI Chemicals Canada Company/Societe PCI Chimie Canada any other Obligor having property, assets or any place of business or office in Canada. "Capital Stock" means, with respect to any Person, any common stock, preferred stock and any other capital stock of such Person and shares, interests, participations or other ownership interest (however designated), of any Person and any rights (other than debt securities convertible into, or exchangeable for, capital stock or such other ownership interests), warrants, options or other rights to purchase any of the foregoing, including each class of common stock and preferred stock of such Person if such Person is a corporation and each general and/or limited partnership interest of such 6 19 Person if such Person is a partnership and/or limited liability company interest of such Person if such Person is a limited liability company. "Capitalized Lease Obligation" means Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP and the amount of such Indebtedness shall be the capitalized amount of such obligations determined in accordance with GAAP. "Cash Equivalents" means, (i) any evidence of Indebtedness with a maturity of one year or less from the date of acquisition issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) certificates of deposit or acceptances with a maturity of one year or less from the date of acquisition of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $250,000,000; (iii) commercial paper with a maturity of one year or less from the date of acquisition issued by a corporation that is not an Affiliate of the Company organized under the laws of any state of the United States of America or the District of Columbia and rated at least "A-1" by S&P or at least "P-1" by Moody's or at least an equivalent rating category of another nationally recognized securities rating agency; (iv) any money market deposit accounts issued or offered by a domestic commercial bank having capital and surplus in excess of $250,000,000; and (v) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the government of the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of acquisition; provided that the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions With Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985. "Change of Control" means the occurrence of any of the following: (i) a "person" or "group" (as such terms are used in Sections 14(d)(2) and 13(d)(3), respectively, of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of at least 35% of the outstanding voting power of the fully diluted Voting Stock of PCI or the Company, (ii) the adoption of a plan relating to the liquidation or dissolution of PCI or the Company, (iii) the merger or consolidation of the Company or PCI, taken individually or on a consolidated basis with its Subsidiaries, with or into another corporation with the effect that the stockholders of PCI or the Company immediately prior to such merger or consolidation cease to be the "beneficial owners" (as defined in Rule 13d-3 under the Exchange Act) of 35% or more of the combined voting power of the securities of the surviving corporation of such merger or the corporation resulting from such merger or consolidation ordinarily (and apart from rights arising under special circumstances) having the right to vote in the election of directors outstanding immediately after such merger or consolidation or (iv) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the Board of Directors of PCI or the Company (together with any new directors whose election by the Board of Directors of PCI or the Company, or whose 7 20 nomination for election by the shareholders of PCI or the Company, was approved by a vote of a majority of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors of PCI or the Company then in office. Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred under clause (iii) above solely as a result of a merger or consolidation of the Company with or into PCI provided that such merger or consolidation is permitted under Article Eight of this Indenture. "Change of Control Date" is defined in Section 1014 hereof. "Change of Control Offer" is defined in Section 1014 hereof. "Change of Control Payment Date" is defined in Section 1014 hereof. "Change of Control Purchase Price" is defined in Section 1014 hereof. "Chapter 11 Cases" means each and all of the cases under Chapter 11 of the Bankruptcy Code commenced by Pioneer Companies, Inc., Pioneer Corporation of America, Imperial West Chemical Co., Kemwater North America Co., PCI Chemicals Canada Inc./PCI Chimie Canada Inc., Pioneer Americas, Inc., Pioneer (East), Inc., Pioneer Water Technologies, Inc., Pioneer Licensing, Inc. and KWT, Inc., and styled In re Pioneer Companies, Inc. et al, Chapter 11 Case No. 01-38259-H3-11 Jointly Administered. "Closing Date" means the date of consummation of the initial offering of the Securities. "Code" means the United States Internal Revenue Code of 1986, as amended, reformed or otherwise modified. "Collateral" means all of the property and assets of each Obligor and Obligor Subsidiary now existing or hereafter acquired which secures the Securities (other than collateral subject to the Lien of the Exit Facility) and as otherwise defined in the Security Documents. "Collateral Agent" means [*], as collateral agent under the Common Security and Intercreditor Agreement, and any successor thereto. "Collateral Proceeds" has the meaning specified in Section 1009 hereof. "Commencement Date" is defined in Section 1109 hereof. "Commission" means the United States Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act or if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. 8 21 "Common Security and Intercreditor Agreement" means the Common Security and Intercreditor Agreement, dated as of [*] 2001, by and among the Indenture Obligors and others, the Administrative Agent (for itself and for the benefit of the Lenders), the Collateral Agent, the Trustee (for itself and for the benefit of the Holders of the Securities), substantially in the form of Exhibit B attached hereto, and as may be amended, supplemented, amended and restated or otherwise modified from time to time. "Company" is defined in the preamble hereto, and includes each other successor thereto. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by any one of its Chairman of the Board of Directors, its President or a Vice President (regardless of vice presidential designation), and by any one of its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Confirmation Order" means the order of the Bankruptcy Court confirming the Plan of Reorganization pursuant to Section 1129 of the Bankruptcy Code. ["Consolidated Cash Flow Available for Fixed Charges" of any Person means for any period the Consolidated Net Income for such period increased by the sum of (i) Consolidated Interest Expense of such Person for such period, plus (ii) Consolidated Income Tax Expense of such Person for such period, plus (iii) the consolidated depreciation and amortization expenses included in the income statement of such Person for such period, plus (iv) other non-cash charges of such Person for such period deducted from consolidated revenues in determining Consolidated Net Income for such period, minus (v) non-cash items of such Person for such period increasing consolidated revenues in determining Consolidated Net Income for such period.] ["Consolidated Fixed Charge Coverage Ratio"of any Person means for any period the ratio of (i) Consolidated Cash Flow Available for Fixed Charges of such Person for such period to (ii) the sum of (A) Consolidated Interest Expense of such Person for such Period, plus (B) the annual interest expense (including the amortization of debt discount) with respect to any Indebtedness proposed to be incurred by such Person or its Subsidiaries, plus (C) the annual interest expense (including the amortization of debt discount) with respect to any other Indebtedness incurred by such Person or its Subsidiaries since the end of such period to the extent not included in clause (ii)(A) above, minus (D) Consolidated Interest Expense of such Person to the extent included in clause (ii)(A) with respect to any Indebtedness that will no longer be outstanding as a result of the incurrence of the Indebtedness proposed to be incurred; provided, however, that in making such computation, the Consolidated Interest Expense of such Person attributable to interest on any Indebtedness bearing a floating interest rate shall be computed on a pro forma basis as if the rate in effect on the date of computation had been the applicable rate for the entire period; provided, further, that in the event such Person or its Subsidiaries has made Asset Sales or acquisitions of assets which are permitted pursuant to the terms and provisions of this Indenture (including acquisitions of other Persons by merger, consolidation or purchase of Capital Stock) during or after such 9 22 period, such computation shall be made on a pro forma basis as if the Asset Sales or acquisitions had taken place on the first day of such period.] ["Consolidated Income Tax Expense" of any Person means for any period the consolidated provision for income taxes of such Person for such period calculated on a consolidated basis in accordance with GAAP.] ["Consolidated Interest Expense" for any Person, means for any period the consolidated interest expense included in a consolidated income statement (without deduction of interest income) of such Person for such period calculated on a consolidated basis in accordance with GAAP, including, without limitation or duplication (or, to the extent not so included, with the addition of), (i) the amortization of debt discounts, (ii) any payments of fees with respect to letters of credit, bankers acceptances or similar facilities, (iii) fees with respect to interest rate swap or similar agreements, or foreign currency hedge, exchange or similar agreements, and (iv) the portion of any rental obligations allocable to interest expense.] ["Consolidated Net Income" means, for any period, and as to any Person, the aggregate Net Income of such Person and its Subsidiaries for such period determined in accordance with GAAP; provided that (i) the Net Income of any Person which is not a Subsidiary of such Person but which is consolidated with such Person or is accounted for by such Person by the equity method of accounting will be included only to the extent of the amount of cash dividends or cash distributions paid to such Person or a Wholly-Owned Subsidiary of such Person, (ii) the Net Income of any Person acquired by such Person or a Subsidiary of such Person in a pooling of interests transaction for any period prior to the date of such acquisition will be excluded, (iii) the Net Income of any Subsidiary of such Person that is subject to restrictions, direct or indirect, on the payment of dividends or the making of distributions to such Person will be excluded to the extent of such restrictions, (iv) the Net Income of any Subsidiary less than 80% of whose securities having the right (apart from the right under special circumstances) to vote in the election of directors are owned by PCI, the Company or their respective Wholly-Owned Subsidiaries will be included only to the extent of the amount of cash dividends or cash distributions actually paid by such Subsidiary to PCI, the Company or a Wholly-Owned Subsidiary of the Company or PCI, (v) all extraordinary gains and losses, and any gain or loss realized upon the termination of any employee pension benefit plan, in respect of dispositions of assets other than in the ordinary course of business and any one-time increase or decrease to Net Income which is required to be recorded because of the adoption of new accounting policies, practices or standards required by GAAP (together, in each case, with any provision for taxes) will be excluded, and (vi) all amounts of "other income, net" classified as such on one or more lines of such Person's statement of operations, in accordance with GAAP, net of applicable income taxes, will be excluded from such Person's aggregate Net Income.] "Consolidated Net Worth" means, for any Person, the total of the amounts shown on the balance sheet of such Person and its Subsidiaries, determined on a consolidated basis without duplication in accordance with GAAP, as of the end of the most recent fiscal quarter of such Person ending at least forty-five (45) days prior to the 10 23 taking of any action for the purpose of which the determination is being made, as (i) the amount of Capital Stock plus (ii) the amount of surplus and retained earnings (or, in the case of a surplus or retained earnings deficit, minus the amount of such deficit). "Corporate Trust Office" means the office of the Trustee or an affiliate or agent thereof at which at any particular time the corporate trust business for the purposes of this Indenture shall be principally administered, which office at the date of execution of this Indenture is located at [Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479], Attention: [Stanley S. Stroup, General Counsel]. "covenant defeasance" is defined in Section 403 hereof. "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. "Default" means any event which is, or after notice or passage of any time or both would be, an Event of Default. "Defaulted Interest" is defined in Section 309 hereof. "defeasance" is defined in Section 402 hereof. "Defeasance Redemption Date" is defined in Section 404 hereof. "Defeased Securities" is defined in Section 401 hereof. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Direction" is defined in Section 105 hereof. "Effective Plan Date" means the first Business Day on which the conditions specified in Section 10.1 of the Plan of Reorganization have been satisfied or waived. "Eligible Investments" means, (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof or Canada or any province thereof (provided that the full faith and credit of the United States of America or Canada, as the case may be, is pledged in support thereof) having maturities of not more than 90 days from the date of acquisition, (ii) time deposits and certificates of deposit with maturities of not more than 90 days from the date of acquisition of any commercial banking institution that is a member of the Federal Reserve System or is a Schedule 1 Canadian Bank, in either case having capital and surplus in excess of $500,000,000 and whose debt has a rating at the time of any such investment of at least "A-1" or the equivalent thereof by S&P or at least "P-1" or the equivalent thereof by Moody's, or any Lender, (iii) fully secured repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) entered into with any bank or financial institution meeting the qualifications 11 24 specified in clause (ii) above, (iv) commercial paper issued by the parent corporation of any commercial banking institution that is a member of the Federal Reserve System or is a Schedule 1 Canadian Bank, in either case having capital and surplus in excess of $500,000,000 and commercial paper or master notes of issuers rated at the time of any such investment at least "A-1" or the equivalent thereof by S&P or at least "P-1" or the equivalent thereof by Moody's, and in each case maturing within 270 days after the date of acquisition, and (v) any shares in an open-end mutual fund organized by a bank or financial institution having combined capital and surplus of at least $500,000,000 investing solely in investments permitted by the foregoing clauses (i), (ii) and (iv). "Environmental Claim" means any claim, assertion, demand, notice of violation, suit, administrative or judicial proceeding, regulatory action, investigation, information request or order involving any Hazardous Materials, Environmental Law, noise or odor pollution or any injury or threat of injury to human health, property or the environment. "Environmental Law" means all international, national, provincial, regional, federal, state, local and municipal statutes, laws (including principles of common and decisional law), regulations, by-laws, policies, guidelines, directives, standards, rules, orders, decrees, judgments, ordinances, permits, certificates, licenses, registrations, approvals, or requirements or authorizations of any governmental or administrative authority relating to the environment, natural resources, safety or health of humans or other organisms, including the manufacture, distribution in commerce, and use or Release of Hazardous Materials. "Event of Default" has the meaning specified in Article Five of this Indenture. "Exchange Act" means the United States Securities Exchange Act of 1934, as amended. "Excluded Holder" is defined in Section 1030(a) hereof. "Existing Indebtedness" means all Indebtedness (other than the Securities outstanding) of the Obligors existing as of the Effective Plan Date after giving effect to the Plan of Reorganization and listed on Schedule 1 hereto. "Exit Facility" means the Credit Agreement, dated as of [*], 2001, between [*], as borrower, and [*], as lender, administrative agent and collateral agent thereunder, as may be amended, supplemented, amended and restated or otherwise modified from time to time., and all agreements and instruments related thereto and contemplated thereby, each dated as of [*], 2001 (including any security agreement entered in connection therewith), as each such agreement or instrument may be amended, supplemented, amended and restated or otherwise modified from time to time. "Exit Facility Provider" means [*] as lender under the Exit Facility or any successor lender or lenders under the Exit Facility. 12 25 "Fair Market Value" means, with respect to any asset or property, the price which could be negotiated in an arm's-length transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value will be determined by a majority of the members of the Boards of Directors of PCI and the Company and a majority of the disinterested members of the Boards of Directors of PCI and the Company, if any, acting in good faith, and will be evidenced by a duly and properly adopted resolution of such Boards of Directors. "Final Order" has the meaning given to it in the Plan of Reorganization. "Fiscal Year" means, with respect to any Obligor, any period of twelve consecutive months ending on December 31; references to a Fiscal Year with a numbering corresponding to any calendar year refer to the fiscal year ending on the 31st of December during such calendar year. "Funding Guarantor" is defined in Section 1310 hereof. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Security" means a security that evidences all of the Securities and bears the legend set forth in Section 202. "Guaranties" means each Guaranty taken together with each other Guaranty. "Guarantor" means, collectively, Pioneer Companies, Inc., a Delaware corporation, Imperial West Chemical Co., a Nevada corporation, Kemwater North America Co., a Delaware corporation, Pioneer Americas LLC, a Delaware limited liability company, Pioneer (East), Inc., a Delaware corporation, Pioneer Water Technologies, Inc., a Delaware corporation, Pioneer Licensing, Inc., a Delaware corporation, and KWT, Inc., a Delaware corporation, and each other guarantor of the Company that becomes a guarantor pursuant to this Indenture, and "Guarantor" shall mean any one of such guarantors. "Guaranty" means the guaranty by any Guarantor of the Company's Indenture Obligations pursuant to a guaranty given in accordance with this Indenture, including, without limitation, the Guaranties by the Guarantors included in Article Thirteen of this Indenture and any Guaranty delivered pursuant to Section 1317 hereof. "Guaranteed Obligations" is defined in Section 1301 hereof. 13 26 "Hazardous Materials" means all pollutants, contaminants, hazardous substances, hazardous chemicals, hazardous wastes, hazardous materials, residual hazardous materials, medical and biochemical wastes, special wastes, toxic substances, petroleum (including crude oil) and petroleum-derived substances, wastes and additives, asbestos, polychlorinated biphenyls, ozone-depleting substances, methane, radioactive materials (including source, special nuclear and by-product materials as defined by 42 U.S.C. Section 2011 et seq. (whether or not 42 U.S.C. Section 2011 et seq. would apply in respect of any Obligor incorporated or organized outside of the United States)) and all other compounds, elements, materials and substances in any form or condition (including products) regulated, restricted or addressed by or under Environmental Laws. "Hedging Obligations" means the obligations of any Person or entity pursuant to any swap or cap agreement, exchange agreement, collar agreement, option, futures or forward hedging contract, derivative instrument or other similar agreement or any arrangement designed to protect such Person or entity against fluctuations in interest rates or foreign exchange rates or the price of raw materials and other chemical products used or produced in the Company's business or the business of any other Obligor, as the case may be. "Holder" means a Person in whose name a Security is registered in the Security Register. "including" means including without limiting the generality of any description preceding such term, and, for purposes of this Indenture, the parties hereto agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "incur" has the meaning given to it in Section 1008 hereof; provided that (i) with respect to any Indebtedness of any Subsidiary of PCI or the Company that is owing to PCI or the Company, or another such Subsidiary, any disposition, pledge or transfer of such Indebtedness to any Person (other than PCI or the Company or a Wholly-Owned Subsidiary of PCI or the Company) shall be deemed to be an incurrence of such Indebtedness and, (ii) with respect to any Indebtedness of PCI or the Company or a Subsidiary of the Company or PCI that is owing to another such Subsidiary, any transaction pursuant to which a Wholly-Owned Subsidiary to which such Indebtedness is owing ceases to be a Wholly-Owned Subsidiary shall be deemed to be an incurrence of such Indebtedness; and provided, further that any Indebtedness of a Person existing at the time such Person becomes a Subsidiary of PCI or the Company shall be deemed to be incurred by such Subsidiary at the time it becomes a Subsidiary. The term "incurrence" has a corresponding meaning. "Indebtedness" of any Person means, without duplication, all liabilities with respect to: (i) indebtedness for money borrowed for the deferred purchase price of property or services or which is evidenced by a bond, debenture, note or other similar instrument or agreement, but excluding trade credit evidenced by any such instrument or agreement incurred in the ordinary course of business and payable on usual and 14 27 customary terms, or Indebtedness of any partnership of which such Person is a partner; (ii) reimbursement obligations, letters of credit and bankers' acceptances; (iii) indebtedness with respect to Hedging Obligations; (iv) Capitalized Lease Obligations; (v) indebtedness, secured or unsecured, created or arising in connection with the acquisition or improvement of any property or asset or the acquisition of any business; (vi) all indebtedness secured by or for which the obligee has an existing right, contingent or otherwise, to be secured by any Lien upon property owned by such Person and all indebtedness secured in the manner specified in this clause even if such Person has not assumed or become liable for the payment thereof; (vii) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person or otherwise representing the deferred and unpaid balance of the purchase price of any such property, including all indebtedness created or arising in the manner specified in this clause even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property; (viii) guaranties, direct or indirect, of any Indebtedness of other Persons referred to in clauses (i) through (vii) above, or of dividends or leases, taxes or other obligations of other Persons, excluding any guaranty arising out of the endorsement of negotiable instruments for collection in the ordinary course of business; (ix) contingent obligations in respect of, or to purchase or otherwise acquire or be responsible or liable for, through the purchase of products or services, irrespective of whether such products are delivered or such services are rendered, or otherwise, any such indebtedness referred to in clauses (i) through (vii) above; (x) any obligation, contingent or otherwise, arising under any surety, performance or maintenance bond; and (xi) all preferred stock or other redeemable stock of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid dividends. As used herein, Indebtedness with respect to any Hedging Obligation means, with respect to any specified Person on any date, the net amount (if any) that would be payable by such specified Person upon the liquidation, close-out or early termination on such date of such Hedging Obligation. For purposes of the foregoing, any settlement amount payable upon the liquidation, close-out or early termination of a Hedging Obligation shall be calculated by PCI and the Company in good faith and in a commercially reasonable manner on the basis that such liquidation, close-out or early termination results from an event of default or other similar event with respect to such specified Person. Any reference in this definition to indebtedness shall be deemed to include any renewals, extensions and refundings of any such indebtedness or any indebtedness issued in exchange for such indebtedness. "Indenture Documents" means this Indenture, the Securities, the Guaranties, the Common Security and Intercreditor Agreement, each Stock Pledge Agreement, each Mortgage (upon execution and delivery thereof), the other Security Documents and each other agreement, document or instrument delivered in connection herewith and therewith, whether or not specifically mentioned herein or therein. "Indenture Obligations" means the obligations (monetary or otherwise) of the Company and each other Obligor and their respective Obligor Subsidiaries under this Indenture, the Securities and the other Indenture Documents, to pay principal, premium, if any, and interest when due and payable, and all other amounts due or to become due 15 28 under or in connection with this Indenture (including, without limitation, all sums due to the Trustee pursuant to Section 606 hereof), the Securities and the other Indenture Documents and the performance of all other obligations to the Trustee and the Holders under this Indenture, the Securities and the other Indenture Documents, according to the terms hereof and thereof. "Indenture Obligor" means the Company, as issuer of the Securities, each of the Guarantors and each other obligor under this Indenture. "Independent Director" means, in relation to any Person, a director other than a director (i) who (apart from being a director of the Person or any of its Subsidiaries) is an employee, insider, associate or Affiliate of the Person or any of its Subsidiaries or has held any such position during the previous year, or (ii) who is a director, an employee, insider, associate or Affiliate of another party to the transaction in question. "Insurance Proceeds" has the meaning specified in each [Mortgage]. "Intercreditor Collateral Account" means the Collateral Account as defined in the Common Security and Intercreditor Agreement. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Securities. "Investment" means any direct or indirect advance, loan, other extension of credit or capital contribution (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others) to, purchase or acquire Capital Stock, bonds, notes, debentures or other securities of, or purchase or acquire all or a substantial part of the business, Capital Stock or other evidence of beneficial ownership of, or any other investment in or guaranty of any Indebtedness of, any Person or any other item that would be classified as an investment on a balance sheet prepared in accordance with GAAP. Investments do not include advances to customers and suppliers in the ordinary course of business on commercially reasonable terms. If any Obligor or any Obligor Subsidiary sells or otherwise disposes of any Capital Stock of any direct or indirect Subsidiary of any Obligor or Obligor Subsidiary such that, after giving effect to any such sale or disposition, such Person is no longer such a Subsidiary of the Obligor or Obligor Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Capital Stock of such Subsidiary not sold or disposed of. "judgment currency" is defined in Section 1005 hereof. "Lenders" shall mean the lenders party to the Term Loan Agreement. "Lien" means any mortgage, pledge, lien, security interest, hypothec, prior claim, charge or encumbrance of any kind (including any conditional sale or other title retention agreement and any lease in the nature thereof). 16 29 "Loan Documents" means collectively, the Term Loan Agreement (including the Guaranties contained therein), the New Tranche A Term Notes, the Common Security and Intercreditor Agreement, each Stock Pledge Agreement, each Mortgage (upon execution and delivery thereof), the other Security Documents and each other agreement, document or instrument delivered in connection therewith, whether or not specifically mentioned herein or therein, each as amended, supplemented, amended and restated or otherwise modified from time to time as permitted in accordance with their respective terms. "Material Adverse Effect" means (i) any material adverse effect on the business, assets, debt service capacity, liabilities (including environmental liabilities), financial condition, operations or prospects of the Obligors and the Obligor Subsidiaries, taken as a whole, (ii) any material adverse effect upon the ability of the Company or any other Obligor to timely perform its respective material obligations under the Indenture Documents or the Transaction Documents to which it is or will be a party, or (iii) any impairment of the legality, validity or enforceability of this Indenture, any other Indenture Document or any Transaction Document, or any material impairment of the rights, remedies or benefits available to the Trustee, the Collateral Agent or the Holders under this Indenture, any other Indenture Document or any Transaction Document or the Administrative Agent or the Lenders under any Transaction Document. "Maturity" when used with respect to any Security means the date on which the principal of such Security becomes due and payable as therein provided or as provided in this Indenture, whether at Stated Maturity, the Asset Sale Purchase Date, the Change of Control Payment Date or the Redemption Date and whether by declaration of acceleration, Change of Control, call for redemption or otherwise. "MEIP" means an equity incentive plan which shall become effective on the Effective Plan Date or as soon as reasonably practicable thereafter, substantially in the form contained in the Plan Supplement (as such term is defined in the Plan of Reorganization). "Moody's" means Moody's Investors Service, Inc. or any successor rating agency. "Mortgage" means each mortgage, deed of trust, or similar security instrument, substantially in the form of Exhibit A attached to this Indenture, which from time to time affects any property (including real property or immovable property situated in the United States or in any Canadian province) that secures PCI's, the Company's or any other Obligor's obligations under this Indenture, the Term Loan Agreement, the New Tranche A Term Notes, the Securities and any other Indenture Document or Transaction Document, as such instruments may be amended, supplemented or otherwise modified from time to time. "Mortgaged Property" has the meaning specified in each Mortgage. "Net Award" has the meaning specified in each Mortgage. 17 30 "Net Income" means, for any period for any Person, the net income of such Person determined in accordance with GAAP. "Net Proceeds" means the aggregate cash proceeds received by any Obligor or any Obligor Subsidiary in respect of any Asset Sale (including, without limitation, the proceeds of insurance paid on account of the loss of or damage to any property, or compensation or other proceeds for any property taken by condemnation, eminent domain or similar proceedings, and any non-cash consideration received by any Obligor or any Obligor Subsidiary from any Asset Sale that is converted into or sold or otherwise disposed of for cash within 90 days after the relevant Asset Sale), net of (i) the direct costs relating to such Asset Sale (including, without limitation, reasonable legal, accounting and investment banking fees and sales commissions), (ii) any taxes paid or payable as a result thereof, (iii) all amounts required to be applied to the repayment of, or representing the amount of permanent reductions in the commitments relating to, Indebtedness (other than the Securities) secured by a Lien on the asset or assets the subject of such Asset Sale which Lien is permitted pursuant hereto, and (iv) any reserve for adjustment in respect of the sale price of such asset or assets required by GAAP. "New Common Stock" means the common stock of PCI authorized by and issued pursuant to the Plan of Reorganization. "New Debt" means the New Tranche A Term Notes and the Securities. "New Other Secured Notes" has the meaning given it in the Plan of Reorganization. "New Other Secured Notes And Claims" means the Allowed Other Secured Claims reinstated pursuant to the Bankruptcy Code and Plan of Reorganization and the New Other Secured Notes. "New Tranche A Term Notes" means indebtedness of the Term Loan Borrower in an aggregate principal amount of $50,000,000, as such indebtedness is continued and incurred by the Term Loan Borrower from time to time in accordance with the terms of the Term Loan Agreement. "Obligor" means the Company, each of the Guarantors and any Person (other than the Administrative Agent, the Collateral Agent, the Trustee, any Lender or any Holder) obligated under any Indenture Document. "Obligor Subsidiary" means, in respect of an Obligor or an Indenture Obligor, any Subsidiary of such Obligor or Indenture Obligor, as the case may be. "Officers' Certificate" means a certificate signed by the Chairman of the Board, Vice Chairman, the President or a Vice President (regardless of vice presidential designation), and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the relevant Obligor or Obligor Subsidiary, as the case may be, and delivered to the Trustee. 18 31 "Old Debt" means indebtedness under (i) those certain $175,000,000 9.25% Senior Secured Guaranteed Notes due October 2007 issued by PCI Chemicals Canada Inc. pursuant to that certain Indenture, dated as of October 30, 1997, among PCI Chemicals Canada Inc., the Guarantors (as such term is defined therein) and the United States Trust Company of New York ("USTC"), in its capacity as trustee and as collateral agent, (ii) that certain Term Loan Agreement, dated as of October 30, 1997, among Pioneer Corporation of America, the Lenders (as such term is defined therein), certain other parties and BNY Asset Solutions LLC, in its capacity as administrative agent, (iii) those certain $200,000,000 9.25% Senior Secured Guaranteed Notes due June 2007 issued by Pioneer Corporation of America pursuant to that certain Indenture, dated as of June 17, 1997 among Pioneer Corporation of America, the Guarantors (as such term is defined therein) and USTC, in its capacity as trustee, and (iv) that certain Term Loan Agreement, dated as of June 17, 1997, among Pioneer Corporation of America, the Lenders (as such term is defined therein), certain other parties and BNY Asset Solutions LLC, in its capacity as administrative agent. "Opinion of Counsel" means a written opinion of counsel, who shall be counsel for the relevant Obligor or Obligor Subsidiary, as the case may be, and who shall be reasonably acceptable to the Trustee. "Opinion of Independent Counsel" means a written opinion of counsel issued by someone who is not an employee or consultant of the relevant Obligor or Obligor Subsidiary, as the case may be, and who shall be reasonably acceptable to the Trustee. "Organizational Documents" means, in respect of any Obligor or other Person, its certificate of incorporation and its by-laws (or equivalent constitutive documents) and all shareholder agreements, voting trusts and similar arrangements to which such Obligor or other Person is a party applicable to any of authorized shares, or other units or forms, of its Capital Stock. "Outstanding" when used with respect to Securities means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders; provided that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor reasonably satisfactory to the Trustee has been made; 19 32 (c) Securities, except to the extent provided in Sections 402 and 403 hereof, with respect to which the Company has effected defeasance or covenant defeasance as provided in Article Four; and (d) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof reasonably satisfactory to it that such Securities are held by a bona fide purchaser in whose hands the Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company, any Guarantor, or any other Obligor upon the Securities or any Affiliate of the Company, any Guarantor, or such other Obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the reasonable satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company, any guarantor or any other Obligor upon the Securities or any Affiliate of the Company, any Guarantor or such other Obligor. "Paying Agent" means any person authorized by the Company to pay the principal of, premium, if any, or interest on any Securities on behalf of the Company. "PCI" means Pioneer Companies, Inc., a Delaware corporation, in its capacities as the parent of the Company and a Guarantor. "Permitted Investments" means (i) any Eligible Investment, (ii) any Investment in the Company or any other Obligor, (iii) Investments in existence on the date hereof and listed on Schedule 2 hereto, (iv) Indebtedness permitted pursuant to clause (vi) of Section 1008 herein, (v) other investments by any Obligor after the date hereof in joint ventures, corporations, limited liability companies, partnerships or Obligor Subsidiaries engaged in a Related Business that do not at any one time outstanding exceed $5,000,000; provided that the amount of Investments pursuant to this clause (v) will be included in the calculation of Restricted Payments pursuant to Section 1006, (vi) promissory notes and other non-cash consideration received by the Obligors or the Obligor Subsidiaries in connection with Asset Sales permitted hereunder; (vii) Investments by PCI in Hedging Obligations permitted hereunder; and (viii) investments (including debt obligations and Capital Stock) received by the Company or its Subsidiaries in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with customers and suppliers arising in the ordinary course of business, in each case of the Company or its Subsidiaries. 20 33 "Permitted Issuance" means (i) the issuance by PCI of shares of Capital Stock as dividends on issued and outstanding Capital Stock of the same class of PCI or pursuant to any dividend reinvestment plan, (ii) the issuance by PCI of options or other equity securities of PCI to outside directors, members of management or employees of PCI or any Subsidiary of PCI, [(iii) the issuance of securities as interest or dividends on pay-in-kind debt or preferred equity securities in accordance with the terms permitted hereunder and under the other Indenture Documents,] (iv) the issuance to PCI or any of its Subsidiaries (or any director, with respect to such director's qualifying shares) by any of PCI's Subsidiaries of any of their respective Capital Stock, in each case with respect to this clause (iv) to the extent such Capital Stock issued to PCI or such Subsidiary is pledged to the Trustee pursuant to the applicable Indenture Document, [(v) the issuance by PCI of shares of its Capital Stock in connection with an acquisition permitted under this Indenture,] (vi) cash payments made in lieu of fractional shares of PCI's Capital Stock in connection with an acquisition referred to in clause (e) above in an aggregate amount not to exceed $250,000 in aggregate amount during the term of this Indenture, and (vii) the issuance by PCI of additional shares of Capital Stock of PCI to infuse additional capital into PCI and its Subsidiaries in an aggregate amount not to exceed $[*] during the term of this Indenture. "Permitted Liens" means as of any particular time, any one or more of the following: (i) Liens for taxes, rates and assessments not yet past due or, if past due, the validity of which is being contested in good faith by the Obligors and the Obligor Subsidiaries by appropriate proceedings promptly instituted and diligently conducted and against which such Obligors and Obligor Subsidiaries have established appropriate reserves in accordance with GAAP; (ii) the Lien of any judgment rendered for an amount and for a period not resulting in an Event of Default which is being contested in good faith by the Obligors and the Obligor Subsidiaries by appropriate proceedings promptly instituted and diligently conducted and against which the Obligors and the Obligor Subsidiaries have established appropriate reserves in accordance with GAAP and which does not have a Material Adverse Effect; (iii) other than in connection with Indebtedness, any Lien arising in the ordinary course of business (a) to secure payments of workers' compensation, unemployment insurance, pension or other social security or retirement benefits, or to secure the performance of bids, tenders, leases, progress payments, contracts (other than for the payment of money) or to secure public or statutory obligations of any Obligor or Obligor Subsidiary, or to secure surety or appeal bonds to which any Obligor or Obligor Subsidiary is a party, (b) imposed by law dealing with materialmen's, mechanics', workmen's, repairmen's, warehousemen's, landlords', vendors' or carriers' Liens created by law, or deposits or pledges which are not yet due or, if due, the validity of which is being contested in good faith by the Obligors and the Obligor Subsidiaries by appropriate proceedings promptly instituted and diligently conducted and against which the Obligors and 21 34 the Obligor Subsidiaries have established appropriate reserves in accordance with GAAP, (c) rights of financial institutions to setoff and chargeback arising by operation of law, and (d) similar Liens; (iv) servitudes, licenses, easements, encumbrances, restrictions, rights-of-way and rights in the nature of easements or similar charges which shall not in the aggregate materially adversely impair the use of the subject property by any Obligor or Obligor Subsidiary and which do not impair or encumber the Collateral; (v) zoning and building by-laws and ordinances, municipal by-laws and regulations, and restrictive covenants, which do not materially interfere with the use of the subject property by any Obligor or any Obligor Subsidiary as such property is used as of the Closing Date and which do not impair or encumber the Collateral; (vi) liens in favor of customs and revenue authorities arising as a matter of law to secure the payment of customs duties in connection with the importation of goods by the Obligor or the Obligor Subsidiaries; (vii) deposits to secure statutory obligations in the form of excise taxes; and (viii) any extension, renewal, substitution or replacement (or successive extensions, renewals, substitutions or replacements), as a whole or in part, of any of the Liens referred to in clauses (i) through (vii) of this definition or the Indebtedness secured thereby; provided that (a) such extension, renewal, substitution or replacement Lien is limited to that portion of the property or assets, now owned or hereafter acquired, that secured the Lien prior to such extension, renewal, substitution or replacement Lien and (b) the Indebtedness secured by such Lien (assuming all available amounts were borrowed) at such time is not increased. "Person" means any natural person, corporation, partnership, firm, association, trust, government, governmental agency, limited liability company or any other entity, whether acting in an individual, fiduciary or other capacity. "Physical Securities" means permanent certificated Securities in registered form in substantially the form set forth in Article Two. "Pioneer Companies" is defined in the preamble of this Indenture. "Plan of Reorganization" means the Debtor's Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code, dated September 21, 2001, filed with the United States Bankruptcy Court, Southern District of Texas, Houston Division, Case No. 01-38259-H3-11, on behalf of Pioneer Companies, Inc., Pioneer Corporation of America, Imperial West Chemical Co., Kemwater North America Co., 22 35 PCI Chemicals Canada Inc./PCI Chimie Canada Inc., Pioneer Americas, Inc., Pioneer (East), Inc., Pioneer Water Technologies, Inc., Pioneer Licensing, Inc., and KWT, Inc. "Post Petition Interest" is defined in Section 1307 hereof. "Power of Attorney" is defined in Section 1508 hereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 308 hereof in exchange for a mutilated Security or in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Security. "Qualified Equity Offering" means an offer and sale of common stock (which is Capital Stock) of PCI made on a primary basis by PCI pursuant to a registration statement that has been declared effective by the Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of such Indenture Obligor), or an offer and sale of common stock (which is Capital Stock) of PCI which may be made pursuant to an exemption from registration under the Securities Act, in each case, only to the extent permitted pursuant to clause (g) of the definition of "Permitted Issuance." "Quebec Mortgage and Security Agreement" means a deed of hypothec executed by an authorized representative of the Company in respect of Collateral located in Quebec, as amended, supplemented, amended and restated or otherwise modified from time to time. "Redemption Date", when used with respect to any Security to be redeemed pursuant to any provision in this Indenture, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price", when used with respect to any Security to be redeemed pursuant to any provision in this Indenture, means the price at which it is to be redeemed pursuant to this Indenture. "Refinancing" is defined in Section 1008 hereof. "Refinancing Indebtedness" is defined in Section 1008 hereof. "Regular Record Date" for the interest payable on any Interest Payment Date means the June 1 or December 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Related Business" means the manufacture or distribution of chlorine, caustic soda, bleach, hydrochloric acid, and other chlorides and aluminum sulfate, and in lines of business reasonably related thereto. 23 36 "Release" means any release, discharge, deposit, pumping, pouring, emptying, injecting, escaping, leaching, migrating, dumping, seepage, spill, leak, flow, discharge, disposal or emission. "Restoration" has the meaning set forth in each Mortgage. "Restricted Payment" is defined in Section 1006 hereof. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Companies, Inc. or any successor rating agency. "Safety and Health Laws" means all national, federal, state, provincial, regional, municipal or local statutes, laws, ordinances, codes, rules, regulations, by-laws, policies, guidelines, directives, judgments, orders or decrees regulating, relating to or imposing liability or standards of conduct concerning employee health and/or safety. "Sale and Leaseback Transaction" with respect to any Person, means any arrangement with another Person for the leasing of any real or tangible personal property, which property has been or is to be sold or transferred or initially leased by such Person to such other Person in contemplation of such leasing (including a lease and leaseback transaction). "Securities" means any of the securities, as defined in the fifth paragraph of the recitals hereof, that are authenticated and delivered under this Indenture. "Securities Act" means the United States Securities Act of 1933, as amended. "Security Documents" means (i) each Mortgage, (ii) each Stock Pledge Agreement, (iii) the Common Security and Intercreditor Agreement, (iv) the Canadian Security Agreements, and all security agreements, mortgages, deeds of trust, pledges, collateral assignments, UCC filings, financing statements and registrations or any other instrument evidencing or creating any security interest in favor of the Collateral Agent in all or any portion of the Collateral, in each case as amended, supplemented or otherwise modified from time to time. "Security Register" has the meaning specified in Section 305 hereof. "Security Registrar" has the meaning specified in Section 305 hereof. "Senior Indebtedness" means [*]. "Special Record Date", for the payment of any Defaulted Interest, means a date fixed by the Trustee pursuant to Section 309 hereof. "Stated Maturity", when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest is due and payable. 24 37 "Stock Pledge Agreement" means the stock pledge agreement by and among PCI, the Company, the Term Loan Borrower, the other Obligor pledgors party thereto and the Collateral Agent, for the benefit of (i) the Administrative Agent (for itself and for the benefit of the Lenders), and (ii) the Trustee (for itself and the Holders of the Securities), in respect of all the issued and outstanding Capital Stock owned by the various pledgors thereunder of the various corporations or entities referred to therein, substantially in the form of Exhibit D attached hereto, as may be amended, supplemented, amended and restated or otherwise modified from time to time, and each other pledge agreement executed and delivered in connection with this Indenture. "Subordinated Indebtedness" means Indebtedness of any Obligor or Obligor Subsidiary as to which the payment of principal of, premium, if any, interest and other payment obligations in respect of such Indebtedness shall be subordinate to the prior payment in full of the Securities (including the Guaranties) to at least the following extent: (i) no payments of principal of, premium, if any, or interest on, or otherwise due in respect of, such Indebtedness may be permitted for so long as any default in the payment of principal of, premium, if any, or interest on the Securities exists; (ii) in the event that any other Default that with the passing of time or the giving of notice, or both, would constitute an Event of Default exists with respect to the Securities, upon notice by Holders of 25% or more of the aggregate principal amount of the Securities to the Trustee, the Trustee shall have the right to give notice to the Company and the holders of such Indebtedness (or trustees or agents therefor) of a payment blockage, and thereafter no payments of principal of, premium, if any, or interest on or otherwise due in respect of such Indebtedness may be made for a period of 179 days from the date of such notice; and (iii) such Indebtedness may not (x) provide for payments of principal of such Indebtedness at the stated maturity thereof or by way of a sinking fund applicable thereto or by way of any mandatory redemption, defeasance, retirement or repurchase thereof by such Obligor or Obligor Subsidiary (including any redemption, retirement or repurchase which is contingent upon events of circumstances, but excluding any retirement required by virtue of acceleration of such Indebtedness upon an event of default thereunder), in each case prior to the final Stated Maturity of the Securities, or (y) permit redemption or other retirement (including pursuant to an offer to purchase made by such Obligor or Obligor Subsidiary) of such other Indebtedness at the option of the holder thereof prior to the final Stated Maturity of the Securities. "Subordinated Obligations" is defined in Section 1307 hereof. "Subsidiary" means, with respect to any Person, (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors, under ordinary circumstances, is at the time owned, directly or indirectly, by such Person and one or more of its Subsidiaries or by one or more of such Person's Subsidiaries or (ii) any other Person of which at least a majority of voting interest, under ordinary circumstances, is at the time owned, directly or indirectly, by such Person and one or more of its Subsidiaries or by one or more of such Person's Subsidiaries, whether or not such corporation or other Person is incorporated or organized in or under the laws of the United States of America or any state thereof. 25 38 "Taxes" is defined in Section 1030 hereof. "Term Loan Agreement" means that certain Term Loan Agreement dated as of [*], 2001 among the Term Loan Borrower, PCI, the Guarantors party thereto and the Lenders from time to time party thereto, and [*], as the Administrative Agent for the Lenders, as amended, restated, supplemented, modified, renewed, refunded, replaced or refinanced from time to time. "Term Loan Borrower" means Pioneer Americas LLC, as borrower under the Term Loan Agreement or any successor as borrower thereto. "Transaction Documents" means the various documents, instruments and agreements, implementing the Plan of Reorganization other than the Indenture Documents (except for the Security Documents which shall also be "Transaction Documents"), including the Loan Documents, the Amended PCI Certificate of Incorporation (as such term is defined in the Plan of Reorganization), the Amended PCI Bylaws (as such term is defined in the Plan of Reorganization), the amended by-laws and certificates of incorporation of each of the Subsidiaries of PCI and of the Company, the Exit Facility, the MEIP, the New Common Stock, the New Other Secured Notes and Claims, the Registration Rights Agreement (as such term is defined in the Plan of Reorganization), the documents relating to the Canadian Corporate Reorganization (as such term is defined in the Term Loan Agreement) and all other agreements, documents, instruments, certificates, filings, consents, approvals, Board of Directors resolutions and opinions executed, delivered or furnished pursuant to or in connection with the implementation of the Plan of Reorganization, each as amended, supplemented, amended and restated or otherwise modified from time to time as permitted in accordance with their respective terms. "Trust Indenture Act" means the United States Trust Indenture Act of 1939, as amended. "Trust Moneys" means all cash or Eligible Investments received by the Collateral Agent, (i) in exchange for the release of property from the Lien of any of the Security Documents, or (ii) as compensation for or proceeds of the sale of all or any part of the Collateral taken by eminent domain or purchased by, or sold pursuant to any order of, a governmental authority or otherwise disposed of, or (iii) as proceeds of insurance upon any, all or part of the Collateral (other than any liability insurance proceeds payable to the Collateral Agent for any loss, liability or expense incurred by it), or (iv) as proceeds of any other sale or other disposition of all or any part of the Collateral by or on behalf of the Collateral Agent or any collection, recovery, receipt, appropriation or other realization of or from all or any part of the Collateral pursuant to the Security Documents or otherwise, or (v) for application under the Indenture as provided in the Indenture or any Security Document, or whose disposition is not otherwise specifically provided for in the Indenture or in any Security Document. 26 39 "Trustee" means the Person named as the "trustee" in the preamble of this Indenture until a successor trustee shall have become such pursuant to the applicable provisions of this Indenture and thereafter "Trustee" shall mean such successor trustee. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by, and acting as an agency or instrumentality of, the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clause (i) or (ii) above, are not callable or redeemable at the option of the issuer thereof. "Voting Stock" of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or Persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. "Wholly-Owned Subsidiary" means, with respect to any Person, a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than capital stock constituting directors' qualifying shares or interests held by directors or shares or interests required to be held by foreign nationals, to the extent mandated by applicable law) are owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person. Section 102. [Intentionally omitted]. Section 103. Compliance Certificates and Opinions. Upon any application or request by any Indenture Obligor to the Trustee to take any action under any provision of this Indenture, such Indenture Obligor shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenants compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents, certificates and/or opinions is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinion contained in such certificate or opinion are based; 27 40 (c) a statement that, in the opinion of each such individual, such individual has made such examination or investigation as is necessary to enable such individual to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 104. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of any Obligor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of any Obligor stating that the information with respect to such factual matters is in the possession of any Obligor, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Opinions of Counsel required to be delivered to the Trustee may have qualifications customary for opinions of the type required and counsel delivering such Opinions of Counsel may rely on certificates of the relevant Obligor or government or other officials customary for opinions of the type required, including certificates certifying as to matters of fact, including that various financial covenants have been complied with. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 105. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other Act (as such term is defined below) provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein 28 41 sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing or the authority of the Person executing the same may also be proved in any other manner which the Trustee deems sufficient in accordance with such reasonable rules as the Trustee may determine. (b) The ownership of Securities shall be evidenced by the Security Register. (c) Any request, demand, authorization, direction, notice, consent, waiver or Act by the Holder of any Security shall bind every future Holder of the same Security or the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, suffered or omitted to be done by the Trustee, any Paying Agent or any Indenture Obligor or its respective Obligor Subsidiary in reliance thereon, whether or not notation of such action is made upon such Security. (d) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of such Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Notwithstanding Trust Indenture Act, Section 316(c), any such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not more than 30 days prior to the first solicitation of Holders generally in connection therewith and no later than the date such solicitation is completed. Without limiting the generality of the foregoing, a Holder, including the Depositary that is a Holder of a Global Security, may make, give or take, by a proxy, or proxies, duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted in this Indenture to be made, given or taken by Holders and the Depositary that is a Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interest in any such Global Security. Notwithstanding the foregoing, upon receipt by the Trustee of (i) any notice of default pursuant to Section 704, (ii) any declaration of acceleration, or any rescission and annulment of any such declaration pursuant to Section 502 or (iii) any direction given pursuant to Section 512 (any such notice, declaration, rescission and annulment, or direction being referred to herein as a "Direction"), a record date shall automatically and without any other action by any Person be set for the purpose of determining the Holders entitled to join in such Direction, which record date shall be the close of business on the day the Trustee receives such Direction. The Holders on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such Direction whether or not such Holders remain Holders after such record date; provided that unless such Direction shall have become effective by virtue of Holders of a 29 42 majority of the aggregate principal amount of the Securities then Outstanding (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such Direction shall automatically and without any action by any Person be cancelled and be of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90-day period, a Direction contrary to, or different from, or, after the expiration of such period, identical to, a Direction that has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this paragraph. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given or taken before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for purposes of determining whether Holders of the requisite proportion of Securities then Outstanding have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for this purpose the Securities then Outstanding shall be computed as of such record date; provided that no such request, demand, authorization, direction, notice, consent, waiver or other Act by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. (e) If at any time a request, demand, authorization, direction, notice, consent, waiver or other Act to be given or taken by the Holders is required pursuant to the terms of this Indenture, the Trustee shall solicit the direction of the Holders of such aggregate principal amount of the Securities then Outstanding as are specified in the applicable provisions of this Indenture and, if not so specified, the Holders of a majority of the aggregate principal amount of the Securities then Outstanding. Section 106. Notices, etc., to Trustee, the Company and any Indenture Obligor or Obligor Subsidiary. Any request, demand, authorization, direction, notice, consent, waiver or other Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: (a) the Trustee by any Holder or by any Indenture Obligor shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, telecopied, hand delivered, or delivered by recognized overnight courier, to the Trustee at [Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479], Attention: [Stanley S. Stroup, General Counsel]; telecopy: [*], or at any other address previously furnished in writing to the Holders or any Indenture Obligor by the Trustee; or (b) any Indenture Obligor, shall be sufficient for every purpose hereunder if in writing (including telecopy) and mailed, first-class postage prepaid, telecopied, hand delivered, or delivered by recognized overnight courier, to the Company addressed to it at c/o Pioneer Companies, Inc., 700 Louisiana Street, Suite 4300, 30 43 Houston, Texas 77002, Attention: [*]; telecopy: (713) 225-6475, or at any other address previously furnished by the Company in writing to the Trustee. Section 107. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, or delivered by recognized overnight courier, to each Holder affected by such event at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice when mailed to a Holder in the aforesaid manner shall be conclusively deemed to have been received by such Holder whether or not actually received by such Holder. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause, it shall be impracticable to mail notice of any event as required by any provision of this Indenture, then any method of giving such notice as shall be reasonably satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. Section 108. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with any provision of the Trust Indenture Act or another provision which is required or deemed to be included in this Indenture by any of the provisions of the Trust Indenture Act, the provision or requirement of the Trust Indenture Act shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Section 109. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 110. Successors and Assigns. All covenants and agreements in this Indenture by the Company and each of the other Indenture Obligors shall bind their respective successors and assigns, whether so expressed or not. 31 44 Section 111. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 112. Benefits of Indenture. Nothing in this Indenture or in the Securities or the Guaranties, express or implied, shall give to any Person (other than the parties hereto, their successors hereunder, any Paying Agent and the Holders) any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 113. Governing Law. This Indenture, the Securities and the Guaranties shall be governed by, and construed in accordance with, the laws of the State of New York. Section 114. Legal Holidays. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest, principal, or premium, if any, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or Stated Maturity and no interest shall accrue with respect to such payment for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to the next succeeding Business Day. Section 115. Schedules and Exhibits. All schedules and exhibits attached hereto are by this reference made a part hereof with the same effect as if herein set forth in full. Section 116. Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. Section 117. Communication by Holders with other Holders. Holders may communicate pursuant to Trust Indenture Act, Section 312(b), with other Holders with respect to their rights under this Indenture or the Securities. Each Indenture Obligor, the Trustee, the Security Registrar and anyone else shall have the protection of Trust Indenture Act, Section 312(c). 32 45 Section 118. No Recourse against Others. A director, officer, employee or stockholder (or other holder of an ownership interest), as such, of any Obligor or Obligor Subsidiary shall not have any liability for any obligations of the Company under the Securities or this Indenture, or for any obligation of any Guarantor under the Guaranties or this Indenture. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. Article Two SECURITY FORMS Section 201. Forms Generally. The Securities, the Guaranties and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article Two, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange, any Organizational Document or governing instrument or applicable law or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. Any portion of the text of any Security may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Security. The Securities shall be initially issued in the form of one permanent Global Security, substantially in the form set forth in this Article Two. The Global Security shall be deposited with the Trustee, as custodian for the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Legends. Every Global Security authenticated and delivered hereunder shall bear the following legend on the face thereof: UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY 33 46 SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFER OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE. Section 203. Form of Face of Security. The form of the face of the Securities shall be substantially as follows: PCI Chemicals Canada Company/Societe PCI Chimie Canada ------------------- 10% SENIOR SECURED GUARANTEED NOTES DUE 2008 CUSIP No: No. __________ $150,000,000 PCI Chemicals Canada Company/Societe PCI Chimie Canada, a unlimited liability company organized and existing under the laws of the province of Nova Scotia, Canada (herein called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of One Hundred And Fifty Million United States dollars ($150,000,000) on [*], 2008, at the office or agency of the Company referred to below, and to pay interest thereon from the date of original issuance, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semiannually on June 15, and December 15, in each year, commencing [December 15], 2001, and at Maturity thereof, at the rate of 10% per annum (subject to adjustment as provided below), in United States dollars, until the principal hereof is paid or duly provided for. 34 47 The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date shall, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be June 1, or December 1 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid, or duly provided for, and interest on such Defaulted Interest at the interest rate borne by the Securities, to the extent lawful, shall forthwith cease to be payable to the Holder on such Regular Record Date, and may be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice of which shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of, premium, if any, and interest on this Security shall be made at the office or agency of the Company maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts against surrender of this Security in the case of any payment due at the Maturity of the principal thereof (other than any payment of interest that first becomes payable on a day other than an Interest Payment Date); provided, however, that payment of interest may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address shall appear on the Security Register; provided, further, that if this Security is a Global Security, payment may be made pursuant to the rules and procedures of the Depositary as permitted in said Indenture. Interest shall be computed on the basis of a 360-day year of twelve 30-day months. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purposes. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. This Security is entitled to the benefits of Guaranties by each of the Guarantors of the punctual payment when due of the Indenture Obligations made in favor of the Trustee for the benefit of the Holders. Such Guaranties shall be senior obligations of each Guarantor, and shall rank pari passu with all existing and future Senior Indebtedness of such Guarantor, and senior to all Subordinated Indebtedness of such Guarantor Such Guaranties shall be secured by Collateral. Reference is hereby made to Article Thirteen of the Indenture for a statement of the respective rights, limitations of rights, duties and obligations under the Guaranties of each of the Guarantors. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof or by the authenticating agent appointed as 35 48 provided in the Indenture by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by the manual or facsimile signature of its authorized officers and its corporate seal to be affixed or reproduced hereon. Dated: PCI CHEMICALS CANADA COMPANY/SOCIETE PCI CHIMIE CANADA By ------------------------------------- Attest: [SEAL] ------------------------------- Secretary
Section 204. Form of Reverse of Securities. The form of the reverse of the Securities shall be substantially as follows: The Holder, by becoming holder of this Security, shall be bound by the terms and conditions of the Indenture and shall be automatically deemed to have ratified and consented to the granting by the Trustee and the Holders to the Collateral Agent of the irrevocable Power of Attorney constituted in the Indenture. The Holder agrees (i) with the Trustee and the other Holders that it will not, without the prior consent of the Trustee and the other Holders, take or obtain any Lien on any property of the Company to secure the obligations of the Company hereunder, except for the benefit of the Collateral Agent or as may otherwise be required by law, and (ii) that, notwithstanding the provisions of Section 32 of the Special Corporate Powers Act (Quebec), the Collateral Agent may, as the Person holding the Power of Attorney of the Trustee and the Holders, acquire any title of indebtedness secured by any hypothec in its favor related to this Security or the Indenture or any other document contemplated hereunder. This Security is one of a duly authorized issue of Securities of the Company designated as its 10% Senior Secured Guaranteed Notes due 2008 (herein called the "Securities"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $150,000,000, which may be issued under an indenture (the "Indenture") dated as of [*], 2001, among the Company, each Guarantor from time to time a party thereto, and [*], as trustee (herein called the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all 36 49 indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties, obligations and immunities thereunder of the Company, the Guarantors, the Trustee and the Holders of the Securities, and of the terms upon which the Securities and the Guaranties are, and are to be, authenticated and delivered. The Indenture contains provisions for defeasance at any time of (a) the entire Indebtedness on the Securities, and (b) certain restrictive covenants and related Defaults and Events of Default, in each case upon compliance or noncompliance with certain conditions set forth therein. The Securities shall be senior obligations of the Company, and shall rank pari passu with all existing and future Senior Indebtedness of the Company, and senior to all Subordinated Indebtedness of the Company. The Company shall have the right at any time and from time to time to redeem the Outstanding Securities, in whole or in part, on not less than thirty (30) nor more than sixty (60) days' prior notice, mailed by first-class mail to the Holders' registered addresses, in cash, in amounts of $1,000 or an integral multiple of $1,000 at the following Redemption Prices (expressed as percentages of the principal amount), if redeemed in the 12-month period commencing [*] in the year indicated below:
Year Redemption Price ---- ---------------- 2001 105.00% 2002 105.00% 2003 105.00% 2004 105.00% 2005 105.00% 2006 102.50% 2007 102.50% 2008 100.00%
in each case together with accrued and unpaid interest to the Redemption Date (subject to the right of Holders of record on relevant record dates to receive interest due on an Interest Payment Date). If less than all of the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata, by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee in its sole discretion considers fair and appropriate. Upon the occurrence of a Change of Control, each Holder may require the Company to repurchase all or a portion of such Holder's Securities. The Company shall apply 100% of the aggregate amount of Net Proceeds from each and every Asset Sale, subject to the certain provisions under the Indenture, the Term Loan Agreement and the provisions of the Common Security and Intercreditor Agreement, if applicable, to pro rata prepay the New Tranche A Term Notes then outstanding and the Securities then Outstanding, on or prior to the 10th day following the 37 50 date on which such Net Proceeds are received by the Company or any Guarantor, or any Subsidiary thereof, at a price equal to 100% of the principal amount thereof, plus accrued interest thereon to the date of prepayment. In the case of any redemption of Securities, interest installments whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities of record as of the close of business on the relevant record date referred to on the face hereof. Securities (or portions thereof) for whose redemption and payment provision is made in accordance with the Indenture shall cease to bear interest from and after the date of redemption. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof. If an Event of Default shall occur and be continuing, the principal amount of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions (including certain amendments permitted without the consent of any Holders and certain amendments permitted only with the consent of all Holders) as therein provided, the amendment thereof and the modification of the rights and obligations of the Obligors and the rights of the Holders under the Indenture or the other Indenture Documents at any time by the Obligors and the Trustee with the consent of the Holders of a majority of aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, (i) to waive compliance by the Obligors with certain provisions of the Indenture, the Guaranties or the other Indenture Documents, and (ii) to waive certain past Defaults under the Indenture and the Guaranties and their consequences. Any such consent or waiver by or on behalf of the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of any Indenture Obligor upon the Securities (in the event such other Obligor is obligated to make payments in respect of the Securities), which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. The Securities may be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Securities are exchangeable for a 38 51 like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any registration of transfer or exchange or redemption of Securities but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to and at the time of due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security is overdue, and neither the Company, the Trustee nor any agent shall be affected by notice to the contrary. In order to secure the due and punctual payment of the principal of, premium, if any, or interest on the Securities when and as the same shall become due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption or otherwise, and interest on the overdue principal of and interest thereon (to the extent permitted by law), if any, on the Securities, and performance of all other obligations of the Company to the Holders or the Trustee under this Indenture and the Securities, the Obligors have entered into the Security Documents with the Collateral Agent. The Securities shall be secured by Liens on and security interests in the Collateral subject to pari passu Liens and security interests and other permitted encumbrances as described further in the Security Documents. Each Holder, by accepting a Security, agrees to all of the terms and provisions of the Security Documents as the same may be amended from time to time pursuant to the respective provisions thereof and of the Indenture. Each Holder acknowledges that a release of any of the Collateral or any Lien strictly in accordance with the terms and provisions of the Security Documents and the terms and provisions of the Indenture will not be deemed for any purpose to be an impairment of the security under the Indenture. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and the Security Documents. 39 52 [This Security is a Global Security and is subject to the provisions of the Indenture relating to Global Securities, including the limitation in Section 305 thereof on transfer and exchanges of Global Securities.](1) This Security and the Indenture shall be governed and construed in accordance with the laws of the State of New York. All terms used in this Security which are defined in the Indenture and not otherwise defined herein shall have the meanings assigned to them in the Indenture. -------- (1) Applicable only to a Global Security. 40 53 [FORM OF TRANSFER NOTICE] FOR VALUE RECEIVED the undersigned registered Holder hereby sell(s), assign(s) and transfer(s) unto Insert Taxpayer Identification No. ----------------------------------------------------------------- ----------------------------------------------------------------- Please print or typewrite name and address including zip code of assignee ----------------------------------------------------------------- the within Security and all rights thereunder, hereby irrevocably constituting and appointing ----------------------------------------------------------------- attorney to transfer said Security on the books of the Company with full power of substitution in the premises. Date: ----------------------- ---------------------------------------- NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. OPTION OF HOLDER TO ELECT PURCHASE A. Purchase pursuant Section 1014 (Change of Control Offer) If you wish to have this Security purchased by the Company pursuant to Section 1014 of the Indenture, check the Box: [ ]. If you wish to have a portion of this Security purchased by the Company pursuant to Section 1014 of the Indenture, state the amount (in authorized denominations): $___________________ 41 54 B. Purchase pursuant Section 1109 (Asset Sale Offer) If you wish to have this Security purchased by the Company pursuant to Section 1109 of the Indenture, check the Box: [ ]. If you wish to have a portion of this Security purchased by the Company pursuant to Section 1109 of the Indenture, state the amount (in authorized denominations): $___________________ Date: Your signature: ---------------------------- (Sign exactly as your name appears on the other side of this Security) Signature Guarantee: ------------------------ Section 205. Form of Trustee's Certificate of Authentication. TRUSTEE'S CERTIFICATE OF AUTHENTICATION. This is one of the Securities referred to in the within-mentioned Indenture. WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee By -------------------------------- Authorized Signatory Section 206. Form of Guaranty of Each of the Guarantors. The form of Guaranty shall be set forth on the Securities substantially as follows: GUARANTIES For value received, each of the undersigned hereby unconditionally guaranties, jointly and severally, to the Holder of this Security the payment of the principal of, premium, if any, or interest on this Security in the amounts and at the time when due and interest on the overdue principal and interest, if any, of this Security, if lawful, and the payment or performance of all other obligations of the Company under 42 55 the Indenture or the Securities, to the Holder of this Security and the Trustee, all in accordance with and subject to the terms and limitations of this Security and Article Thirteen of the Indenture. This Guaranty shall not become effective until the Trustee duly manually executes the certificate of authentication on this Security. PIONEER COMPANIES, INC. Attest By ------------------------------ ------------------------------ Name: Name: Title: Title: IMPERIAL WEST CHEMICAL CO. Attest By ------------------------------ ------------------------------ Name: Name: Title: Title: KEMWATER NORTH AMERICA CO. Attest By ------------------------------ ------------------------------ Name: Name: Title: Title: PIONEER AMERICAS LLC Attest By ------------------------------ ------------------------------ Name: Name: Title: Title: PIONEER (EAST), INC. Attest By ------------------------------ ------------------------------ Name: Name: Title: Title:
43 56 PIONEER WATER TECHNOLOGIES, INC. Attest By ------------------------------ ------------------------------ Name: Name: Title: Title: PIONEER LICENSING, INC. Attest By ------------------------------ ------------------------------ Name: Name: Title: Title: KWT, INC. Attest By ------------------------------ ------------------------------ Name: Name: Title: Title:
ARTICLE THREE THE SECURITIES Section 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $150,000,000 in principal amount of Securities, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Sections 303, 304, 305, 306, 308, 906, 1009, 1014 or 1108 hereof. The Securities shall be known and designated as the "10% Senior Secured Guaranteed Notes due 2008" of the Company. The Stated Maturity of the principal amount of the Securities shall be [*], 2008, and the Securities shall each bear interest at the rate of 10% per annum from the Closing Date or from the most recent Interest Payment Date to which interest has been paid, as the case may be, payable on [December 15,] 2001 and semiannually thereafter on June 15 and December 15, in each year, until the principal thereof is paid or duly made available for payment. 44 57 The principal of, premium, if any, or interest on the Global Security shall be payable to the Depositary or its nominee, as the case may be, as the sole registered owner and the sole Holder of the Global Security represented thereby. The principal of, premium, if any, or interest on the Securities shall be payable at the office or agency of the Company maintained for such purpose; provided, however, that at the option of the Company, interest may be paid by check mailed to the addresses of the Persons entitled thereto as such addresses shall appear on the Security Register. The Securities shall be redeemable as provided in Article Eleven. At the election of the Company, the entire Indebtedness on the Securities or certain of the Company's obligations and covenants and certain Events of Default thereunder may be defeased as provided in Article Four. Section 302. Denominations. The Securities shall be issuable only in fully registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by one of its Chairman of the Board, its President or one of its Vice Presidents under its corporate seal reproduced thereon and attested to by its Secretary or one of its Assistant Secretaries. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices on the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee, in accordance with such Company Order, shall authenticate and deliver such Securities as provided in this Indenture and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 311, for all purposes of this Indenture such Security shall be deemed 45 58 never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. In case the Company or any Guarantor, pursuant to and in accordance with the provisions of Article Eight, shall be consolidated, merged with or into any other Person or shall sell, assign, convey, transfer or lease substantially all of its properties and assets to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company or such Guarantor shall have been merged, or the Person which shall have received a sale, assignment, conveyance, transfer or lease as aforesaid, shall have executed an indenture supplemental hereto with the Trustee pursuant to Article Eight, any of the Securities authenticated or delivered prior to such consolidation, merger, sale, assignment, conveyance, transfer or lease may, from time to time, at the request of the successor Person, be exchanged for other Securities executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Securities surrendered for such exchange and of like principal amount and the Trustee, upon Company Request of the successor Person, shall authenticate and deliver Securities as specified in such request for the purpose of such exchange. If Securities shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Securities, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Securities at the time Outstanding for Securities authenticated and delivered in such new name. The Trustee (at the expense of the Company) may appoint an authenticating agent acceptable to the Company to authenticate Securities on behalf of the Trustee. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Security Registrar or Paying Agent to deal with the Company and its Affiliates. Section 304. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for such purpose pursuant to Section 1002 hereof, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate 46 59 and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations and of like tenor and aggregate principal amount. Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. Section 305. Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee, or such other office as the Trustee may designate, a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 hereof being herein sometimes referred to as the "Security Register") in which, subject to such reasonable regulations as the Security Registrar may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee or an agent thereof or of the Company shall initially be the "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Company designated pursuant to Section 1002 hereof, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series of any authorized denomination or denominations, of a like aggregate principal amount. Any Holder of the Global Security shall, by acceptance of such Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by the Holder of such Global Security (or its agent) and that ownership of a beneficial interest in the Security shall be required to be reflected in a book entry. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations, of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities of the same series which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same Indebtedness, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer, or for exchange or redemption shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. 47 60 No service charge shall be made to a Holder for any registration of transfer or exchange or redemption of Securities, but the Company may require payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 303, 304, 305, 306, 308, 906, 1009, 1014 or 1108 hereof not involving any transfer. The Company shall not be required (a) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the date of selection of Securities for redemption under Section 1104 hereof and ending at the close of business on the day of the mailing of a notice of redemption in respect of any such Securities selected for redemption, or (b) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of Securities being redeemed in part. Section 306. Book-Entry Provisions for Global Security. (a) The Global Security shall (i) be registered in the name of the Depositary for such Global Security or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian for such Depositary, (iii) constitute a single Security for all purposes of this Indenture, and (iv) bear legends as set forth in Section 202 hereof. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary, or the Trustee as its custodian, or under the Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a beneficial holder of any Security as if such person were a Holder. (b) Transfers of the Global Security shall be limited to transfers of such Global Security in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in the Global Security may be transferred in accordance with the rules and procedures of the Depositary. Beneficial owners may obtain Physical Securities in exchange for their beneficial interests in the Global Security upon request in accordance with the Depositary's and the Security Registrar's procedures. In addition, Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Security if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for the Global Security and a successor depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing and the Security Registrar has received a request from the Depositary. 48 61 (c) In connection with any transfer of a portion of the beneficial interests in the Global Security to beneficial owners pursuant to subsection (b) of this Section, the Security Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of the Global Security in an amount equal to the principal amount of the beneficial interest in the Global Security to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Securities of like tenor and amount. (d) In connection with the transfer of the entire Global Security to beneficial owners pursuant to subsection (b) of this Section, the Global Security shall be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the Global Security, an equal aggregate principal amount of Physical Securities of authorized denominations. (e) The registered Holder of the Global Security may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests in the Global Security through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. Section 307. [Intentionally omitted.] Section 308. Mutilated, Destroyed, Lost and Stolen Securities. If (a) any mutilated Security is surrendered to the Trustee, or (b) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company, each Guarantor and the Trustee, such security or indemnity, in each case, as may be required by them to keep each of them harmless, then, in the absence of notice to the Company, any Guarantor or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a replacement Security of like tenor and principal amount, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a replacement Security, pay such Security. Upon the issuance of any replacement Securities under this Section, the Company may require the payment of a sum sufficient to pay all documentary, stamp or similar issue or transfer taxes or other governmental charges that may be imposed in relation thereof and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every replacement Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company and the Guarantors, whether or not the destroyed, lost or 49 62 stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 309. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security is registered at the close of business on the Regular Record Date for such interest (or, if no business is conducted by the Trustee at its Corporate Trust Office on such Interest Payment Date, at 5:00 P.M. New York City time on such Interest Payment Date). Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date and interest on such defaulted interest at the then applicable interest rate borne by the Securities, to the extent lawful (such defaulted interest and interest thereon herein collectively called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the Regular Record Date and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in subsection (a) or (b) below: (a) the Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which date shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date (not less than 30 days after such notice) of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment (such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this subsection provided). Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company in writing of such Special Record Date. In the name and at the expense of the Company, the Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities are 50 63 registered on such Special Record Date and shall no longer be payable pursuant to the following subsection (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after written notice given by the Company to the Trustee of the proposed payment pursuant to this subsection, such payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 310. Persons Deemed Owners. The Company, any Guarantor, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 309 hereof) interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Company, any Guarantor, the Trustee nor any agent of the Company, any Guarantor or the Trustee shall be affected by notice to the contrary. Section 311. Cancellation. All Securities surrendered for payment, purchase, redemption, registration of transfer or exchange shall be delivered to the Trustee and, if not already canceled, shall be promptly canceled by it. The Company and any Guarantor may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company or such Guarantor may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be destroyed and certification of their destruction delivered to the Company. The Trustee shall provide the Company a list of all Securities that have been canceled from time to time as requested by the Company. Section 312. Computation of Interest; Interest Act (Canada). Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. For purposes of the Interest Act (Canada), any amount of interest or fees calculated on the basis of a period comprising 360, 365 or 366 days and expressed as an annual rate is equal to the said rate of interest or fees multiplied by the actual number of days comprised within the calendar year divided by 360, 365 or 366 days, as the case may be. 51 64 Section 313. Deposit of Moneys. Prior to 10:00 a.m., New York City time, on each Interest Payment Date and at Maturity, the Company shall have deposited with the Trustee or a Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or at Maturity, as the case may be, in a timely manner which permits the Trustee or such Paying Agent to remit payment to the Holders on such Interest Payment Date or at Maturity, as the case may be. Section 314. CUSIP Number. The Company in issuing the Securities may use a "CUSIP" number(s) and if so used, the Trustee shall use the CUSIP number(s) in notices of redemption or exchange as a convenience to Holders, provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number(s) printed in the notice or on the Securities and that reliance may be placed only on the other identification numbers printed on the Securities. ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE Section 401. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may, at its and PCI's option by Board Resolution of their respective Board of Directors, at any time, with respect to the Securities, elect to have either Section 402 or Section 403 hereof be applied to all of the Outstanding Securities (the "Defeased Securities"), upon compliance with the conditions set forth below in this Article Four. Section 402. Defeasance and Discharge. Upon the Company's exercise under Section 401 hereof of the option applicable to this Section 402, the Company, each of the Guarantors and any other Indenture Obligor upon the Securities, if any, shall be deemed to have been discharged from its obligations with respect to the Defeased Securities on the date the conditions set forth below are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the Defeased Securities, which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 405 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Securities and this Indenture, including obligations to the Trustee, if any (and the Trustee, at the expense of the Company and upon written request, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Defeased Securities to receive, solely from the trust fund described in Section 404 52 65 hereof and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, or interest on such Securities when such payments are due, (b) the Company's obligations with respect to such Defeased Securities under Sections 304, 305, 308, 1002 and 1018 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder including, without limitation, the Trustee's rights under Section 606 hereof and the Company's obligations in connection therewith, and (d) this Article Four. Subject to compliance with this Article Four, the Company may exercise its option under this Section 402 notwithstanding the prior exercise of its option under Section 403 hereof with respect to the Securities. Section 403. Covenant Defeasance. Upon the Company's exercise under Section 401 hereof of the option applicable to this Section 403, the Company and each Guarantor shall be released from its obligations under any covenant or provision contained or referred to in Sections 1003, 1004, 1005, 1006, 1007, 1008, 1009, 1010, 1011, 1012, 1014, 1015, 1016, 1020, 1021, 1022, 1025 and 1317 hereof with respect to the Defeased Securities on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance"), and the Defeased Securities shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the Defeased Securities, the Company and each Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or Article, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or Article or by reason of any reference in any such Section or Article to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 501(2) or (3) hereof but, except as specified above, the remainder of this Indenture and such Defeased Securities shall be unaffected thereby. Section 404. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of either Section 402 or Section 403 hereof to the Defeased Securities: (1) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 608 hereof who shall agree to comply with the provisions of this Article Four applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (a) United States dollars in an amount, or (b) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms shall provide, not later than one day before the due date of any payment, money in an amount, or (c) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants or a nationally recognized 53 66 investment banking firm expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee), to pay and discharge, the principal of, premium, if any, or interest on the Defeased Securities on the Stated Maturity of such principal or installment of principal or interest (such date being referred to as the "Defeasance Redemption Date"), if when exercising under Section 401 hereof either its option applicable to Section 402 hereof or its option applicable to Section 403 hereof, the Company shall have delivered to the Trustee an irrevocable notice to redeem all of the Outstanding Securities on the Defeasance Redemption Date); provided that the Trustee shall have been irrevocably instructed to apply such United States dollars or the proceeds of such U.S. Government Obligations to said payments with respect to the Securities. (2) In the case of an election under Section 402 hereof, the Company shall have delivered to the Trustee an Opinion of Independent Counsel in the United States of America or Canada, as applicable, stating that (a) the Company has received from the Internal Revenue Service a ruling and from the Canada Customs and Revenue Agency a ruling or (b) since the date of this Indenture, there has been a change in the applicable federal income tax law, including by means of a Revenue Ruling published by the Internal Revenue Service and a ruling from the Canada Customs and Revenue Agency has been published, in either case to the effect that, and based thereon such Opinion of Independent Counsel in the United States of America shall confirm that, the Holders of the Outstanding Securities will not recognize income, gain or loss for U.S. Federal income tax and Canadian federal or provincial income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (3) In the case of an election under Section 403 hereof, the Company shall have delivered to the Trustee an Opinion of Independent Counsel in the United States of America or Canada, as applicable, to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for U.S. Federal income tax, Canadian federal or provincial income tax or certain other tax purposes as a result of such covenant defeasance and will be subject to U.S. Federal income tax or Canadian federal or provincial income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (4) No Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Sections 501(10), (11) or (12) hereof are concerned, at any time during the period ending on the 91st day after the date of deposit. (5) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default under, any material agreement or 54 67 instrument (other than this Indenture) to which the Company or any Guarantor is a party or by which it is bound. (6) The Company shall have delivered to the Trustee an Opinion of Independent Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable Bankruptcy Law. (7) The Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of the Securities or any Guaranty over the other creditors of the Company or any Guarantor with the intent of defeating, hindering, delaying or defrauding creditors of the Company, any Guarantor or others. (8) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Independent Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 402 hereof or the covenant defeasance under Section 403 hereof (as the case may be) have been complied with as contemplated by this Section 404. Opinions of Counsel or Opinions of Independent Counsel required to be delivered under this Section shall be in form and substance satisfactory to the Trustee, and may have qualifications customary for opinions of the type required and counsel delivering such opinions may rely on certificates of the Company or government or other officials customary for opinions of the type required, including certificates certifying as to matters of fact, including that various financial covenants have been complied with. Section 405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1018 hereof, all United States dollars and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 405, the "Trustee") pursuant to Section 404 hereof in respect of the Defeased Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal, premium, if any, and interest but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 404 hereof or the principal and interest received in respect thereof (other than any such tax, fee or other charge which by law is for the account of the Holders of the Defeased Securities). Anything in this Article Four to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any 55 68 United States dollars or U.S. Government Obligations held by it as provided in Section 404 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect defeasance or covenant defeasance. Section 406. Reinstatement. If the Trustee or Paying Agent is unable to apply any United States dollars or U.S. Government Obligations in accordance with Section 402 or 403 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and each Guarantor's obligations under this Indenture and the Securities (including, without limitation, the provisions of Article Thirteen hereof) shall be revived and reinstated as though no deposit had occurred pursuant to Section 402 or 403 hereof, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such United States dollars or U.S. Government Obligations in accordance with Section 402 or 403 hereof, as the case may be; provided, however, that if the Company makes any payment to the Trustee or Paying Agent of principal of, premium, if any, or interest on any Security following the reinstatement of its obligations, the Trustee or Paying Agent shall promptly pay any such amount to the Holders of the Securities and the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. Section 407. Repayment of the Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of, premium, if any, or interest on any Security and remaining unclaimed for two years after such principal, interest or premium, if any, has become due and payable, shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust. The Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease, provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such notification or publication, any unclaimed balance of such money then remaining shall promptly be repaid to the Company. 56 69 ARTICLE FIVE REMEDIES Section 501. Events of Default. An "Event of Default" shall occur if: (1) (a) The Company shall default in the payment of any principal of any Security when the same becomes due, whether by acceleration, at maturity, upon redemption, in connection with a Change of Control or an Asset Sale, or otherwise, (b) the Company shall fail to pay any interest, fee or penalty on the Securities, or any other amount payable hereunder, within three (3) days after any such interest or other amount becomes due in accordance with the terms hereof, or (c) any other Obligor shall default (and such default shall continue unremedied for a period of three (3) days) in the payment when due of any fee with respect to any Security or any monetary Indenture Obligation (other than those covered by clauses (a) or (b) hereof); (2) Any Indenture Obligor (including the Company) fails to observe or perform any covenant, condition or agreement on the part of such Indenture Obligor to be observed or performed pursuant to Section 1005, 1006, 1007, 1008, 1009, 1010, 1011, 1012, 1013, 1014, 1020, 1317 or Article Eight hereof; (3) Any Obligor (including the Company) fails to duly observe or perform any other covenant, condition or agreement in, to and under this Indenture or any other Indenture Document executed by it and such failure continues for a period of 30 days; (4) Any Obligor (including the Company) denies, disaffirms or repudiate its obligations under this Indenture (including the Guaranties of the Securities) or the Securities, or any other Indenture Documents or Transaction Documents to which it is a party, or any material provision of any Indenture Document or Transaction Document shall cease to be valid or binding or any Obligor shall so assert in writing; (5) a default occurs (a) in the payment when due, whether by acceleration or otherwise, of any amount (including principal, premium or interest) in respect of any Indebtedness of any Obligor (including the Company), including Indebtedness in respect of the New Tranche A Term Notes (subject only to any applicable grace period pursuant to the terms of such Indebtedness) but not including the Indebtedness described in and covered by clause (1) of this Section 501, (b) a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause 57 70 such Indebtedness to become due and payable prior to its expressed maturity, or (c) a default or an event of default shall occur in the performance or observance of any obligation or condition of any agreement (including any Transaction Document) to which any Obligor is party or by which it is bound and such default or event of default could reasonably be expected to have a Material Adverse Effect; (6) a final judgment is, or final judgments are, entered by a court or courts of competent jurisdiction against any Obligor or any Obligor Subsidiary of such Obligor and such judgment or judgments remain undischarged, unbonded or unstayed for a period of thirty (30) days, provided that the aggregate of all such judgments equals or exceeds $1,000,000 or any such individual judgment exceeds $500,000 (other than, in each case, any judgment as to which and only to the extent that, a reputable insurance company has acknowledged coverage of such claim in writing); (7) issuance of a notice of Lien, levy, assessment, injunction or attachment (other than pursuant to the Security Documents) against the property of any Obligor having an aggregate value in excess of $1,000,000 which is not stayed or lifted within thirty (30) days; (8) any representation, warranty or certification of any Obligor (including the Company) made or deemed to be made hereunder or in any other Indenture Document or any Transaction Document executed by it or in any other writing or certificate furnished by or on behalf of any Obligor (including the Company) for the purposes of or in connection with this Indenture or such other Indenture Document or any Transaction Document is or shall be incorrect when made or deemed made in any material respect; (9) (a) any of the Security Documents ceases to give the Collateral Agent a valid and perfected Lien of the priority required thereby or the rights, powers and privileges purported to be created thereby (other than in accordance with their respective terms or if released by the Trustee, at the direction of all of the Holders in accordance with the terms hereof), or (b) any of the Security Documents is declared null and void, or (c) any Obligor denies any of its obligations under any of the Security Documents or (d) any Collateral becomes subject to any Lien other than the Liens created or permitted by the Security Documents or the Indenture, or (e) any Collateral (or part thereof) is seized or taken by any governmental agency or authority; (10) any Obligor or any Obligor Subsidiary, pursuant to or within the meaning of any Bankruptcy Law: (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case in which it is a debtor, 58 71 (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) admits in writing its inability to pay debts as the same become due; (11) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (a) is for relief against any Obligor or any Obligor Subsidiary in an involuntary case in which it is a debtor, (b) appoints a Custodian of any Obligor or any Obligor Subsidiary or for all or substantially all of their respective property, or (c) orders the liquidation of any Obligor or any Obligor Subsidiary, and the order or decree remains unstayed and in effect for sixty (60) days; (12) any Obligor or any Obligor Subsidiary commits or suffers to occur a Canadian Act of Bankruptcy; or (13) the Guaranty of any Guarantor for any reason ceases to be, or is asserted by any Guarantor or the Company not to be, in full force and effect or enforceable in accordance with its terms, except to the extent contemplated in the Guaranty. Section 502. Acceleration. If an Event of Default (other than an Event of Default specified in clauses (10), (11) and (12) of Section 501 hereof) occurs and is continuing for any reason, whether voluntary or involuntary, then, subject to the provisions of the Common Security and Intercreditor Agreement, the Trustee, by notice to the Company, or the Holders of at least 25% of the aggregate principal amount of the Securities then Outstanding, by written notice to the Company and the Trustee, may declare the unpaid principal of, premium, if any, and any accrued interest on all the Securities to be immediately due and payable. Upon such declaration, the principal, premium, if any, and interest on the Securities shall become automatically and immediately due and payable, without further notice, demand or presentment. If an Event of Default specified in clause (10), (11) or (12) of Section 501 hereof occurs, such an amount shall ipso facto automatically be and become immediately due and payable, without any declaration or other act on the part of the Trustee or any Holder, and such amount shall be dealt with in accordance with, and subject to, the provisions of the Common Security and Intercreditor Agreement. Other than in respect of (i) a continuing Default or Event of Default in the payment of the 59 72 principal of, premium, if any, or interest on any Security held by a non-consenting Holder, or (ii) a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Security then Outstanding, or (iii) any continuing Default or Event of Default in respect of any matter involving the release of Collateral, which shall not be waived without the consent of the Holder of each then Outstanding Security, Holders of a majority of the aggregate principal amount of the Securities then Outstanding (or, in the case of the failure to make a Change of Control Offer pursuant to Section 1014 hereof, two-thirds of the aggregate principal amount of Securities then Outstanding) by written notice to the Trustee, may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if: (a) the Company has paid or deposited with the Trustee a sum sufficient to pay: (i) all sums paid or advanced by the Trustee under this Indenture and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; (ii) all overdue interest on all Securities; (iii) the principal of and premium, if any, on any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities; and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities; and (b) all Events of Default, other than the non-payment of principal of the Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 504 hereof. No such rescission shall affect any subsequent Default or impair any right consequent thereon provided in Section 504 hereof. Section 503. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may, in accordance with the provisions of the Common Security and Intercreditor Agreement, pursue any available remedy (under this Indenture or otherwise) to collect the payment of principal, premium, if any, or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding pursuant to the provisions of the Common Security and Intercreditor Agreement even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. 60 73 Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 308, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy, including such other rights and remedies of the Holders as set forth in the Common Security and Intercreditor Agreement. Section 504. Waiver of Past Defaults. The Holders of a majority of the aggregate principal amount of the Securities then Outstanding (or, in the case of the failure by the Company to make a Change of Control Offer pursuant to Section 1014 hereof, two-thirds of the Holders of the aggregate principal amount of the Securities then Outstanding), by notice to the Trustee, may waive an existing Default or Event of Default and its consequences, except in respect of (i) a continuing Default or Event of Default in the payment of the principal of, premium, if any, or interest on any Security held by a non-consenting Holder, or (ii) a covenant or provision hereof which under Article Nine, cannot be modified or amended without the consent of the Holder of each Security then Outstanding, or (iii) any continuing Default or Event of Default in respect of any matter involving the release of Collateral, which shall not be waived without the consent of the Holder of each then Outstanding Security. Upon any such waiver, such Default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; provided, however, that no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Section 505. Control by Majority. The Holders of a majority of the aggregate principal amount of the Securities then Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Securities by this Indenture or the Security Documents. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Holders, or that may involve the Trustee in personal liability. Section 506. Limitation on Suits. A Holder may pursue a remedy with respect to this Indenture or the Securities only if: (1) such Holder gives to the Trustee written notice of a continuing Event of Default; 61 74 (2) the Holders of at least 25% of principal amount of the Securities then Outstanding make a written request to the Trustee to pursue the remedy; (3) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within ten (10) days after receipt of the request and the offer and, if requested, the provision of the indemnity; and (5) during such ten (10) day period the Holders of a majority of the aggregate principal amount of the Securities then Outstanding do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to affect, disturb or prejudice the rights of another Holder or to obtain, or seek to obtain, a preference or priority over another Holder or to enforce any right under this Indenture or under the Securities, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of the Securities. For the protection and enforcement of the provisions of this Section, each and every Holder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Section 507. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal, or premium, if any, and interest on the Security, on or after the respective due dates expressed in the Security (or, in the case of redemption or repurchase, on the Redemption Date or repurchase date), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. Section 508. Collection Suit by Trustee. If an Event of Default specified in Section 501(1) or (2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against any Obligor or any Obligor Subsidiary for the whole amount of principal, premium, if any, and interest remaining unpaid on the Securities and interest on overdue principal and, to the extent lawful, premium and interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, subject to Article Thirteen. If any Obligor or Obligor Subsidiary fails to pay such amounts forthwith upon the demand of the Trustee pursuant to the immediately preceding paragraph, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree, may enforce the same against such Obligor, and may collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of such Obligor wherever situated. 62 75 If an Event of Default occurs and is continuing, the Trustee may, in its discretion, proceed to protect and enforce its rights and the rights of the Holders under this Indenture (including the Guaranties of the Securities) and the Common Security and Intercreditor Agreement by such appropriate private or judicial proceedings as the Trustee shall deem most effectual to protect and enforce such rights, including, without limitation, seeking recourse against any Guarantor pursuant to the terms of any Guaranty, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein or therein, or to enforce any other proper remedy, subject however to Section 505 hereof. Section 509. Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to any Obligor or any Obligor Subsidiary, their creditors or their property. The Trustee shall be entitled and empowered, subject to Article Thirteen, to collect, receive and distribute any money or other property payable or deliverable on any such claims and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 606 hereof out of the estate in any such proceeding shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties which the Holders of the Securities may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 510. Priorities. If the Trustee collects any money pursuant to this Article Three, it shall pay out the money in the following order: First: to (i) the Trustee, its agents and attorneys for amounts due under Section 606 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection and (ii) the Collateral Agent, pursuant to the terms of the Common Security and Intercreditor Agreement; 63 76 Second: to (i) Holders for amounts due and unpaid on the Securities for principal, premium, if any, and interest ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal, premium, if any, and interest respectively, and (ii) subject to the Common Security and Intercreditor Agreement, to the Administrative Agent for obligations under the Term Loan Agreement, including amounts of principal of, premium, if any, and interest on such obligations; Third: without duplication, to Holders for any other Indenture Obligations owing to the Holders under this Indenture or the Securities; and Fourth: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders. Section 511. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 507 hereof or a suit by Holders of more than 10% of the aggregate principal amount of the Securities then Outstanding or any suit instituted by any Holder for the enforcement of the payment of the principal of, premium, if any, or interest on any Security on or after the respective Stated Maturities expressed in such Security (or, in the case of redemption or repurchase, on or after the Redemption Date or repurchase date). Section 512. Waiver of Stay, Extension or Usury Laws. Each Indenture Obligor covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive such Indenture Obligor from paying all or any portion of the principal of, premium, if any, or interest on the Securities contemplated herein or in the Securities or which may affect the covenants or the performance of this Indenture. Each Indenture Obligor (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. 64 77 ARTICLE SIX THE TRUSTEE Section 601. Notice of Defaults. Within thirty (30) days after the occurrence of any Default, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, notice of such Default hereunder known to the Trustee unless such Default shall have been cured or waived. Section 602. Certain Rights of Trustee. Subject to the provisions of Sections 315(a) through 315(d) of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of Indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) the Trustee may consult with counsel and any written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder or under any Security Document in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or any Security Document at the request or direction of any of the Holders pursuant to this Indenture unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred therein or thereby in compliance with such request or direction; (e) the Trustee shall not be liable for any action taken or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture or any Security Document other than any liabilities arising out of the gross negligence of the Trustee; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, approval, appraisal, bond, debenture, note, coupon, security or other paper or document unless requested in writing to do so by 65 78 the Holders of not less than a majority of the aggregate principal amount of the Securities then Outstanding; provided that the Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may deem fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder or under any Security Document either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) no provision of this Indenture or any Security Document shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers; and (i) notwithstanding anything to the contrary set forth herein or in any Security Document, under no circumstances shall the Trustee be required to take possession of or maintain an action to foreclose upon any Mortgaged Property. Section 603. Trustee Not Responsible for Recitals, Dispositions of Securities or Application of Proceeds Thereof. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1, if any, supplied to the Company are true and accurate subject to the qualifications set forth therein. The Trustee shall not be accountable for the use or application by the Company of the Securities or the proceeds thereof. Section 604. Trustee and Agents May Hold Securities; Collections; etc. The Trustee, any Paying Agent, Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities, with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent and, subject to Trust Indenture Act, Sections 310 and 311, may otherwise deal with the Company and receive, collect, hold and retain collections from the Company with the same rights it would have if it were not the Trustee, Paying Agent, Security Registrar or such other agent. 66 79 Section 605. Money Held in Trust. All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by applicable provisions of law. Except for funds or securities deposited with the Trustee pursuant to Article Four, the Trustee may invest all moneys received by the Trustee, until used or applied as herein provided, in Cash Equivalents in accordance with the written directions of the Company. The Trustee shall not be liable for any losses incurred in connection with any investments made in accordance with this Section 605, unless the Trustee acted with gross negligence or in bad faith. With respect to any losses on investments made under this Section 605, the Company is liable for the full extent of any such loss. Section 606. Compensation and Indemnification of Trustee and Its Prior Claim. The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for all services rendered by it hereunder (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) and the Company covenants and agrees to pay or reimburse the Trustee and each predecessor Trustee, upon its request, for all reasonable expenses, disbursements and advances incurred or made by or on behalf of it in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and of all agents and other persons not regularly in its employ), except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify the Trustee and each predecessor Trustee for, and to hold it harmless against, any loss, liability, tax, assessment or other governmental charge (other than taxes applicable to the Trustee's compensation hereunder) or expense incurred without gross negligence or bad faith on such Trustee's part, arising out of or in connection with the acceptance or administration of this Indenture or any Security Document or the trusts hereunder and such Trustee's duties hereunder, including enforcement of this Section 606 and also including any liability which the Trustee may incur as a result of failure to withhold, pay or report any tax, assessment or other governmental charge, and the costs and expenses of defending itself against or investigating any claim of liability in the premises. The obligations of the Company under this Section to compensate and indemnify the Trustee and each predecessor Trustee and to pay or reimburse the Trustee and each predecessor Trustee for expenses, disbursements and advances shall constitute an additional obligation hereunder and shall survive the satisfaction and discharge of this Indenture, or the resignation or removal of any Trustee. To secure the Company's payment obligations in this Section 606, the Trustee shall have a Lien prior to the Securities on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, premium, if any, or interest on particular Securities. 67 80 When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(10), (11) or (12), the expenses and the compensation for the services shall be preferred over the status of Holders in any proceeding under any Bankruptcy Law and are intended to constitute expenses of administration under any Bankruptcy Law. Section 607. Conflicting Interests. The Trustee shall comply with the provisions of Section 310(b) of the Trust Indenture Act. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. Section 608. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act as trustee under Trust Indenture Act, Section 310(a)(1), and which shall have a combined capital and surplus of at least $50,000,000 or which shall be a wholly-owned subsidiary of a company that has a combined capital and surplus of at least $50,000,000, to the extent there is an institution eligible and willing to serve. If the Trustee does not have an office in The City of New York, the Trustee may appoint an agent in The City of New York reasonably acceptable to PCI and the Company to conduct any activities which the Trustee may be required under this Indenture to conduct in The City of New York. If the Trustee does not have an office in The City of New York or has not appointed an agent in The City of New York, the Trustee shall be a participant in the Depository Trust Company and its FAST distribution systems. If such corporation published reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect hereinafter specified in this Article Six. Section 609. Resignation and Removal; Appointment of Successor Trustee. (a) No resignation or removal of the Trustee and no appointment of a successor trustee pursuant to this Article Six shall become effective until the acceptance of appointment by the successor trustee under Section 610 hereof. (b) The Trustee, or any trustee or trustees hereafter appointed, may at any time resign by giving written notice thereof to the Company. Upon receiving such notice of resignation, the Company shall promptly appoint a successor trustee by written instrument executed by authority of its Board of Directors, a copy of which shall be delivered to the resigning Trustee and a copy to the successor trustee. If an instrument of 68 81 acceptance by a successor trustee shall not have been delivered to the Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may, or any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper, appoint a successor trustee. (c) The Trustee may be removed at any time by an Act of the Holders of not less than a majority of the aggregate principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with the provisions of Trust Indenture Act, Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 608 hereof and shall fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee, its property or its affairs for the purpose of rehabilitation, conservation or liquidation, then, in any case, (i) the Company by a Board Resolution of its Board of Directors, may remove the Trustee, or (ii) subject to Section 511 hereof, the Holder of any Security who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper, prescribe or remove the Trustee and appoint a successor trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution of its Board of Directors, shall promptly appoint a successor trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor trustee shall be appointed by Act of the Holders of a majority of the aggregate principal amount of the Securities then Outstanding, delivered to PCI, the Company and the retiring Trustee, the successor trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor trustee and supersede the successor trustee appointed by the Company. If no successor trustee shall have been so appointed by the Company or the Holders of the Securities and accepted appointment in 69 82 the manner hereinafter provided, the Holder of any Security who has been a bona fide Holder for at least six months may, subject to Section 511 hereof, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Security Register. Each notice shall include the name of the successor trustee and the address of its Corporate Trust Office or agent hereunder. Section 610. Acceptance of Appointment by Successor. Every successor trustee appointed hereunder shall execute, acknowledge and deliver to the Obligors and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee as if originally named as Trustee hereunder; provided, however, that on the written request of the Company or the successor trustee, upon payment of its charges then unpaid, such retiring Trustee shall pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, each Indenture Obligor shall execute any and all instruments to more fully and certainly vest in and confirm in such successor trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such Trustee or such successor trustee to secure any amounts then due such Trustee pursuant to the provisions of Section 606 hereof. No successor trustee with respect to the Securities shall accept appointment as provided in this Section 610 unless at the time of such acceptance such successor trustee shall be eligible to act as trustee under the provisions of Trust Indenture Act, Section 310(a) and this Article Six and shall have a combined capital and surplus of at least $50,000,000 or which shall be a wholly-owned subsidiary of a company that has a combined capital and surplus of at least $50,000,000 and have a Corporate Trust Office or an agent selected in accordance with Section 608 hereof. Upon acceptance of appointment by any successor trustee as provided in this Section 610, the Company shall give notice thereof to the Holders of the Securities, by mailing such notice to such Holders at their addresses as they shall appear on the Security Register. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 609 hereof. If the Company fails to give such notice within ten (10) days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be given at the expense of the Company. 70 83 Section 611. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be eligible under Trust Indenture Act, Section 310(a) and this Article Six and shall have a combined capital and surplus of at least $50,000,000 or which shall be a wholly-owned subsidiary of a company that has a combined capital and surplus of at least $50,000,000 and have a Corporate Trust Office or an agent selected in accordance with Section 608 hereof without the execution or filing of any paper or any further act on the part of any of the parties hereto. If at the time such successor to the Trustee shall succeed to the trusts created by this Indenture, any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated. If at such time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of such successor trustee. In all such cases provided for under this paragraph, such certificate shall have the full force which it has anywhere in the Securities or in this Indenture, unless the certificate of the Trustee shall have provided that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 612. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or other Indenture Obligor under the Guaranties and the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). A Trustee who has resigned or been removed shall be subject to the Trust Indenture Act, Section 311(a) to the extent indicated therein. Section 613. Certain Duties and Responsibilities. Except during the continuance of an Event of Default, (a) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (b) in the absence of bad faith or actual knowledge on its part, the Trustee may conclusively rely, as to the truth of the statements and the 71 84 correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture but shall not be required to verify the contents thereof. (2) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY Section 701. Company to Furnish Trustee Names and Addresses of Holders. The Company shall furnish or cause to be furnished to the Trustee (a) semiannually, not more than ten (10) days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date; and (b) at such other times as the Trustee may request in writing, within thirty (30) days after receipt by the Company of any such request, a list of similar form and content as of a date not more than fifteen (15) days prior to the time such list is furnished; provided, however, that if and so long as the Trustee shall be the Security Registrar, no such list need be furnished. Section 702. Preservation of Information; Disclosure of Names and Addresses of Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. 72 85 (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders in accordance with Trust Indenture Act, Section 312, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Trust Indenture Act, Section 312. Section 703. Reports by Trustee. Within sixty (60) days after May 15 of each year commencing with the first May 15 after the Closing Date, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Security Register, as provided in Trust Indenture Act, Section 313(c), a brief report dated as of such May 15 in accordance with and to the extent required by Trust Indenture Act, Section 313(a). The Trustee shall also comply with Trust Indenture Act, Section 313(b). Commencing at the time this Indenture is qualified under the Trust Indenture Act, a copy of each report at the time of its mailing to Holders shall be filed with the Commission and each stock exchange on which the Securities are listed of which the Company has notified the Trustee in writing. The Company shall notify the Trustee when Securities are listed on any stock exchange. Section 704. Reports by Company and Guarantors. PCI and the Company will furnish, or will cause to be furnished, to each Holder and the Trustee copies of the following financial statements, reports, notices and information and shall perform, or cause to be performed, such other covenants as are set forth below. (a) Annual Audited Financial Statements. Deliver, within ninety (90) days after each Fiscal Year, a copy of the annual audited financial statements of PCI, the Company and their respective Subsidiaries, as well as of any of the Guarantors as are required to file their annual audited financial statements with the Commission pursuant to the Securities Act or the Exchange Act and the rules and regulations thereunder, prepared on a consolidated and consolidating basis and in conformity with GAAP and certified by an independent certified public accountant who shall be satisfactory to the Trustee, together with (i) a certificate from such accountant to the effect that, in making the examination necessary for the signing of such annual audit report, such accountant has not become aware of any Default or Event of Default that has occurred and is continuing and that relates to financial or other accounting matters or the covenants set forth in Article Ten or, if such accountant has become aware of any such event, describing it, and (ii) if prepared in connection with the annual audit report, the annual operating statements 73 86 of PCI, the Company and such Subsidiaries prepared on a consolidating basis and in conformity with GAAP applied in a manner consistent with the audit report referred to in preceding clause (a)(i) of this Section 704, signed by PCI's, the Company's and such other Guarantor's chief financial officer or assistant treasurer. (b) Quarterly Financial Statements. Deliver, within forty-five (45) days after the end of each Fiscal Quarter, a copy of the unaudited financial statements of PCI, the Company and their respective Subsidiaries, as well as of any Guarantors as are required to file their quarterly financial statements with the Commission pursuant to the Securities Act or the Exchange Act, and the rules and regulations thereunder, prepared on a consolidating and consolidated basis and in conformity with GAAP and applied in a manner consistent with the audit report referred to in preceding clause (a)(i) of this Section 704, signed by PCI's, the Company's and such other Guarantor's chief financial officer and consisting of at least a balance sheet as at the close of such Fiscal Quarter and an income statement and cash flow statement for such Fiscal Quarter compared, in each case, to the actual results for the same period during the prior Fiscal Year and to the Company's budget delivered pursuant to clause (c) below for the current Fiscal Year. (c) (i) File, or caused to be filed, all applicable periodic reports and other reports and documents pursuant to Section 13 or 15(d) of the Exchange Act, and the rules and regulations thereunder, within the time limits periods specified therein, and remain, and cause each other applicable Obligor and applicable Obligor Subsidiary to remain, a company reporting to the Commission under Section 13 or 15(d) of the Exchange Act and such rules and regulations or part of a group of consolidated companies, one or more whom reports or report to the Commission in such manner, and (ii) within five (5) days of such filing or report having been made, (x) transmit by mail to Holders of Securities, as their names and addresses appear in the Security Register, without cost to such Holders, and (y) file with the Trustee copies of each filing and report made by any Obligor or any Obligor Subsidiary, or any third party with respect to any Obligor or Obligor Subsidiary with or to any securities exchange or the Commission or any Securities Commission in Canada, including any registration statements and all amendments thereto filed with respect to the Securities, or as required pursuant to this Indenture or any other document relating thereto. (d) Give prompt notice of the occurrence of (i) a Default or an Event of Default or (ii) a default by any Obligor or any Obligor Subsidiary under any material note, indenture, loan agreement, mortgage, lease, deed or other material similar agreement to which any Obligor or any Obligor Subsidiary, as appropriate, is a party or by which it is bound (including any of the Indenture Documents and Transaction Documents). (e) Deliver any statement, report, notice and/or information required to be delivered to the Collateral Agent pursuant to any of the Security Documents at the same time as delivery thereof to the Collateral Agent. 74 87 (f) Provide any information required to be provided pursuant to other provisions of this Indenture, and such other reports or information from time to time requested by the Trustee or any Holder. The Trustee has no duty to review any financial or other reports for purposes of determining compliance with this or any other provisions of this Indenture. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE Section 801. When Indenture Obligors May Merge, Etc. No Indenture Obligor shall, nor shall it cause or permit any of its Obligor Subsidiaries to, consolidate with or merge into, or sell, assign, convey, lease or transfer all or substantially all of its assets and those of its Subsidiaries taken as a whole to, any Person, unless each of the following conditions in this Section 801 is satisfied: (a) the resulting, surviving or transferee Person expressly assumes all the obligations of such Indenture Obligor and each of its Obligor Subsidiaries under this Indenture and each other Indenture Document to which such Indenture Obligor and/or Obligor Subsidiaries is a party pursuant to amendments in form and substance reasonably satisfactory to the Trustee (without prejudice, in the case of the Transaction Documents, to the terms thereof); (b) such resulting, surviving or transferee Person is organized and existing under the laws of the United States of America, a state thereof or the District of Columbia or, in the case of an assignor or transferee of the assets of the Company, under the laws of Canada or one of Canada's provinces; (c) at the time of the occurrence of such transaction and after giving effect to such transaction on a pro forma basis, such Person could incur $1.00 of additional Indebtedness (assuming a market rate of interest with respect to such additional Indebtedness); (d) (x) at the time of the occurrence of such transaction and after giving effect to such transaction on a pro forma basis, the Consolidated Net Worth of such Person is greater than the Consolidated Net Worth of the Obligors and the Obligor Subsidiaries, taken together, immediately prior to such transaction, and (y) the Administrative Agent, the Lenders, the Trustee and the Holders of the Securities shall have received an opinion of a nationally recognized investment banking firm not affiliated to any Person involved in any such merger or consolidation relating to fairness and confirming that the position of the Lenders and the Holders of the Securities will not in any way be less favorable than it was immediately prior to any such merger or consolidation as a result of such merger or consolidation; 75 88 (e) each Guarantor, to the extent applicable, will acknowledge and confirm in writing that its Guaranty hereunder will apply to such Person's obligations under this Indenture, the Securities, each other Indenture Document and its guaranty under the New Tranche A Term Notes and the Loan Documents will apply to such Person's obligations under the Transaction Documents; (f) immediately before and immediately after giving effect to such transaction and treating any Indebtedness which becomes an obligation of any Obligor or Obligor Subsidiary or of such Person as a result of such transaction as having been incurred by such Obligor or such Obligor Subsidiary or such Person, as the case may be, at the time of such transaction, no Default or Event of Default shall have occurred and be continuing; and (g) the Company shall have received an Opinion of Independent Counsel in Canada to the effect that (x) any payment of interest or principal on the Securities by the Company to a Holder will, after the amalgamation, consolidation, merger, sale, assignment, conveyance, transfer, lease or other disposition of assets, be exempt from Canadian withholding tax, if the Holder is or is deemed to be a non-resident of Canada, deals at arm's length with the resulting, surviving or transferee Person for purposes of the Income Tax Act (Canada) at the time of making the payment, and (y) no other taxes on income (including taxable capital gains) will be payable under the Income Tax Act (Canada) by a Holder of the Securities who is or who is deemed to be a non-resident of Canada in respect of the acquisition, ownership or disposition of the Securities, including the receipt of principal thereof, or premium, if any, or interest, thereon, provided that such Holder does not use or hold, and is not deemed to use or hold, the Securities in carrying on a business in Canada for purposes of the Income Tax Act (Canada) and, in the case of a Holder of Securities who carries on an insurance business in Canada and elsewhere, the Securities are not effectively connected with its Canadian insurance business. The Company shall deliver to the Trustee, prior to the consummation of any proposed transaction pursuant to this Section 801, an Officers' Certificate to the foregoing effect and an Opinion of Counsel, stating that the proposed transaction and such amendments comply with this Indenture. The provisions of this Section 801 will not apply to any transaction (including any Asset Sale made in accordance with Section 1009 with respect to any Guarantor) if the Guaranty of such Guarantor is released in connection with such transaction in accordance with the applicable provisions of this Indenture and the other Indenture Documents. Section 802. Successor Substituted. Upon any consolidation or merger, or any sale, assignment, conveyance, transfer or disposition of all or substantially all of the properties and assets of any Obligor or Obligor Subsidiary in accordance with Section 801 hereof, the successor Person formed by such consolidation or into which such Obligor or Obligor Subsidiary is merged or the successor Person to which such sale, assignment, conveyance, transfer, 76 89 lease or disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, PCI, the Company or a Guarantor, as the case may be, under this Indenture, the Securities, its Guaranty, and/or the other Indenture Documents, as the case may be, with the same effect as if such successor had been named as PCI, the Company or a Guarantor, as the case may be, herein, in the Securities, the Guaranty, and such other Indenture Documents, as the case may be. When a successor assumes all the obligations of its predecessor under this Indenture, the Securities, a Guaranty, and/or other Indenture Documents, as the case may be, the predecessor shall be released from those obligations; provided that in the case of a transfer by lease, the predecessor shall not be released from the principal of, premium, if any, or interest on the Securities or any other Indenture Obligations relating to, this Indenture, the Securities, each Guaranty, or the other Indenture Documents, as the case may be. Notwithstanding anything in the foregoing, any consolidation or merger, or any sale, assignment, conveyance, transfer or disposition of properties or assets under this Article Eight shall be subject to the provisions of Section 1014 and Section 1109 hereof. ARTICLE NINE SUPPLEMENTAL INDENTURES Section 901. Supplemental Indentures and Agreements without Consent of Holders. (a) Without the consent of any Holders, the Indenture Obligors and their respective Obligor Subsidiaries (if a party to the applicable document or instrument), when authorized by Board Resolutions of their respective Boards of Directors, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto or agreements or other instruments with respect to any Guaranty, in form and substance satisfactory to the Trustee, for any of the following purposes: (i) to cure any ambiguity, defect or inconsistency herein or therein; (ii) to provide for the assumption pursuant to Article Eight of the Company's and/or a Guarantor's obligations to the Holders in the case of a merger, consolidation or sale of assets; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to make any change herein or therein that does not adversely affect the rights hereunder or thereunder of any Holder; (v) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; 77 90 (vi) to add a Guarantor pursuant to the requirements of Section 1317 hereof; (vii) to evidence and provide the acceptance of the appointment of a successor trustee hereunder; (viii) to provide additional collateral for the Securities or the Guaranties or other Indebtedness permitted to be secured by the Collateral, and in connection therewith (and only in such limited respect), to modify covenants, to provide additional indemnity to the Trustee, and to modify other provisions of this Indenture, the Securities and the Guaranties that relate solely to such additional collateral or that will or may be impacted by the providing of such collateral, and to enter into agreements, documents or other instruments to effect the foregoing, including, without limitation, intercreditor and collateral agency agreements relating to Liens on such collateral on a pari passu basis in favor of the Trustee for the benefit of the Holders; (ix) to add to the covenants of any Indenture Obligor or any other obligor upon the Securities for the benefit of the Holders, or to surrender any right or power herein or therein conferred upon such Indenture Obligor or any other obligor upon the Securities herein or therein, in the Securities or in any Guaranty; or (x) to add any additional Events of Default for the benefit of the Holders of all Securities. (b) Without the consent of any Holders, the Trustee, on behalf of the Holders, at any time and from time to time, may enter, subject to the provisions of the relevant Indenture Documents (other than the Indenture), into one or more amendments, supplements or other modifications to such other Indenture Document, in form and substance satisfactory to the Trustee for any of the following purposes: (i) to cure any ambiguity, defect or inconsistency therein; (ii) to provide for the assumption pursuant to Article Eight of the Company's and/or a Guarantor's obligations to the Holders in the case of a merger, consolidation or sale of assets; (iii) to make any change therein that does not adversely affect the rights hereunder or thereunder of any Holder; (iv) to effectuate and evidence the succession of another entity to any Obligor and the assumption by any successor of the covenants of such Obligor, under the Indenture Documents to which such Obligor is a party; (v) to evidence and provide the acceptance of the appointment of a successor trustee hereunder; 78 91 (vi) to provide additional collateral for the Securities or the Guaranties or other Indebtedness permitted to be secured by the Collateral, and in connection therewith (and only in such limited respect), to modify covenants, to provide additional indemnity to the Trustee, and to modify other provisions of this Indenture, the Securities and the Guaranties that relate solely to such additional collateral or that will or may be impacted by the providing of such additional collateral, and to enter into agreements, documents or other instruments to effect the foregoing, including, without limitation, intercreditor and collateral agency agreements relating to Liens on such collateral on a pari passu basis in favor of the Trustee for the benefit of the Holders; or (vii) to add to the covenants of any Obligor or any other obligor upon the Securities for the benefit of the Holders, or to surrender any right or power therein conferred upon such Obligor or any other obligor upon the Securities therein; or (viii) to add any additional Events of Default for the benefit of the Holders of all Securities. Section 902. Supplemental Indentures and Agreements with Consent of Holders. With the consent of the Holders of not less than a majority of the aggregate principal amount of the Securities then Outstanding, by Act of said Holders delivered to the Company, each Indenture Obligor and their respective Obligor Subsidiaries (if a party thereto), when authorized by Board Resolutions of their respective Boards of Directors, and the Trustee may enter into an indenture or indentures supplemental hereto or agreements or other instruments with respect to any Guaranty or any other Indenture Documents (subject, in the case of such other Indenture Documents to the applicable provisions of such Indenture Documents) in form and substance satisfactory to the Trustee for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture, the Securities, any Guaranty or any other Indenture Documents, as the case may be; provided, however, that no such supplemental indenture, agreement or instrument shall, without the consent of the Holder of each Outstanding Security affected thereby: (i) reduce the percentage of the aggregate principal amount of Securities, the consent of whose Holders is required for any amendment, supplement or waiver (or compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture and/or such other Indenture Document, as applicable; (ii) reduce the rate of, or change the time for payment of, any premium, if any, or interest (including Defaulted Interest), payable on any Security, or change the place of payment where, or the coin or currency in which, any Security or any premium, if any, or interest thereon is payable, or impair the 79 92 right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); (iii) reduce the principal of or change the Stated Maturity of any Security, or alter the optional redemption provisions, or alter the price at which the Company shall offer to purchase such Securities pursuant to Sections 1014 or 1109 hereof; (iv) make any Security payable in money other than that stated in the Security; (v) make any change in Sections 504 or 507 hereof; (vi) waive a Default or Event of Default in the payment of principal of, premium, if any, or interest on the Securities, including any such obligation arising under Sections 1009, 1014 or Section 1109 hereof (except a rescission of acceleration of the Securities pursuant to Section 502 hereof by the Holders of at least a majority of the aggregate principal amount of the Securities then Outstanding (or in the case of the failure to make a Change of Control Offer, two-third of the aggregate principal amount of the Securities then Outstanding) and a waiver of the payment default that resulted from such acceleration); (vii) waive a purchase payment required to be made under Sections 1009, 1014 or 1109 or a payment under Article Thirteen hereof with respect to any Security; (viii) affect the ranking of the Securities; (ix) affect adversely the interests, rights or obligations of the Trustee or the Collateral Agent, unless consented to by the Trustee or the Collateral Agent, as applicable; (x) release (x) any Guarantor from its obligations under its Guaranty, or (y) any Collateral other than pursuant to the terms of the Indenture, such Guaranty or the applicable Security Document; or (xi) make any change in the provisions of this Section 902. Further, no such supplemental indenture shall, without the consent of the Holders of all of the Securities then Outstanding, permit the creation of any Lien prior to or pari passu with the Lien of the Security Documents with respect to any of the Collateral, or terminate the Liens of the Security Documents, on any Collateral or deprive any Holder of the security afforded by the Lien of the Security Documents, except to the extent expressly permitted by this Indenture, the Common Security and Intercreditor Agreement or any of the Security Documents. 80 93 Upon the written request of the Indenture Obligors and their respective Obligor Subsidiaries (if parties thereto), accompanied by a copy of Board Resolutions of their respective Boards of Directors, authorizing the execution of any such supplemental indenture, Guaranty or Indenture Document, and upon the filing with the Trustee of evidence of the consent of Holders as aforesaid, the Trustee shall, subject to Section 903 hereof, join with the Indenture Obligors and such Obligor Subsidiaries in the execution of such supplemental indenture, Guaranty or Indenture Document. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture or Guaranty or agreement or instrument relating to any Guaranty or any other Indenture Document, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures and Agreements. In executing, or accepting the additional trusts created by, any supplemental indenture, agreement or instrument permitted by this Article Nine or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Trust Indenture Act, Section 315(a) through 315(d) and Section 602 hereof) shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate stating that the execution of such supplemental indenture, agreement or instrument is authorized or permitted by this Indenture, that no consent is required or that all requisite consents have been received and that such supplemental indenture, agreement or instrument constitutes the legal, valid and binding obligation of the Indenture Obligors and Obligor Subsidiaries or their respective successors, as the case may be, enforceable against such entity in accordance with its terms, subject to customary exceptions. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture, agreement or instrument which affects the Trustee's own rights, duties or immunities under this Indenture, any Guaranty or otherwise. Section 904. Revocation Effect of Supplemental Indentures. Until a supplemental indenture, amendment or waiver becomes effective, a consent to it by a Holder of a Security is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of consent is not made on any Security. Upon the execution of any supplemental indenture under this Article Nine, this Indenture shall be modified in accordance therewith and such supplemental indenture shall form a part of this Indenture for all purposes and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article Nine shall conform to the requirements of the Trust Indenture Act as then in effect. 81 94 Section 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article Nine may bear a notation in form satisfactory to the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform to any such supplemental indenture may be prepared and executed by the Company and each Guarantor and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE TEN COVENANTS Section 1001. Payment of Principal, Premium and Interest. The Company shall duly and punctually pay the principal of, premium, if any, and interest on the Securities in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company shall maintain (or cause to be maintained) an office or agency where Securities may be presented or surrendered for payment. The Company also shall maintain (or cause to be maintained) in The City of New York an office or agency where Securities may be surrendered for registration or transfer, redemption or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. Such office or agency shall be initially at the Corporate Trust Office. The Company shall give prompt written notice to the Trustee of the location and any change in the location of any such offices or agencies. If at any time the Company shall fail to maintain (or cause to be maintained) any such required offices or agencies or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee described above and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may from time to time designate one or more additional offices or agencies (in or outside of The City of New York) where the Securities may be presented or surrendered for any or all such purposes, and may from time to time rescind such designation. The Company shall give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such office or agency. Section 1003. Compliance Certificate. (a) Each of PCI and the Company shall deliver to the Trustee, within ninety (90) days after the end of each fiscal year of PCI and the Company, an Officers' 82 95 Certificate stating that a review of the activities of each Obligor and each Obligor Subsidiary during the period in respect of which the financial statements have been furnished pursuant to Section 704(a) hereof, and the preceding fiscal year has been made under the supervision of the signing officers with a view to determining whether each has kept, observed, performed and fulfilled its Indenture Obligations under this Indenture and the other Indenture Documents, and further stating, as to each such officer signing such certificate, that to the best of his or her knowledge each has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and the other Indenture Documents to which it is a party and is not in default in the performance or observance of any of the terms, provisions and conditions hereof or thereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action each is taking or proposes to take with respect thereto). (b) Each of PCI and the Company shall deliver to the Trustee, within forty-five (45) days after the end of the first three quarters of each fiscal year, an Officers' Certificate stating that a review of the activities of each Obligor and each Obligor Subsidiary during the period in respect of which the financial statements have been furnished pursuant to Section 704(b) hereof, and the preceding fiscal quarter has been made under the supervision of the signing officers with a view to determining whether each has kept, observed, performed and fulfilled its Indenture Obligations under this Indenture and the other Indenture Documents, and further stating, as to each such officer signing such certificate, that to the best of his or her knowledge each has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and the other Indenture Documents to which it is a party and is not in default in the performance or observance of any of the terms, provisions and conditions hereof or thereof (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action each is taking or proposes to take with respect thereto). (c) [Intentionally omitted.] (d) Each Indenture Obligor shall, so long as any of the Securities are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of (i) any Default or Event of Default, or (ii) a default by any Obligor or any Obligor Subsidiary under any material note, indenture, loan agreement, mortgage, lease, deed or other material similar agreement to which any Obligor or any Obligor Subsidiary, as appropriate, is a party or by which it is bound (including any of the Indenture Documents and Transaction Documents), an Officers' Certificate specifying such Default, Event of Default or such other default or event of default and what action the Company is taking or proposes to take with respect thereto. Section 1004. Taxes. Each Indenture Obligor shall, and shall cause each of its Obligor Subsidiaries to, pay prior to delinquency (a) all federal, state and other material Taxes, assessments and governmental levies upon it, its income and its properties, and (b) all 83 96 lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Indenture Obligor or any of its Obligor Subsidiaries, except as are being contested in good faith and by appropriate proceedings diligently conducted by the Indenture Obligors and in respect of which appropriate reserves are being maintained in accordance with GAAP. Section 1005. Jurisdiction, Service of Process and Venue Immunity; Judgment Currency. (a) Each Indenture Obligor irrevocably agrees that any suit, action or proceeding with respect to this Indenture or any other Indenture Document or any judgment entered by any court in respect thereof may be brought in the United States District Court for the Southern District of New York, in the Supreme Court of the State of New York sitting in New York County (including its Appellate Division), or in any other appellate court in the State of New York, as the party commencing such suit, action or proceeding may elect in its sole discretion, and each Indenture Obligor hereby irrevocably submits to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. Each Indenture Obligor further submits, for the purpose of any suit, action, proceeding or judgment brought or rendered against any Collateral or other property, to the appropriate courts of the jurisdiction where such Collateral or other property may be found. (b) Each Indenture Obligor agrees that service of all writs, process and summonses in any such suit, action or proceeding brought in any Federal or state court located in The City of New York may be made upon CT Corporation, presently located at 111 Eight Avenue, 13th Floor, New York, New York 10011, U.S.A. (the "U.S. Process Agent"), and each Indenture Obligor hereby confirms and agrees that the U.S. Process Agent has been duly and irrevocably appointed as its agent and true and lawful attorney-in-fact in its name, place and stead to accept such service of any and all such writs, process and summonses, and agrees that the failure of the U.S. Process Agent to give any notice of any such service of process to the applicable Indenture Obligor shall not impair or affect the validity of such service or of any judgment based thereon. Each Indenture Obligor hereby further irrevocably consents to the service of process in any suit, action or proceeding in such courts by the mailing thereof by registered or certified mail, postage prepaid, at its address set forth in Section 106 hereof or by personal service within or without the jurisdiction of its domicile. (c) Nothing herein shall in any way be deemed to limit the ability of the Trustee or the Holders to serve any such writs, process or summonses in any other manner permitted by applicable law or to obtain jurisdiction over any Indenture Obligor in such other jurisdictions, and in such manner, as may be permitted by applicable law. (d) Each Indenture Obligor hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Indenture or any other Indenture Document brought in the Supreme Court of the State of New York, County of New York, in the United States District Court for the Southern 84 97 District of New York or in the courts of the jurisdiction of its domicile or in the courts of the jurisdiction where any Collateral or other property of such Person may be found, and hereby further irrevocably waives, to the fullest extent permitted by applicable law, any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. (e) To the extent that any Indenture Obligor may be or become entitled, in any judicial proceeding which may at any time be commenced with respect to this Indenture or any other Indenture Document, to claim for itself or the Collateral or its other property or revenues any immunity from suit, court jurisdiction, attachment prior to judgment, attachment in aid of execution of a judgment, execution of a judgment or from any other legal process or remedy relating to its obligations under this Indenture or any other Indenture Document, and to the extent that there may be attributed such an immunity (whether or not claimed), such Indenture Obligor hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the fullest extent permitted by the laws of the state of New York. (f) This is an international debt transaction in which the specification of United States dollars and payment in New York City is of the essence, and the obligation of the Indenture Obligors under this Indenture and the other Indenture Documents to make payment to (or for the account of) the Trustee and the Holders in dollars shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any other currency or in another place except to the extent that such tender or recovery results in the effective receipt by the Trustee and the Holders in New York City of the full amounts of dollars payable to the Trustee and the Holders under this Indenture and the other Indenture Documents. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in dollars into another currency (in this Section 1005 called the "judgment currency"), the rate of exchange that shall be applied shall be that at which in accordance with normal banking procedures dollars could be purchased in New York City with the judgment currency on the Business Day next preceding the day on which such judgment is rendered. The obligation of each Indenture Obligor in respect of any such sum due from it to the Trustee and the Holders under this Indenture or any other Indenture Document shall, notwithstanding the rate of exchange actually applied in rendering such judgment, be discharged only to the extent that on the Business Day following receipt by the Trustee or the Holders, as the case may be, of any sum adjudged to be due under this Indenture or any other Indenture Document, as the case may be, in the judgment currency the Trustee or the Holders, as the case may be, may in accordance with normal banking procedures purchase and transfer dollars to New York City with the amount of the judgment currency so adjudged to be due, and each Indenture Obligor hereby, as a separate obligation and notwithstanding any such judgment, agrees to indemnify the Trustee and the Holders against, and to pay the Trustee and the Holders on demand, in dollars, the amount (if any) by which the sum originally due to the Trustee or the Holders, as the case may be, in dollars under this Indenture or any other Indenture Document exceeds the amount of the dollars so purchased and transferred. 85 98 Section 1006. Limitation on Restricted Payments. No Indenture Obligor will, nor will it cause, permit or suffer any of its Obligor Subsidiaries to, (a) declare or pay any dividends or make any other distributions (including through mergers, liquidations or other transactions but excluding, for the avoidance of doubt, the issuance of New Common Stock pursuant to the Plan of Reorganization) on any class of Capital Stock of any Indenture Obligor or its Obligor Subsidiaries (other than dividends or distributions payable or paid by a Wholly-Owned Subsidiary of PCI or of the Company on account of its Capital Stock held by PCI or the Company or another Subsidiary of PCI or the Company or payable or paid in shares of Capital Stock of the Company other than preferred stock or redeemable stock), (b) make any payment on account of, or set apart money for a sinking or other analogous fund for, the purchase, redemption or other retirement of such Capital Stock, (c) purchase, defease, redeem or otherwise retire any Subordinated Indebtedness (other than with the proceeds of the issuance of Capital Stock of PCI which is permitted to be issued pursuant to the terms of this Indenture or with the proceeds of Subordinated Indebtedness which is permitted to be incurred pursuant to the terms of this Indenture), or (d) make any Investment, either directly or indirectly, whether in cash or property or in obligations of any Indenture Obligor or its Obligor Subsidiaries (all of the foregoing being called "Restricted Payments"). Notwithstanding the foregoing, any Obligor may make (i) Permitted Issuances, (ii) Restricted Payments made pursuant to the Transaction Documents, (iii) Permitted Investments, and (iv) regularly scheduled payments on Subordinated Indebtedness which is permitted to be incurred pursuant to the terms of this Indenture. Section 1007. Limitations on Payment Restrictions Affecting Subsidiaries. No Indenture Obligor shall, nor shall it permit any of its Obligor Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Obligor Subsidiary to (a) pay dividends or make any other distribution to any Indenture Obligor or its Obligor Subsidiaries on its Capital Stock, (b) pay any Indebtedness owed to any Indenture Obligor or such other Subsidiary, (c) make loans or advances to any Indenture Obligor or such other Subsidiary, or (d) transfer any of its property or assets to any Indenture Obligor or such other Subsidiary, except: (i) consensual encumbrances or restrictions contained in or created pursuant to any Indenture Documents or the Transaction Documents; (ii) any restriction, with respect to a Subsidiary of any Indenture Obligor that is not a Subsidiary of such Indenture Obligor on the Closing Date, in existence at the time such entity becomes a Subsidiary of such Indenture Obligor; provided that such encumbrance or restriction is not created in anticipation of or in connection with such entity becoming a Subsidiary of the Company and is not applicable to any Person or the properties or assets of any Person other than a Person that becomes a Subsidiary; 86 99 (iii) encumbrances or restrictions contained in any other Indebtedness permitted to be incurred subsequent to the Closing Date pursuant to the provisions of Section 1008 hereof, provided that any such encumbrances or restrictions are not more restrictive taken individually and as a whole (as determined in good faith by the chief financial officer of the Company) than the most restrictive of those provided for in the Indebtedness referred to in clause (i) of this Section 1007; (iv) any such encumbrance or restriction consisting of customary nonassignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease; (v) any restriction with respect to such a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary in compliance with the Indenture pending the closing of such sale or disposition; or (vi) any encumbrance or restriction required or mandated by applicable law. Section 1008. Limitations on Indebtedness. No Indenture Obligor shall, nor shall it permit its Obligor Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become liable with respect to, or become responsible for the payment of, contingently or otherwise ("incur"), any Indebtedness. Notwithstanding the foregoing limitations, the limitations of this Section 1008 shall not apply to the incurrence of the following Indebtedness: (i) Indebtedness of the Company evidenced by the Securities, Indebtedness of any Guarantor evidenced by the Guaranties with respect thereto and Indebtedness of the Company and of the Guarantors, as evidenced by and in respect of all other Transaction Documents; (ii) Indebtedness evidenced by the New Tranche A Term Notes, Indebtedness in respect of the Term Loans, the Term Loan Agreement and all other obligations incurred thereunder; (iii) Indebtedness of any Indenture Obligor or Obligor Subsidiaries constituting Existing Indebtedness and any extension, deferral, renewal, refinancing or refunding thereof, without increasing the aggregate principal amount of such Indebtedness then outstanding and covered thereby; (iv) Indebtedness of PCI and the Company in respect of and in accordance with the terms of, the Exit Facility; provided that, notwithstanding the terms of the Exit Facility, the aggregate principal amount of Indebtedness at any time outstanding under the Exit Facility shall not exceed $50,000,000; 87 100 (v) Capitalized Lease Obligations of any Indenture Obligor or its Obligor Subsidiaries, including Indebtedness in respect of Capitalized Lease Obligations of any Indenture Obligor or its Obligor Subsidiary secured by Liens that secure the payment of all or part of the purchase price of assets or property acquired or constructed in the ordinary course of business after the Closing Date; provided, however, that the aggregate principal amount of such Capitalized Lease Obligations, including such Indebtedness in respect of Capitalized Lease Obligations of Indenture Obligors and all of their respective Obligors Subsidiaries, does not exceed $10,000,000 in the aggregate outstanding at any time; (vi) Indebtedness, not secured by or subject to any Lien, of PCI or the Company to any of their respective Subsidiaries or of any such Subsidiary to PCI, the Company or another such Subsidiary (but only so long as such Indebtedness is held by PCI, the Company or such Subsidiary); (vii) Indebtedness, not secured by or subject to any Lien, under Hedging Obligations incurred in the ordinary course of PCI's or the Company's business; provided, however, that in the case of foreign currency exchange or similar agreements which relate to other Indebtedness, such agreements do not increase the Indebtedness of any Indenture Obligor or its Obligor Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates, and in the case of interest rate protection agreements, only if the notional principal amount of such interest rate protection agreement does not exceed the principal amount of the Indebtedness to which such interest rate protection agreement relates; (viii) [Indebtedness, not secured by or subject to any Lien, in respect of performance, completion, guaranty, surety and similar bonds, banker's acceptances, bills of exchange or letters of credit provided or to be endorsed by PCI, the Company or any of their respective Subsidiaries in the ordinary course of business]; and (ix) Indebtedness, not secured by or subject to any Lien, in respect of (i) any guaranty provided by PCI, the Company or any of their respective Subsidiaries in respect of any other Indebtedness permitted to be incurred hereunder and not otherwise referred to above; provided, however, that if such Indebtedness guaranteed is subordinated in right of payment to any other Indebtedness of the Indenture Obligor thereof, then such guaranty shall be subordinated to Indebtedness of such guarantor to the same extent, (ii) indemnities in favor of Persons issuing title insurance policies, (iii) indemnifications in the Transaction Documents and in any agreements contemplated thereunder or thereby and (iv) indemnities in the Organizational Documents of PCI and its Subsidiaries; (x) Indebtedness, not secured by or subject to any Lien, of a Person which becomes a Subsidiary of the Company incurred and outstanding on or prior to the date on which such Person was acquired as a Subsidiary by the Company; 88 101 provided that (i) on the date of such acquisition and after giving effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Company for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such incurrence would have been at least equal to 2.5:1.0 determined on a pro forma basis after giving effect, in each case, to such acquisition which makes that Person a Subsidiary of the Company, and (ii) immediately after giving effect to the acquisition of such Person, no Default or Event of Default shall occur and be continuing; (xi) Indebtedness subject to Liens permitted by Section 1012; (xii) Indebtedness incurred in respect of New Other Secured Notes and Claims; (xiii) Subordinated Indebtedness, not secured by or subject to any Lien, not to exceed $[*] in the aggregate at any one time outstanding; provided that (i) on the date of incurrence of such Subordinated Indebtedness and after giving effect thereto, the Consolidated Fixed Charge Coverage Ratio of the Company for the most recently ended four full fiscal quarters immediately preceding the date of such incurrence would have been at least equal to 2.5:1.0 determined on a pro forma basis, and (ii) immediately after giving effect to such Indebtedness, no Default or Event of Default shall have occurred and be continuing; and (xiv) any refinancing, refunding, deferral, renewal or extension (each, a "Refinancing") of any Indebtedness of any Obligor or any Obligor Subsidiary permitted by subsections (ii), (iii), (iv), (x) and (xii) (the "Refinancing Indebtedness"); provided, however, that (a) such Refinancing Indebtedness does not exceed the aggregate principal amount of the Indebtedness so refinanced, plus the amount of any premium required to be paid in connection with such Refinancing in accordance with the terms of such Indebtedness or the amount of any premium reasonably determined by such Obligor as necessary to accomplish such Refinancing, plus the amount of reasonable and customary out-of-pocket fees and expenses payable in connection therewith, (b) the Refinancing Indebtedness does not provide for any mandatory redemption, amortization or sinking fund requirement in an amount greater than or at a time prior to the amounts and times specified in the Indebtedness being refinanced, refunded, deferred, renewed or extended and (c) if the Indebtedness being refinanced, refunded, deferred, renewed or extended is subordinated to the Securities, the Refinancing Indebtedness incurred to refinance, refund, defer, renew or extend such Indebtedness is subordinated in right of payment to the Obligations on terms at least as favorable to the Holders and the Lenders as those contained in the documentation governing the Indebtedness being so refinanced, refunded, deferred, renewed or extended; provided, however, that no Indebtedness permitted to be incurred pursuant to this Section 1008 shall contain any terms that are more restrictive on or to the obligor of such 89 102 Indebtedness than those set forth in this Indenture, whether taken individually or as a whole. Section 1009. Asset Sales. (a) No Indenture Obligor shall, nor shall it permit any of its Obligor Subsidiaries to, make any Asset Sale (other than to another Indenture Obligor or such other Subsidiary) unless (i) such Indenture Obligor or such Subsidiary receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the assets sold or otherwise disposed of, and at least 85% of the consideration received by such Indenture Obligor or such Subsidiary from such Asset Sale is in the form of cash (in Dollars) and no portion thereof shall consist of inventory or accounts receivable or other property that would become subject to a Lien held by any other creditor of such Indenture Obligor or of any such Subsidiary other than the Lenders or the Holders of the Securities; provided, however, that the amount of any cash equivalent or note or other obligation received by such Indenture Obligor or such Subsidiary from the transferee in any such transaction that is converted within 45 days by such Indenture Obligor or such Subsidiary into cash shall be deemed upon such conversion to be cash for purposes of this provision; (ii) to the extent such Asset Sale involves Collateral, (x) the consent of the Holders of a majority of the aggregate principal amount of the Securities then Outstanding shall be obtained prior to the consummation of such sale and (y) PCI or the Company shall cause the aggregate cash proceeds received by such Indenture Obligor or such Subsidiary in respect of such Asset Sale which are allocated to the Collateral, net of the items set forth in clauses (i) through (iii) of the definition of Net Proceeds (the "Collateral Proceeds"), to be deposited with the Collateral Agent in the Intercreditor Collateral Account as and when received by such Indenture Obligor or any such Subsidiary; and (iii) the Net Proceeds received by such Indenture Obligor or such Subsidiary from any Asset Sale are applied in accordance with the following paragraphs. (b) The Company shall apply 100% of the aggregate amount of Net Proceeds from each and every Asset Sale, subject to the provisions, if applicable, of the Common Security and Intercreditor Agreement, to the purchase of Securities tendered to the Company for purchase, in each case then Outstanding, on or prior to the tenth day following the date on which such Net Proceeds are received by such Indenture Obligor or any such Subsidiary at a price (the "Asset Sale Purchase Price") equal to 100% of the principal amount thereof, plus accrued interest, and premium, if any, to the date of purchase pursuant to an offer to purchase made by the Company (an "Asset Sale Offer") with respect to the Securities, as the case may be. (c) Until such time, if any, as the Net Proceeds from any Asset Sale are applied in accordance with this covenant, such Net Proceeds shall be segregated from the other assets of each Indenture Obligor and each of its Obligor Subsidiaries and invested in cash or Eligible Investments. (d) Any Asset Sale Offer shall be made substantially in accordance with the procedures described under Section 1109 hereof. Each Indenture Obligor shall cause a notice of any Asset Sale Offer to be mailed to the Trustee and the Holders at their 90 103 registered addresses not less than 30 days nor more than 45 days before the purchase date. In the case of a sale of Collateral, the notice of an Asset Sale Offer shall contain the following additional information: (i) a description of the interests to be released; (ii) the Fair Market Value of the released interests as of a date no later than 60 days before the date of such notice; and (iii) certification that the purchase price received is not less than the Fair Market Value of such released interest as of the date of such release. Such notice to the Trustee shall be accompanied by an Officers' Certificate setting forth a statement to the effect that (x) an Indenture Obligor has made an Asset Sale, and/or (y) there has occurred a destruction or condemnation in respect of Collateral resulting in Insurance Proceeds or Net Awards which are not required to be applied to effect a Restoration of the affected Collateral under the applicable Security Document. The notice shall also be accompanied by an Opinion of Counsel as to the Asset Sale Offer and satisfactory evidence from a title company that the Liens of the Collateral Agent or the remaining Collateral continue unimpaired as perfected first priority liens. Upon receiving notice of an Asset Sale Offer, Holders may elect to tender their Securities in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent that Holders properly tender Securities in an amount exceeding the Asset Sale Offer, Securities of tendering Holders shall be repurchased on a pro rata basis (based on amounts tendered). (e) In the event any Indenture Obligor is required to make an Asset Sale Offer at a time when such Indenture Obligor is prohibited from making such Offer, any other Indenture Obligor shall, on or prior to the date that such Indenture Obligor is required to make an Asset Sale Offer, seek the consent of the Holders and the Lenders to repurchase Securities pursuant to such Asset Sale Offer; provided, however, that the failure to make or consummate the Asset Sale Offer as provided herein shall constitute an Event of Default. (f) The Company shall comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act, any other tender offer rules under the Exchange Act and all other applicable U.S. Federal and state and Canadian federal and provincial securities laws or regulations in connection with any offer to repurchase and the repurchase of the Securities as described above. (g) No Indenture Obligor shall, nor shall it not permit any of its Obligor Subsidiaries to, create or permit to exist or become effective any consensual restriction, other than restrictions not more restrictive taken as a whole (as determined in good faith by the Board of Directors of PCI) than those in effect under the Exit Facility or any other Indebtedness permitted by Section 1008, that would materially impair the ability of any Indenture Obligor or any of its Obligor Subsidiaries to comply with the provisions of this Section 1009. (h) If at any time any non-cash consideration permitted by this Section 1009 (other than any such consideration consisting of inventory, accounts receivable and 91 104 certain related assets securing or permitted to secure the Exit Facility) is received by any Indenture Obligor or any Obligor Subsidiary, as the case may be, in connection with any Asset Sale of assets permitted by this Section 1009 which includes Collateral, such non-cash consideration shall be made subject to the Lien of the Security Documents in the manner contemplated in the Common Security and Intercreditor Agreement to the extent of the purchase price allocated to the Collateral. If and when any such non-cash consideration received from any Asset Sale (whether or not relating to Collateral) is converted into or sold or otherwise disposed of for cash, then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Proceeds thereof shall be applied in accordance with this Section 1009 and this Indenture. (i) All Insurance Proceeds and all Net Awards required to be delivered to the Collateral Agent pursuant to any Security Document shall constitute Trust Moneys and shall be delivered, or caused to be delivered by each Indenture Obligor or any of its Obligor Subsidiaries, as the case may be, to the Collateral Agent contemporaneously with receipt by any Indenture Obligor or any of its Obligor Subsidiaries and be deposited into the appropriate Intercreditor Collateral Account and applied in accordance with the applicable provisions of the Common Security and Intercreditor Agreement. Insurance Proceeds and Net Awards so deposited that may be applied by each Indenture Obligor or any of its Obligor Subsidiaries to effect a Restoration of the affected Collateral under the applicable Security Document may be withdrawn from the Intercreditor Collateral Account only in accordance with the applicable provisions of the Common Security and Intercreditor Agreement. Insurance Proceeds and Net Awards so deposited that are not applied to effect a Restoration of the affected Collateral under the applicable Security Document may only be withdrawn in accordance with applicable provisions of the Common Security and Intercreditor Agreement. Section 1010. Limitation on Sale and Leaseback Transactions. No Indenture Obligor shall, nor shall it permit any of its Obligor Subsidiaries to, enter into any Sale and Leaseback Transaction unless (a) at the time of the occurrence of such transaction and after giving effect to such transaction and (x) in the case of a Sale and Leaseback Transaction which is a Capitalized Lease Obligation, giving effect to the Indebtedness in respect thereof, the Indenture Obligor and any of its Obligor Subsidiaries entering into such transaction will remain in compliance with the clause (d) of Section 1008 and (y) in the case of any other Sale and Leaseback Transaction, giving effect to the Attributable Indebtedness in respect thereof, the aggregate Attributed Indebtedness of the Indenture Obligors and their Obligor Subsidiaries, taken as a whole, does not exceed $1,000,000, (b) at the time of the occurrence of such transaction, such Indenture Obligor or its Obligor Subsidiaries could incur Indebtedness secured by a Lien on property in a principal amount equal to or exceeding the Attributable Indebtedness in respect of such Sale and Leaseback Transaction pursuant to Section 1012 hereof, and (c) the transfer of assets in such Sale and Leaseback Transaction is permitted by, and the Company shall apply the proceeds of such transaction in compliance with, Section 1009 hereof. 92 105 Section 1011. Limitation on Transactions With Affiliates. (a) No Indenture Obligor shall, nor shall it permit any of its Obligor Subsidiaries to, directly or indirectly, enter into any transaction with or series of related transactions with or for the benefit of any of their respective Affiliates, except on an arm's-length basis and if (x)(i) in the case of any such transaction other than with any Indenture Obligor or Obligor Subsidiary in which the aggregate rental value, remuneration or other consideration (including the value of a loan), together with the aggregate rental value, remuneration or other consideration (including the value of a loan) of all such other transactions consummated in the year during which such transaction is proposed to be consummated, is less than or equal to $750,000, PCI and the Company shall deliver Board Resolutions of their respective Board of Directors to the Trustee evidencing that the Board of Directors and the Independent Directors of each of PCI and the Company that are disinterested each, acting together in the first instance and separately in second, have (by a majority vote) determined in good faith that the aggregate rental value, remuneration or other consideration (including the value of any loan) inuring to the benefit of such Affiliate from any such transaction is not greater than that which would be charged to or extended by such Indenture Obligor or any of its Obligor Subsidiaries, as the case may be, on an arm's-length basis for similar properties, assets, rights, goods or services by or to a Person not affiliated with any Indenture Obligor or any of its Obligor Subsidiaries, as the case may be, and (ii) in the case of any such transaction in which the aggregate rental value, remuneration or other consideration (including the value of any loan), together with the aggregate rental value, remuneration or other consideration (including the value of any loan) of all such other transactions consummated in the year during which such transactions are proposed to be consummated, exceeds $750,000, PCI and the Company shall deliver to the Trustee Board Resolutions as described in clause (a)(x)(i) of this Section 1011 and an opinion of a nationally recognized investment banking firm, not affiliated with any Indenture Obligor or any of its Obligor Subsidiaries or the Affiliate which is party to such transaction, to the effect that the aggregate rental price, remuneration or other consideration (including the value of a loan) inuring to the benefit of such Affiliate from any such transaction is not greater than that which would be charged to or extended by such Indenture Obligor or any of its Obligor Subsidiaries, as the case may be, on an arm's-length basis for similar properties, assets, rights, goods or services by or to a Person not affiliated with such Indenture Obligor or any of its Obligor Subsidiaries, as the case may be, and (y) all such transactions referred to in clauses (a)(x)(i) and (a)(x)(ii) of this Section 1011 are entered into in good faith. (b) The provisions of the preceding paragraph do not prohibit (i) the execution and delivery of the Indenture Documents and the Transaction Documents and the consummation of the transactions contemplated herein or therein or the implementation of the Plan of Reorganization, (ii) any permitted payment on, or with respect to, Capital Stock of PCI Held by creditors of any Indenture Obligor, (iii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of PCI and the Company pursuant and consistent with the MEIP, (iv) loans or advances to employees in the ordinary course 93 106 of business consistent with past practices, not to exceed $500,000 in the aggregate principal amount outstanding at any time, or (v) the payment of fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of PCI, the Company or any of their respective Subsidiaries, as determined by the Board of Directors of PCI, the Company or any of their respective Subsidiaries in good faith. Section 1012. Limitation on Liens. No Indenture Obligor shall, nor shall it permit any of its Obligor Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of their respective assets or properties now owned or acquired after the Closing Date, or any income or profits therefrom, excluding, however, from the operation of the foregoing any of the following: (a) Liens (i) securing obligations owed in respect of Allowed Secured Tax Claims and obligation owed in respect of Allowed Other Secured Claims reinstated in accordance with the Bankruptcy Code and pursuant to the Plan of Reorganization, (ii) securing the Indenture Obligations, (iii) on accounts receivable, inventory and related general intangibles securing obligations under the Exit Facility, (iv) securing the obligations under the Transaction Documents, and (v) securing obligations under New Other Secured Notes (to the extent the corresponding Allowed Other Secured Claims shall not have been reinstated) and any other Lien granted by the Obligors as permitted by the Plan of Reorganization; (b) Permitted Liens; (c) Liens on assets or property of the Company, or on assets or property of Subsidiaries of the Company, to secure the payment of all or a part of the purchase price of assets or property acquired or constructed in the ordinary course of business after the Closing Date; provided, however, that (i) the aggregate principal amount of Indebtedness secured by such Liens does not exceed the original cost or purchase price of the assets or property so acquired (including the reasonable and customary costs of associated with the acquisition of such acquired assets) or constructed, (ii) the Indebtedness secured by such Liens is otherwise permitted to be incurred hereunder, (iii) such Liens do not encumber any other assets or property of any Indenture Obligor or any of its Obligor Subsidiaries, and (iv) the Indebtedness secured by such Liens may not be created more than 100 days after the later of the acquisition, completion of construction, repair, improvement, addition or commencement of full operation of the property subject to such Liens; (d) Liens on the assets or property permitted to be acquired hereby by the Company or any of its Subsidiaries after the Closing Date; provided, however, that (i) such Liens existed on the date such asset or property was acquired and were not incurred as a result of or in anticipation of such acquisition and (ii) such Liens shall not extend to or cover any property or assets of any Indenture Obligor or any of its Obligor Subsidiaries other than the property or assets so acquired; 94 107 (e) Liens securing Indebtedness which is incurred to refinance Indebtedness which has been secured by a Lien permitted hereunder and which is permitted to be refinanced hereunder; provided, however, that such Liens do not extend to or cover any assets or property of any Obligor or any Obligor Subsidiaries not securing the Indebtedness so refinanced; (f) Liens on assets or property of any Obligor or any Obligor Subsidiary that is subject (and only subject) to a Sale and Leaseback Transaction, provided, however, that the aggregate principal amount of Attributable Indebtedness in respect of all Sale and Leaseback Transactions then Outstanding shall not at the time such a Lien is incurred exceed $1,000,000; (g) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Subsidiaries in the ordinary course of business in accordance with past practices of the Company or any of its Subsidiaries; and (h) Liens arising out of barter transactions or arrangements for the sale or purchase of goods or services entered into by the Company or any of its Subsidiaries in the ordinary course of business in accordance with the past practices of the Company or any of its Subsidiaries. Section 1013. Corporate Existence; Corporate Separateness. Subject to Article Eight, each Indenture Obligor shall do or cause to be done all things necessary to preserve and keep in full force and effect (a) its corporate existence and the corporate existence of each of its Obligor Subsidiaries, in each case in accordance with their respective Organizational Documents (as the same may, subject to Section 1024, be amended from time to time) and (b) its (and its Subsidiaries) rights (charter and statutory), licenses and franchises necessary or desirable in the normal course of its business; provided, however, that no Indenture Obligor shall be required to preserve such corporate existence or such licenses, permits or approvals if the failure to preserve the same could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Each Indenture Obligor will, and will cause each of its Obligor Subsidiaries to, satisfy customary corporate formalities, including the holding of regular Board of Directors' and shareholders' meetings and the maintenance of corporate offices and records. No Indenture Obligor nor any of its respective Subsidiaries shall take any action, or conduct their respective affairs in a manner, which is likely to result in the corporate existence of any such Subsidiary being ignored by any court of competent jurisdiction. Section 1014. Change of Control. (a) Each Indenture Obligor will, and will cause each of its Obligor Subsidiaries to, give reasonable notice to the Trustee and the Holders of any proposed 95 108 Change of Control prior to consummating, or permitting the consummation of, such Change of Control. (b) In the event of a Change of Control (the date of such occurrence being the "Change of Control Date"), each Indenture Obligor shall notify the Holders in writing of such occurrence and shall make an irrevocable offer (the "Change of Control Offer") to purchase, on a Business Day not later than 60 days following the Change of Control Date (the "Change of Control Payment Date"), all Securities then Outstanding at a purchase price (the "Change of Control Purchase Price") equal to 100% of the principal amount thereof plus accrued and unpaid interest to the Change of Control Payment Date. (c) Notice of a Change of Control Offer shall be mailed by the Company to the Holders at their registered addresses not less than 30 days nor more than 45 days before the Change of Control Payment Date. The Change of Control Offer shall remain open for at least 20 Business Days and until 5:00 p.m., New York City time, on the Business Day next preceding the Change of Control Payment Date. Substantially simultaneously with mailing of the notice, the Company shall cause a copy of such notice to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. (d) The notice, which governs the terms of the Change of Control Offer, shall state: (i) that the Change of Control Offer is being made pursuant to this Section 1014 and that all Securities (or portions thereof) tendered will be accepted for payment; (ii) the Change of Control Purchase Price and the Change of Control Payment Date; (iii) that any Securities not surrendered or accepted for payment shall continue to accrue interest, and premium, if any; (iv) that, unless the Company defaults in the payment of the Change of Control Purchase Price, any Securities accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest, or premium, if any, after the Change of Control Payment Date; (v) that any Holder electing to have a Security purchased (in whole or in part) pursuant to a Change of Control Offer shall be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent at the address specified in the notice (or otherwise make effective delivery of the Security pursuant to book-entry procedures and the related rules of the applicable Depositary) at least five Business Days before the Change of Control Payment Date; (vi) that any Holder shall be entitled to withdraw its election if the Paying Agent receives, not later than three (3) Business Days prior to the Change 96 109 of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase, the certificate number of the Security and a statement that such Holder is withdrawing his or her election to have such Security purchased; (vii) that Holders whose Securities are purchased only in part shall be issued Securities representing the unpurchased portion of the Securities surrendered, which unpurchased portion must be equal to $1,000 principal amount or an integral multiple thereof; (viii) the instructions that Holders must follow in order to tender their Securities; and (ix) the circumstances and relevant facts regarding such Change of Control (including but not limited to information with respect to pro forma financial information after giving effect to such Change of Control and information regarding the Persons acquiring control). (e) On the Change of Control Payment Date, the Company shall: (i) accept for payment the Securities, or portions thereof, surrendered and properly tendered and not withdrawn, pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay the Change of Control Purchase Price of all the Securities, or portions thereof, so accepted; and (iii) deliver to the Trustee the Securities so accepted together with an Officers' Certificate stating that such Securities have been accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the Change of Control Purchase Price and the Trustee shall promptly authenticate and mail to such Holders a new Security equal in principal amount to the unpurchased portion of the Security surrendered. (f) Subject to applicable escheat laws, as provided in the Securities, the Trustee and the Paying Agent shall, upon the Company's written request, return to the Company any cash that remains unclaimed, together with interest or dividends, if any, thereon, held by them for the payment of the Change of Control Purchase Price; provided, however, that (x) to the extent that the aggregate amount of cash deposited by the Company pursuant to clause (ii) of paragraph (e) above exceeds the aggregate Change of Control Purchase Price of the Securities or portions thereof to be purchased, then the Trustee shall hold such excess for the Company and (y) unless otherwise directed by the Company in writing, promptly after the Business Day following the Change of Control Payment Date the Trustee shall return any such excess to the Company, together with interest, if any, thereon. 97 110 (g) The Company shall comply, to the extent applicable, with the requirements of Rule 14e-1 under the Exchange Act, any other tender offer rules under the Exchange Act and all other applicable U.S. Federal and state and Canadian federal and provincial securities laws or regulations in connection with the offer to repurchase and the repurchase of the Securities as described above. (h) No Indenture Obligor shall, nor shall it permit any of its Subsidiaries to, create or permit to exist or become effective any restriction (other than restrictions not more restrictive taken as a whole (as determined in good faith by the Board of Directors of such Indenture Obligor) than those in effect under Indebtedness under the Term Loan Agreement) that would impair the ability of such Indenture Obligor to make a Change of Control Offer to purchase the Securities or, if such Change of Control Offer is made, to pay for the Securities tendered for purchase; provided, however, that the failure to make or consummate the Change of Control Offer shall constitute an Event of Default. Section 1015. Maintenance of Properties. Each Indenture Obligor shall, and shall cause each of its Obligor Subsidiaries to, maintain its properties and assets in normal working order and condition as of the Closing Date (reasonable wear and tear excepted) and make all repairs, renewals, replacements, additions, betterments and improvements thereto, as shall be reasonably necessary for the proper conduct of the business of Indenture Obligors and the Obligor Subsidiaries taken as a whole[; provided that nothing herein shall prevent any Indenture Obligor or any Obligor Subsidiary from discontinuing any maintenance of any such properties if such discontinuance could not be reasonably be expected individually or in the aggregate, to have a Material Adverse Effect]. Section 1016. Maintenance of Insurance. Each Indenture Obligor shall, and shall cause each of its Obligor Subsidiaries to, maintain property, liability, casualty, directors' and officers (D&O) and other insurance (subject to the customary deductibles and retentions) with reputable insurance companies in such amounts and against such risks as is customarily carried by responsible companies engaged in similar businesses and owning similar assets in the general areas in which the Indenture Obligors and its Obligor Subsidiaries operate (which may include self-insurance in comparable form to that maintained by such responsible companies) and each Indenture Obligor shall, and shall cause each of its respective Subsidiaries to, have the Trustee, for its benefit and for the benefit of Holders, named as loss payee or additional insured, as the case may be, by endorsement to the policies for such insurance. Section 1017. Stock Pledge Agreements. Each Indenture Obligor and each of its Obligor Subsidiary in existence as of the Closing Date (except for any such Obligor Subsidiary which has no Subsidiaries) shall pledge the Capital Stock of its Subsidiaries owned by it to secure the Indenture 98 111 Obligations pro rata (and as further provided for in the Stock Pledge Agreement and the Common Security and Intercreditor Agreement) and each Indenture Obligor will, and will cause each existing Subsidiary to, pledge such Capital Stock of any Subsidiary of any Indenture Obligor or such existing Obligor Subsidiary formed after the Closing Date to secure the Indenture Obligations and will execute and deliver to the Trustee and the Collateral Agent one or more stock pledge agreements substantially in the form of the Stock Pledge Agreement providing for the pledge to the Collateral Agent for the benefit of (x) the Administrative Agent (for itself and the Lenders), and (y) the Trustee (for itself and the Holders of the Securities) of all the Capital Stock of such newly formed Subsidiary held by such Indenture Obligor or such existing Obligor Subsidiary, as the case maybe, and deliver to the Collateral Agent stock certificates evidencing such Capital Stock (together with undated stock powers executed in blank), which Capital Stock and stock powers will become "Collateral" for purposes of the Security Documents. This Section 1017 shall apply mutatis mutandis to any such newly formed Subsidiary. Section 1018. Money for Security Payments to be Held in Trust. If the Company shall at any time act as its own Paying Agent, it shall, on or before each due date of the principal of, premium, if any, or interest on any of the Securities, segregate and hold in trust for the benefit of the Holders entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. If the Company is not acting as Paying Agent, the Company shall, before 10:00 a.m. New York City time on each due date of the principal of, premium, if any, or interest, on any Securities, deposit with a Paying Agent a sum in same day funds sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium, or interest and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee of such action or any failure so to act. If the Company is not acting as Paying Agent, the Company shall cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall: (a) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any Default by the Company or any Guarantor (or any other Indenture Obligor upon the Securities) in the making of any payment of principal, premium, if any, or interest; 99 112 (c) at any time during the continuance of any such Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (d) acknowledge, accept and agree to comply in all aspects with the provisions of this Indenture relating to the duties, rights and disabilities of such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Security and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall promptly be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust. The Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days from the date of such notification or publication, any unclaimed balance of such money then remaining shall promptly be repaid to the Company. Section 1019. [Redemption of Securities with proceeds of Qualified Equity Offering. PCI may, but shall not be obliged to, make and consummate one or more Qualified Equity Offering. If the proceeds of a Qualified Equity Offerings, or of one or more such Qualified Equity Offerings, are greater than $35,000,000 (after giving effect to any mandatory application of proceeds from such Qualified Equity Offering to repay the New Tranche A Term Notes in accordance with the Term Loan Agreement) and no Indebtedness in respect of the New Tranche A Term Notes is outstanding (including as a result of the proceeds of such Qualified Equity Offering being applied to repay the New Tranche A Notes in accordance with the Term Loan Agreement), then PCI and the Company shall cause the proceeds of any consummated Qualified Equity Offering that are in excess of $35,000,000 to be applied to redeem Outstanding Securities(and if such proceeds are not sufficient to redeem all of the Securities then Outstanding, then to redeem the then Outstanding Securities on a pro rata basis) and the provisions of 100 113 Sections 1101 through to and including Section 1108 shall apply in respect of such redemption as if the Company shall have exercised its right to redeem Outstanding Securities pursuant to Article Eleven. Section 1020. Limitation on Ownership of Wholly-Owned Subsidiary Stock. No Indenture Obligor and no Obligor Subsidiary (a) shall, nor shall it permit any of its Wholly-Owned Subsidiaries to, transfer, convey, sell or otherwise dispose of any Capital Stock of such Wholly-Owned Subsidiary to any Person (other than such Indenture Obligor, any of its Obligor Subsidiaries or another such Wholly-Owned Subsidiary), unless (i) such transfer, conveyance, sale or other disposition is of all the Capital Stock of such Wholly-Owned Subsidiary and (ii) the Net Proceeds from such transfer, conveyance, sale, lease or other disposition are applied in accordance with Section 1009 hereof, and (b) shall permit any Wholly-Owned Subsidiary of any Indenture Obligor or any of its Obligor Subsidiaries to issue any of its Capital Stock (other than, if necessary, Capital Stock constituting directors' qualifying shares or interests held by directors or shares or interests required to be held by foreign nationals, to the extent mandated by applicable law) to any Person other than to the any Indenture Obligor or a Wholly-Owned Subsidiary of any Indenture Obligor. Section 1021. Impairment of Security Interest. No Indenture Obligor shall, nor shall it cause or permit any of its Obligor Subsidiaries to, take or omit to take any action which action or omission might or would have the result of affecting or impairing the Liens and security interest in favor of the Collateral Agent for the benefit of the Holders with respect to the Collateral and no Indenture Obligor shall grant, nor shall it cause or permit any of its Obligor Subsidiaries to grant, to any Person, or suffer any Person to have any interest whatsoever in the Collateral, in each case other than as otherwise permitted by this Indenture, the Term Loan Agreement, the New Tranche A Term Notes, the Securities and the Security Documents. No Indenture Obligor shall, nor shall it cause or permit any of its Obligor Subsidiaries to, enter into any agreement or instrument that by its terms requires that the proceeds received from any sale of Collateral be applied to repay, redeem, defease or otherwise acquire or retire any Indebtedness of any Person, other than pursuant to this Indenture, the Term Loan Agreement, the New Tranche A Term Notes, the Securities and the Security Documents or any instrument governing Indebtedness permitted to be secured by a Lien on the Collateral pursuant to Section 1012 hereof. Section 1022. Amendment to Certain Agreements. No Indenture Obligor shall, nor shall it permit any of its Obligor Subsidiaries to, amend, modify or supplement, or consent to any amendment, modification or supplement of, the Exit Facility, the New Other Notes And Claims and the Transaction Documents [, except, in each case to the extent such amendment, 101 114 modification or supplement could not reasonably be expected to have a Material Adverse Effect]. Section 1023. Plan of Reorganization. Each Indenture Obligor shall, and shall cause each of its Obligor Subsidiaries to, take all such steps and actions and to consummate all transactions necessary to implement the Plan of Reorganization to the extent such steps, actions and transactions are contemplated in the Plan of Reorganization as occurring after the Closing Date and to the extent the Plan of Reorganization contemplates that any Indenture Obligor or any Obligor Subsidiary shall take such steps and actions or consummate such transactions. Section 1024. Nature of Business, Organizational Documents and Capital Structure and New Subsidiaries; Books and Records. (a) No Indenture Obligor shall, nor shall it cause or permit any of its Obligor Subsidiaries to, (i) engage directly or indirectly in any business activity other than in a Related Business, (ii) amend or modify any material provision of its Organizational Documents except to the extent such amendment could not reasonably be expected to have a Material Adverse Effect, or (iii) change its legal or capital structure or form any Subsidiary of any Affiliate other than as otherwise permitted under Article Eight. (b) Each Indenture Obligor shall, and shall cause each of its Obligor Subsidiaries to, keep books and records which accurately reflect in all material respects all of its business affairs and transactions and permit the Trustee and each Holder or any of their respective representatives at all times during normal business hours, or such other reasonable times, and upon reasonable notice (unless a Default or Event of Default has occurred or the Trustee reasonably suspects that a Default or Event of Default has occurred, in which case no prior notice shall be required), to visit all of its or their offices, to inspect the properties of each Indenture Obligor and each of its Obligor Subsidiaries, to inspect the Collateral, to discuss its financial matters, its business, its assets, its liabilities and its prospects with its officers and with its independent public accountants (and each Indenture Obligor and each of its Obligor Subsidiaries hereby authorizes such independent public accountants to discuss all such matters with the Trustee and each Holder or such representatives whether or not any representative of any Indenture Obligor or its Obligor Subsidiaries is present) and to examine, and photocopy extracts from, any of its books or other corporate records including management letters prepared by independent accountants, in each case for the purposes of monitoring each Indenture Obligor's compliance with its obligations under the Indenture Documents to which it is a party. 102 115 Section 1025. Compliance with Laws and Environmental and Safety and Health Matters. Each Indenture Obligor shall comply, and shall cause each of its Obligor Subsidiaries to (a) comply, in all material respects with all applicable laws, statutes, rules, regulations, by-laws, policies, guidelines, directives, decrees, opinions or agency requirements or orders (including, without limitation, Environmental Laws and Safety and Health Laws), (b) notify the Trustee promptly after becoming aware of any Environmental Claim, or any fact or circumstance that could reasonably be expected to result in an Environmental Claim or a violation of, or liability under, any laws, statutes, rules, regulations, by-laws, policies, guidelines, directives, decrees, opinions or agency requirements or orders, including Environmental Laws and Safety and Health Laws, that could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, and (c) promptly forward to the Trustee a copy of any material order, notice, permit, application, or any other communication or report received in connection with any such matters (whether relating to matters referred to generally in clause (a) or with particularity in clause (b) of this Section 1025). Section 1026. [Intentionally omitted] Section 1027. Authorizations; Performance of Obligations. Each Indenture Obligor shall, and shall cause each of its Obligor Subsidiaries to, make and keep in full force and effect all authorizations from and registrations with governmental authorities and agencies required for the validity or enforceability of the Indenture Documents. Each Indenture Obligor shall perform, and cause each of its Obligor Subsidiaries to perform, its obligations under any material agreement or instrument to which it is a party. Section 1028. Further Assurances. (a) Promptly upon the request of the Trustee or any Holder through the Trustee, each Indenture Obligor shall correct, and shall cause each of its Obligor Subsidiaries promptly to correct, any material defect or error that may be discovered in any Indenture Document or in the execution, acknowledgment, filing or recordation thereof, and (b) promptly upon the request by the Trustee or Collateral Agent or any Holder through the Trustee or Collateral Agent, each Indenture Obligor shall, and shall cause its Obligor Subsidiaries to, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trusts, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as the Trustee or Collateral Agent or any Holder through the Trustee or Collateral Agent, may reasonably require from time to time in order to (i) carry out more effectively the purposes of the Indenture Documents, (ii) to the fullest extent permitted by applicable law, subject any Indenture Obligor's or any of its Obligor Subsidiaries' properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Security Documents, (iii) perfect and 103 116 maintain the validity, effectiveness and priority of any of the Security Documents and any of the Liens intended to be created thereunder, and (iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Holders the rights granted or now or hereafter intended to be granted to the Holders under any Indenture Document or under any other instrument executed in connection with any Indenture Document to which any Indenture Obligor or any of its Obligor Subsidiaries is or is to be a party. Section 1029. Fiscal Year. Each of PCI and the Company will not change its Fiscal Year. Section 1030. Additional Amounts. (a) Any and all payments by the Company to or for the account of any Holder hereunder, other than an Excluded Holder, shall be made free and clear of, and without deduction, for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto, excluding, in the case of each Holder, taxes imposed on its net income or franchise taxes imposed in lieu of a tax on net income by the jurisdiction under the laws of which a Holder is organized or maintained or any political subdivision thereof (all such nonexcluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If the Company is required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Securities, the Company shall pay such additional amounts ("Additional Amounts") as may be necessary so that the net amount received by each Holder (including Additional Amounts) after such withholding or deduction will not be less than the amount the Holder would have received if such Taxes had not been withheld or deducted; provided that no Additional Amounts shall be payable with respect to a payment made to a Holder to the extent solely attributable to (i) such Holder not being treated as dealing at arm's length with the Company within the meaning of the Income Tax Act (Canada) at the time of making such payment, or (ii) such Holder's being connected with Canada or any province or territory thereof otherwise than solely by reason of the Holder's activity in connection with purchasing the Securities, by the mere holding of Securities or by reason of the receipt of payments thereunder (collectively, Persons described in clauses (i) and (ii) of this Section 1030(a) are "Excluded Holders"). The Company will also (1) make such withholding or deduction, and (2) remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. (b) The Company shall furnish to the Holders, within 30 calendar days after the date the payment of any Taxes is due pursuant to the applicable law, certified copies of tax receipts evidencing such payment by the Company. The Company shall upon written request of each Holder (other than an Excluded Holder), reimburse each such Holder for the amount of (i) any Taxes so levied or imposed and paid by such Holder as a result of payments made under or with respect to the Securities, and (ii) any Taxes so levied or imposed with respect to any reimbursement under foregoing clause (i) so that the net amount received by such Holder (net of payments made under or with 104 117 respect to the Securities) after such reimbursement will not be less than the net amount the Holder would have received if Taxes on such reimbursement had not been imposed; provided, however, no reimbursement shall be made in respect of Taxes for which no Additional Amounts would be payable by reason of clause (i) or (ii) of the second preceding sentence. (c) In addition, the Company agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Indenture. (d) At least 30 calendar days prior to each date on which any payment under or with respect to the Securities is due and payable, if the Company will be obligated to pay Additional Amounts with respect to such payment, the Company will deliver to the Trustee an Officers' Certificate stating the fact that such Additional Amounts will be payable and the amounts so payable and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to Holders on the payment date. Whenever in this Indenture there is mentioned, in any context, the payment of principal, premium, if any, or interest, or any other amount payable under or with respect to any Securities, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof. The Holders, by acceptance of a Note, and the Company agree that the payment of any Additional Amounts by the Company shall be treated as payments of interest. (e) If the Company fails to pay any Taxes when due to the appropriate taxing authority or fails to remit the required receipts or other required documentary evidence, the Company shall indemnify the Holders for any incremental Taxes, interest or penalties that may become payable by any Holder, other than an excluded Holder, as a result of any such failure. Section 1031. Pension Transfer Agreement. The Company shall fulfill all of its obligations under the Pension Transfer Agreement date October 31, 1997, between the Company and ICI Canada, in accordance with the terms thereof, that relate to the establishment, funding, maintenance and operation of each Canadian Pension Plan to be established therewith. ARTICLE ELEVEN REDEMPTION OF SECURITIES Section 1101. Rights of Redemption. The Company shall have the right at any time and from time to time to redeem the Outstanding Securities, in whole or in part, on not less than thirty (30) nor more than sixty (60) days' prior notice, mailed by first-class mail to the Holders' registered addresses, in cash, in amounts of $1,000 or an integral multiple of $1,000 at 105 118 the following Redemption Prices (expressed as percentages of the principal amount), if redeemed in the 12-month period commencing [*], in the year indicated below:
Year Redemption Price ---- ---------------- 2001 105.00% 2002 105.00% 2003 105.00% 2004 105.00% 2005 105.00% 2006 102.50% 2007 102.50% 2008 100.00%
in each case together with accrued and unpaid interest, to the Redemption Date (subject to the right of Holders of record on relevant record dates to receive interest, due on an Interest Payment Date). If less than all of the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata, by lot or by any other method the Trustee shall deem fair and appropriate. Securities may be redeemed or repurchased as set forth in Sections 1009, 1014 and 1109 hereof. Any redemption pursuant to this Section 1101 shall be made pursuant to the provisions of Sections 1102 through 1108 hereof. Section 1102. Applicability of Article. Redemption of Securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article Eleven. Section 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 hereof shall be evidenced by a Company Order and an Officers' Certificate. In case of any redemption at the election of the Company, the Company shall, not less than forty-five (45) nor more than sixty (60) days prior to the Redemption Date fixed by the Company (unless a shorter notice period shall be satisfactory to the Trustee), notify the Trustee in writing of such Redemption Date, the Redemption Price and of the principal amount of Securities to be redeemed. Section 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities or portions thereof to be redeemed shall be selected not more than thirty (30) days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, pro rata, by lot or such other method as the Trustee shall deem fair and appropriate and the amounts to be redeemed may be equal to $1,000 or any integral multiple thereof. 106 119 The Trustee shall promptly notify the Company and the Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. Section 1105. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than thirty (30) nor more than sixty (60) days prior to the Redemption Date to each Holder of Securities to be redeemed at his address appearing in the Security Register. All notices of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Securities are to be redeemed, the identification of the particular Securities to be redeemed; (d) in the case of a Security to be redeemed in part, the principal amount of such Security to be redeemed and that after the Redemption Date upon surrender of such Security, a new Security or new Securities in the aggregate principal amount equal to the unredeemed portion thereof will be issued; (e) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price; (f) that on the Redemption Date the Redemption Price will become due and payable upon each such Security or portion thereof, and that (unless the Company shall default in payment of the Redemption Price) interest, and premium, if any, thereon shall cease to accrue on and after said date; (g) the place or places where such Securities are to be surrendered for payment of the Redemption Price; (h) the paragraph of the Securities and/or Section of this Indenture pursuant to which the Securities called for redemption are being redeemed; and (i) the CUSIP number, if any, relating to such Securities (as to the accuracy of which the Trustee shall make no representation). 107 120 Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's written request, by the Trustee in the name and at the expense of PCI and the Company. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice. In any case, failure to mail such notice, or any defect in any notice so mailed, to any particular Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. Section 1106. Deposit of Redemption Price. On or prior to 10:00 a.m., New York City time, on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1018 hereof) an amount of money in same day funds sufficient to pay the Redemption Price of and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on all the Securities or portions thereof which are to be redeemed on that date. When the Redemption Date falls on an Interest Payment Date, payments of interest due on such date are to be paid as provided hereunder as if no such redemption were occurring. Section 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such on the relevant Regular Record Dates according to the terms and the provisions of Section 309 hereof. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal, and premium, if any, shall, until paid, bear interest from the Redemption Date at the rate borne by such Security. Section 1108. Securities Redeemed or Purchased in Part. Any Security which is to be redeemed or purchased only in part shall be surrendered to the Paying Agent at the office or agency maintained for such purpose pursuant to Section 1002 hereof (with, if the Company, the Security Registrar or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Security Registrar or the Trustee duly executed by the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such 108 121 Security without service charge, a new Security or Securities of any authorized denomination as requested by such Holder in an aggregate principal amount equal to, and in exchange for, the portion of the principal of the Security so surrendered that is not redeemed or purchased. Section 1109. Asset Sale Offers. In the event that the Company shall commence an Asset Sale Offer pursuant to Section 1009 hereof, it shall follow the procedures specified below. The Asset Sale Offer shall remain open for twenty (20) Business Days after the date on which such Asset Sale Offer is commenced (the "Commencement Date"), except to the extent required to be extended pursuant to applicable law (as so extended, the "Asset Sale Offer Period"). No later than one Business Day after the termination of the Asset Sale Offer Period (the "Asset Sale Purchase Date"), the Company shall purchase the principal amount (the "Asset Sale Offer Amount") of Securities required pursuant to Section 1009 hereof to be purchased in such Asset Sale Offer and other pari passu Indebtedness that is required by its terms to be purchased in such Asset Sale Offer or, if less than the Asset Sale Offer Amount has been tendered, all Securities tendered in response to the Asset Sale Offer. If the Asset Sale Purchase Date is on or after a Regular Record Date and on or before the related Interest Payment Date, or any accrued interest shall be paid to the Person in whose name a Security is registered at the close of business on such Regular Record Date, and no additional interest shall be payable to Holders who tender Securities pursuant to the Asset Sale Offer. On the Commencement Date of any Asset Sale Offer, the Company shall send or cause to be sent, by first class mail, a notice to each of the Holders, with a copy to the Trustee. Such notice, which shall govern the terms of the Asset Sale Offer, shall contain all instructions and materials necessary to enable the Holders to tender Securities pursuant to the Asset Sale Offer and shall state: (1) that the Asset Sale Offer is being made pursuant to Section 1009 hereof and this Section 1109 and the length of time the Asset Sale Offer shall remain open; (2) the Asset Sale Offer Amount, the Asset Sale Purchase Price and the Asset Sale Purchase Date; (3) that any Security not tendered or accepted for payment shall continue to accrue interest, and premium, if any, in accordance with this Indenture; (4) that, unless the Company defaults in the payment of the Asset Sale Purchase Price, all Securities accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Purchase Date; 109 122 (5) that Holders electing to have Securities purchased pursuant to any Asset Sale Offer shall be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice prior to the close of business on the Business Day preceding the Asset Sale Purchase Date; (6) that Holders shall be entitled to withdraw their election if the Company, Depositary or Paying Agent, as the case may be, receives not later than the close of business on the Business Day preceding the termination of the Asset Sale Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security the Holder delivered for purchase, the certificate number on the Security and a statement that such Holder is withdrawing his election to have the Security purchased; (7) that, if the aggregate principal amount of Securities surrendered by Holders together with any other pari passu Indebtedness that is required by its terms to be purchased in such Asset Sale Offer exceeds the Asset Sale Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased); and (8) that Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered, which unpurchased portion must be equal to $1,000 principal amount or an integral multiples thereof. On or before 10:00 a.m., New York City time, on each Asset Sale Purchase Date, the Company shall irrevocably deposit with the Trustee or Paying Agent in immediately available funds the aggregate Asset Sale Purchase Price with respect to a principal amount of Securities equal to the Asset Sale Offer Amount, together with accrued interest thereon, to be held for payment in accordance with the terms of this Section 1109. On the Asset Sale Purchase Date, the Company shall, (i) to the extent lawful, (i) accept for payment, on a pro rata basis to the extent necessary, an aggregate principal amount equal to the Asset Sale Offer Amount of Securities tendered pursuant to the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been tendered, all Securities or portions thereof tendered, (ii) deliver, or cause the Paying Agent or depositary, as the case may be, to deliver to the Trustee Securities so accepted, and (iii) deliver to the Trustee an Officers' Certificate stating that such Securities or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 1109. The Company, a depositary or Paying Agent, as the case may be, shall promptly (but in any case not later than two (2) Business Days after the Asset Sale Purchase Date) mail or deliver to each tendering Holder an amount equal to the Asset Sale Purchase Price with respect to the Securities tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Security, and the Trustee shall authenticate and mail or deliver such new Security, to such Holder, 110 123 equal in principal amount to any unpurchased portion of such Holder's Securities surrendered. Any Security not accepted in the Asset Sale Offer shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce in a newspaper of general circulation the results of the Asset Sale Offer on the Asset Sale Purchase Date. The Asset Sale Offer shall be made by the Company in compliance with all applicable laws, including, without limitation, the requirements of Rule 14e-1 under the Exchange Act, any other tender offer rules under the Exchange Act and all other applicable U.S. Federal and state and Canadian federal and provincial securities laws. Subject to applicable escheat laws, as provided in the Securities, the Trustee and the Paying Agent shall return to the Company any cash that remains unclaimed, together with interest, if any, thereon, held by them for the payment of the Asset Sale Purchase Price; provided, however, that (x) to the extent that the aggregate amount of an Asset Sale Offer exceeds the aggregate Asset Sale Purchase Price of the Securities or portions thereof to be purchased, the Trustee shall hold such excess for the Company, and (y) unless otherwise directed by the Company in writing, promptly after the Business Day following the Asset Sale Purchase Date the Trustee shall return any such excess to the Company together with interest or dividends, if any, thereon. Other than as specifically provided in this Section 1109, each purchase pursuant to this Section 1109 shall be made pursuant to the provisions of Sections 1101 through 1108 hereof. ARTICLE TWELVE SATISFACTION AND DISCHARGE Section 1201. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when each of the following are satisfied: (a) either (1) all the Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 308 hereof, or (ii) all Securities for whose payment United States dollars have theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1018 hereof) have been delivered to the Trustee for cancellation; or 111 124 (2) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) shall become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company or any Guarantor, in the case of (2)(i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in United States dollars sufficient to pay and discharge the entire Indebtedness on the Securities not theretofore delivered to the Trustee for cancellation, for the principal, premium, if any, and accrued interest at such Stated Maturity or Redemption Date; (b) the Company or any other Indenture Obligor has paid or caused to be paid all other sums payable hereunder by the Company and such other Indenture Obligor, and has indefeasibly discharged all Indebtedness hereunder; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel stating that (i) all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and (ii) such satisfaction and discharge shall not result in a breach or violation of or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or any Indenture Obligor is a party or by which the Company or any Indenture Obligor is bound. Opinions of Counsel required to be delivered under this Section may have qualifications customary for opinions of the type required and counsel delivering such Opinions of Counsel may rely on certificates of the Company or government or other officials customary for opinions of the type required, including certificates certifying as to matters of fact, including that various financial covenants have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 606 hereof and, if United States dollars shall have been deposited with the Trustee pursuant to subclause (2) of subsection (a) of this Section, the obligations of the Trustee under Section 1202 and the last paragraph of Section 1018 hereof shall survive. Section 1202. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1018 hereof, all United States dollars deposited with the Trustee pursuant to Section 1201 hereof shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal of, premium, if any, and interest on the Securities for whose payment such United States dollars have been deposited with the Trustee. 112 125 ARTICLE THIRTEEN GUARANTY Section 1301. Guaranty; Limitation of Liability. (a) Each Guarantor, jointly and severally, hereby absolutely, unconditionally and irrevocably guaranties the punctual payment when due, whether at scheduled maturity or on any date of a required or optional prepayment or by acceleration, demand or otherwise, of all Indenture Obligations of the Company now or hereafter existing under or in respect of the Indenture Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Indenture Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such Indenture Obligations being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Trustee, the Collateral Agent or the Holders in enforcing any rights under each Guaranty or any other Indenture Document. Without limiting the generality of the foregoing, each Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Company to the Trustee, the Collateral Agent and the Holders under or in respect of the Indenture Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company. (b) Each Guarantor, and by its acceptance of this Guaranty, the Trustee, the Collateral Agent and each Holder, hereby confirms that it is the intention of all such Persons that this Guaranty and the Indenture Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this Guaranty and the Indenture Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Trustee, the Collateral Agent, the Holders and the Guarantors hereby irrevocably agree that the Indenture Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum amount as will result in the Indenture Obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance. (c) Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to the Trustee, the Collateral Agent or any Holders under this Guaranty or any other guaranty, such Guarantor will contribute, to the maximum extent permitted by law, such amounts to each other Guarantor and any other guarantor or surety so as to maximize the aggregate amount paid to the Trustee, the Collateral Agent and the Holders under or in respect of the Indenture Documents. (d) It is specifically acknowledged and agreed that this Guaranty has been delivered by each Guarantor free of any conditions whatsoever and that no 113 126 representations, warranties or promises have been made to any Guarantor affecting its liabilities hereunder, and that the Trustee shall not be bound by any representations, warranties or promises now or at any time hereafter made by the Company to any Guarantor. Section 1302. Guaranty Absolute. Each Guarantor guaranties that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Indenture Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Trustee, the Collateral Agent or any Holder with respect thereto. The obligations of each Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other Obligations of any other Indenture Obligor under or in respect of the Indenture Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Company, any other Guarantor or any of their respective Subsidiaries or whether the Company, any other Guarantor or any of their respective Subsidiaries is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following: (i) any lack of validity or enforceability of any Indenture Document or any agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Indenture Obligations of any other Obligor under or in respect of the Indenture Documents, or any other amendment or waiver of, or any consent to departure from, any Indenture Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Obligor or any of its Subsidiaries or otherwise; (iii) any taking, exchange, release or non-perfection of any Collateral or any other collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations; (iv) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Guaranteed Obligations or any other Indenture Obligations of any Obligor under the Indenture Documents or any other assets of any Obligor or any of its Subsidiaries; (v) any change, restructuring or termination of the corporate structure or existence of any Obligor or any of its Subsidiaries; (vi) any failure of any of the Trustee, the Collateral Agent or any Holder to disclose to any Obligor any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other 114 127 Obligor now or hereafter known to the Trustee, the Collateral Agent or any Holder (each Guarantor waiving any duty on the part of the Trustee, the Collateral Agent or any Holder to disclose such information); (vii) the failure of any other Person to execute or deliver this Guaranty, any Guaranty Supplement or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or (viii) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Trustee, the Collateral Agent or any Holder that might otherwise constitute a defense available to, or a discharge of, any Obligor or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Trustee, the Collateral Agent, or any Holder or any other Person upon the insolvency, bankruptcy or reorganization of the Company or any other Indenture Obligor or otherwise, all as though such payment had not been made. Section 1303. Right to Demand Full Performance. In the event of any demand for payment or performance by the Trustee from any Guarantor hereunder, the Trustee or the Holders shall have the right to demand its full claim and to receive all payments in respect thereof until the Indenture Obligations have been paid in full and the Guarantors shall continue to be jointly and severally liable hereunder for any balance which may be owing to the Trustee or the Holders by the Company under this Indenture and the Securities. The retention by the Trustee or the Holders of any security, prior to the realization by the Trustee or the Holders of their rights to such security upon foreclosure thereon, shall not, as between the Trustee and any Guarantor, be considered as a purchase of such security, or as payment, satisfaction or reduction of the Indenture Obligations due to the Trustee or the Holders by the Company or any part thereof. Section 1304. Waivers and Acknowledgments. (a) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Trustee, the Collateral Agent, or any Holder protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any Obligor or any Person or any Collateral. (b) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. 115 128 (c) Each Guarantor hereby unconditionally and irrevocably waives, to the extent permitted by law, (i) any defense arising by reason of any claim or defense based upon an election of remedies by the Trustee, the Collateral Agent, or any Holders that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Indenture Obligors, any other guarantor or surety or any other Person or any Collateral, and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Indenture Obligations of such Guarantor hereunder. (d) Each Guarantor acknowledges that the Trustee or the Collateral Agent may, without notice to or demand upon such Guarantor and without affecting the liability of such Guarantor under this Guaranty, foreclose under any mortgage or other security interest by nonjudicial sale, and each Guarantor hereby waives any defense to the recovery by the Trustee, the Collateral Agent or the Holders against such Guarantor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable law. (e) Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of the Trustee, the Collateral Agent, or any Holder to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Obligor or any of its Subsidiaries now or hereafter known by the Trustee, the Collateral Agent, or any Holder. (f) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Indenture Documents and that the waivers set forth in Section 1302 and this Section 1304 are knowingly made in contemplation of such benefits. Section 1305. The Guarantors Remain Obligated in Event the Company is No Longer Obligated to Discharge Indenture Obligations. It is the express intention of the Trustee and the Guarantors that if for any reason the Company has no legal existence, is or becomes under no legal obligation to discharge the Indenture Obligations owing to the Trustee or the Holders by the Company or if any of the Indenture Obligations owing by the Company to the Trustee or the Holders become irrecoverable from the Company by operation of law or for any reason whatsoever, this Guaranty and the covenants, agreements and obligations of the Guarantors contained in this Article Thirteen shall nevertheless be binding upon the Guarantors, as principal debtor, until such time as all such Indenture Obligations have been paid in full to the Trustee and all Indenture Obligations owing to the Trustee or the Holders by the Company have been discharged, or such earlier time as Section 402 hereof shall apply to the Securities and the Guarantors shall be responsible for the payment thereof to the Trustee or the Holders upon demand. 116 129 Section 1306. Subrogation. Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Company, any other Obligor or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor's Obligations under or in respect of this Guaranty or any other Indenture Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Trustee, the Collateral Agent, or any Holder against the Company, any other Obligor or any other insider guarantor or any Collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, any other Obligor or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the latest of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, and (b) the full and complete payment and performance of the Indenture Obligations, such amount shall be received and held in trust for the benefit of the Trustee, the Collateral Agent, and the Holders, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Trustee in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Indenture Documents, or to be held as Collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) any Guarantor shall make payment to the Trustee, the Collateral Agent or any Holder of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, and (iii) the Indenture Obligations shall have been paid and performed completely and fully, the Trustee, the Collateral Agent, and the Holders will, at such Guarantor's request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty. Section 1307. Subordination. Each Guarantor hereby subordinates any and all debts, liabilities and other obligations owed to such Guarantor by each other Obligor (the "Subordinated Obligations") to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 1307. (a) Prohibited Payments, Etc. Except during the continuance of any Event of Default (including the commencement and continuation of any proceeding 117 130 under any Bankruptcy Law relating to any other Obligor), each Guarantor may receive regularly scheduled payments from any other Obligor on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Obligor), however, unless the Holders of a majority of the aggregate principal amount of the Securities then Outstanding otherwise agree, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations. (b) Prior Payment of Guaranteed Obligations. In any proceeding under any Bankruptcy Law relating to any other Obligor, each Guarantor agrees that the Trustee, the Collateral Agent, and the Holders shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding ("Post Petition Interest")) before such Guarantor receives payment of any Subordinated Obligations. (c) Turn-Over. After the occurrence and during the continuance of any Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to any other Obligor), each Guarantor shall, if the Trustee so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Trustee, the Collateral Agent, and the Holders and deliver such payments to the Trustee on account of the Guaranteed Obligations (including all Post Petition Interest as referred to in Section 1307(b)), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty. 118 131 Section 1308. Continuing Guaranty; Assignments. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the latest of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, and (ii) the payment and performance in full of all the Indenture Obligations of all the Obligors under any Indenture Document, (b) be binding upon each Guarantor, its successors and assigns permitted by this Indenture, and (c) inure to the benefit of and be enforceable by the Trustee, the Collateral Agent, and the Holders and their respective successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, the Trustee, the Collateral Agent or any Holder may assign or otherwise transfer all or any portion of its rights under this Guaranty (including, without limitation, all or any portion of its New Tranche A Term Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Trustee, the Collateral Agent, or such Holder herein or otherwise, in each case as and to the extent provided in this Indenture. No Guarantor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Trustee, the Collateral Agent and each of the Holders. Section 1309. Guaranty Is in Addition to Other Security. This Guaranty shall be in addition to and not in substitution for any other guaranties or other security which the Trustee may now or hereafter hold in respect of the Indenture Obligations owing to the Trustee or the Holders by the Company and (except as may be required by law) the Trustee shall be under no obligation to marshal in favor of each of the Guarantors any other guaranties or other security or any moneys or other assets which the Trustee may be entitled to receive or upon which the Trustee or the Holders may have a claim. Section 1310. Contribution. In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Guaranty, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Securities or any other Guarantor's obligation with respect to its Guaranty. Section 1311. Trustee's Duties; Notice to Trustee. (a) Any provision in this Article Thirteen or elsewhere in this Indenture allowing the Trustee to request any information or to take any action authorized by, or on behalf of any Guarantor, shall be subject to Section 602(d) and shall be permissive and shall not be obligatory on the Trustee except as the Holders may direct in accordance with the provisions of this Indenture or where the failure of the Trustee to 119 132 request any such information or to take any such action arises from the Trustee's gross negligence, bad faith or willful misconduct. (b) The Trustee shall not be required to inquire into the existence, powers or capacities of the Company or any Guarantor or the officers, directors or agents acting or purporting to act on their respective behalf. Section 1312. Release of Guaranty. Concurrently with the payment in full of all of the Indenture Obligations, the Guarantors shall be released from and relieved of their obligations under this Article Thirteen, except that this Section 1312 shall survive such release of the Guarantors and the termination of this Indenture. Upon the delivery by the Company to the Trustee of an Officers' Certificate and, if requested by the Trustee, an Opinion of Counsel to the effect that the transaction giving rise to the release of this Guaranty was made by the Company in accordance with the provisions of this Indenture and the Securities, the Trustee shall execute any documents reasonably required in order to evidence the release of the Guarantors from their obligations under this Guaranty. If any of the Indenture Obligations are revived and reinstated after the termination of this Guaranty, then all of the obligations of the Guarantors under this Guaranty shall be revived and reinstated as if this Guaranty had not been terminated until such time as the Indenture Obligations are paid in full and each Guarantor shall enter into an amendment to this Guaranty, reasonably satisfactory to the Trustee, evidencing such revival and reinstatement. Section 1313. Execution of Guaranty. To evidence the Guaranty, each Guarantor hereby agrees to execute the guaranty substantially in the form set forth in Section 206 hereof, to be endorsed on each Security authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of each Guarantor by its Chairman of the Board, its President, or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. If an officer whose signature is on this Indenture no longer holds that office at the time the Trustee authenticates a Security on which a Guaranty is endorsed, such Guaranty shall be valid nevertheless. Section 1314. Payment Permitted by Each of the Guarantors if no Default. Nothing contained in this Article Thirteen, elsewhere in this Indenture or in any of the Securities shall affect the obligation of any Guarantor to make, or prevent any Guarantor from making at any time, payments pursuant to the Securities. 120 133 Section 1315. Notice to Trustee by Each of the Guarantors. Each Guarantor shall give prompt written notice to the Trustee of any fact known to such Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Guaranty. Notwithstanding the provisions of this Article Thirteen or any provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from any Guarantor or any Trustee, fiduciary or agent therefor. Prior to the receipt of any such written notice, the Trustee shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least three (3) Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of, premium, if any, or interest on any Security or any other Indenture Obligations), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it after such date nor shall the Trustee be charged with knowledge of the curing of any such default or the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate to such effect. Section 1316. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting under this Indenture, the term "Trustee" as used in this Article Thirteen shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully, for all intents and purposes, as if such Paying Agent were named in this Article Thirteen in addition to or in place of the Trustee; provided, however, that this Section 1316 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 1317. Additional Guaranties. Each Subsidiary of an Indenture Obligor shall be a Guarantor and, accordingly, if any Subsidiary of any Indenture Obligor shall be formed after the Closing Date, such Indenture Obligor shall cause such Subsidiary to execute and deliver to the Trustee a duly executed supplemental indenture, pursuant to which such Subsidiary shall unconditionally guaranty, in accordance with Article Thirteen hereof, all of PCI and the Company's obligations under the Indenture and the Securities on the same terms as the other Guarantors, and such guaranty shall rank pari passu with the senior Indebtedness of such Subsidiary. 121 134 Section 1318. No Suspension of Remedies. Nothing contained in this Article Thirteen shall limit the right of the Trustee or the Holders of Securities to take any action to accelerate the maturity of the Securities pursuant to the provisions described under Article Five and as set forth in this Indenture or to pursue any rights or remedies hereunder or under applicable law. ARTICLE FOURTEEN CONDITIONS TO EFFECTIVENESS OF INDENTURE This Indenture shall become effective, and the issuance of the Securities shall be made subject to, the prior or concurrent satisfaction of each of the conditions set forth in this Article Fourteen. Section 1401. Conditions Precedent to the Effectiveness of the Plan of Reorganization, etc. All conditions precedent to the effectiveness of the Plan of Reorganization shall have been satisfied or waived in accordance with the terms of the Plan of Reorganization, the Confirmation Order shall have become a Final Order and the Effective Plan Date shall have occurred. Section 1402. Implementation of Plan of Reorganization. The transactions contemplated by the Plan of Reorganization to have been consummated on or before the Closing Date shall have been consummated on or before the Closing Date in accordance with the terms of the Plan of Reorganization, including the Term Loan Agreement and the other Indenture Documents taking effect, and the granting of Liens securing the Collateral. ARTICLE FIFTEEN SECURITY Section 1501. Security. (a) In order to secure the due and punctual payment of principal of, premium, if any, and interest on the Indenture Obligations when and as the same shall become due and payable, whether on an Interest Payment Date, at maturity, by acceleration, repurchase, redemption, in connection with an Change of Control or Asset Sale, or otherwise, and interest on the overdue principal of, interest (to the extent permitted by law), and premium, if any, on the Securities, and performance of all other obligations of the Company to the Trustee or the Holders under this Indenture and each other Indenture Document and of all obligations of the Guarantors under the Guaranty and each other Indenture Document, the Company and the other Obligors have entered into the applicable Security Documents to which each is a party. Each Indenture Obligor 122 135 hereby acknowledges and agrees with each other Indenture Obligor, the Trustee, and the Holders that such Indenture Obligor has secured valuable and fair consideration and corporate and other benefit for entering into each Security Document to which it is a party. (b) Each Holder, by accepting a Security, consents and agrees to all of the terms and provisions of the Security Documents and the Common Security and Intercreditor Agreement, as the same may be in effect or amended from time to time in accordance with the provisions of the Security Documents, the Common Security and Intercreditor Agreement and this Indenture, and authorizes and directs the Collateral Agent to act as mortgagee or secured party with respect thereto or to act as collateral agent pursuant to the Common Security and Intercreditor Agreement. (c) As set forth in and governed by the Security Documents, as among the Holders, the Collateral as now or hereafter constituted shall be held for the equal and ratable benefit of the Holders without preference, priority or distinction of any thereof over any other by reason of difference in time of issuance, sale or otherwise, as security for the Securities. Section 1502. Recording; Priority; Opinions, Etc. (a) Each Indenture Obligor will, and will cause each of its Obligor Subsidiaries to, perform at its sole cost and expense any and all acts and execute any and all documents (including, without limitation, the execution, amendment or supplementation of any financing statement, continuation statement, charge, registration or other statement) for filing under the provisions of the UCC and the rules and regulations thereunder, applicable Canadian federal or provincial statutes (including the Civil Code of Quebec) and the rules and regulations thereunder, or any other statute, rule or regulation of any applicable federal, state, provincial or local jurisdiction, including any filings in local real estate land record offices, which are necessary or advisable and shall do such other acts and execute such other documents as may be required under any of the Security Documents to which it is a party, from time to time, in order to grant and maintain valid and perfected Liens on the Collateral relating to it in favor of the Collateral Agent in the priorities expressed to be created by the Security Documents, subject only to Liens permitted under the Security Documents to be senior or pari passu to the Liens of the Collateral Agent, and to fully preserve and protect, and set-up against third persons, the rights of the Trustee, the Collateral Agent and the Holder under this Indenture and the other Indenture Documents. Each relevant Indenture Obligor will, and will cause each of its Obligor Subsidiaries to, pay and satisfy promptly all mortgage and financing and continuation statement recording and/or filing fees or registration fees, charges and taxes relating to this Indenture, the Security Documents and the other Indenture Documents, any amendments thereto and any other instruments of further assurance. (b) The Company shall, on each anniversary of the Closing Date beginning in the year 2002 and upon each delivery of a stock pledge agreement pursuant to Section 1017, furnish to the Trustee an Opinion of Counsel, dated as of such date, 123 136 either (a) to the effect that, in the opinion of such counsel, such action has been taken with respect to the recordings, registerings, filings, re-recordings, re-registerings and refilings of all financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Lien of each of the Security Documents and reciting with respect to such Liens the details of such action or referencing prior Opinions of Counsel in which such details are given, and stating that all financing statements and continuation statements and other filings or registrations have been executed and filed that are necessary as of such date, and during the succeeding twelve months, fully to preserve and protect, and set-up against third persons, the rights of the Collateral Agent, the Holders and the Trustee hereunder and under each of the Security Documents with respect to the Liens, or (b) to the effect that, in the opinion of such counsel, no such action is necessary to maintain such Liens. Section 1503. Release of Collateral. The Trustee shall not direct the Collateral Agent to release Collateral from the Lien of the Security Documents unless such release is in accordance with the provisions of the Security Documents and Trust Indenture Act, Section 314(d). Section 1504. Trust Indenture Act Requirements. The release of any Collateral from any of the Security Documents or the release of, in whole or in part, the Liens created by any of the Security Documents, will not be deemed to impair the Lien of the Security Documents in contravention of the provisions hereof if and to the extent the Collateral or Liens are released pursuant to the terms of the Security Documents. The Trustee and each of the Holders acknowledge that a release of Collateral or Liens strictly in accordance with the terms of the Security Documents and the terms hereof will not be deemed for any purpose to be an impairment of the Liens created pursuant to the Security Documents in contravention of the terms of this Indenture. Without limitation, the Company and each other Indenture Obligor on the Securities shall cause Trust Indenture Act, Section 314(d) relating to the release of property or securities from the Liens of the Security Documents to be complied with. Any certificate or opinion required by Trust Indenture Act, Section 314(d) may be made by an officer of PCI, the Company or any Guarantor, as the case may be, except in cases where Trust Indenture Act, Section 314(d) requires that such certificate or opinion be made by an independent person. Section 1505. Suits to Protect Collateral. Subject to the provisions of the Common Security and Intercreditor Agreement, the Trustee, acting at the written direction of the all Holders, shall have power to institute and to maintain, or direct the Collateral Agent to institute and maintain, such suits and proceedings as the Trustee may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of any of the Security Documents or this Indenture, and such suits and proceedings as the Trustee may deem expedient to preserve or protect its interests and the interests of the Holders in the Collateral (including power to institute and maintain suits or proceedings to restrain the 124 137 enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the Liens of each Collateral Agent in the Collateral or be prejudicial to the interests of the Holders or the Trustee). Nothing in this Section 1505 shall prohibit, restrict or prevent the Holders, upon the vote or consent of the Holders of a majority of the aggregate principal amount of the Securities then Outstanding, to institute such suits or proceedings independently of the Trustee and/or the Collateral Agent. Section 1506. Determinations Relating to Collateral. In the event (a) the Trustee shall receive any written request from PCI, the Company or any Guarantor under any Security Document for consent or approval with respect to any matter or thing relating to any Collateral or any Obligor's obligations with respect thereto, or (b) there shall be due to or from the Trustee under the provisions of any Security Document, any performance or the delivery of any instrument, or (c) the Trustee shall become aware of any nonperformance by any Obligor of any covenant or any breach of any representation or warranty of PCI, the Company or any Guarantor set forth in any Security Document, then, in each such event, the Trustee shall be entitled, at the expense of the Company and subject to Sections 602(d) and (h) hereof, to hire experts, consultants, agents and attorneys (including internal counsel) to advise the Trustee on the manner in which the Trustee should respond to such request or render any requested performance or response to such nonperformance or breach. The Trustee shall be fully protected in the taking of any action recommended or approved by any such expert, consultant, agent or attorney (including internal counsel) or agreed to by the Holders of a majority of the aggregate principal amount of the Securities then Outstanding pursuant to Section 505 hereof. Section 1507. Trust Moneys. To the extent Trust Moneys consist of insurance proceeds or condemnation or other taking awards, any such moneys which may be used to effect a restoration of the affected Collateral shall be permitted to be withdrawn by the Company and paid by the Collateral Agent in accordance with the Common Security and Intercreditor Agreement. The Company shall deliver (a) an Officers' Certificate certifying as to expenditures made or costs incurred, the necessity or desirability in the conduct of the Company's business of the repaired, rebuilt, or replaced property, and the Fair Market Value of such property as of the date of the expenditures, (b) an Opinion of Counsel as to the validity and perfection of the Collateral Agent's lien on the repaired or replaced Collateral and (c) an architect's certificate as to the costs of such restoration and compliance with law, all in accordance with the Common Security and Intercreditor Agreement. To the extent Trust Moneys consist of Collateral Proceeds, and the Company intends to reinvest such proceeds in the Company or in one or more Subsidiaries in a Related Business, such Trust Moneys shall be permitted to be withdrawn by the Company upon delivery to the Trustee and the Collateral Agent of (a) a 125 138 Company Order regarding such withdrawal, (b) an Officers' Certificate certifying compliance with the Indenture, (c) instruments granting the Collateral Agent first priority Liens, for the benefit of the Trustee, for itself and the Holders, and the Administrative Agent, for itself and the Lenders on the real or personal property interests in which the Company or any Subsidiary have invested, and (d) an Opinion of Counsel as to the instruments governing such Liens and security interests, all in accordance with the Common Security and Intercreditor Agreement. Trust Moneys shall be permitted to be applied from time to time (x) to the payment of principal, premium, if any, and interest on the Securities, or (y) to the extent otherwise permitted by the Indenture, to redeem or repurchase Securities, including without limitation pursuant to a Change of Control Offer or (to the extent such Trust Moneys constitute proceeds from Asset Sales) an Asset Sale Offer, or (z) at the direction of PCI, the Company and each Guarantor, to pay any other Indebtedness secured by liens in the Collateral (but only to the extent such Trust Moneys constitute Collateral Proceeds). In each case the Trustee and each Collateral Agent shall receive (a) resolutions of the Boards of Directors of the PCI, the Company and each Guarantor directing such application, (b) an Officers' Certificate, and (c) an Opinion of Counsel, and the Collateral Agent shall receive cash equaling the accrued interest, if any, required to be paid in connection with such payment or purchase. Trust Moneys received by each Collateral Agent or the Trustee pursuant to an Asset Sale Offer remaining after the completion of such Asset Sale Offer shall be permitted to be withdrawn by the Company upon request of the Company and delivery of an Officers' Certificate and an Opinion of Counsel, all in accordance with the Common Security and Intercreditor Agreement. Any release of Collateral, including Trust Moneys, will be subject to the provisions of Section 314(d) of the Trust Indenture Act relating to, among other things, the delivery of a certificate or an opinion of an engineer, appraiser or other expert as to the Fair Market Value of Collateral being released from the Liens of the Security Documents. Section 1508. Power of Attorney for Collateral in Quebec. For the purposes of the security on the Collateral located in Quebec, the validity, publication or perfection of which is governed by the laws of the province of Quebec, each of the Trustee and the Holders hereby irrevocably grants to the Collateral Agent a power of attorney within the meaning of the Civil Code of Quebec (the "Power of Attorney"). The Collateral Agent hereby accepts such Power of Attorney for the purposes of holding such security. Each Holder agrees (i) with the other Holders that it will not, without the prior consent of the Trustee and the other Holders, take or obtain any Lien on any property of the Company to secure the Indenture Obligations of the Company hereunder or under the Securities, except for the benefit of the Collateral Agent for and on behalf of, the Trustee and the Holders, or as may otherwise be required by law; and (ii) that, notwithstanding the provisions of Section 32 of the Special Corporate Powers Act (Quebec), the Collateral Agent may, as a Person holding the Power of Attorney of the Trustee and the Holders, acquire any title to indebtedness secured by any 126 139 hypothec in its favor related to this Indenture or the Securities or any other document contemplated hereunder. [signature pages follow] 127 140 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. PCI CHEMICALS CANADA COMPANY/ SOCIETE PCI CHIMIE CANADA, as Issuer Attest By ------------------------------- ------------------------------- Name: Name: Title: Title: PIONEER COMPANIES, INC. Attest By ------------------------------- ------------------------------- Name: Name: Title: Title: SUBSIDIARY GUARANTORS: IMPERIAL WEST CHEMICAL CO. Attest By ------------------------------- ------------------------------- Name: Name: Title: Title: KEMWATER NORTH AMERICA CO. Attest By ------------------------------- ------------------------------- Name: Name: Title: Title: PIONEER AMERICAS LLC Attest By ------------------------------- ------------------------------- Name: Name: Title: Title:
141 PIONEER (EAST), INC. Attest By ------------------------------- ------------------------------- Name: Name: Title: Title: PIONEER WATER TECHNOLOGIES, INC. Attest By ------------------------------- ------------------------------- Name: Name: Title: Title: PIONEER LICENSING, INC. Attest By ------------------------------- ------------------------------- Name: Name: Title: Title: KWT, INC. Attest By ------------------------------- ------------------------------- Name: Name: Title: Title:
142 SCHEDULE 1 [EXISTING INDEBTEDNESS] [To be filed with Amendment to Form T-3] 143 SCHEDULE 2 [EXISTING INVESTMENTS] [To be filed with Amendment to Form T-3] 144 EXHIBIT A [FORM OF MORTGAGE] [To be filed with Amendment to Form T-3] 145 EXHIBIT B [FORM OF COMMON SECURITY AND INTERCREDITOR AGREEMENT] [To be filed with Amendment to Form T-3] 146 EXHIBIT C [FORM OF STOCK PLEDGE AGREEMENT] [To be filed with Amendment to Form T-3] EX-99.T3E 25 h90985ex99-t3e.txt AMENDED JOINT DISCLOSURE STATEMENT 1 EXHIBIT T3E UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION ----------------------------------------- : In re: : CHAPTER 11 : PIONEER COMPANIES, INC., : PIONEER CORPORATION OF AMERICA, : IMPERIAL WEST CHEMICAL CO., : KEMWATER NORTH AMERICA CO., : PCI CHEMICALS CANADA INC./PCI : Case No. 01-38259-H3-11 CHIMIE CANADA INC., : PIONEER AMERICAS, INC., : PIONEER (EAST), INC., : PIONEER WATER TECHNOLOGIES, INC., : PIONEER LICENSING, INC., and : KWT, INC., : : Debtors. : JOINTLY ADMINISTERED : ----------------------------------------- DEBTORS' JOINT DISCLOSURE STATEMENT PURSUANT TO SECTION 1125 OF THE BANKRUPTCY CODE WEIL, GOTSHAL & MANGES LLP Attorneys for the Debtors 700 Louisiana, Suite 1600 Houston, Texas 77002 (713) 546-5000 and 100 Crescent Court, Suite 1300 Dallas, Texas 75201 (214) 746-7700 Dated: Houston, Texas September 21, 2001 2 INTRODUCTION...........................................................................1 A. Holders of Claims and Equity Interests Entitled to Vote..................2 B. Voting Procedures........................................................3 C. Confirmation Hearing.....................................................3 II. OVERVIEW OF THE PLAN..........................................................5 III. GENERAL INFORMATION...........................................................7 A. Overview of Chapter 11...................................................7 B. Description and History of Business......................................7 1. The Debtors........................................................7 2. History............................................................9 3. Business...........................................................9 4. Ownership of the Debtors..........................................10 5. Production, Distribution, and Storage Facilities..................10 6. Significant Indebtedness..........................................12 C. Events Leading to the Commencement of the Chapter 11 Cases..............13 IV. EVENTS DURING THE CHAPTER 11 CASES...........................................15 A. Stabilization of Business...............................................15 1. Continuation of Business; Stay of Litigation......................15 2. First Day Orders..................................................16 3. DIP Facility......................................................16 4. Retention of Professionals........................................16 5. Compliance with Bankruptcy Code, Bankruptcy Rules, Local Court Rules, and U.S. Trustee Deadlines.....................17 B. Appointment of the Creditors' Committee.................................17 V. THE PLAN OF REORGANIZATION...................................................18 A. Classification and Treatment of Claims and Equity Interests.............18 1. Compensation and Reimbursement Claims.............................18 2. Administrative Expense Claims.....................................19 3. Priority Tax Claims...............................................20 4. Class 1 - Other Priority Claims...................................20 5. Class 2 - Congress Secured Claims.................................20 6. Class 3 - PCA U.S. Secured Term and Note Claims...................21 7. Class 4 - Canadian Secured Term and Note Claims...................21
3 8. Class 5 - Secured Tax Claims......................................22 9. Class 6 - Other Secured Claims....................................22 10. Class 7 - Convenience Claims......................................23 11. Class 8 - General Unsecured Claims................................23 12. Class 9 - Canadian Deficiency Claims and U.S. Deficiency Claims.............................................24 13. Class 10 - Subordinated Claims....................................25 14. Class 11 - PCI Equity Interests...................................25 B. Securities to be Issued Under the Plan..................................25 1. New Notes.........................................................25 2. New Common Stock..................................................25 C. Method of Distributions Under the Plan..................................26 D. Timing of Distributions Under the Plan..................................27 1. Distributions on the Effective Date...............................27 2. Distributions to Holders of General Unsecured Claims..............27 E. Consolidation of the Debtors............................................28 1. Restructuring Transactions........................................28 2. Order of Transactions.............................................31 3. Approval and Acknowledgment.......................................31 4. Substantive Consolidation.........................................32 5. Issuance and Transfers of Common Stock of the Subsidiaries........33 6. Merger of Corporate Entities......................................33 F. Treatment of Executory Contracts and Unexpired Leases...................33 G. Provisions for Treatment of Disputed Claims and Equity Interests........35 H. Distributions Relating to Allowed Insured Claims........................36 I. Implementation and Effect of Confirmation...............................36 a. Means for Implementation of the Plan..........................36 b. Term of Bankruptcy Injunction or Stays........................41 c. Revesting of Assets...........................................41 d. Causes of Action..............................................41 e. Discharge of Debtors..........................................41 f. Injunction....................................................41 J. Conditions Precedent to Effectiveness of the Plan.......................42 1. Conditions Precedent..............................................42
2 4 2. Effect of Failure of Conditions...................................43 3. Waiver of Conditions to Confirmation and Effective Date...........43 4. Effects of Plan Confirmation......................................43 a. Limitation of Liability.......................................43 b. Releases......................................................44 c. Mutual Releases...............................................44 K. Implementation and Effect of Confirmation of the Plan...................45 L. Discharge and Injunction................................................45 M. Summary of Other Provisions of the Plan.................................46 1. Retiree Benefits..................................................46 2. Amended Bylaws and Amended Certificates of Incorporation..........46 3. Amendments or Modifications of the Plan...........................47 4. Indemnification...................................................48 5. Cancellation and Surrender of Existing Securities and Agreements........................................................48 6. Revocation of the Plan............................................49 7. Preservation of Causes of Action..................................49 8. Termination of Committees.........................................50 9. Effectuating Documents, Further Transactions and Corporate Action............................................................50 10. Plan Supplement...................................................50 11. Voting for Purposes of the Canadian Plan..........................51 VI. CONFIRMATION AND CONSUMMATION PROCEDURE......................................51 A. Solicitation of Votes...................................................51 B. The Confirmation Hearing................................................52 C. Confirmation............................................................53 1. Acceptance........................................................53 2. Unfair Discrimination and Fair and Equitable Tests................53 3. Feasibility.......................................................54 4. Best Interests Test...............................................55 D. Consummation............................................................56 E. Exit Financing..........................................................57 VII. MANAGEMENT OF THE REORGANIZED DEBTORS........................................57 A. Board of Directors and Management.......................................57
3 5 1. Composition of Boards of Directors................................57 a. Reorganized Pioneer...........................................57 b. Reorganized Subsidiaries......................................57 2. Identity of Officers..............................................57 B. Compensation of Executive Officers......................................59 C. Management Equity Incentive Plan........................................60 D. Continuation of Existing Severance Plans and D&O Insurance..............60 VIII. SECURITIES LAWS MATTERS......................................................60 A. Initial Offer and Distribution of the New Securities....................60 B. Subsequent Transfers of the New Securities..............................61 C. Shelf Registration Statement............................................63 D. Registration Rights Agreements..........................................63 E. Applicability of Canadian Securities Laws...............................64 IX. VALUATION....................................................................64 A. Reorganization Value....................................................64 X. CERTAIN RISK FACTORS TO BE CONSIDERED........................................66 A. Overall Risks to Recovery by Holders of Claims..........................66 1. Ability to Refinance Certain Indebtedness.........................66 2. Significant Holders...............................................66 3. Lack of Established Market for the New Common Stock...............67 4. Lack of Trading Market for the New Tranche B Notes.......... .....67 5. Dividend Policies.................................................67 6. Preferred Stock...................................................67 7. Projected Financial Information...................................68 8. Business Factors and Competitive Conditions.......................68 9. U.S. Environmental Laws...........................................69 10. Canadian Environmental Laws.......................................71 11. Indemnities............................................... .......72 12. Hart-Scott-Rodino Act Requirements................................74 13. Market Volatility.................................................75 XI. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN.....................76 A. Introduction............................................................76 B. Consequences to Holders of Claims.......................................77
4 6 1. Realization and Recognition of Gain or Loss in General............77 2. Holders of Allowed Administrative Expense Claims (Unclassified), and Allowed Other Priority Claims (Class 1).......78 3. Holders of Congress Secured Claims (Class 2)......................78 4. Holders of Allowed PCA U.S. Secured Term and Note Claims (Class 3) and Allowed Canadian Secured Term and Note Claims (Class 4).............................................78 a. Gain or Loss..................................................78 b. Interest Income...............................................80 5. Holders of Other Secured Claims (Class 6).........................81 6. Holders of Allowed Convenience Claims (Class 7)...................82 7. Holders of Allowed General Unsecured Claims (Class 8) and Allowed Canadian Deficiency Claims and U.S. Deficiency Claims (Class 9).......................................82 8. Holders of Subordinated Claims (Class 10) and PCI Equity Interests (Class 11)...............................82 9. Allocation of Consideration to Interest...........................83 10. U.S. Withholding..................................................83 C. Consequences to the Debtors or the Reorganized Debtors..................83 1. Discharge-of-Indebtedness Income Generally........................83 2. Attribute Reduction...............................................84 3. Utilization of Net Operating Loss Carryovers......................85 4. Consolidated Return Items.........................................86 5. Restructuring Transactions........................................87 6. Alternative Minimum Tax...........................................87 7. Special Considerations Applicable to PCICC........................87 XII. CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES.............................88 A. Introduction............................................................88 B. Consequences to Nonresident Holders of Claims...........................88 C. Consequences to the Debtors and the Reorganized Debtors.................89 XIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN....................89 A. Liquidation Under Chapter 7.............................................89 B. Alternative Plan of Reorganization......................................90 XIV. CONCLUSION AND RECOMMENDATION................................................90
5 7 INTRODUCTION Pioneer Companies, Inc. ("PCI") and its affiliates, Pioneer Corporation of America ("PCA"), PCI Chemicals Canada Inc./PCI Chimie Canada Inc. ("PCICC"), Pioneer Americas, Inc. ("PAI"), Pioneer (East) Inc. ("Pioneer East"), Pioneer Licensing, Inc. ("Pioneer Licensing"), Pioneer Water Technologies, Inc. ("PWT"), Imperial West Chemical Co. ("Imperial"), Kemwater North America Company ("KNA"), and KWT, Inc. ("KWT") (PCA, PCICC, PAI, Pioneer East, Pioneer Licensing, PWT, Imperial, KNA, and KWT are referred to collectively as the "Subsidiaries"), in these jointly administered Chapter 11 Cases (PCI and the Subsidiaries are collectively referred to as "Pioneer" or the "Debtors") submit this Disclosure Statement pursuant to section 1125 of title 11 of the United States Code (the "Bankruptcy Code") to holders of Claims against and Equity Interests in the Debtors in connection with (i) the solicitation of acceptances of the Debtors' Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated September 21, 2001, as the same may be amended (the "Plan") filed by the Debtors with the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court") and (ii) the hearing to consider confirmation of the Plan (the "Confirmation Hearing") scheduled for November 7, 2001 at 2:00 p.m. (Central Time). Unless otherwise defined herein, all capitalized terms contained herein have the meanings ascribed to them in the Plan. Attached as exhibits to this Disclosure Statement are copies of the following: o The Plan (Exhibit A); o Order of the Bankruptcy Court dated September 21, 2001 (the "Disclosure Statement Order"), among other things, approving the Disclosure Statement and establishing certain procedures with respect to the solicitation and tabulation of votes to accept or reject the Plan (Exhibit B); o Pioneer Companies, Inc., et al. 2000 Form 10-K (Exhibit C); o Pioneer Companies, Inc., et al. Projected Financial Information (Exhibit D); and o Pioneer Companies, Inc., et al. Liquidation Analysis (Exhibit E). In addition, a Ballot for the acceptance or rejection of the Plan is enclosed with the Disclosure Statement submitted to the holders of Claims that the Debtors believe may be entitled to vote to accept or reject the Plan. On September 21, 2001, after notice and a hearing, the Bankruptcy Court entered the Disclosure Statement Order approving this Disclosure Statement as containing adequate information of a kind and in sufficient detail to enable hypothetical, reasonable investors typical of the Debtors' creditors and equity interest holders to make an informed judgment whether to accept or reject the Plan. APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN. 8 The Disclosure Statement Order, a copy of which is annexed hereto as Exhibit B, sets forth in detail the deadlines, procedures and instructions for voting to accept or reject the Plan and for filing objections to confirmation of the Plan, the record date for voting purposes, and the applicable standards for tabulating Ballots. In addition, detailed voting instructions accompany each Ballot. Each holder of a Claim entitled to vote on the Plan should read the Disclosure Statement, the Plan, the Disclosure Statement Order and the instructions accompanying the Ballots in their entirety before voting on the Plan. These documents contain, among other things, important information concerning the classification of Claims and Equity Interests for voting purposes and the tabulation of votes. No solicitation of votes to accept the Plan may be made except pursuant to section 1125 of the Bankruptcy Code. A. Holders of Claims and Equity Interests Entitled to Vote. Pursuant to the provisions of the Bankruptcy Code, only holders of allowed claims or equity interests in classes of claims or equity interests that are impaired are entitled to vote to accept or reject a proposed chapter 11 plan. Classes of claims or equity interests in which the holders of claims or equity interests are unimpaired under a chapter 11 plan are deemed to have accepted the plan and are not entitled to vote to accept or reject the plan. Classes 3, 4, 5, 7, 8 and 9 of the Plan are impaired and, to the extent Claims in such Classes are Allowed Claims, the holders of such Claims will receive distributions under the Plan. Holders of Claims in those Classes are entitled to vote to accept or reject the Plan. Classes 1, 2 and 6 of the Plan are unimpaired and are conclusively presumed to have accepted the Plan. Classes 10 and 11 and of the Plan are impaired and will receive no distributions under the Plan. Holders of Subordinated Claims and Equity Interests in Classes 10 and 11 are conclusively presumed to have rejected the Plan. Therefore, the Debtors are soliciting acceptances only from holders of Allowed Claims in Classes 3, 4, 5, 7, 8, and 9. The Bankruptcy Code defines "acceptance" of a plan by a class of claims as acceptance by creditors in that class that hold at least two-thirds in dollar amount and more than one-half in number of the claims that cast ballots for acceptance or rejection of the Plan. For a more detailed description of the requirements for confirmation of the Plan, see Section VI., "Confirmation and Consummation Procedure." If a Class of Claims rejects the Plan, the Debtors reserve the right to amend the Plan or request confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code or both. Section 1129(b) permits the confirmation of a plan of reorganization notwithstanding the nonacceptance of a plan by one or more impaired classes of claims or equity interests. Under that section, a plan may be confirmed by a bankruptcy court if it does not "discriminate unfairly" and is "fair and equitable" with respect to each nonaccepting class. For a more detailed description of the requirements for confirmation of a nonconsensual plan, see Section VI.C.2., "Confirmation and Consummation Procedure -- Confirmation -- Unfair Discrimination and Fair and Equitable Tests." If one or more of the Classes of Claims entitled to vote on the Plan votes to reject the Plan, the Debtors intend to request confirmation of the Plan pursuant to section 1129(b) of 2 9 the Bankruptcy Code. The determination as to whether to seek confirmation of the Plan under such circumstances will be announced before or at the Confirmation Hearing. B. Voting Procedures. If you are entitled to vote to accept or reject the Plan, a Ballot is enclosed for the purpose of voting on the Plan. If you hold Claims in more than one Class and you are entitled to vote Claims in more than one Class, you may receive separate Ballots which must be used for each separate Class of Claims. Please vote and return your Ballot(s) to: Pioneer Companies, Inc. c/o The Altman Group, Inc. 60 East 42nd Street, Suite 1241 New York, New York 10165 DO NOT RETURN YOUR NOTES OR SECURITIES WITH YOUR BALLOT. TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION OF THE PLAN MUST BE RECEIVED NO LATER THAN 4:30 P.M., CENTRAL TIME, ON OCTOBER 30, 2001. ANY EXECUTED BALLOT RECEIVED WHICH DOES NOT INDICATE EITHER AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE DEEMED TO CONSTITUTE AN ACCEPTANCE OF THE PLAN. Any Claim in an impaired Class as to which an objection or request for estimation is pending or which is scheduled by the Debtors as unliquidated, Disputed or contingent is not entitled to vote unless the holder of such Claim has obtained an order of the Bankruptcy Court temporarily allowing such Claim for the purpose of voting on the Plan. The Bankruptcy Court entered an order setting September 7, 2001 as the record date for voting on the Plan. Accordingly, only holders of record as of September 7, 2001 that are otherwise entitled to vote under the Plan will receive a Ballot and may vote on the Plan. If you are a holder of a Claim entitled to vote on the Plan and did not receive a Ballot, received a damaged Ballot or lost your Ballot, or if you have any questions concerning the Disclosure Statement, the Plan or the procedures for voting on the Plan, please call Herb Slatin at The Altman Group at (212) 681-9600. C. Confirmation Hearing. Pursuant to section 1128 of the Bankruptcy Code, the Confirmation Hearing will be held on November 7, 2001 at 2:00 p.m. (Central Time), before the Honorable Letitia Z. Clark, United States Bankruptcy Judge, at the United States Bankruptcy Court, 401 Bob Casey United States Courthouse, 3rd Floor, 515 Rusk Avenue, Houston, Texas 77002. The Bankruptcy Court has directed that objections, if any, to confirmation of the Plan be served and filed so that they are received on or before October 30, 2001 at 4:30 p.m., (Central Time), in the manner described below in Section VI.B., "Confirmation and Consummation Procedure--The Confirmation Hearing." The Confirmation Hearing may be adjourned from time to time by the Bankruptcy 3 10 Court without further notice except for the announcement of the adjournment date made at the Confirmation Hearing or at any subsequent adjourned Confirmation Hearing. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE AS OF THE DATE HEREOF UNLESS ANOTHER TIME IS SPECIFIED HEREIN, AND THE DELIVERY OF THIS DISCLOSURE STATEMENT SHALL NOT CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION STATED SINCE THE DATE HEREOF. HOLDERS OF CLAIMS SHOULD CAREFULLY READ THIS DISCLOSURE STATEMENT IN ITS ENTIRETY, INCLUDING THE PLAN, PRIOR TO VOTING ON THE PLAN. FOR THE CONVENIENCE OF HOLDERS OF CLAIMS AND EQUITY INTERESTS, THIS DISCLOSURE STATEMENT SUMMARIZES THE TERMS OF THE PLAN, BUT THE PLAN ITSELF QUALIFIES ALL SUMMARIES. IF ANY INCONSISTENCY EXISTS BETWEEN THE PLAN AND THE DISCLOSURE STATEMENT, THE TERMS OF THE PLAN ARE CONTROLLING. THE DISCLOSURE STATEMENT MAY NOT BE RELIED ON FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER TO VOTE TO ACCEPT OR REJECT THE PLAN, AND NOTHING STATED HEREIN SHALL CONSTITUTE AN ADMISSION OF ANY FACT OR LIABILITY BY ANY PARTY, OR BE ADMISSIBLE IN ANY PROCEEDING INVOLVING THE DEBTORS OR ANY OTHER PARTY, OR BE DEEMED CONCLUSIVE EVIDENCE OF THE TAX OR OTHER LEGAL EFFECTS OF THE PLAN ON THE DEBTORS OR HOLDERS OF CLAIMS OR EQUITY INTERESTS. CERTAIN OF THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, BY NATURE, ARE FORWARD LOOKING AND CONTAIN ESTIMATES AND ASSUMPTIONS. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS WILL BE REFLECTIVE OF ACTUAL OUTCOMES. ALL HOLDERS OF CLAIMS SHOULD CAREFULLY READ AND CONSIDER FULLY ARTICLE X OF THIS DISCLOSURE STATEMENT, "CERTAIN RISK FACTORS TO BE CONSIDERED," BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. SUMMARIES OF CERTAIN PROVISIONS OF AGREEMENTS REFERRED TO IN THIS DISCLOSURE STATEMENT DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO, AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO, THE FULL TEXT OF THE APPLICABLE AGREEMENT, INCLUDING THE DEFINITIONS OF TERMS CONTAINED IN SUCH AGREEMENT. THE DEBTORS BELIEVE THAT THE PLAN WILL ENABLE THEM TO SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THEIR CREDITORS AND EQUITY INTEREST HOLDERS. THE DEBTORS URGE THAT CREDITORS VOTE TO ACCEPT THE PLAN. 4 11 THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS HAS BEEN ACTIVELY INVOLVED IN NEGOTIATING THE PLAN, SUPPORTS CONFIRMATION OF THE PLAN AND URGES THE HOLDERS OF CLAIMS IN IMPAIRED CLASSES TO ACCEPT THE PLAN. II. OVERVIEW OF THE PLAN The following table briefly summarizes the classification and treatment of Claims and Equity Interests under the Plan. SUMMARY OF CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN(1)
Type of Claim or Estimated Class Equity Interest Treatment Recovery ----- ------------------ --------- -------- -- Administrative Expense Unimpaired; paid in full, in Cash, or in accordance 100% Claims with the terms and conditions of transactions or agreements relating to obligations incurred in the ordinary course of business during the pendency of the Chapter 11 Cases or assumed by the Debtors in Possession. -- Priority Tax Claims Unimpaired; at the sole option of Reorganized Pioneer, 100% (estimated at either (i) paid in full, in Cash, or (ii) paid over a approximately $1,960,800 six-year period from the date of assessment as provided to $2,267,500 (inclusive in section 1129(a)(9)(C) of the Bankruptcy Code with of Secured Tax Claims)) interest payable at a rate of 8.0% per annum or as otherwise established by the Bankruptcy Court. 1 Other Priority Claims Unimpaired; paid in full, in Cash. 100% (estimated at $-0-) 2 Congress Secured Claims Unimpaired; treated in accordance with the terms of 100% (estimated at the DIP Facility and/or the Exit Facility. approximately $35,000,000) 3 PCA U.S. Secured Term and Impaired; Pro Rata Share of forty-three percent (43%) 100% (44.36% Note Claims (estimated at of (i) the New Tranche A Term Notes (including the of total approximately Guarantees thereof), (ii) the New Tranche B Notes Claims) $141,914,341) (including the Guarantees thereof), and (iii) 9,700,000 shares of the New Common Stock.
---------- (2) This table is only a summary of the classification and treatment of Claims and Equity Interests under the Plan. The estimated recoveries for Classes of Claims receiving New Common Stock are based upon the midpoint of the current estimates of value of the New Common Stock to be issued under the Plan. To the extent that the actual value of the New Common Stock varies from the amounts estimated, the recoveries of holders of such Claims may be higher or lower. See Section IX.A., "Valuation--Reorganization Value." Reference should be made to the entire Disclosure Statement and the Plan for a complete description of the classification and treatment of Claims and Equity Interests. 5 12
Type of Claim or Estimated Class Equity Interest Treatment Recovery ----- ------------------ --------- -------- 4 Canadian Secured Term and Impaired; Pro Rata Share of fifty-seven percent (57%) 100% (67.07% Note Claims of (i) the New Tranche A Term Notes (including the of total (estimated at Guarantees thereof), (ii) the New Tranche B Notes Claims) approximately (including the Guarantees thereof), and (iii) 9,700,000 $188,119,010) shares of the New Common Stock. 5 Secured Tax Claims Impaired; at the sole option of Reorganized Pioneer, 100% (estimated at either (i) paid in full, in Cash, plus interest required approximately $1,960,800 to be paid pursuant to section 506(b) of the Bankruptcy to $2,267,500 (inclusive Code, or (ii) paid over a six-year period from the date of Priority Tax Claims)) of assessment with interest payable at a rate of 8.0% per annum or as otherwise established by the Bankruptcy Court. 6 Other Secured Claims Unimpaired; at the sole option of Reorganized Pioneer, 100% (estimated at either (i) reinstated by curing all outstanding approximately $5,945,000) defaults, all legal, equitable and contractual rights remaining unaltered, (ii) paid in full, in Cash, plus interest required to be paid pursuant to section 506(b) of the Bankruptcy Code, or (iii) fully and completely satisfied by delivery or retention of the Collateral securing the Other Secured Claims and payment of interest required to be paid pursuant to section 506(b) of the Bankruptcy Code. 7 Convenience Claims Impaired; Cash in an amount equal to 100% of such 100% (estimated at Allowed Convenience Claim. approximately $2,000,000) 8 General Unsecured Claims Impaired; Pro Rata Share of the Class 8 and Class 9 7.10%(2) (estimated at Distribution. approximately $56,649,415) 9 Canadian Deficiency Impaired; Pro Rata Share of the Class 8 and Class 9 0% Claims and U.S. Distribution.(3) Deficiency Claims (estimated at approximately $270,289,046) 10 Subordinated Claims Impaired; no distributions on account of such Claims. 0% (estimated at $-0-)
---------- (2) The estimated recoveries for General Unsecured Claims are based upon the Debtors' estimates of the amount of Allowed General Unsecured Claims as of the Commencement Date. For purposes of the Plan, Claims against multiple Debtors are deemed to be one Claim against the consolidated Debtors and guarantee Claims are eliminated. See Section V.E.4., "The Plan of Reorganization--Consolidation of the Debtors--Substantive Consolidation." (3) Acceptance by Class 9 of the Plan shall constitute a waiver of the right of the holders of Allowed Canadian Deficiency Claims and/or Allowed U.S. Deficiency Claims to receive their Pro Rata Share of the Class 9 Distribution. If Class 9 accepts the Plan, the Debtors shall distribute the Class 9 Distribution on a pro rata basis to the holders of Class 8 Allowed General Unsecured Claims, and not to the holders of Allowed Canadian Deficiency Claims or Allowed U.S. Deficiency Claims. 6 13
Type of Claim or Estimated Class Equity Interest Treatment Recovery ----- ------------------ --------- -------- 11 PCI Equity Interests Impaired; all PCI Equity Interests shall be cancelled, $0-per share extinguished, and of no further force and effect.
III. GENERAL INFORMATION A. Overview of Chapter 11. Chapter 11 is the principal business reorganization chapter of the Bankruptcy Code. Under chapter 11 of the Bankruptcy Code, a debtor is authorized to reorganize its business for the benefit of itself, its creditors and equity interest holders. In addition to permitting rehabilitation of a debtor, another goal of chapter 11 is to promote equality of treatment for similarly situated creditors and similarly situated equity interest holders with respect to the distribution of a debtor's assets. The commencement of a chapter 11 case creates an estate that is comprised of all of the legal and equitable interests of the debtor as of the filing date. The Bankruptcy Code provides that the debtor may continue to operate its business and remain in possession of its property as a "debtor-in-possession." The consummation of a plan of reorganization is the principal objective of a chapter 11 reorganization case. A plan of reorganization sets forth the means for satisfying claims against and interests in a debtor. Confirmation of a plan of reorganization by the bankruptcy court makes the plan binding upon a debtor, any issuer of securities under the plan, any person acquiring property under the plan and any creditor or equity interest holder of a debtor. Subject to certain limited exceptions, the confirmation order discharges a debtor from any debt that arose prior to the date of confirmation of the plan and substitutes therefor the obligations specified under the confirmed plan. After a plan of reorganization has been filed, the holders of claims against or interests in a debtor are permitted to vote to accept or reject the plan. Before soliciting acceptances of the proposed plan, however, section 1125 of the Bankruptcy Code requires a debtor to prepare a disclosure statement containing adequate information of a kind, and in sufficient detail, to enable a hypothetical reasonable investor to make an informed judgment about the plan. The Debtors are submitting this Disclosure Statement to holders of Claims against and Equity Interests in the Debtors to satisfy the requirements of section 1125 of the Bankruptcy Code. B. Description and History of Business. 1. The Debtors Pioneer conducts its primary business through its wholly-owned direct and indirect operating subsidiaries, PAI and PCICC. The following is an organizational chart of the Debtors. 7 14 PIONEER COMPANIES, INC. 1 1 1 1 ------------------------------------------------ 1 1 1 1 1 1 PIONEER CORPORATION OF AMERICA PIONEER WATER TECHNOLOGIES, INC. 1 1 PIONEER (EAST), INC. KWT,INC. PCI CHEMICALS CANADA INC./ PCI CHIMIE CANADA INC. PIONEER AMERICAS, INC. PIONEER LICENSING, INC. IMPERIAL WEST CHEMICAL CO. 1 1 1 KEMWATER NORTH AMERICA CO. 8 15 2. History Pioneer's current operations as a chlor-alkali producer began in 1988 with the acquisition of facilities in Henderson, Nevada and St. Gabriel, Louisiana. In 1989, Pioneer acquired bleach production and chlorine repackaging operations in Tracy and Santa Fe Springs, California. The existing operations were acquired by the predecessor to PCI in 1995. A bleach production and chlorine repackaging facility in Tacoma, Washington was acquired in 1996. In 1997, Pioneer acquired its Tacoma chlor-alkali manufacturing facilities, as well as its Canadian operations, consisting of chlor-alkali manufacturing facilities in Becancour, Quebec and Dalhousie, New Brunswick, a bleach and pulping additive manufacturing facility in Cornwall, Ontario and a research laboratory in Mississauga, Ontario. Pioneer no longer owns certain operations that were acquired during the period since 1988, including an iron chloride, aluminum sulfate and polyaluminum chloride manufacturing business that operated plants in Antioch and Pittsburg, California, Spokane, Washington and Savannah, Georgia, and bleach production and chlorine repackaging operations in Marysville and City of Industry, California and Kalama, Washington. 3. Business Pioneer manufactures and markets chlorine and caustic soda and several related products. Pioneer owns and operates five chlor-alkali plants and several related product manufacturing facilities in North America with aggregate production capacity of approximately 850,000 electrochemical units ("ECUs", each consisting of 1 ton of chlorine and 1.1 tons of caustic soda). Approximately 60% of Pioneer's source of electricity, a major raw material in chlor-alkali production, is hydro-power based, currently the cheapest source in North America. In addition, over 22% of Pioneer's ECU capacity employs membrane cell technology, the most efficient technology. Pioneer is one of the six largest chlor-alkali producers in North America, with approximately 6% of North American production capacity. As of December 31, 2000, Pioneer had 895 employees, although as a result of an organizational restructuring Pioneer has approximately 815 employees at the current time. As of December 31, 2000, 90 of Pioneer's employees at the Henderson, Nevada plant were covered by collective bargaining agreements with the United Steelworkers of America and with the International Association of Machinists and Aerospace Workers that are in effect until March 13, 2004, and 112 of Pioneer's employees at the Tacoma facility were covered by collective bargaining agreements with the International Chemical Workers and the Operating Engineers that are in effect until June 11, 2003. At Pioneer's Becancour facility, 137 employees were covered by collective bargaining agreements with the Energy and Paper Workers Union that are in effect until April 30, 2006, and 32 employees at Pioneer's Cornwall facility were represented by the United Steelworkers Union, with a collective bargaining agreement that expires on October 31, 2002. Ten employees at Pioneer's Tacoma bleach and chlorine repackaging facility were covered by a collective bargaining agreement with the Teamsters Union that is in effect until December 1, 2002. Pioneer's other employees are not covered by union contracts or collective bargaining agreements. Pioneer considers its relationship with its employees to be good, and it has not experienced any strikes or work stoppages. 9 16 Pioneer manufactures and markets chlorine, caustic soda, hydrochloric acid and related products used in a variety of applications, including water treatment, plastics, pulp and paper, detergents, agricultural chemicals, pharmaceuticals, and medical disinfectants. Chlorine and caustic soda are the seventh and sixth most commonly produced chemicals, respectively, in the United States, based on volume, and are used in a wide variety of applications and chemical processes. Caustic soda and chlorine are co-products, concurrently produced in a ratio of approximately 1.1 to 1, through the electrolysis of salt water. 4. Ownership of the Debtors As of May 10, 2001, Interlaken Investment Partners, L.P., a Delaware limited partnership (the "Interlaken Partnership") beneficially owned approximately 34.9% of the voting power of Pioneer and William R. Berkley, who is also Chairman of the Board of Pioneer and who may be deemed to beneficially own all shares of Pioneer common stock held by the Interlaken Partnership, beneficially owned approximately 59.8% of the voting power of Pioneer. As of May 10, 2001, there were approximately 130 holders of record of the Class A Common Stock and there were two holders of record of the Class B Common Stock. 5. Production, Distribution, and Storage Facilities The following table sets forth certain information regarding Pioneer's principal production, distribution, and storage facilities as of July 31, 2001. All property is owned by Pioneer unless otherwise indicated.
LOCATION MANUFACTURED PRODUCTS -------- --------------------- Becancour, Quebec........................ Chlorine and caustic soda Hydrochloric acid Bleach Hydrogen Tacoma, Washington ...................... Chlorine and caustic soda Hydrochloric acid Calcium chloride Hydrogen St. Gabriel, Louisiana .................. Chlorine and caustic soda Hydrogen Henderson, Nevada........................ Chlorine and caustic soda Hydrochloric acid Bleach Hydrogen Dalhousie, New Brunswick................. Chlorine and caustic soda Sodium chlorate Hydrogen Cornwall, Ontario*....................... Bleach Cereclor(R)chlorinated paraffin
10 17 PSR 2000(R)pulping additive IMPAQT(R)pulping additive Tracy, California*....................... Bleach Chlorine repackaging Santa Fe Springs, California*............ Bleach Chlorine repackaging Tacoma, Washington....................... Bleach Chlorine repackaging Various*................................. Distribution
*Leased property The corporate headquarters for Pioneer is located in leased office space in Houston, Texas under a lease terminating in 2006. Pioneer also leases office space in Montreal, Quebec under a lease terminating in 2008 and owns a technology center in Mississauga, located on 1.2 acres of land in the Sheridan Park Research Centre near Toronto, Ontario, which conducts applications research, particularly with respect to pulp and paper process technology. The acquisition of the chlor-alkali facility in Tacoma, including costs and expenses, was financed with the proceeds of a nine and one-half year $100 million term facility provided to PCA (the "PCA Term Facility"), and with a portion of the proceeds of a $200 million offering of 9 1/4% Senior Secured Notes due 2007 issued by PCA (the "PCA Senior Notes"). The PCA Senior Notes and obligations outstanding under the PCA Term Facility are secured by first mortgages on PAI's Tacoma, St. Gabriel and Henderson facilities. The acquisition of the PCICC facilities was financed with the proceeds of a nine and one-quarter year $83 million term facility provided to PAI (the "PCICC Term Facility"), and with the proceeds of a $175 million offering of 9 1/4% Senior Secured Notes due 2007 issued by PCICC (the "PCICC Senior Notes"). The PCICC Senior Notes and obligations outstanding under the PCICC Term Facility are secured by liens on and security interests in substantially all tangible and intangible property and assets used in PCICC's business in Canada, other than inventory and accounts receivable. Pioneer also operates the following production facilities: Becancour, Quebec. The Becancour facility is located on a 100-acre site in an industrial park on the deep-water St. Lawrence Seaway. The plant was constructed in 1975, with additions in 1979 and 1997. Annual production capacity is 340,000 tons of chlorine, 383,000 tons of caustic soda and 150,000 tons of hydrochloric acid. In addition, the site has a bleach production facility. Tacoma, Washington. The Tacoma plant is located on a 31-acre site which is part of an industrial complex on the Hylebos Waterway in Tacoma, Washington. The plant was upgraded and expanded in the late 1970s and in 1988. The site has rail facilities as well as docks capable of handling oceangoing vessels. Annual capacity is 125,000 tons of chlorine, 137,500 tons of caustic soda, 58,000 tons of hydrochloric acid (which uses chlorine as a raw material) and 8,800 tons of calcium chloride. 11 18 St. Gabriel, Louisiana. The St. Gabriel plant is located on a 100-acre site near Baton Rouge, Louisiana. Approximately 228 acres adjoining the site are available to Pioneer for future industrial development. The plant was completed in 1970 and is situated on the Mississippi River with river frontage and deepwater docking, loading and unloading facilities. Annual production capacity at St. Gabriel is 197,000 tons of chlorine and 216,700 tons of caustic soda. Henderson, Nevada. The Henderson plant is located on a 374-acre site near Las Vegas, Nevada. Approximately 70 acres are developed and used for production facilities. The original plant, which began operation in 1942, was upgraded and rebuilt in 1976-77. Annual production capacity at the plant is 152,000 tons of chlorine, 167,200 tons of caustic soda and 130,000 tons of hydrochloric acid. In addition, the plant produces bleach. The Henderson plant is part of an industrial complex shared with three other manufacturing companies. Common facilities and property are owned and managed by subsidiaries of Basic Management, Inc. ("BMI"), which provide common services to the four site companies. BMI's facilities include extensive water and high voltage power distribution systems and access roads. Dalhousie, New Brunswick. The Dalhousie facility is located on a 36-acre site along the north shore of New Brunswick on the Restigouche River. The facility consists of a chlor-alkali plant built in 1963 and expanded in 1971 and a sodium chlorate plant built in 1992. Annual production capacity is 36,000 tons of chlorine, 40,000 tons of caustic soda and 22,000 tons of sodium chlorate. Cornwall, Ontario. The Cornwall units are located on leased portions of a 36-acre site on the St. Lawrence River. The facilities consist of a hydrochloric acid facility, Cereclor(R)chlorinated paraffin plant, a PSR 2000(R)pulping additive plant and an IMPAQT(R)pulping additive plant. Tracy, California. The Tracy plant includes a bleach production facility and a chlorine repackaging facility on a 15-acre tract. The land at the facility is leased under a lease expiring in the year 2005, with two five-year renewal options. Santa Fe Springs, California. The Santa Fe Springs plant includes a bleach production plant and a chlorine repackaging facility on a 4.5-acre tract. The land at the facility is leased under a lease expiring in 2008 with a five-year renewal option. Tacoma, Washington. The Tacoma bleach plant serves the Pacific Northwest market. The plant consists of a bleach production facility and a chlorine repackaging facility on a five-acre company-owned site. 6 Significant Indebtedness. As of the Commencement Date, the Debtors' significant indebtedness consisted of: (i) approximately $26.7 million of principal on the secured indebtedness incurred or guaranteed by certain of the Debtors under the Existing Credit Facility, (ii) $80.0 million in principal on the secured indebtedness incurred or guaranteed by the Debtors under the PCA Canadian Term Loan Agreement, (iii) $175.0 million in principal on the secured indebtedness incurred or guaranteed by the Debtors under the PCICC Senior Notes, (iv) $96.75 million in 12 19 principal on the secured indebtedness incurred or guaranteed by the Debtors under the PCA U.S. Term Loan Agreement, and (v) $200.0 million in principal on the secured indebtedness incurred or guaranteed by the Debtors under the PCA Senior Notes. In addition, the Debtors estimate that as of the Commencement Date the allowed unsecured obligations (excluding deficiency claims) of the Debtors to vendors and suppliers aggregated approximately $39 million. C. Events Leading to the Commencement of the Chapter 11 Cases. The chlorine and caustic soda markets have been, and are likely to continue to be cyclical. Periods of high demand, high capacity utilization and increasing operating margins tend to result in new plant investments and increased production until supply exceeds demand, followed by a period of declining prices and declining capacity utilization until the cycle is repeated. In addition, the industry currently faces volatile power costs, depressed pricing and weakening demand for chlor-alkali products. Pioneer suffered a net loss for the year 2000 of $105.6 million, or $9.15 per share, compared to a net loss in 1999 of $50.4 million, or $4.38 per share. The net loss for 2000 included a tax provision of $41.0 million, primarily attributable to a valuation allowance for its net operating loss carryforward. For the first quarter of 2001, Pioneer incurred a net loss of $20.1 million, or $1.74 per share, compared to a net loss of $9.6 million, or $0.83 per share, during the first quarter of 2000. The net loss for 1999, 2000, and 2001 is almost entirely attributable to the problems facing the industry generally, specifically the increasing electricity costs, reductions in chlor-alkali pricing, and a softening demand for chlorine. In December 2000, due to a lack of sufficient liquidity Pioneer did not make payments on various debt obligations, which currently total approximately $597.7 million. As a result, at December 31, 2000, Pioneer was not in compliance with the terms of certain of its debt agreements. On the Commencement Date, Pioneer was currently unable to meet its obligations as they became due. Pioneer has recently completed various strategic actions to ensure its viability for the upcoming years including sales of eight non-strategic assets and businesses, closure of three plants and four off-site storage tanks, cost reduction projects in the order of $16 million, workforce reduction of 464 employees and reduction of selling, general and administrative and capital expenditures. In December 2000, the Debtors did not make interest payments due with respect to the PCA Senior Notes, the PCA U.S. Term Loan Agreement, and the PCA Canadian Term Loan Agreement. In April 2001, the Debtors failed to make an interest payment due on the PCICC Senior Notes. As a result, with the respective grace periods having expired, the Debtors are in default under the PCA Senior Notes, the PCA U.S. Term Loan Agreement, the PCA Canadian Term Loan Agreement, and the PCICC Senior Notes. In February 2001, certain of the holders (collectively, the "Holders") of (i) the PCA Senior Notes, (ii) debt under the PCA U.S. Term Loan Agreement, (iii) debt under the PCA Canadian Term Loan Agreement, and (iv) the PCICC Senior Notes met with representatives of the Debtors to work toward a restructuring of the Debtors' business. In order to better coordinate 13 20 their efforts, the Holders organized themselves into the Ad Hoc Committee(4) and employed legal and financial advisors. Pioneer has been advised that members of the Ad Hoc Committee hold (i) 85% of the debt evidenced by the PCA U.S. Term Loan Agreement and the PCA Canadian Term Loan Agreement and (ii) approximately 50% of the debt evidenced by the PCA Senior Notes and the PCICC Senior Notes. Prior to the Commencement Date, the Ad Hoc Committee was represented by Dewey Ballantine LLP, Kaye Scholer LLP, and McCarthy Tetrault, whose fees and expenses were paid by the Debtors. Houlihan Lokey Howard & Zukin served as financial advisors to the Ad Hoc Committee. In accordance with the terms of an agreement effective as of June 14, 2001 (the "Inter-Creditor Agreement"), the Holders agreed to pursue and support a financial restructuring plan pursuant to which the aggregate consideration paid, distributed or provided by the Debtors to senior secured creditors would be distributed on an agreed basis. Under the Inter-Creditor Agreement, such a financial restructuring plan would provide that holders of Canadian Secured Term and Note Claims, consisting of those senior secured creditors whose notes are secured principally by assets located in Canada, would receive, on a pro rata basis, 57% of the aggregate consideration and collateral paid, distributed or provided to senior secured creditors, and the holders of PCA U.S. Secured Term and Note Claims, consisting of those senior secured creditors whose notes are secured principally by assets located in the United States, would receive, on a pro rata basis, 43% of the aggregate consideration and collateral paid, distributed or provided to senior secured creditors. ---------- (4) The Ad Hoc Committee is an unofficial committee of certain Holders of PCA U.S. Secured Term and Note Claims and Canadian Secured Term and Note Claims, the members of which consist of, as of the date hereof, Bennett Restructuring Fund, L.P., Bennett Restructuring Fund II, L.P., Bennett Offshore Restructuring Fund, Inc., JP Morgan Securities, PPM America/JNL High Yield Bond Series, PPM America High Yield (Cayman Islands) CBO I Company Ltd., Putnam Master Intermediate Income Trust, Putnam Managed High Yield Trust, Putnam Variable Trust-Putnam VT High Yield Fund, Putnam High Yield Trust, Putnam Variable Trust-Putnam VT, Putnam Diversified Income Fund, Putnam High Yield Advantage Fund, Putnam Funds Trust-Putnam High Yield Trust II, Putnam Diversified Income Trust, Putnam Strategic Income Fund, Putnam Funds Trust-Putnam High Yield Trust II, Putnam Premier Income Trust, Putnam Master Income Trust, Putnam Convertible Opportunities and Income Trust, Putnam High Income Convertible and Bond Fund, Putnam Asset Allocation Funds-Growth Portfolio, Putnam Variable Trust-Putnam VT Income Fund, Putnam Asset Allocation Funds-Conservative Portfolio, Putnam World Trust II - Putnam High Yield Bond Fund (Dublin), Putnam CBO III, Limited, Putnam CBO II, Limited, The Putnam Advisory Company, LLC, Putnam High Yield Fixed Income Fund, LLC, Income Fund of Boston, High Income Trust, Eaton Vance High Yield Euro Fund 3550, Hallmark Master NY 2, Oppenheimer Champion Income Fund, Oppenheimer Strategic Income Fund, Oppenheimer High Yield Fund, Oppenheimer Bond Fund, Oppenheimer Multi-Sector Income Trust, Oppenheimer Variable Account Funds f/a/o Oppenheimer Strategic Bond Fund/VA, Oppenheimer High Income Fund/VA, Oppenheimer Champion Income Fund, Oppenheimer Strategic Income Fund, Oppenheimer High Yield Fund, Oppenheimer Variable Account Funds f/a/o Oppenheimer Strategic Bond Fund/VA, Oppenheimer High Income Fund/VA, Barclays Capital, Putnam VT High Yield Fund, Putnam Investment Management, LLC, Morgan Stanley Dean Witter Prime Income Trust, Archimedes Funding, L.L.C., ING Capital Advisors LLC, Archimedes Funding II, LTD., Archimedes Funding III, LTD., Merrill Lynch Senior Floating Rate Fund, Inc., Merrill Lynch Prime Rate Portfolio, Merrill Lynch Investment Managers, L.P., Merrill Lynch Global Investment Series, Income Strategies Portfolio, Merrill Lynch Investment Managers, L.P., Debt Strategies Fund, Inc., Van Kampen CLO II, Limited, Van Kampen Senior Floating Rate Fund, Van Kampen Prime Rate Income Trust, Van Kampen Senior Income Trust, KZH Soleil, LLC, KZH Shoshone, LLC, KZH Pondview, LLC, and HarbourView Asset Management Corporation. 14 21 After providing the Ad Hoc Committee and its advisors with information regarding the Debtors' business operations, the Debtors negotiated the terms of a restructuring with the Ad Hoc Committee. After exploring various out-of-court restructuring alternatives, the Debtors determined that the best way to achieve a restructuring was by commencing pre-negotiated bankruptcy cases. Following extensive negotiations, the Debtors and the Ad Hoc Committee reached consensus on the general terms of a restructuring on July 30, 2001 (as amended, the "Lock-Up Agreement"). Under the Lock-Up Agreement, the Debtors agreed, among other things and subject to the terms and conditions of the Lock-Up Agreement, (i) to commence the Chapter 11 Cases, (ii) to prepare and file the Plan and the Disclosure Statement, and (iii) to use their best efforts to have the Disclosure Statement approved, the Plan confirmed, and the restructuring consummated as expeditiously as possible. Under the Lock-Up Agreement, the Ad Hoc Committee agreed, among other things and subject to the terms and conditions of the Lock-Up Agreement, to support the Plan. Because of certain modifications to the Plan after execution of the Lock-Up Agreement, the Lock-Up Agreement is no longer in force and effect. Nonetheless, the Debtors believe, based on negotiations with the Creditors' Committee, that they will receive a sufficient number of votes to confirm the Plan. Concurrently with the filing of the Chapter 11 Cases, PCICC, a Canadian subsidiary of PCI, is seeking protection under the CCAA in the Canadian Court in order to reorganize and restructure its business, debts and corporate tax structure in an orderly fashion and to propose a plan of arrangement to its creditors in a manner coordinated with the restructuring contemplated by the Plan. IV. EVENTS DURING THE CHAPTER 11 CASES On July 31, 2001, the Debtors commenced the Chapter 11 Cases in the Bankruptcy Court. The Debtors continue to operate their businesses and manage their properties as Debtors in Possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. The following is a brief description of some of the major events during the Chapter 11 Cases. A. Stabilization of Business. 1. Continuation of Business; Stay of Litigation. Following the commencement of the Chapter 11 Cases, the Debtors have continued to operate as Debtors in Possession with the protection of the Bankruptcy Court. The Bankruptcy Court has certain supervisory powers over the Debtors' operations during the pendency of the Chapter 11 Cases. The Debtors are operating in the ordinary course of business; any transactions that are outside the ordinary course of business require Bankruptcy Court approval. An immediate effect of the filing of a bankruptcy case is the imposition of the automatic stay under the Bankruptcy Code which, with limited exceptions, enjoins the 15 22 commencement or continuation of all litigation against the Debtors. This injunction will remain in effect until the Effective Date unless modified or lifted by order of the Bankruptcy Court. 2. First Day Orders On the Commencement Date, the Debtors submitted to the Bankruptcy Court a number of "first day orders," along with supporting applications and affidavits. These first day orders included, among others, (i) an order for joint administration of the Chapter 11 Cases; (ii) an order authorizing the employment of professionals utilized in the ordinary course of business; (iii) an order establishing procedures for interim compensation and reimbursement of chapter 11 professionals; (iv) an order extending the time to file schedules of assets and liabilities, schedules of executory contracts and unexpired leases, and statements of financial affairs; (v) an order authorizing the Debtors to employ a notice and claims agent and solicitation and balloting agent; (vi) an order approving debtor in possession financing and use of cash collateral; (vii) an order authorizing the maintenance of the Debtors' cash management system, business forms, and bank accounts; (viii) an order to pay prepetition wages, reimbursable employee expenses and employee benefits; (ix) an order to maintain utility services to the Debtors; (x) an order granting administrative expense status to the Debtors' undisputed obligations arising from the postpetition delivery of materials ordered in the prepetition period and authorizing the Debtors to pay such obligations in the ordinary course of business; (xi) an order authorizing the Debtors to pay prepetition sales and use taxes; (xii) an order authorizing the Debtors to satisfy prepetition claims of common carriers and warehousemen, prepetition customs duties and customs broker charges, and certain prepetition obligations to foreign creditors; (xiii) a notice of designation as complex chapter 11 bankruptcy cases, (xiv) an order to file consolidated creditor list and for authorization to serve notice of commencement of case and Section 341 meeting; (xv) an order authorizing payment of prepetition claims of critical vendors; (xvi) an order approving a cross-border insolvency protocol (the "Protocol") for administration of the Chapter 11 Cases and the Canadian Proceedings; and (xvii) an order establishing a disclosure statement hearing, fixing a bar date, and approving notice procedures. 3. DIP Facility To provide the Debtors with the cash and liquidity to conduct their operations, the Debtors entered into a $50 million debtor in possession financing facility funded by Congress and various lenders thereto (the "DIP Facility"). The Bankruptcy Court entered a final order approving the DIP Facility on August 20, 2001. The DIP Facility provides that the obligations of the Debtors thereunder constitute administrative expense obligations with superpriority over any and all administrative expenses. 4. Retention of Professionals Since the Commencement Date, the Bankruptcy Court has entered orders authorizing the Debtors to retain Weil, Gotshal & Manges LLP as restructuring counsel and Dresdner Kleinwort Wasserstein ("DrKW"), as investment bankers and financial advisors. The Debtors have also sought authorization of the Bankruptcy Court to retain Deloitte & Touche as auditors and accountants. 16 23 The Bankruptcy Court also entered orders authorizing the Creditors' Committee to retain Dewey Ballantine LLP and Bracewell & Patterson, LLP as co-counsel to the Creditors' Committee and Houlihan Lokey Howard & Zukin as financial advisors to the Creditors' Committee. 5. Compliance with Bankruptcy Code, Bankruptcy Rules, Local Court Rules, and U.S. Trustee Deadlines On August 30, 2001, the Debtors filed their Statements of Financial Affairs, Schedules of Assets and Liabilities, Schedules of Executory Contracts and Unexpired Leases, and Lists of Equity Security Holders (collectively, and as the same may be amended or modified through and including the Confirmation Date, the "Schedules"). On September 5, 2001, the United States Trustee conducted a meeting of creditors pursuant to section 341 of the Bankruptcy Code. Additionally, the Debtors have filed all monthly operating reports required by the Office of the United States Trustee. By order dated August 3, 2001 (the "Bar Date Order"), pursuant to Bankruptcy Rule 3003(c)(3), the Bankruptcy Court fixed October 15, 2001 at 4:30 p.m. (Central Time) (the "Bar Date") as the date by which proofs of claim are required to be filed in the Chapter 11 Cases. In accordance with the Bar Date Order, on or about September 7, 2001, a proof of claim form, a notice regarding the scheduling of each Claim and a notice regarding the Bar Date Order were mailed to all creditors listed on the Schedules. Additionally, notice of the Bar Date was published in the following newspapers: The Wall Street Journal (National Edition), the Houston Chronicle, The Globe and Mail (Toronto) and LeDevoir (Montreal). Pursuant to the Bar Date Order, all proofs of claim arising from the rejection of unexpired leases or executory contracts where the order authorizing such rejection is entered in conjunction with confirmation of the Plan must file a proof of claim within thirty (30) days after the applicable rejection order is entered or as otherwise ordered by the Court. B. Appointment of the Creditors' Committee. On July 31, 2001, the United States Trustee appointed the Creditors' Committee to represent the interests of the Debtors' unsecured creditors. Since its formation, the Debtors have consulted with the Creditors' Committee concerning the administration of the Chapter 11 Cases. The Creditors' Committee currently consists of five (5) members. The members of the Creditors' Committee are set forth below. The Debtors have kept the Creditors' Committee informed about their operations and have sought the concurrence of the Creditors' Committee for actions and transactions taken outside of the ordinary course of the Debtors' business. The Creditors' Committee has participated actively, together with the Debtors' management and Professionals, in, among other things, reviewing the Debtors' business operations and the Debtors' business plans. The Debtors and their Professionals have met with the Creditors' Committee's Professionals on numerous occasions in connection with the negotiation of the Plan. 17 24 Creditors' Committee Members Merrill Lynch Oppenheimer Funds, Inc. Attn: Michael Brown Attn: Keith Bachman 800 Scudders Mill Road - Section 1B One Tower Center Plainsboro, NJ 08536 East Brunswick, NJ 08816 PPM America, Inc. Putnam Investment Management Attn: Joel Klein Attn: Patrick Flynn 225 West Wacker, Suite 1200 One Post Office Square Chicago, IL 60606 Boston, MA 02190 VanKampen Investment Advisory, Inc. Attn: Doug Smith/Michael Starshak One Park View Plaza Oakbrook Terrace Chicago, IL 60181 V. THE PLAN OF REORGANIZATION The Debtors believe that (i) through the Plan, holders of Allowed Claims will obtain a substantially greater recovery from the Estates of the Debtors than the recovery that they would receive if the assets of the Debtors were liquidated under chapter 7 of the Bankruptcy Code and PCICC was liquidated under similar or analogous Canadian laws and (ii) the Plan will afford the Debtors the opportunity and ability to continue in business as a viable going concern and preserve ongoing employment for the Debtors' employees. The Plan is annexed hereto as Exhibit A and forms a part of this Disclosure Statement. The summary of the Plan set forth below is qualified in its entirety by reference to the more detailed provisions of the Plan. A. Classification and Treatment of Claims and Equity Interests. The Plan classifies Claims and Equity Interests separately and provides different treatment for different Classes of Claims and Equity Interests in accordance with the Bankruptcy Code. As described more fully below, the Plan provides, separately for each Class, that holders of certain Claims and Equity Interests will receive various amounts and types of consideration based on the different rights of the holders of Claims and Equity Interests in each Class. 1. Compensation and Reimbursement Claims Compensation and Reimbursement Claims are Administrative Expense Claims for the compensation of professionals and reimbursement of expenses incurred by such professionals pursuant to sections 503(b)(2), 503(b)(3), 503(b)(4) and 503(b)(5) of the Bankruptcy Code (the "Compensation and Reimbursement Claims"). All payments to professionals for Compensation and Reimbursement Claims will be made in accordance with the procedures established by the 18 25 Bankruptcy Code, the Bankruptcy Rules and the Bankruptcy Court relating to the payment of interim and final compensation for services rendered and reimbursement of expenses. The aggregate amount of compensation for services rendered and reimbursement of expenses incurred by Professionals (including Professionals employed by the Debtors and the Creditors' Committee) through August 31, 2001 is approximately $1,085,400. The Bankruptcy Court will review and determine all applications for compensation for services rendered and reimbursement of expenses. Section 503(b) of the Bankruptcy Code provides for payment of compensation to creditors, indenture trustees and other entities making a "substantial contribution" to a reorganization case, and to attorneys for and other professional advisors to such entities. The amounts, if any, which may be sought by entities for such compensation are not known by the Debtors at this time. Requests for compensation must be approved by the Bankruptcy Court after a hearing on notice at which the Debtors and other parties in interest may participate and, if appropriate, object to the allowance of any compensation and reimbursement of expenses. Pursuant to the Plan, each holder of a Compensation and Reimbursement Claim (i) shall file its respective final application for allowance of compensation for services rendered and reimbursement of expenses incurred through the date (the "Confirmation Date") on which the Clerk of the Bankruptcy Court enters the order (the "Confirmation Order") of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code on the docket by the date that is sixty (60) days after the Effective Date or such other date as may be fixed by the Bankruptcy Court and, (ii) if granted such an award by the Bankruptcy Court, shall be paid in full in such amounts as are Allowed by the Bankruptcy Court (a) on the date such Compensation and Reimbursement Claim becomes an Allowed Claim, or as soon thereafter as is practicable, or (b) upon such other terms as may be mutually agreed upon between such holder of such Compensation and Reimbursement Claim and the Debtors in Possession or, on and after the Effective Date, the Reorganized Debtors. 2. Administrative Expense Claims Administrative Expense Claims are Claims constituting a cost or expense of administration of the Chapter 11 Cases allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code. Such Claims include any actual and necessary costs and expenses of preserving the Estates of the Debtors, any actual and necessary costs and expenses of operating the business of the Debtors in Possession, any indebtedness or obligations incurred or assumed by the Debtors in Possession in connection with the conduct of their business including, without limitation, for the acquisition or lease of property or an interest in property or the rendition of services, all Compensation and Reimbursement of Claims to the extent Allowed by the Bankruptcy Court under section 330 or 503 of the Bankruptcy Code, and any fees or charges assessed against the Estates of the Debtors under section 1930 of chapter 123 of title 28 of the United States Code. Administrative Expense Claims also include administrative reclamation claims. Except as provided for above with respect to Compensation and Reimbursement Claims, pursuant to the Plan, Administrative Expense Claims will be paid in full, in Cash, on the later of the Effective Date and the date such Administrative Expense Claim becomes an Allowed 19 26 Claim, or as soon thereafter as is practicable. Allowed Administrative Expense Claims representing obligations incurred in the ordinary course of business by the Debtors in Possession (including amounts owed to vendors and suppliers that have sold goods or furnished services to the Debtors in Possession since the Commencement Date) will be assumed and paid by the Reorganized Debtors in accordance with the terms and conditions of the particular transactions and any agreements relating thereto. 3. Priority Tax Claims Priority Tax Claims are Claims for taxes entitled to priority in payment under section 507(a)(8) of the Bankruptcy Code. The Debtors estimate that the amount of Allowed Priority Tax Claims that have not previously been paid pursuant to an order of the Bankruptcy Court will be in a range of approximately $1,800,000 to $2,100,000 and $240,000 (Cdn) to $250,000 (Cdn). Each holder of an Allowed Priority Tax Claim will receive, at the sole option of Reorganized Pioneer, (i) Cash in an amount equal to such Allowed Priority Tax Claim on the later of the Effective Date and the date such Priority Tax Claim becomes an Allowed Claim, or as soon thereafter as is practicable, or (ii) equal annual Cash payments in an aggregate amount equal to such Allowed Priority Tax Claim, together with interest at an annual rate equal to 8.0% over a period through the sixth (6th) anniversary of the date of assessment of such Allowed Priority Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Priority Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Priority Tax Claim. 4. Class 1 - Other Priority Claims Other Priority Claims are Claims which are entitled to priority in accordance with section 507(a) of the Bankruptcy Code (other than Administrative Expense Claims and Priority Tax Claims). Such Claims include (i) Unsecured Claims for accrued employee compensation earned within 90 days prior to the Commencement Date to the extent of $4,650 per employee and (ii) contributions to employee benefit plans arising from services rendered within 180 days prior to the Commencement Date, but only for each such plan to the extent of (a) the number of employees covered by such plan multiplied by $4,650, less (b) the aggregate amount paid to such employees from the Estates for wages, salaries or commissions. Pursuant to the Plan, holders of Allowed Other Priority Claims, if any exist, will be paid in full, in Cash on the later of the Effective Date and the date such Other Priority Claim becomes an Allowed Claim, or as soon thereafter as is practicable. 5. Class 2 - Congress Secured Claims Class 2 is unimpaired by the Plan. Each holder of an Allowed Congress Secured Claim is conclusively presumed to have accepted the Plan and is not entitled to vote to accept or reject the Plan. Each holder of an Allowed Congress Secured Claim shall be treated in accordance with the DIP Facility and/or the Exit Facility. 20 27 6. Class 3 - PCA U.S. Secured Term and Note Claims Class 3 PCA U.S. Secured Term and Note Claims are deemed Allowed under the Plan in an amount equal to the principal amount of such respective Claims, together with all accrued and unpaid non-default interest arising under the terms of the PCA U.S. Term Loan Agreement and the PCA Senior Notes, respectively, through and including the Effective Date. Class 3 is impaired by the Plan. Each holder of an Allowed PCA U.S. Secured Term and Note Claim shall be entitled to vote to accept or reject the Plan. On the Effective Date, each holder of an Allowed PCA U.S. Secured Term and Note Claim as of the Record Date shall receive, pursuant to the implementation of the transactions set forth in Section 7.1 of the Plan (including, without limitation, the exchanges provided for in Section 7.1(i) of the Plan) and on account of such holder's Allowed PCA U.S. Secured Term and Note Claim, such holder's Pro Rata Share of forty-three percent (43%) of (i) the New Tranche A Term Notes (including the Guarantees thereof), (ii) the New Tranche B Notes (including the Guarantees thereof), and (iii) 9,700,000 shares of the New Common Stock. For every $1,000 principal amount of PCA U.S. Secured Term and Note Claims, such holders will receive approximately $72 in principal amount of New Tranche A Term Notes, $217 in principal amount of New Tranche B Notes, and 14 Shares of New Common Stock, subject to the rounding provisions of Sections 5.3(f) of the Plan. Acceptance of the Plan by Class 3 shall constitute an instruction by the holders of Class 3 PCA U.S. Secured Term and Note Claims to the respective Indenture Trustees and New Indenture Trustees, as the case may be, to take all actions necessary to effectuate the Plan. 7. Class 4 - Canadian Secured Term and Note Claims Class 4 Canadian Secured Term and Note Claims are deemed Allowed under the Plan in an amount equal to the principal amount of such respective Claims, together with all accrued and unpaid non-default interest arising under the terms of the PCA Canadian Term Loan Agreement and the PCICC Senior Notes, respectively, through and including the Effective Date. Class 4 is impaired by the Plan. Each holder of an Allowed Canadian Secured Term and Note Claim shall be entitled to vote to accept or reject the Plan. On the Effective Date, each holder of an Allowed Canadian Secured Term and Note Claim as of the Record Date shall receive, pursuant to the implementation of the transactions set forth in Section 7.1 of the Plan (including, without limitation, the exchanges provided for in Sections 7.1(i) and (j) of the Plan) and on account of such holder's Allowed Canadian Secured Term and Note Claim, such holder's Pro Rata Share of fifty-seven percent (57%) of (i) the New Tranche A Term Notes (including the Guarantees thereof), (ii) the New Tranche B Notes (including the Guarantees thereof), and (iii) 9,700,000 shares of the New Common Stock. For every $1,000 principal amount of Canadian Secured Term and Note Claims, such holders will receive approximately $112 in principal amount of New Tranche A Term Notes, $335 in principal amount of New Tranche B Notes, and 22 Shares of New Common Stock, subject to the rounding provisions of Sections 5.3(f) of the Plan. 21 28 Acceptance of the Plan by Class 4 shall constitute an instruction by the holders of Class 4 Canadian Secured Term and Note Claims to the respective Indenture Trustees and New Indenture Trustees, as the case may be, to take all actions necessary to effectuate the Plan. 8. Class 5 - Secured Tax Claims Class 5 consists of all Secured Tax Claims. The Debtors have not yet analyzed each tax Claim to determine which tax Claims are Priority Tax Claims. As previously stated, the Debtors estimate that their total Priority Tax Claims and Secured Tax Claims that have not previously been paid pursuant to an Order of the Bankruptcy Court will be in a range of approximately $1,800,000 to $2,100,000 and $240,000 (Cdn) to $250,000 (Cdn). Each holder of an Allowed Secured Tax Claim will receive, at the sole option of Reorganized Pioneer, (i) Cash in an amount equal to such Allowed Secured Tax Claim, including any interest on such Allowed Secured Tax Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, on the later of the Effective Date and the date such Allowed Secured Tax Claim becomes an Allowed Secured Claim, or as soon thereafter as is practicable, or (b) equal annual Cash payments in an aggregate amount equal to such Allowed Secured Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth (6th) anniversary of the date of assessment of such Allowed Secured Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Secured Tax Claim. Each holder of an Allowed Secured Tax Claim shall retain the Liens (or replacement Liens as may be contemplated under nonbankruptcy law) securing its Allowed Secured Tax Claim as of the Effective Date until full and final payment of such Allowed Secured Tax Claim is made as provided in the Plan, and upon such full and final payment, such Liens shall be deemed null and void and shall be unenforceable for all purposes. 9. Class 6 - Other Secured Claims The Other Secured Claims consist of all Secured Claims other than Congress Secured Claims, PCA U.S. Secured Term and Note Claims, Canadian Secured Term and Note Claims, and Secured Tax Claims. Based upon the Debtors' Schedules, the Debtors believe that the Other Secured Claims include, among others, Claims relating to a note with a current principal amount of $2,200,000 held by Montrose Chemical Corporation of California (secured by a Lien on a hydrochloric acid production unity in Henderson, Nevada), current obligations of approximately $1,700,000 under a letter of credit issued by Bank of America in support of certain obligations issued by the Economic Development Corporation of Pierce County, Washington (secured by a Lien on a bleach production and chlorine repackaging facility in Tacoma, Washington), a note with a current principal amount of approximately $156,000 held by the McCullough Family Trust (secured by a Lien on certain real property in Antioch, California), and Claims represented by mechanics' Liens and equipment and utility deposits which the Debtors do not believe are material in the aggregate. 22 29 At the sole option of Reorganized Pioneer, (i) each Allowed Other Secured Claim shall be reinstated and rendered unimpaired in accordance with section 1124(2) of the Bankruptcy Code or (ii) each holder of an Allowed Other Secured Claim shall receive a New Other Secured Note in an amount equal to such Allowed Other Secured Claim on the later of the Effective Date and the date such Allowed Other Secured Claim becomes an Allowed Other Secured Claim, or as soon thereafter as is practicable. To the extent that the Creditors' Committee determines that the value of the Collateral is less than the amount of an Other Secured Claim, the undersecured portion of such Claim shall be treated as a Class 8 General Unsecured Claim. 10. Class 7 - Convenience Claims The Convenience Claims are Unsecured Claims in the amount of $500.00 or less and Unsecured Claims that are reduced to $500.00 by the election of the holders thereof on such holders' Ballots. The Debtors estimate that Allowed Convenience Claims, excluding Convenience Claims in amounts greater than $500.00 of holders who elect to opt into Class 7, will aggregate approximately $2,000,000.00. Pursuant to the Plan, each holder of an Allowed Convenience Claim as of the Record Date will receive Cash in an amount equal to 100% of its Allowed Convenience Claim on the later of the Effective Date and the date such Claim becomes an Allowed Claim, or as soon thereafter as is practicable. 11. Class 8 - General Unsecured Claims The General Unsecured Claims means all Unsecured Claims other than a Convenience Claim, a Subordinated Claim, a Canadian Deficiency Claim, or a U.S. Deficiency Claim. General Unsecured Claims shall also include any Pioneer 2000 Group Claim. Such Claims include (i) Claims in respect of outstanding unsecured notes issued in connection with certain acquisitions, (ii) Claims in respect of the rejection of leases of non-residential real property and executory contracts, and (iii) Claims relating to personal injury, property damage or products liability or other similar Claims that have not been compromised and settled or otherwise resolved (the "Tort Claims"). The aggregate amount of General Unsecured Claims, as reflected in the Debtors' Schedules is $38,911,065.07 and $26,475,147.26 (Cdn), excluding Claims for which no amounts were specified, otherwise unliquidated Claims, Claims against multiple Debtors, amended Claims, duplicate Claims and guarantee Claims. For purposes of the Plan, Claims against multiple Debtors are deemed one Claim against the consolidated Debtors and guarantee Claims are deemed eliminated. See Section V.E.4., "The Plan of Reorganization--Consolidation of the Debtors--Substantive Consolidation." The Debtors estimate that the amount of Allowed General Unsecured Claims are approximately $38,911,065.00 and $26,475,150.00 (Cdn) for an aggregate of approximately $56,649,415.00. The Debtors' estimate of Allowed General Unsecured Claims is based upon an analysis of the General Unsecured Claims and the Debtors' experience to date in resolving disputes concerning the amount of such General Unsecured Claims. Many of the personal injury Tort Claims, which are General Unsecured Claims, are unliquidated and, in accordance with the Plan, will be liquidated in the tribunal in which they are pending on the Effective Date or, if no action was 23 30 pending on the Effective Date, in any tribunal of appropriate jurisdiction or in accordance with any alternative dispute resolution or similar proceeding as the same may be approved by order of the Bankruptcy Court. The resolution of Tort Claims could result in Allowed General Unsecured Claims in amounts greater than those estimated by the Debtors for purposes of this Disclosure Statement. See Section V.H., "The Plan of Reorganization--Distributions Relating to Allowed Insured Claims." Pursuant to the Plan, on the Initial Distribution Date, each holder of an Allowed General Unsecured Claim as of the Record Date shall receive a Pro Rata Share of the Class 8 and Class 9 Distribution. Each holder of an Allowed Canadian Deficiency Claim and/or an Allowed U.S. Deficiency Claim as of the Record Date shall be entitled to receive such holder's Pro Rata Share of the Class 8 and Class 9 Distribution; provided, however, that the acceptance by Class 9 of the Plan shall constitute a waiver of the right of the holders of Allowed Canadian Deficiency Claims or Allowed U.S. Deficiency Claims to receive the Class 9 Distribution. The Debtors shall distribute the Class 9 Distribution on a pro rata basis to the holders of Class 8 Allowed General Unsecured Claims, and not to the holders of Allowed Canadian Deficiency Claims or Allowed U.S. Deficiency Claims. Under the Plan, personal injury Tort Claims will be determined and liquidated in the administrative or judicial tribunals in which they are pending on the Effective Date or, if no action was pending on the Effective Date, in any administrative or judicial forum of appropriate jurisdiction or in accordance with any alternative dispute resolution or similar proceeding as the same may be approved by order of the Bankruptcy Court, provided that the holder of such Tort Claim timely filed a proof of claim. The Debtors, however, reserve the right to seek estimation of any and all personal injury Tort Claims in a court or courts of competent jurisdiction. To the extent that a personal injury Tort Claim is determined and liquidated pursuant to a final, nonappealable judgment in such a tribunal or in any such alternative dispute resolution or similar proceeding, such personal injury Tort Claim shall be deemed an Allowed General Unsecured Claim in such liquidated amount and, subject to Section 5.5 of the Plan--Distributions Relating to Allowed Insured Claims, satisfied in accordance with the treatment specified in Class 8 of the Plan for holders of General Unsecured Claims. See Section V.H., "The Plan of Reorganization--Distributions Relating to Allowed Insured Claims." 12. Class 9 - Canadian Deficiency Claims and U.S. Deficiency Claims Class 9 Canadian Deficiency Claims and U.S. Deficiency Claims are deemed Allowed in the amount of $92,341,928.00 and $177,947,118.00, respectively, for purposes of the Plan and assuming confirmation thereof. Each holder of an Allowed Canadian Deficiency Claim or an Allowed U.S. Deficiency Claim is entitled to vote to accept or reject the Plan. Each holder of an Allowed Canadian Deficiency Claim and/or an Allowed U.S. Deficiency Claim as of the Record Date shall be entitled to receive such holder's Pro Rata Share of the Class 8 and Class 9 Distribution; provided, however, that the acceptance by Class 9 of the Plan shall constitute a waiver of the right of the holders of Allowed Canadian Deficiency Claims and/or Allowed U.S. Deficiency Claims to receive their Pro Rata Share of the Class 9 24 31 Distribution. The Debtors shall distribute the Class 9 Distribution on a pro rata basis to the holders of Class 8 Allowed General Unsecured Claims, and not to the holders of Allowed Canadian Deficiency Claims and/or Allowed U.S. Deficiency Claims. 13. Class 10 - Subordinated Claims The Subordinated Claims include the Claims subordinated pursuant to section 510 of the Bankruptcy Code. The Debtors estimate that the total value of Subordinated Claims is $0. Pursuant to the Plan, the holders of Subordinated Claims shall receive no distributions on account of such Subordinated Claims. 14. Class 11 - PCI Equity Interests The PCI Equity Interests are shares of common stock or preferred stock or other instruments evidencing an ownership interest in PCI, whether or not transferable, and any option, warrant or right, contractual or otherwise, to acquire any such interest. Pursuant to the Plan, holders of PCI Equity Interests as of the Record Date, shall receive no distributions on account of such PCI Equity Interests. On the Effective Date, all PCI Equity Interests shall be cancelled, extinguished, and of no further force and effect as of the Effective Date. B. Securities to be Issued Under the Plan. 1. New Notes Pursuant to Section 8.5 of the Plan, Reorganized PCI, Reorganized PCA, Reorganized PAI, and Reorganized PCICC are authorized to issue the New Tranche A Term Notes, the New Tranche B Notes, the Guarantees, and the New Other Secured Notes. Holders of Claims in Class 3 will receive their Pro Rata Share of forty-three percent (43%) of the New Tranche A Term Notes and the New Tranche B Notes. Holders of Claims in Class 4 will receive their Pro Rata Share of fifty-seven percent (57%) of the New Tranche A Term Notes and the New Tranche B Notes. Other Secured Notes, if issued, will be distributed to holders of Other Secured Claims in accordance with Section 4.6 of the Plan. 2. New Common Stock Pursuant to the Plan, on the Effective Date, all PCI Equity Interests will be cancelled. Commencing on the Initial Distribution Date, Reorganized Pioneer will distribute New Common Stock to holders of Claims in Classes 3, 4, and 8. Pursuant to the Plan, Reorganized Pioneer will issue 10,000,000 shares of New Common Stock of which an aggregate of approximately 9,700,000 shares of New Common Stock will be issued to holders of Claims in Classes 3 and 4 and an aggregate of approximately 300,000 shares of New Common Stock will be issued to holders of Claims in Class 8. Holders of the New Common Stock will be entitled to one vote per share on all matters to be voted upon by the stockholders. Holders of a plurality of the shares voting for the 25 32 election of directors can elect all of the directors since the holders of the New Common Stock will not have cumulative voting rights. For a more detailed description of the process by which Reorganized Pioneer will elect its Board of Directors, see Section VII.A.1.a., "Management of the Reorganized Debtors--Board of Directors and Management--Composition of Board of Directors--Reorganized Pioneer." C. Method of Distributions Under the Plan. Subject to Bankruptcy Rule 9010, and except as otherwise provided in Section 5.3 of the Plan, all distributions under the Plan shall be made by or on behalf of Reorganized Pioneer to the holder of each Allowed Claim at the address of such holder as listed on the Debtors' Schedules as of the Record Date, unless the Debtors or Reorganized Debtors have been notified in writing of a change of address, including, without limitation, by the filing of a proof of Claim or Equity Interest by such holder that provides an address for such holder different from the address reflected on the Debtors' Schedules. As at the close of business on the Record Date, the claims register shall be closed, and there shall be no further changes in the record holders of any Claims. Pioneer and Reorganized Pioneer shall have no obligation to recognize any transfer of any Claims occurring after the Record Date. Pioneer and Reorganized Pioneer shall instead be entitled to recognize and deal for all purposes under the Plan (except as to voting to accept or reject the Plan) with only those record holders stated on the claims register as of the close of business on the Record Date. Any payment of Cash made by Reorganized Pioneer pursuant to the Plan shall be made by check drawn on a domestic bank. No payment of Cash less than $100.00 shall be made by Reorganized Pioneer to any holder of a Claim unless a request therefor is made in writing to Reorganized Pioneer. No fractional shares of New Common Stock shall be distributed under the Plan. When any distribution on account of an Allowed Claim pursuant to the Plan would otherwise result in the issuance of a number of shares of New Common Stock that is not a whole number, the actual distribution of shares of New Common Stock shall be rounded as follows: (i) fractions of 1/2 or greater shall be rounded to the next higher whole number; and (ii) fractions of less than 1/2 shall be rounded to the next lower whole number. The total number of shares of New Common Stock to be distributed to a Class of Claims shall be adjusted as necessary to account for rounding. New Tranche A Term Notes and New Tranche B Notes shall only be issued in multiples of $1,000. Any New Tranche A Term Notes and New Tranche B Notes that would have been distributed in multiples of other than $1,000 shall be as follows: (i) amounts less than $500.00 shall be reduced to $0.00 and (ii) amounts equal to or greater than $500.00 shall be increased to $1,000.00. Any payment or distribution required to be made under the Plan on a day other than a Business Day shall be made on the next succeeding Business Day. Except with respect to distributions under the Plan to holders of Allowed General Unsecured Claims, any distributions under the Plan that are unclaimed for a period of one year after distribution thereof shall be revested in Reorganized Pioneer and any entitlement of any holder of any Claim to such distributions shall be extinguished and forever barred. Distributions 26 33 under the Plan to holders of Allowed General Unsecured Claims that are unclaimed for a period of one year after distribution thereof shall be added to the Reserve and any entitlement of such holders of Allowed General Unsecured Claims to such distributions shall be extinguished and forever barred. D. Timing of Distributions Under the Plan. 1. Distributions on the Effective Date Payments and distributions to holders of Allowed Administrative Expense Claims, Allowed Priority Tax Claims, Allowed Other Priority Claims, Allowed Congress Secured Claims, Allowed PCA U.S. Secured Terms and Note Claims, Allowed Canadian Secured Term and Note Claims, Allowed Secured Tax Claims, Allowed Other Secured Claims, Allowed Convenience Claims, and Allowed General Unsecured Claims shall be made on the later of the Effective Date and the date such Claims become Allowed Claims, or as soon thereafter as is practicable. 2. Distributions to Holders of General Unsecured Claims Payments and distributions to holders of General Unsecured Claims are dependent upon the total amount of Allowed General Unsecured Claims. Under the Plan, Reorganized Pioneer will not distribute any New Common Stock to the holders of Disputed General Unsecured Claims unless such Disputed Claims become Allowed Claims. To provide for distributions to holders of Disputed General Unsecured Claims as such Disputed Claims are Allowed, the Plan provides for Reorganized Pioneer to reserve from distributions that would otherwise be made to holders of General Unsecured Claims on the Initial Distribution Date and each Subsequent Distribution Date, the New Common Stock to which holders of Disputed General Unsecured Claims would be entitled to under the Plan as of such dates as if such Disputed Claims were Allowed Claims in their Disputed Claim Amounts. The Initial Distribution Date means that date that is sixty (60) days subsequent to the Effective Date, or as soon thereafter as is practicable. A Subsequent Distribution Date means the twentieth (20th) day after the end of the Quarter following the Initial Distribution Date and the twentieth day after each subsequent Quarter. New Common Stock held in the Reserve shall be held in trust by the Reorganized Debtors for the benefit of the potential claimants of such securities and shall not constitute property of the Reorganized Debtors. Initial distributions to holders of Allowed General Unsecured Claims that are Allowed prior to the Effective Date shall be made on the Initial Distribution Date. Holders of Disputed General Unsecured Claims that become Allowed Claims subsequent to the Initial Distribution Date shall receive distributions of New Common Stock from the amounts in the Reserve and, on the next Subsequent Distribution Date that follows the Quarter during which such Disputed General Unsecured Claims become Allowed Claims pursuant to a Final Order. Such distributions shall be made in accordance with the Plan based upon the distributions that would have been made to such holder under the Plan if the Disputed General Unsecured Claim had been an Allowed Claim on or prior to the Effective Date, without any post-Effective Date interest thereon. 27 34 As described above, the following consideration shall constitute Surplus Distributions pursuant to the Plan: (i) pursuant to Section 5.3(g) of the Plan, distributions under the Plan to holders of Allowed General Unsecured Claims that are unclaimed for a period of one year after distribution thereof and (ii) to the extent that a Disputed General Unsecured Claim is not Allowed or becomes an Allowed Claim in an amount less than the Disputed Claim Amount, the excess of the amount of New Common Stock held in the Reserve over the amount of New Common Stock actually distributed on account of such Disputed General Unsecured Claim. The Surplus Distributions shall be distributed and allocated to the holders of Allowed General Unsecured Claims based upon their Pro Rata Share. In order to afford the Reorganized Debtors sufficient time to attempt to resolve a significant portion of the Disputed General Unsecured Claims, the first and second distributions of the Surplus Distributions under the Plan shall occur on the Subsequent Distribution Dates that occur on the twentieth (20th) day after the end of the second and fourth Quarters, respectively, following the Quarter in which the Initial Distribution Date occurs. Subsequent distributions of the Surplus Distributions shall occur on each Subsequent Distribution Date thereafter. Notwithstanding the foregoing, the Reorganized Debtors are not required to make any Surplus Distributions on a Subsequent Distribution Date unless the number of shares of New Common Stock to be distributed on a Subsequent Distribution Date aggregates 30,000 or more, unless the distribution is the last distribution under the Plan. The Disbursing Agents will fulfill the obligations that the Reorganized Debtors have under the Plan with respect to distributions to holders of Allowed General Unsecured Claims, including, without limitation, holding all reserves and accounts pursuant to the Plan, including the Reserve. The Indenture Trustees, or such Person(s) as the Indenture Trustees may designate, will act as Disbursing Agents under the Plan with respect to distributions to holders of Claims in Classes 3 and 4, and will make all distributions required to be distributed under the applicable provisions of the Plan. The PCA Senior Notes Indenture Trustee and the PCICC Senior Notes Indenture Trustee shall make all distributions in respect of Allowed Claims relating to the PCA Senior Notes Indenture and the PCICC Senior Notes Indenture, respectively. The PCA Canadian Term Loan Agreement Administrative Agent and the PCA U.S. Term Loan Agreement Administrative Agent will make all distributions in respect of Allowed Claims relating to the PCA Canadian Term Loan Agreement and the PCA U.S. Term Loan Agreement, respectively. Reorganized Pioneer, or such Person(s) as Reorganized Pioneer may designate, will act as Disbursing Agents under the Plan with respect to all distributions to holders of Claims other than Class 3 and 4 Claims and will make all distributions required to be distributed under the applicable provisions of the Plan. E. Consolidation of the Debtors. 1. Restructuring Transactions On or prior to the Effective Date, the following transactions will be consummated by the Debtors in the order set forth below; provided, however, that none of the following steps shall occur unless all of the following steps occur and, provided, however, that the holders of Claims shall receive the distributions provided for in Sections 4.3 and 4.4 of the Plan. 28 35 a. On or prior to the Effective Date, PCICC shall be continued into a Nova Scotia company. b. On or prior to the Effective Date, PCICC shall incorporate a Nova Scotia unlimited liability company as a subsidiary. c. On or prior to the Effective Date, PCA shall form a new corporation ("Newco"), a Delaware corporation. d. PCA shall contribute the stock of PCICC and all of its other subsidiaries (including PAI) to Newco for shares of Newco. e. PCA shall file Articles of Conversion in Delaware, thus becoming a limited liability company. This entity will hereinafter be referred to as PCA LLC. f. PCA LLC shall distribute the stock of Newco to PCI. g. Newco shall be merged into PCI, the survivor being PCI. Pursuant to the merger, Newco's assets, consisting of the stock of PCICC and the other Subsidiaries, shall be transferred to PCI. h. PCI shall contribute the stock of PAI to PCA LLC for a membership interest in PCA LLC having an equivalent value. i. Allowed PCA U.S. Secured Term and Note Claims as of the Record Date, shall be exchanged for Allowed Secured Claims as of the Record Date relating to the PCICC Senior Notes, based on the proportion of the Allowed PCA U.S. Secured Term and Note Claims determined by the formula A x [B/C x 57%] where A is the amount of a particular holder's Allowed PCA U.S. Secured Term and Note Claims, B is the aggregate amount of the Allowed Secured Claims relating to PCICC Senior Notes and C is the aggregate amount of the Allowed Canadian Secured Term and Note Claims (the exchanged Claims are referred to as the "Exchanged Allowed PCA U.S. Secured Term and Note Claims" and the Claims which are retained by the initial holders are referred to as the "Retained Initial Allowed PCA U.S. Secured Term and Note Claims") and the holders of Allowed Secured Claims relating to the PCICC Senior Notes as of the Record Date shall receive their Pro Rata Share of the Exchanged Allowed PCA U.S. Secured Term and Note Claims and the holders of the Allowed PCA U.S. Secured Term and Note Claims shall receive on the exchange from the holders of the Allowed Secured Claims relating to the PCICC Senior Notes, their Pro Rata Share of the proportion of the Allowed Secured Claims relating to the PCICC Senior Notes determined by the formula E x 43% where E is the aggregate Allowed Secured Claims relating to the PCICC Senior Notes. j. Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement shall be exchanged for Allowed Secured Claims relating to the PCICC Senior Notes as of the Record Date, based on the proportion of the Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement determined by the formula A x [B/C x 57%] where A is the amount of a particular holder's Allowed Secured Claim relating to the PCA Canadian Term Loan Agreement, B is the aggregate amount of the Allowed Secured Claims relating to the PCICC Senior Notes and C is the aggregate amount of the Allowed Canadian Secured Term and Note 29 36 Claims (the exchanged claims are referred to as the "Exchanged Allowed PCA Canadian Term Loan Claims" and the Claims which are retained by the initial holders are referred to as the "Retained Initial Allowed Secured PCA Canadian Term Loan Claims"), and the holders of the Allowed Secured Claims relating to the PCICC Senior Notes as of the Record Date shall receive their Pro Rata Share of the Exchanged PCA Canadian Term Loan Claims and the holders of the PCA Canadian Term Loan Claims shall receive on the exchange from the holders of the Allowed Secured Claims relating to the PCICC Senior Notes their Pro Rata Share of the proportion of the Allowed Secured Claims relating to the PCICC Senior Notes determined by the formula D x [E/F x 57%] where D is the amount of the Allowed Claims relating to the PCICC Senior Notes, E is the aggregate amount of the Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement and F is the aggregate amount of the Allowed Canadian Secured Term and Note Claims. k. PCI shall contribute to PCA LLC 9,700,000 shares of the New Common Stock. l. Subject to giving effect to the exchanges provided for in Sections 7.1(i) and (j) of the Plan, Allowed PCA U.S. Secured Term and Note Claims shall be transferred to PCA LLC. m. Holders of the Retained Initial Allowed PCA U.S. Secured Term and Note Claims shall receive in exchange for those Claims, their proportionate share of the balance of the 9,700,000 shares of New Common Stock of PCI and New Tranche A Term Notes that will not be distributed in the distributions provided for in Sections 7.1(o) and (r) of the Plan. n. Subject to giving effect to the exchanges provided for in Sections 7.1(i) and (j) of the Plan, Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement shall be transferred to PCA LLC. o. Holders of the Retained Initial Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement shall receive in exchange for those Claims, their proportionate share of the (i) 9,700,000 shares of New Common Stock (to be delivered by PCA LLC) and (ii) the New Tranche A Term Notes (to be issued by PCA LLC) determined by the formula A/(A+43%) where A is the amount determined by the formula C/D x 57%, where C is the aggregate amount of the Allowed Secured Claims in respect of the PCA Canadian Term Loan and D is the aggregate amount of the Allowed Canadian Secured Term and Note Claims. p. PCICC and the subsidiary incorporated in Section 7.1(b) of the Plan shall amalgamate to form PCICC ULC. The transactions occurring subsequent to the amalgamation described in Section 7.1(p) are conditional upon the occurrence of such amalgamation. q. Subject to giving effect to the exchanges provided for in Sections 7.1(i) and (j) of the Plan, PCICC ULC shall issue the New Tranche B Notes in exchange for the Allowed Secured Claims relating to the PCICC Senior Notes. r. Former holders of Exchanged Allowed PCA Canadian Term Loan Claims that did not receive shares of the New Common Stock and the New Tranche A Term Notes pursuant to Section 7.1(o) of the Plan shall receive their proportionate share of the New Common Stock and the New Tranche A Term Notes based on the same formula used in Section 7.1(o) of the Plan to determine the proportionate share received by the holders mentioned in Section 7.1(o) of the 30 37 Plan. Former holders of the Exchanged Allowed PCA U.S. Secured Term and Note Claims that did not receive shares of the New Common Stock and the New Tranche A Term Notes pursuant to Section 7.1(m) of the Plan shall receive their proportionate share of the New Common Stock and New Tranche A debt after subtracting the distributions to be made to both the holders of the Retained Initial Allowed Secured Claims relating to the PCA Canadian Term Loan and the holders of the Exchanged Allowed PCA Canadian Term Loan Claims. s. PCI shall contribute PCA LLC to PCICC ULC in exchange for preference stock of PCICC ULC having a fair market value equal to the value of PCA LLC. t. PAI shall be merged into PCA LLC, the survivor being PCA LLC which shall change its name to PAI LLC. u. All inter-company debts owing by PAI LLC to PCICC ULC shall remain outstanding and be paid in the ordinary course of business. 2. Order of Transactions For greater certainty, the approval and confirmation of the Plan shall constitute the approval of each holder of an Allowed PCA U.S. Secured Term and Note Claim and of an Allowed Canadian Secured Term and Note Claim to each transaction listed in Section 7.1 of the Plan (provided, however, that all such transactions occur) in the order set forth above including, without limitation, the exchanges provided for in Sections 7.1(i), (j), (l), (m), (n), (o), (q) and (r) of the Plan without any further action required to be taken by such holder and each holder irrevocably appoints the Debtors as his agent to give effect to all of the transactions described above. 3. Approval and Acknowledgment The approval and confirmation of the Plan shall constitute an approval and acknowledgement by each of the parties that it intends that (a) Section 7.1(a) of the Plan constitutes a plan of reorganization for U.S. federal income tax purposes; (b) Sections 7.1(e), (i), (j), (l), (m), (n), (o), (q), and (r) of the Plan are integrated and constitute a plan of reorganization for U.S. federal income tax purposes pursuant to which the holders of PCA U.S. Secured Term and Note Claims and PCA Canadian Term Loan Claims exchange directly with the Debtors their Initial Allowed Claims(5) for PCI New Common Stock, New Tranche A Term Notes, and New Tranche B Notes (in each case, which notes are issued by PCI for U.S. federal income tax purposes); (c) Sections 7.1(i), (j), (l), (n), (p), (q), and (r) of the Plan are integrated and constitute a plan of reorganization for U.S. federal income tax purposes pursuant to which the holders of PCIC Senior Note Claims exchange directly with the Debtors their Initial Allowed Claims for PCI New Common Stock, New Tranche A Term Notes and New Tranche B Notes (in each case, which notes are issued by PCI for U.S. federal income tax purposes); (d) Section 7.1(t) of the Plan constitutes the adoption of a plan of complete liquidation of PAI into PCI for U.S. federal ---------- (5) Initial Allowed Claim means, with respect to each creditor, the Allowed Claim(s) owned by such creditor prior to the consummation of the transactions set forth in Section 7.1 of the Plan. 31 38 income tax purposes; and (e) Newco is a corporation that will engage in no activities other than as related to the Plan and should be treated in accordance with the principles of Rev. Rul. 73-427. Confirmation of the Plan constitutes the agreement and acknowledgement by PCI, its Subsidiaries, each of the holders of Allowed PCA U.S. Secured Term and Note Claims and each of the holders of Allowed Canadian Secured Term and Note Claims not to report the transaction for U.S. federal income tax purposes in a manner that is inconsistent with the prior sentence 4. Substantive Consolidation Substantive consolidation is an equitable remedy which a bankruptcy court may be asked to apply in chapter 11 cases involving affiliated debtors. Substantive consolidation involves the pooling and merging of the assets and liabilities of the affected debtors. All of the debtors in the substantively consolidated group are treated as if they were a single corporate and economic entity. Consequently, a creditor of one of the substantively consolidated debtors is treated as a creditor of the substantively consolidated group of debtors and issues of individual corporate ownership of property and individual corporate liability on obligations are ignored. Substantive consolidation of two or more debtors' estates generally results in the deemed consolidation of the assets and liabilities of the debtors, the deemed elimination of intercompany claims, subsidiary equity or ownership interests, multiple and duplicative creditor claims, joint and several liability claims and guarantees, and the payment of allowed claims from a common fund. Entry of the Confirmation Order shall constitute the approval, pursuant to section 105(a) of the Bankruptcy Code, effective as of the Effective Date, of the substantive consolidation of the Chapter 11 Cases for all purposes related to the Plan, including, without limitation, for purposes of voting, confirmation and distribution. Pursuant to such order, (i) all assets and liabilities of the Subsidiaries shall be deemed merged or treated as though they were merged into and with the assets and liabilities of Pioneer, (ii) no distributions shall be made under the Plan on account of intercompany claims among the Debtors (except as set forth in Section 7.1 of the Plan), (iii) all guarantees of the Debtors of the obligations of any other Debtor shall be deemed eliminated so that any Claim against any Debtor and any guarantee thereof executed by any other Debtor and any joint or several liability of any of the Debtors shall be deemed to be one obligation of the consolidated Debtors, and (iv) each and every Claim filed or to be filed in the Chapter 11 Case of any of the Debtors shall be deemed filed against the consolidated Debtors, and shall be deemed one Claim against and obligation of the consolidated Debtors. Such substantive consolidation shall not (other than for purposes related to the Plan) affect (i) the legal and corporate structures of the Reorganized Debtors, subject to the right of the Debtors or Reorganized Debtors to effect restructurings as provided in Section 7.1 of the Plan, (ii) intercompany claims by and among the Debtors or Reorganized Debtors, (iii) Subsidiary Equity Interests, and (iv) pre- and post-Commencement Date guarantees that are required to be maintained (a) in connection with executory contracts or unexpired leases that were entered into during the Chapter 11 Cases or that have been or will be assumed or (b) pursuant to the Plan. Notwithstanding the substantive consolidation of the Chapter 11 Cases, PCICC has filed a separate Canadian Plan; however, creditors proving Claims against PCICC will be entitled to the same treatment under the Canadian Plan as is provided for the in the Plan. 32 39 5. Issuance and Transfers of Common Stock of the Subsidiaries On the Effective Date, shares of New Common Stock of the Reorganized Subsidiaries will be issued to Reorganized PCI directly or indirectly so as to recreate the prepetition corporate structure, subject to Section 7.1 of the Plan. 6. Merger of Corporate Entities The Plan provides that, on or as of the Effective Date, as determined by the Debtors with the consent of the Creditors' Committee, any or all of the Subsidiaries may be merged into one or more of the Debtors or dissolved. Upon the occurrence of any such merger, all assets of the merged entities shall be transferred to and become the assets of the surviving corporation, and all liabilities of the merged entities, except to the extent discharged, released or extinguished pursuant to the Plan and the Confirmation Order, shall be assumed by and shall become the liabilities of the surviving corporation. All mergers and dissolutions shall be effective as of the Effective Date pursuant to the Confirmation Order without any further action by the stockholders or directors of any of the Debtors, the Debtors in Possession or the Reorganized Debtors. The Debtors will determine whether any or all of the Subsidiaries will be merged into one or more of the Debtors or dissolved, and disclose the same (and the post-merger and/or dissolution structure of the Reorganized Debtors) to the Bankruptcy Court, prior to the Confirmation Hearing. F. Treatment of Executory Contracts and Unexpired Leases. The Bankruptcy Code grants the Debtors the power, subject to the approval of the Bankruptcy Court, to assume or reject executory contracts and unexpired leases. If an executory contract or unexpired lease is rejected, the other party to the agreement may file a claim for damages incurred by reason of the rejection. In the case of rejection of leases of real property, such damage claims are subject to certain limitations imposed by the Bankruptcy Code. Pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, all executory contracts and unexpired leases that exist between the Debtors and any person shall be deemed assumed by the Reorganized Debtors as of the Effective Date, except for any executory contract or unexpired lease (i) which has been assumed pursuant to an order of the Bankruptcy Court entered prior to the Confirmation Date, (ii) which has been rejected pursuant to an order of the Bankruptcy Court entered prior to the Confirmation Date, (iii) as to which a motion for approval of the rejection of such executory contract or unexpired lease has been Filed and served prior to the Confirmation Date or (iv) which is set forth in Schedule 6.1(a)(x) (executory contracts) or Schedule 6.1(a)(y) (unexpired leases), which Schedules shall be included as part of the Plan Supplement which will be Filed with the Bankruptcy Court at least ten (10) days prior to the last day upon which holders of Claims may vote to accept or reject the Plan. The Debtors or Reorganized Debtors reserve the right, at any time on or prior to the Confirmation Date, to amend Schedules 6.1(a)(x) or 6.1(a)(y) to delete any executory contract or unexpired lease therefrom or add any executory contract or unexpired lease thereto, in which event such executory contract(s) or unexpired lease(s) shall be deemed to be, respectively, assumed or rejected. The Debtors or Reorganized Debtors shall provide notice of any amendments to Schedules 6.1(a)(x) or 6.1(a)(y) to the parties to the executory contracts and unexpired leases 33 40 affected thereby. The listing of an agreement on Schedules 6.1(a)(x) and 6.1(a)(y) shall not constitute an admission by the Debtors or Reorganized Debtors that such agreement is an executory contract or an unexpired lease or that the Debtors or Reorganized Debtors have any liability thereunder. Pursuant to the Plan, each executory contract and unexpired lease listed or to be listed on Schedules 6.1(a)(x) or 6.1(a)(y) that relates to the use or occupancy of real property shall include (i) modifications, amendments, supplements, restatements, or other agreements made directly or indirectly by any agreement, instrument, or other document that in any manner affects such executory contract or unexpired lease, without regard to whether such agreement, instrument or other document is listed on Schedules 6.1(a)(x) or 6.1(a)(y) and (ii) executory contracts or unexpired leases appurtenant to the premises listed on Schedules 6.1(a)(x) or 6.1(a)(y), including, without limitation, all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, powers, uses, usufructs, reciprocal easement agreements, vault, tunnel or bridge agreements or franchises, and any other interests in real estate or rights in rem relating to such premises to the extent any of the foregoing are executory contracts or unexpired leases, unless any of the foregoing agreements previously have been assumed. Pursuant to the Plan, each of the Debtors' insurance policies and any agreements, documents or instruments relating thereto, including, without limitation, any retrospective premium rating plans relating to such policies, shall be treated as executory contracts under the Plan. Notwithstanding the foregoing, distributions under the Plan to any holder of a Claim covered by any of such insurance policies and related agreements, documents or instruments that are assumed under the Plan, shall be in accordance with the treatment provided under Article IV and Section 5.5 of the Plan. The treatment of the Debtors' insurance policies and any agreements, documents or instruments relating thereto as executory contracts under the Plan shall not constitute or be deemed a waiver of any Cause of Action that the Debtors may hold against any entity, including, without limitation, the insurer under any of the Debtors' policies of insurance. See Section V.H., "The Plan of Reorganization--Distributions Relating to Allowed Insured Claims." Except as provided in Section 6.1(a) of the Plan, all employment and severance practices and policies and all compensation and benefit plans, policies and programs of the Debtors applicable to their directors, officers or employees, including, without limitation, all savings plans, retirement plans, health care plans, severance benefit plans, incentive plans, workers' compensation programs and life, disability and other insurance plans are treated as executory contracts under the Plan and are assumed under the Plan pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code. The entry of the Confirmation Order by the Bankruptcy Court shall constitute (i) the approval of all assumptions pursuant to the Plan, (ii) the approval of all rejections pursuant to the Plan and (iii) the approval, pursuant to section 365(d)(4) of the Bankruptcy Code, of the extension of time within which the Debtors may assume or reject unexpired leases pursuant to the Plan, through the date of entry of an order approving the assumption or rejection of such unexpired leases. 34 41 Except as may otherwise be agreed to by the parties, within sixty (60) days after the Effective Date or as soon thereafter as is practicable, the Reorganized Debtors shall cure any and all undisputed defaults under any executory contract or unexpired lease assumed pursuant to the Plan in accordance with section 365(b)(1) of the Bankruptcy Code or in accordance with agreements previously negotiated by the parties in respect of the reduction of prepetition Claims, as applicable. All disputed defaults that are required to be cured shall be cured either within thirty (30) days of the entry of a Final Order determining the amount, if any, of the Debtors' or Reorganized Debtors' liability with respect thereto, or as may otherwise be agreed to by the parties. Claims arising out of the rejection of executory contracts or unexpired leases pursuant to the Plan must be Filed with the Bankruptcy Court and/or served upon the Debtors or Reorganized Debtors as otherwise may be provided in the Confirmation Order, by no later than thirty (30) days after the later of (i) notice of entry of an order approving the rejection of such executory contract or unexpired lease, (ii) notice of entry of the Confirmation Order and (iii) notice of an amendment to Schedule 6.1(a)(x) or 6.1(a)(y). Any Claims not Filed within such time will be forever barred from assertion against the Debtors, their Estates, the Reorganized Debtors and their property. Unless otherwise ordered by the Bankruptcy Court, all Claims arising from the rejection of executory contracts and unexpired leases shall be treated as General Unsecured Claims under the Plan. G. Provisions for Treatment of Disputed Claims and Equity Interests. Except as to applications for allowances of Compensation and Reimbursement Claims under sections 330 and 503 of the Bankruptcy Code, the Debtors or Reorganized Debtors shall have the exclusive right to make and File objections to Administrative Expense Claims, Claims and Equity Interests subsequent to the Confirmation Date. All objections shall be litigated to Final Order, subject to the Debtors' and Reorganized Debtors' right to compromise, settle, otherwise resolve or withdraw any such objections, without approval of the Bankruptcy Court. Unless otherwise ordered by the Bankruptcy Court, the Debtors or Reorganized Debtors shall File all objections to Administrative Expense Claims that are the subject of proofs of claim or requests for payment Filed with the Bankruptcy Court (other than applications for allowances of Compensation and Reimbursement Claims), Claims and Equity Interests and serve such objections upon the holder of the Administrative Expense Claim, Claim or Equity Interest as to which the objection is made as soon as is practicable, but in no event later than sixty (60) days after the Effective Date or such later date as may be approved by the Bankruptcy Court. Notwithstanding any other provision of the Plan, if any portion of a Claim or Equity Interest is Disputed, no payment or distribution provided under the Plan will be made on account of any of such Claim or Equity Interest, unless such Disputed Claim or Disputed Equity Interest becomes Allowed. Payments and distributions to each holder of a Claim or Equity Interest that is Disputed or is not Allowed, to the extent that such Claim or Equity Interest ultimately becomes Allowed, will be made in accordance with the provisions of the Plan governing the Class of Claims or Equity Interests in which such Claim or Equity Interest is classified. See Section V.A., "The Plan of Reorganization--Classification and Treatment of Claims and Equity Interests." 35 42 Pursuant to the Disclosure Statement Order, a copy of which is annexed hereto as Exhibit B, the Bankruptcy Court has allowed certain Disputed Claims in certain amounts solely for the purpose of permitting holders thereof to vote to accept or reject the Plan. The specific provisions relating to the voting of such Claims are set forth in such order. H. Distributions Relating to Allowed Insured Claims. Distributions under the Plan to each holder of an Allowed Claim arising from an incident or occurrence that is covered under the Debtors' insurance policies (the "Allowed Insured Claims") shall be in accordance with the treatment provided under the Plan for the Class in which such Allowed Insured Claim is classified, but solely to the extent that such Allowed Insured Claim is not satisfied from proceeds payable to the holder thereof under any pertinent insurance policies and applicable law. Nothing contained in the preceding sentence shall constitute or be deemed a waiver of any Cause of Action that the Debtors or any entity may hold against any other entity, including, without limitation, insurers under any policies of insurance. I. Implementation and Effect of Confirmation. a. Means for Implementation of the Plan. In addition to the provisions set forth elsewhere in the Plan, the following shall constitute the means for implementation of the Plan: (i) Exit Financing. On the Effective Date, the transactions contemplated by the Exit Facility shall be consummated and thereupon become effective. (ii) Effectiveness of Securities, Instruments and Agreements. On the Effective Date, all documents set forth in the Plan Supplement and all other agreements entered into or documents issued pursuant to the Plan, including, without limitation the New Tranche A Term Loan Agreement, the New Tranche A Term Notes, the New Tranche B Notes Indenture, the New Tranche B Notes, the Guarantees, the MEIP, the New Common Stock, and/or any agreement entered into or instrument issued or in connection with any of the foregoing shall become effective and binding in accordance with their respective terms and conditions upon the parties thereto and shall be deemed to become effective simultaneously. (iii) Corporate Action for Reorganized Debtors. On the Effective Date, all matters provided for under the Plan that would otherwise require approval of the stockholders, directors or members of one or more of the Debtors or Reorganized Debtors or their successors in interest under the Plan, including, without limitation, the issue of preferred stock, the New Common Stock, the New Notes, the Guarantees, and documents relating thereto, the authorization to issue options pursuant to the MEIP, the amendment and restatement of certificates of incorporation and bylaws of the Reorganized Debtors, corporate mergers or dissolutions effectuated pursuant to the Plan, and the election or appointment, as the case may be, of directors and officers of the Debtors pursuant to the Plan, shall be taken without such authorizations pursuant to section 303 of the General Corporation Law of the State of Delaware, in the case of the Debtors and Reorganized Debtors incorporated in the State of Delaware, and, in the case of Debtors and Reorganized Debtors organized outside the State of Delaware, pursuant to the applicable 36 43 general corporation law of such other jurisdictions. On the Effective Date or as soon thereafter as is practicable, the Reorganized Debtors shall, if required, file their amended certificates of incorporation with the Secretary of State of the state in which each Reorganized Debtor is incorporated, in accordance with the applicable general corporation law of such states. (iv) Approval of Agreements. The solicitation of votes on the Plan shall be deemed a solicitation for the approval of the Plan Documents and all transactions contemplated by the Plan. Entry of the Confirmation Order shall constitute approval of the Plan Documents and such transactions, including, without limitation, the transactions listed in Section 7.1 of the Plan. (v) Shelf Registration Statements. Prior to the Effective Date, the Reorganized Debtors shall file with the SEC, at their expense, a "shelf" registration statement or registration statements on the applicable registration forms (the "Shelf Registration Statements") under the Securities Act for the offering for resale on a continuous or delayed basis (the "Shelf Registration" or "Shelf Registrations") of the New Tranche B Notes (and the Guarantees thereof), and the New Common Stock held by persons who may be deemed to be "underwriters" (the New Tranche B Notes, the related Guarantees, and the New Common Stock are referred to collectively as the "Registerable Securities"). Each person who is to receive, pursuant to the Plan, an aggregate of ten percent (10%) or more of the New Common Stock shall be named as a "selling securityholder" in the prospectus or prospectuses to be included in such Shelf Registration Statements subject only to the provision of certain information required to be included therein. Each person who, pursuant to the Plan, is to receive an aggregate of greater than five percent (5%), but less than ten percent (10%) of New Common Stock shall be named as a "selling securityholder" in such prospectus upon written notice to the Debtors, received prior to the effectiveness of such Shelf Registration Statements, stating upon such person's election to be so named and providing certain information required to be included therein. The Reorganized Debtors shall use their best efforts to have the Shelf Registration declared effective on the Effective Date, and the Reorganized Debtors shall use their best efforts to keep the Shelf Registration effective for a three-year period from the Effective Date (the "Three-Year Period") and supplement or make amendments to the Shelf Registration, if required under the Securities Act or by the rules and regulations promulgated thereunder, or in accordance with the terms of the Registration Rights Agreement, and have such supplements and amendments declared effective as soon practicable after filing. Any person that holds five percent (5%) or more of any Registerable Security at the expiration of effectiveness of the Shelf Registration or Shelf Registrations after the Three-Year Period, but who has not sold such Registerable Security pursuant to the Shelf Registration Statements shall be granted customary demand and piggyback registration rights by the Debtors with respect to all Registerable Securities held by such person at such time; provided, however, that in no event shall holders of Registerable Securities have more than two (2) demand registration rights in any 12-month period nor more than seven (7) demand registration rights in the aggregate. Prior to the Effective Date, the Reorganized Debtors shall enter into a registration rights agreement with respect to the matters described in Section 9.1(e) of the Plan, which 37 44 registration rights agreement shall be in substantially the form contained in the Plan Supplement. (vi) Cancellation of Existing Securities and Agreements. Except as provided in Section 7.1 of the Plan, on the Effective Date, the PCICC Senior Notes, the PCA Senior Notes, and any or all instruments evidencing Canadian Secured Term and Note Claims or PCA U.S. Secured Term and Notes Claims shall be canceled and extinguished, and the holders thereof shall have no rights and such instruments shall evidence no rights, except the right to receive the distributions, if any, to be made to holders of such instruments under the Plan and pursuant to the implementation of the transactions set forth in Section 7.1 of the Plan. Except with respect to the performance by the Indenture Trustees or their agents of the obligations of the Indenture Trustees under the Plan or in connection with any distribution to be made under the Plan, effective as of the Effective Date, the Indenture Trustees and their agents, successors and assigns shall be discharged of all of their obligations associated with, as the case may be, the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA U.S. Term Loan Agreement, the PCA Canadian Credit Agreement and related agreements and released from all Claims arising in the Chapter 11 Cases and, effective as of the Effective Date, the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA U.S. Term Loan Agreement, and the PCA Canadian Credit Agreement shall be deemed canceled, except that such cancellation shall not impair the rights of either (i) the holders of PCICC Senior Notes and/or PCA Senior Notes or (ii) the holders of debt under the PCA U.S. Term Loan Agreement and/or the PCA Canadian Credit Agreement to receive distributions under the Plan or the rights of the Indenture Trustees under their respective charging liens, if any, pursuant to, as the case may be, the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA U.S. Term Loan Agreement, and the PCA Canadian Credit Agreement to the extent that any of the Indenture Trustees have not received payment. (vii) Rights of the Indenture Trustees. The Indenture Trustees shall be entitled to Administrative Expense Claims as provided for in, and subject to the restrictions of, this section of the Plan and no Reorganized Debtor shall have any obligations to any indenture trustee, including the Indenture Trustees, agent or servicer (or to any Disbursing Agent replacing such indenture trustee, agent or servicer) for any fees, costs or expenses except as expressly set forth in this section of the Plan. Prior to the Effective Date, the Indenture Trustees shall provide the Debtors with a statement of the Indenture Trustee Expenses projected through the Effective Date. Upon the timely receipt of one or more invoices in accordance with the preceding sentence, the Reorganized Debtors shall, on the Effective Date, pay the Indenture Trustees' Expenses, in full, in Cash. Notwithstanding the foregoing, to the extent that the Reorganized Debtors dispute any portion of the Indenture Trustees' Expenses, the Reorganized Debtors shall reserve Cash on the Effective Date in such Disputed amount and such dispute shall be presented to the Bankruptcy Court for adjudication. On the Effective Date, subject to the payment of the non-Disputed portion of the Indenture Trustees' Expenses and the establishment of the reserve set forth in the preceding sentence with respect to any Disputed portion of the Indenture Trustee Expenses, all Liens of the Indenture Trustees in any distributions shall be forever released and discharged. Once the Indenture Trustees have completed performance of all of their duties set forth in the Plan or in connection with any 38 45 distributions to be made under the Plan, if any, the Indenture Trustees, and their successors and assigns, shall be relieved of all obligations as the Indenture Trustees, respectively, effective as of the Effective Date. (viii) Surrender of Existing Securities. As a condition precedent to receiving any distribution pursuant to the Plan, each holder of a Canadian Secured Term and Note Claim and/or a PCA U.S. Secured Term and Note Claim who holds such securities in certificated form must surrender such PCICC Senior Note, PCA Senior Note or other instrument evidencing such Canadian Secured Term and Note Claim or PCA U.S. Secured Term and Note Claim to the appropriate Disbursing Agent pursuant to a letter of transmittal furnished by the Disbursing Agents. Any New Notes to be distributed pursuant to the Plan on account of any such Claim will, pending such surrender, be treated as an undeliverable distribution. (ix) Special Procedures for Lost, Stolen, Mutilated or Destroyed Instruments. In addition to any requirements under the Debtors' certificates of incorporation or bylaws, any holder of a Claim evidenced by an instrument that has been lost, stolen, mutilated or destroyed will, in lieu of surrendering such instrument, deliver to the Disbursing Agents: (a) evidence satisfactory to the Disbursing Agents and the Debtors of the loss, theft, mutilation or destruction and (b) such security or indemnity as may be required by the Disbursing Agents to hold the Disbursing Agents and the Debtors harmless from any damages, liabilities or costs incurred in treating such individual as a holder of an instrument. Upon compliance with Section 9.1(i) of the Plan, the holder of a Claim evidenced by any such lost, stolen, mutilated or destroyed instrument will, for all purposes under the Plan, be deemed to have surrendered such instrument. (x) New Tranche A Term Notes. The New Tranche A Term Notes shall be in the aggregate principal amount of $50 million, shall be issued by PCA or its successor in interest pursuant to the New Tranche A Term Loan Agreement, shall bear interest at the LIBOR Rate plus 350 basis points, shall be payable monthly, shall be prepayable with excess cash flow and shall mature on the date five (5) years after the Effective Date (the "New Tranche A Term Notes"). (xi) The New Tranche B Notes. The New Tranche B Notes shall be in the aggregate principal amount of $150 million, shall be issued by PCICC or its successor in interest pursuant to the New Tranche B Notes Indenture, shall bear interest at ten percent (10.0%) per annum, shall be payable semi-annually and shall mature on the date seven (7) years after the Effective Date (the "New Tranche B Notes"). The New Tranche B Notes shall be redeemable at a price equal to 105% of the principal amount thereof until the fourth (4th) anniversary of the Effective Date, at a price equal to 102.5% of the principal amount thereof from the fourth (4th) anniversary until the fifth (5th) anniversary of the Effective Date, and at a price equal to 100% of the principal amount thereof thereafter. Any such redemption shall include accrued and unpaid interest. (xii) Liens Securing New Tranche A Term Notes and New Tranche B Notes. The New Tranche A Term Notes and the New Tranche B Notes shall be secured by (i) first priority Liens on all of the Reorganized Debtors' real and personal property, 39 46 tangible and intangible assets, rights, titles, and interests now owned or hereinafter acquired, with the exception of (a) those assets of the Reorganized Debtors that are subject to Liens on accounts receivable, inventory, and general intangibles that relate thereto pursuant to the Exit Facility, and (b) those assets of the Reorganized Debtors that are subject to Liens relating to or arising under the Other Secured Claims; and (ii) second priority Liens on all assets of the Reorganized Debtors that are subject to other prior Liens (other than assets of the Reorganized Debtors that are subject to Liens to secure the Exit Facility, unless the Exit Facility allows for the grant of such Liens) as of the Effective Date, provided, however, that such second priority Liens shall be subject and subordinate to the enforcement rights of the senior lienholder under the Exit Facility. The New Tranche A Term Notes and the New Tranche B Notes shall rank senior in right of payment to all other indebtedness and obligations of the Reorganized Debtors, with the exception of the Exit Facility, with respect to which the New Tranche A Term Notes and the New Tranche B Notes shall rank pari passu. On the Effective Date, the Reorganized Debtors shall execute and deliver to the appropriate New Indenture Trustee in connection with the New Tranche A Term Loan Agreement and in connection with the New Tranche B Notes Indenture, such documents, instruments, and agreements entered into in connection therewith. On the Effective Date, the Reorganized Debtors shall execute and deliver such further documents, instruments, and agreements necessary to effectuate and further evidence the terms and conditions of the Plan. (xiii) Guarantees. On the Effective Date, each of the Reorganized Debtors, other than the applicable issuer, will guarantee payment in full when due, whether at maturity, by acceleration, redemption, or otherwise, and all other obligations of the respective issuers under the New Tranche A Term Notes and the New Tranche B Notes (collectively, the "Guarantees"). (xiv) New Common Stock. The New Common Stock shall have a par value of $.01 per share and such rights with respect to dividends, liquidation, voting and other matters as are provided for by applicable nonbankruptcy law or in the Amended PCI Certificate of Incorporation and the Amended PCI Bylaws. (xv) Listing of New Common Stock. Reorganized PCI shall use reasonable commercial efforts to cause the shares of New Common Stock to be listed on a national securities exchange or the Nasdaq National Market. (xvi) Operation of the Debtors in Possession Between the Confirmation Date and the Effective Date. The Debtors shall continue to operate as debtors in possession, subject to the supervision of the Bankruptcy Court, pursuant to the Bankruptcy Code during the period from the Confirmation Date through and until the Effective Date, and any obligation incurred by the Debtors in Possession during that period shall constitute an Administrative Expense Claim. (xvii) Administration After the Effective Date. After the Effective Date, the Reorganized Debtors may operate their businesses, and may use, acquire, and dispose of their property, free of any restrictions of the Bankruptcy Code and Bankruptcy Rules, but 40 47 subject to the continuing jurisdiction of the Bankruptcy Court as set forth in Article 11 of the Plan. b. Term of Bankruptcy Injunction or Stays. All injunctions or stays provided for in the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date. c. Revesting of Assets. (i) The property of the Estates of the Debtors shall revest in the Reorganized Debtors on the Effective Date. (ii) From and after the Effective Date, the Reorganized Debtors may operate their businesses, and may use, acquire and dispose of property free of any restrictions imposed under the Bankruptcy Code. (iii) As of the Effective Date, all property of the Debtors and Reorganized Debtors shall be free and clear of all Liens, Claims and interests of holders of Claims and Equity Interests, except as provided in the Plan. d. Causes of Action. As of the Effective Date, pursuant to section 1123(b) (3)(B) of the Bankruptcy Code, any and all Causes of Action and avoidance Claims the Debtors and Debtors in Possession are empowered to bring under sections 502(d), 544, 545, 547, 548, 549, 550 and 551 of the Bankruptcy Code or applicable non-bankruptcy law, shall become assets of the Reorganized Debtors, and the Reorganized Debtors shall have the authority to prosecute such Causes of Action and avoidance Claims for the benefit of the Estates of the Debtors. Specifically, the Debtors are reviewing their Schedules, including payments made in the ninety days prior to the Commencement Date as listed in Section 3(a) of their Statement of Financial Affairs, and the Debtors and the Reorganized Debtors reserve the right to identify, pursue and prosecute all Causes of Action and avoidance Claims thereunder. The Reorganized Debtors shall have the authority to compromise and settle, otherwise resolve, discontinue, abandon or dismiss all Causes of Action and avoidance Claims without approval of the Bankruptcy Court. e. Discharge of Debtors. The rights afforded herein and the treatment of all Claims and Equity Interests herein shall be in exchange for and in complete satisfaction, discharge and release of Claims and Equity Interests of any nature whatsoever, including any interest accrued on such Claims from and after the Commencement Date, against the Debtors and the Debtors in Possession, or any of their assets or properties. Except as otherwise provided herein, (a) on the Effective Date, all such Claims against and Equity Interests in the Debtors shall be satisfied, discharged and released in full, and (b) all persons shall be precluded from asserting against the Reorganized Debtors, their successors, or their assets or properties any other or further Claims or Equity Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. f. Injunction. Except as otherwise expressly provided in the Plan, the Confirmation Order or a separate Order of the Bankruptcy Court, all entities who have held, hold or may hold Claims against or Equity Interests in any or all of the Debtors, are permanently enjoined, on and after the Effective Date, from (a) commencing or continuing in any manner any action or other 41 48 proceeding of any kind with respect to any such Claim or Equity Interest; (b) the enforcement, attachment, collection or recovery by any manner or means of any judgment, award, decree or order against the Debtors on account of any such Claim or Equity Interest; (c) creating, perfecting or enforcing any encumbrance of any kind against the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest; and (d) asserting any right of setoff, subrogation or recoupment of any kind against any obligation due from the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest. Such injunction shall extend to successors of the Debtors (including, without limitation, the Reorganized Debtors) and their respective properties and interests in property. J. Conditions Precedent to Effectiveness of the Plan. 1. Conditions Precedent The Plan shall not become effective unless and until the following conditions shall have been satisfied or waived pursuant to Section 10.3 of the Plan: a. The Confirmation Order shall authorize and direct that the Debtors and the Reorganized Debtors take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases and other agreements or documents created in connection with the Plan, including those actions contemplated by the provisions of the Plan set forth in Section 9.1 of the Plan. b. The Confirmation Order shall be in form and substance reasonably satisfactory to the Creditors' Committee and shall have become a Final Order. c. The statutory fees owing to the United States Trustee shall have been paid in full. d. All Plan Documents shall be in a form satisfactory to the Debtors, the Reorganized Debtors, and the Creditors' Committee. e. The Exit Facility shall have been entered into by all parties thereto and all conditions to the initial draw thereunder shall have been satisfied in accordance with the terms thereof. f. The CCAA Order shall have been issued in a form and substance acceptable to the Creditors' Committee, shall not have been reversed, stayed, modified or amended, and shall have become final, binding, and nonappealable. g. The Shelf Registration shall have become effective. h. All other actions, authorizations, consents and regulatory approvals required (if any) and all Plan Documents necessary to implement the provisions of the Plan shall have been obtained, effected or executed in a manner acceptable to the Debtors and the Creditors' Committee or, if waivable, waived by the Person or Persons entitled to the benefit thereof. 42 49 2. Effect of Failure of Conditions. If each condition to the Effective Date has not been satisfied or duly waived within sixty (60) days after the Confirmation Date, then (unless the period for satisfaction or waiver of conditions has been extended at the option of the Debtors for a period not exceeding 120 days) upon motion by any party in interest, made before the time that each of the conditions has been satisfied or duly waived and upon notice to such parties in interest as the Bankruptcy Court may direct, the Confirmation Order will be vacated by the Bankruptcy Court; provided however, that notwithstanding the Filing of such motion, the Confirmation Order may not be vacated if each of the conditions to the Effective Date is either satisfied or duly waived before the Clerk enters a Final Order granting such motion. If the Confirmation Order is vacated pursuant to this Section 10.2, this Plan shall be deemed null and void in all respects, including without limitation the discharge of Claims pursuant to Section 1141 of the Bankruptcy Code and the assumptions or rejections of executory contracts and unexpired leases provided for herein, and nothing contained herein shall (1) constitute a waiver or release of any Claims by, or Claims against, the Debtors or (2) prejudice in any manner the rights of the Debtor. 3. Waiver of Conditions to Confirmation and Effective Date. Each of the conditions to Confirmation and the Effective Date, other than the conditions set forth in Section 10.1 of the Plan, may be waived in whole or in part by the Debtors and the Creditors' Committee at any time, without notice or an Order of the Bankruptcy Court. The failure to satisfy or to waive any condition may be asserted by the Debtors or the Creditors' Committee regardless of the circumstances giving rise to failure of such condition to be satisfied (including any action or inaction by the Debtors). The failure of the Debtors or the Creditors' Committee to exercise any of the foregoing rights will not be deemed a waiver of any other rights, and each such right will be deemed an ongoing right that may be asserted at any time. 4. Effects of Plan Confirmation. a. Limitation of Liability. Neither the Debtors, the Reorganized Debtors, the Creditors' Committee, the Ad Hoc Committee, U.S. Trust nor any of their respective post-Petition Date employees, officers, directors, agents or representatives, or any Professionals (which, for the purpose of Section 10.4 of the Plan, shall include any Canadian counsel of the Debtors, the Reorganized Debtors, the Creditors' Committee, and the Ad Hoc Committee) employed by any of them (a "Plan Participant"), shall have or incur any liability to any Person whatsoever, including, specifically, any Holder of a Claim, under any theory of liability, for any act taken or omission made in good faith directly related to formulating, preparing, disseminating, implementing, confirming or consummating this Plan, the Confirmation Order, or any contract, instrument, release, or other agreement or document created or entered into, or any other act taken or omitted to be taken in connection with this Plan, provided that nothing in this paragraph shall limit the liability of any Person for breach of any express obligation it has under the terms of this Plan or under any agreement or other document entered into by such Person either post-petition or in accordance with the terms of this Plan or for any breach of a duty of care owed to any other Person occurring after the Effective Date. Nothing contained herein shall 43 50 bar public investors from bringing direct, rather than derivative, claims and actions against officers, directors, and other third parties. b. Releases. Except as otherwise provided in this Plan or the Confirmation Order, on the Effective Date, the Debtors will release unconditionally, and hereby are deemed to release unconditionally (i) each of the Debtors' officers, directors, shareholders, employees, consultants, attorneys, accountants, financial advisors and other representatives, (ii) the Creditors' Committee and, solely in their capacity as members of representatives of the Creditors' Committee, each member, consultant, attorney, accountant or other representative of the Creditors' Committee, (iii) the Ad Hoc Committee and, solely in their capacity as members or representatives of the Ad Hoc Committee, each member, consultant, attorney, accountant or other representative of the Ad Hoc Committee, (iv) the PCA Senior Notes Indenture Trustee and PCICC Senior Notes Indenture Trustee, (v) all holders of Canadian Secured Term and Note Claims and/or PCA U.S. Secured Term and Notes Claims who may be entitled to receive distribution of property pursuant to this Plan, and (vi) if a holder votes its Claim to accept the Plan, such holder of a Pioneer Group 2000 Claim and, in each case, any affiliate of such persons (the persons specified in clauses (i), (ii), (iii), (iv), (v), and (vi) are referred to collectively as the "Debtors' Releasees"), from any and all Claims, direct actions, Causes of Action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees), whether fixed or contingent, liquidated or unliquidated, direct or indirect, known or unknown which the Debtors ever had, now have, or hereafter can, shall or may have, in law, equity or otherwise, for, upon or arising out of or by reason of any fact, event, circumstance, matter, cause or thing whatsoever taking place on or prior to the Effective Date in any way relating to the Debtors' Releasees, the Debtors, the Chapter 11 Cases or this Plan, including Claims or Causes of Action under Chapter 5 of the Bankruptcy Code. If and to the extent that the Bankruptcy Court concludes that the Plan cannot be confirmed with any portion of the foregoing releases, then the Debtors, with the prior consent of the Creditors' Committee, reserve the right to amend the Plan so as to give effect as much as possible to the foregoing releases, or to delete them provided, however, that the foregoing mutual release shall not apply to any Claims, direct actions, Causes of Action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees) in the case of fraud. c. Mutual Releases. On the Effective Date, the Debtors, the Debtors in Possession, the members of the Creditors' Committee, the PCA Senior Notes Indenture Trustee and the PCICC Senior Notes Indenture Trustee shall be deemed to have released each other, its, and such other's affiliates, principals, officers, directors, attorneys, accountants, financial advisors, advisory affiliates, employees, and agents from any and all Claims, direct actions, Causes of Action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees), whether fixed or contingent, liquidated or unliquidated, direct or indirect, known or unknown which they ever had, now have, or hereafter can, shall or may have, in law, equity or otherwise, for, upon or arising out of or by reason of any fact, event, circumstance, matter, cause or thing whatsoever taking place on or prior to the Effective Date in any way relating to the Debtors, the Debtors in Possession, the members of the Creditors Committee, the PCA Senior Notes Indenture Trustee and the PCICC Senior Notes Indenture Trustee, the Chapter 11 Cases, 44 51 or this Plan; provided, however, that the foregoing mutual release shall not apply to any Claims, direct actions, Causes of Action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees) (i) arising under or are based on this Plan, the Related Documents, or any other document, instrument or agreement to be executed or delivered thereunder or (ii) in the case of fraud. If and to the extent that the Bankruptcy Court concludes that the Plan cannot be confirmed with any portion of the foregoing releases, then the Debtors, with the prior consent of the Creditors' Committee, reserve the right to amend the Plan so as to give effect as much as possible to the foregoing releases, or to delete them. K. Implementation and Effect of Confirmation of the Plan. The property of the Estates of the Debtors shall revest in the Reorganized Debtors on the Effective Date, and shall be free and clear of all Liens, Claims and interests of holders of Claims and Equity Interests, except as provided in the Plan. From and after the Effective Date, the Reorganized Debtors may operate their businesses, and may use, acquire and dispose of property free of any restrictions imposed under the Bankruptcy Code. All injunctions or stays provided for in the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date. L. Discharge and Injunction. The rights afforded in the Plan and the treatment of all Claims and Equity Interests in the Plan shall be in exchange for and in complete satisfaction, discharge and release of Claims and Equity Interests of any nature whatsoever, including any interest accrued on such Claims from and after the Commencement Date, against the Debtors and the Debtors in Possession, or any of their assets or properties. Except as otherwise provided in the Plan, (i) on the Effective Date, all such Claims against and Equity Interests in the Debtors shall be satisfied, discharged and released in full, and (ii) all persons shall be precluded from asserting against the Reorganized Debtors, their successors, or their assets or properties any other or further Claims or Equity Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. Except as otherwise expressly provided in the Plan or the Confirmation Order, all entities who have held, hold or may hold Claims against or Equity Interests in any or all of the Debtors, are permanently enjoined, on and after the Effective Date, from (i) commencing or continuing in any manner any action or other proceeding of any kind with respect to any such Claim or Equity Interest, (ii) the enforcement, attachment, collection or recovery by any manner or means of any judgment, award, decree or order against the Debtors on account of any such Claim or Equity Interest, (iii) creating, perfecting or enforcing any encumbrance of any kind against the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest and (iv) asserting any right of setoff, subrogation or recoupment of any kind against any obligation due from the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest. Such injunction shall extend to successors of the Debtors (including, without limitation, the Reorganized Debtors) and their respective properties and interests in property. 45 52 M. Summary of Other Provisions of the Plan. The following paragraphs summarize certain other significant provisions of the Plan. The Plan should be referred to for the complete text of these and other provisions of the Plan. 1. Retiree Benefits The Plan provides that, pursuant to section 1114(a) of the Bankruptcy Code, payments, if any, due to any person for the purpose of providing or reimbursing payments for retired employees and their spouses and dependents for medical, surgical, or hospital care benefits, or benefits in the event of sickness, accident, disability, or death under any plan, fund, or program (through the purchase of insurance or otherwise) maintained or established in whole or in part by the Debtors prior to the Commencement Date shall be continued for the duration of the period the Debtors have obligated themselves to provide such benefits. Pursuant to the terms of the Debtors' retiree benefits plans, the Debtors reserve the right to modify or terminate benefits under such plans at any time, or from time to time. The Pension Benefit Guaranty Corporation ("PBGC") is the United States government agency that administers the mandatory termination insurance program for defined benefit pension plans under Title IV of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. ss.ss. 1301-1461 (1994 & Supp. V 1999). A defined benefit pension plan is one that provides an employee, upon retirement, a fixed, periodic payment as determined by the terms of the plan. See 29 U.S.C. ss. 1002(35). The PBGC guarantees the payment of certain pension benefits upon termination of a defined benefit pension plan. See 29 U.S.C. ss.ss. 1321, 1322. The Retirement Plans are intended to be maintained in accordance with Title IV of ERISA. In the event of a termination of the Retirement Plans, ERISA may impose joint and several liability for any unfunded benefit liabilities under the Retirement Plans on the Debtors and all members of the Debtors controlled group of corporations. See 29 U.S.C. ss. 1362(a). Defined benefit plans covered by Title IV of ERISA may be terminated only if the statutory requirements of either sections 4041 or 4042 of ERISA are met. 29 U.S.C. ss.ss. 1341, 1342. The Debtors intend to continue to fund the Retirement Plans in accordance with the minimum funding standards under ERISA, pay all required PBGC insurance premiums, and comply with all applicable requirements of the Retirement Plans and ERISA. In addition, the Debtors' Chapter 11 Cases, and in particular the Plan, the Confirmation Order and section 1141 of the Bankruptcy Code, shall not in any way be construed as discharging, releasing or relieving the Debtors, or any other party, in any capacity, from any liability with respect to the Retirement Plans under any law, governmental policy or regulatory provision. PBGC and the Retirement Plans shall not be enjoined or precluded from enforcing such liability as a result of any of the provisions of the Plan or the Plan's confirmation. 2. Amended Bylaws and Amended Certificates of Incorporation The amended and restated Bylaws of Reorganized PCI (the "Amended PCI Bylaws"), the amended and restated Certificate of Incorporation of Reorganized PCI (the 46 53 "Amended PCI Certificate of Incorporation") and the certificates of incorporation of each of the Reorganized Subsidiaries shall be amended and restated as of the Effective Date to the extent necessary to, among other things, (a) prohibit the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code, subject to further amendment of such certificates of incorporation and bylaws as permitted by applicable law and (b) effectuate the provisions of the Plan, in each case without any further action by the stockholders or directors of the Debtors, the Debtors in Possession or the Reorganized Debtors. The following is a summary of certain additional provisions anticipated to be included in the Amended Pioneer Certificate of Incorporation. The proposed form of Amended Pioneer Certificate of Incorporation will be included in the Plan Supplement. a. Number of Directors. Under the Amended Pioneer Certificate of Incorporation, on the Effective Date, Reorganized Pioneer's Board of Directors will initially consist of five (5) directors. b. Special Meetings. The Amended Pioneer Certificate of Incorporation will provide that special meetings of stockholders may be called only by the Chairman of the Board, the President, a majority of the Board of Directors, or any holder or holders of at least 51% of the outstanding shares of the New Common Stock. c. Common Stock. The Amended Pioneer Certificate of Incorporation will provide that the Board of Directors is authorized, without action by the stockholders, to issue up to 50,000,000 shares of common stock, par value $.01 per share (the "New Common Stock"). The issuance of additional shares of the New Common Stock would adversely affect the voting power of the holders of the New Common Stock and could have the effect of discouraging or making more difficult any attempt by a person or group to effect a change in control of Reorganized Pioneer. d. Preferred Stock. The Amended Pioneer Certificate of Incorporation will provide that the Board of Directors is authorized, without action by the stockholders, to issue up to 10,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"), in one or more series, to establish the number of shares to be included in each such series and to fix the designations, voting powers, preferences and relative, participating, optional and other rights, of the shares of each such series, and the qualifications, limitations and restrictions thereof. Such matters may include, among others, voting rights, conversion and exchange privileges, dividend rates, redemption rights, sinking fund provisions and liquidation rights that could be superior and prior to New Common Stock. The issuance of one or more series of the Preferred Stock could, under certain circumstances, adversely affect the voting power of the holders of New Common Stock and could have the effect of discouraging or making more difficult any attempt by a person or group to effect a change in control of Reorganized Pioneer. 3. Amendments or Modifications of the Plan Alterations, amendments or modifications of the Plan may be proposed in writing by the Debtors, subject to the prior approval of the Creditors' Committee, at any time prior to the Confirmation Date, provided that the Plan, as altered, amended or modified, satisfies the 47 54 conditions of sections 1122 and 1123 of the Bankruptcy Code, and the Debtors shall have complied with section 1125 of the Bankruptcy Code; provided, however, that, prior to the date of the commencement of solicitation of votes to accept or reject the Plan, no alteration, amendment or modification of the Plan that would materially and adversely change the treatment of General Unsecured Claims may be made without prior approval of the Creditors' Committee, which approval shall not be unreasonably withheld. The Plan may be altered, amended or modified at any time after the Confirmation Date and before substantial consummation, provided that the Plan, as altered, amended or modified, satisfies the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan, as altered, amended or modified, under section 1129 of the Bankruptcy Code and the circumstances warrant such alterations, amendments or modifications. A holder of a Claim or Equity Interest that has accepted the Plan shall be deemed to have accepted the Plan, as altered, amended or modified, if the proposed alteration, amendment or modification does not materially and adversely change the treatment of the Claim or Equity Interest of such holder. 4. Indemnification Pursuant to the Plan, the obligations of the Debtors to defend, indemnify, reimburse or limit the liability of their present and any former directors, officers or employees that were directors, officers or employees, respectively, on or after the Commencement Date against any Claims or obligations pursuant to the Debtors' certificates of incorporation or bylaws, applicable state law, Canadian law, provincial law, or specific agreement, or any combination of the foregoing, shall survive confirmation of the Plan, remain unaffected thereby, and not be discharged irrespective of whether indemnification, defense, reimbursement or limitation is owed in connection with an event occurring before, on, or after the Commencement Date. The Debtors are not aware of any material indemnification Claims. 5. Cancellation and Surrender of Existing Securities and Agreements Pursuant to the Plan, on the Effective Date, the promissory notes, share certificates and other instruments evidencing any Claim or Equity Interest shall be deemed cancelled without further act or action under any applicable agreement, law, regulation, order or rule and the obligations of the Debtors under the agreements, indentures and certificates of designations governing such Claims and Equity Interests, as the case may be, shall be discharged. Each holder of a promissory note, share certificate or other instrument evidencing a Claim or Equity Interest shall surrender such promissory note, share certificate or instrument to the Reorganized Debtors, unless such requirement is waived by the Reorganized Debtors. No distribution of property under the Plan shall be made to or on behalf of any such holders unless and until such promissory note, share certificate or instrument is received by the Reorganized Debtors or the unavailability of such promissory note, share certificate or instrument is established to the reasonable satisfaction of the Reorganized Debtors or such requirement is waived by the Reorganized Debtors. The Reorganized Debtors may require any holder that is unable to surrender or cause to be surrendered any such promissory notes, share certificates or instruments to deliver an affidavit of loss and indemnity and/or furnish a bond in form and substance (including, without limitation, with respect to amount) reasonably satisfactory to the Reorganized Debtors. Any holder that fails within the later of one year after the Confirmation Date and the date of Allowance of its Claim or Equity Interest (i) if possible, to surrender or cause to be surrendered such promissory note, share certificate or instrument, (ii) if requested, to execute and deliver an affidavit of loss and indemnity reasonably satisfactory to the 48 55 Reorganized Debtors and (iii) if requested, to furnish a bond reasonably satisfactory to the Reorganized Debtors, shall be deemed to have forfeited all rights, Claims and Causes of Action against the Debtors and Reorganized Debtors and shall not participate in any distribution hereunder. Section 1143 of the Bankruptcy Code provides, as follows: If a plan requires presentment or surrender of a security or the performance of any other act as a condition to participation in distribution under the plan, such action shall be taken no later than five years after the date of the entry of the order of confirmation. Any entity that has not within such time presented or surrendered such entity's security or taken any such other action that the plan requires may not participate in distribution under the plan. Pursuant to section 1143, a plan of reorganization may provide for a deadline for the reversion of assets to the reorganized debtor that is not later than five years after confirmation. Section 1143, however, does not prohibit a shorter reversion deadline. Accordingly, the one year deadline provided for in the Plan--the later of one year after the Confirmation Date and the date of Allowance--satisfies the requirements of section 1143 of the Bankruptcy Code. 6. Revocation of the Plan The Debtors, subject to the prior approval of the Creditors' Committee, reserve the right to revoke or withdraw the Plan prior to the Confirmation Date. If the Debtors revoke or withdraw the Plan prior to the Confirmation Date, then the Plan shall be deemed null and void. In such event, nothing contained in the Plan shall constitute or be deemed a waiver or release of any Claims by or against the Debtors or any other person or prejudice in any manner the rights of the Debtors or any person in any further proceedings involving the Debtors. 7. Preservation of Causes of Action As of the Effective Date, pursuant to section 1123(b)(3)(B) of the Bankruptcy Code, any and all Causes of Action and Avoidance Claims the Debtors and Debtors in Possession, are empowered to bring under Sections 502(d), 544, 545, 547, 548, 549, 550, 551, and 553 of the Bankruptcy Code, or applicable non-bankruptcy law, shall become assets of the Reorganized Debtors, and the Reorganized Debtors shall have the authority to prosecute such Causes of Action and Avoidance Claims for the benefit of the Estates of the Debtors. Specifically, the Debtors are reviewing their Schedules, including payments made in the ninety (90) days prior to the Commencement Date as listed in Section 3(a) of their Statement of Financial Affairs, and the Debtors and the Reorganized Debtors reserve the right to identify, pursue and prosecute all Causes of Action and Avoidance Claims thereunder. The Reorganized Debtors shall have the authority to compromise and settle, otherwise resolve, discontinue, 49 56 abandon or dismiss all such Causes of Action without approval of the Bankruptcy Court. The Debtors presently are unaware of any material Causes of Action preserved under the Plan that will be pursued by the Debtors or Reorganized Debtors prior to or subsequent to the Effective Date. 8. Termination of Committees Pursuant to the Plan, the appointments of the Creditors' Committee and the Ad Hoc Committee shall terminate on the later of the Effective Date and the date of the hearing to consider applications for final allowances of Compensation and Reimbursement Claims. 9. Effectuating Documents, Further Transactions and Corporate Action Pursuant to the Plan, each of the Debtors or Reorganized Debtors is authorized to execute, deliver, file or record such contracts, instruments, releases, indentures and other agreements or documents and take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan and any notes or securities issued pursuant to the Plan. In addition, on the Effective Date, all matters provided for under the Plan that would otherwise require approval of the stockholders, directors or members of one or more of the Debtors or Reorganized Debtors or their successors in interest under the Plan, including, without limitation, the authorization to issue or cause the issuance of preferred stock, the issuance of New Common Stock and New Notes, the effectiveness of the Amended Pioneer Certificate of Incorporation, the Amended Pioneer Bylaws and the amended and restated certificates of incorporation of the Reorganized Subsidiaries, corporate mergers or dissolutions effectuated pursuant to the Plan, the election or appointment, as the case may be, of directors and officers of the Debtors pursuant to the Plan, the authorization and approval of the MEIP shall be deemed to have occurred and shall be in effect from and after the Effective Date pursuant to the applicable general corporation law of the states in which the Debtors or Reorganized Debtors are incorporated, without any requirement of further action by the stockholders or directors of the Debtors or Reorganized Debtors. On the Effective Date or as soon thereafter as is practicable, each of the Reorganized Debtors shall, if required, file its amended certificate of incorporation with the Secretary of State of the state in which such Reorganized Debtor is incorporated, in accordance with the applicable general corporation law of such states. 10. Plan Supplement Forms of the documents relating to the Amended PCI Certificate of Incorporation, the Amended PCI Bylaws, the New Notes, the New Tranche A Term Loan Agreement, the New Tranche B Notes Indenture, Schedules 6.1(a)(x) and 6.1(a)(y) referred to in Section 6.1 of the Plan, the MEIP, and all other material agreements related thereto, shall be contained in the Plan Supplement and Filed with the Clerk of the Bankruptcy Court at least ten (10) days prior to the Voting Deadline. Forms of the documents relating to the Exit Facility shall be contained in the Plan Supplement and Filed with the Clerk of the Bankruptcy Court at least ten (10) days prior to the Voting Deadline. Upon its filing with the Bankruptcy Court, the Plan Supplement may be inspected in the office of the Clerk of the Bankruptcy Court during normal court hours. Holders of Claims or Equity Interests may obtain a copy of the Plan Supplement upon written request to 50 57 PCI in accordance with Section 12.12 of the Plan or by telephone request as set forth in the notice to be served in conjunction with the Filing of the Plan Supplement. 11. Voting for Purposes of the Canadian Plan The holders of Allowed PCA U.S. Secured Term and Note Claims and Allowed U.S. Deficiency Claims voting on the Plan shall be deemed to have cast the same vote (whether accepting or rejecting the Plan) on the Canadian Plan in the same amount as a Secured Creditor (as defined in the Canadian Plan) under the Canadian Plan. The holders of Allowed Canadian Secured Term and Note Claims voting on the Plan shall be deemed to have cast the same vote (whether accepting or rejecting the Plan) on the Canadian Plan in the same amount as a Secured Creditor (as defined in the Canadian Plan) under the Canadian Plan. The holders of Allowed Canadian Deficiency Claims voting on the Plan shall be deemed to have cast the same vote (whether accepting or rejecting the Plan) on the Canadian Plan in the same amount as an Unsecured Creditor (as defined in the Canadian Plan) under the Canadian Plan. The holders of Allowed Unsecured Claims against PCICC voting on the Plan shall be deemed to have cast the same vote (whether accepting or rejecting the Plan) on the Canadian Plan in the same amount as an Unsecured Creditor (as defined in the Canadian Plan) under the Canadian Plan. VI. CONFIRMATION AND CONSUMMATION PROCEDURE Under the Bankruptcy Code, the following steps must be taken to confirm the Plan: A. Solicitation of Votes. In accordance with sections 1126 and 1129 of the Bankruptcy Code, the Claims in Classes 3, 4, 5, 7, 8, and 9 of the Plan are impaired and the holders of Allowed Claims in each of such Classes are entitled to vote to accept or reject the Plan. Claims in Classes 1, 2, and 6 are unimpaired. The holders of Allowed Claims in each of Classes 1, 2, and 6 are conclusively presumed to accept the Plan. The holders of Claims in Classes 10 and 11 are impaired and are conclusively presumed to reject the Plan. The solicitation of acceptances with respect to such Classes is not required under section 1126(f) of the Bankruptcy Code. As to classes of claims entitled to vote on a plan, the Bankruptcy Code defines acceptance of a plan by a class of creditors as acceptance by holders of at least two-thirds in dollar amount and more than one-half in number of the claims of that class that have timely voted to accept or reject a plan. A vote may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that acceptance or rejection was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. Any creditor in an impaired Class (i) whose Claim has been listed by the Debtors in the Debtors' Schedules filed with the Bankruptcy Court (provided that such Claim has not been scheduled as Disputed, contingent or unliquidated or listed in the amount of $0.00) or (ii) who filed a proof of claim on or before October 15, 2001 (or, if not filed by such date, any proof of claim filed within any other applicable period of limitations or with leave of the Bankruptcy 51 58 Court), which Claim is not the subject of an objection or request for estimation, is entitled to vote. B. The Confirmation Hearing. The Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a confirmation hearing. The Confirmation Hearing in respect of the Plan has been scheduled for November 7, 2001 at 2:00 p.m. (Central Time), before the Honorable Letitia Z. Clark, United States Bankruptcy Judge at the United States Bankruptcy Court, 401 Bob Casey United States Courthouse, 3rd Floor, 515 Rusk Avenue, Houston, Texas 77002. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice except for an announcement of the adjourned date made at the Confirmation Hearing. Any objection to confirmation must be made in writing and specify in detail the name and address of the objector, all grounds for the objection and the amount of the Claim or number of shares of common stock of Pioneer held by the objector. Any such objection must be Filed with the Bankruptcy Court and served so that it is received by the Bankruptcy Court and the following parties on or before October 30, 2001 at 4:30 p.m. (Central Time): Pioneer Companies, Inc. Dewey Ballantine LLP 700 Louisiana Street, Suite 4300 Attorneys for the Creditors' Committee Houston, Texas 77002 1301 Avenue of the Americas Attn: Kent Stephenson, Esq. New York, New York 10019 Attn: Michael J. Sage, Esq. Weil, Gotshal & Manges LLP Bracewell & Patterson L.L.P. Attorneys for the Debtors Attorneys for the Creditors' Committee 700 Louisiana Street, Suite 1600 711 Louisiana Street, Suite 2900 Houston, Texas 77002 Houston, Texas 77002 Attn: Sylvia Mayer Baker, Esq. Attn: Alfredo R. Perez, Esq. Weil, Gotshal & Manges LLP Office Of The United States Trustee Attorneys for the Debtors (Region 7) 100 Crescent Court, Suite 1300 515 Rusk Street, Suite 3516 Dallas, Texas 75206 Houston, Texas 77002 Attn: Stephen A. Youngman, Esq. Attn: Hector Duran, Esq. Kaye Scholer LLP Attorneys for Bank of New York 311 South Wacker Drive, Suite 6200 Chicago, Illinois 60606 Attn: Richard G. Smolev, Esq. Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014. 52 59 C. Confirmation. At the Confirmation Hearing, the Bankruptcy Court will confirm the Plan only if all of the requirements of section 1129 of the Bankruptcy Code are met. Among the requirements for confirmation of a plan are that the plan is (i) accepted by all impaired classes of claims and equity interests or, if rejected by an impaired class, that the plan "does not discriminate unfairly" and is "fair and equitable" as to such class, (ii) feasible and (iii) in the "best interests" of creditors and stockholders that are impaired under the plan. 1. Acceptance Classes 3, 4, 5, 7, 8, and 9 of the Plan are impaired under the Plan and are entitled to vote to accept or reject the Plan. Classes 1, 2, and 6 of the Plan are unimpaired and, therefore, are conclusively presumed to have voted to accept the Plan. Classes 10 and 11 are impaired under the Plan, and holders of Subordinated Claims and PCI Equity Interests are conclusively presumed to have voted to reject the Plan. The Debtors reserve the right to amend the Plan in accordance with Section 12.6 of the Plan or seek nonconsensual confirmation of the Plan under section 1129(b) of the Bankruptcy Code or both with respect to any Class of Claims that is entitled to vote to accept or reject the Plan, if such Class rejects the Plan. The Debtors will seek nonconsensual confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to Class 10 Subordinated Claims and Class 11 PCI Equity Interests. 2. Unfair Discrimination and Fair and Equitable Tests To obtain nonconsensual confirmation of the Plan, it must be demonstrated to the Bankruptcy Court that the Plan "does not discriminate unfairly" and is "fair and equitable" with respect to each impaired, nonaccepting Class. The Bankruptcy Code provides a non-exclusive definition of the phrase "fair and equitable." The Bankruptcy Code establishes "cram down" tests for secured creditors, unsecured creditors and equity holders, as follows: a. Secured Creditors. Either (i) each impaired secured creditor retains its liens securing its secured claim and receives on account of its secured claim deferred cash payments having a present value equal to the amount of its allowed secured claim, (ii) each impaired secured creditor realizes the "indubitable equivalent" of its allowed secured claim or (iii) the property securing the claim is sold free and clear of liens with such liens to attach to the proceeds of the sale and the treatment of such liens on proceeds to be as provided in clause (i) or (ii) of this subparagraph. b. Unsecured Creditors. Either (i) each impaired unsecured creditor receives or retains under the plan property of a value equal to the amount of its allowed claim or (ii) the holders of claims and interests that are junior to the claims of the dissenting class will not receive any property under the plan. c. Equity Interests. Either (i) each holder of an equity interest will receive or retain under the plan property of a value equal to the greatest of the fixed liquidation preference to which such holder is entitled, the fixed redemption price to which such holder is entitled or the value of the interest or (ii) the holder of an interest that is junior to the nonaccepting class will not receive or retain any property under the plan. 53 60 3. Feasibility The Bankruptcy Code permits a plan to be confirmed if it is not likely to be followed by liquidation or the need for further financial reorganization. For purposes of determining whether the Plan meets this requirement, the Debtors have analyzed their ability to meet their obligations under the Plan. As part of this analysis, the Debtors have prepared projections of their financial performance for each of the three fiscal years in the period ending December 31 (the "Projection Period"). These projections, and the assumptions on which they are based, are included in the Pioneer Companies, Inc. et al. Projected Financial Information annexed hereto as Exhibit D. Based upon such projections, the Debtors believe that they will be able to make all payments required pursuant to the Plan and, therefore, that confirmation of the Plan is not likely to be followed by liquidation or the need for further reorganization. The Debtors further believe that they will be able to repay or refinance all of the then-outstanding indebtedness under the Plan at or prior to the maturity of such indebtedness. The financial information and projections appended to the Disclosure Statement include for the three fiscal years in the Projection Period: o Pro Forma Consolidated Balance Sheet of the Reorganized Debtors as of September 30, 2001; o Projected Consolidated Balance Sheets of the Reorganized Debtors as of December 31, 2001, 2002, 2003, and 2004; o Projected Consolidated Statements of Operation of the Reorganized Debtors for the period ending December 31, 2001, including confirmation adjustments, and for the periods ending December 31, 2002, 2003 and 2004; o Projected Consolidated Statements of Cash Flow of the Reorganized Debtors for the period ending December 31, 2001, including confirmation adjustments, and for the periods ending December 31, 2002, 2003 and 2004; and o Projected Capitalization Table of the Reorganized Debtors as of September 30, 2001 and December 31, 2001, 2002, 2003, and 2004. The pro forma financial information and the projections are based on the assumption that the Plan will be confirmed by the Bankruptcy Court and, for projection purposes, that the Effective Date under the Plan will occur on September 30, 2001. Although the projections and information are based upon a September 30, 2001 Effective Date, the Debtors believe that an actual Effective Date not occurring until the fourth quarter of fiscal 2001 would not have any material effect on the projections. The Debtors have prepared these financial projections based upon certain assumptions which they believe to be reasonable under the circumstances. Those assumptions considered to be significant are described in the financial projections, which are annexed hereto 54 61 as Exhibit D. The financial projections have not been examined or compiled by independent accountants. The Debtors make no representation as to the accuracy of the projections or their ability to achieve the projected results. Many of the assumptions on which the projections are based are subject to significant uncertainties. Inevitably, some assumptions will not materialize and unanticipated events and circumstances may affect the actual financial results. Therefore, the actual results achieved throughout the Projection Period may vary from the projected results and the variations may be material. All holders of Claims that are entitled to vote to accept or reject the Plan are urged to examine carefully all of the assumptions on which the financial projections are based in evaluating the Plan. 4. Best Interests Test With respect to each impaired Class of Claims and Equity Interests, confirmation of the Plan requires that each holder of a Claim or Equity Interest either (i) accept the Plan or (ii) receive or retain under the Plan property of a value, as of the Effective Date, that is not less than the value such holder would receive or retain if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. To determine what holders of Claims and Equity Interests of each impaired Class would receive if the Debtors were liquidated under chapter 7, the Bankruptcy Court must determine the dollar amount that would be generated from the liquidation of the Debtors' assets and properties in the context of a chapter 7 liquidation case. The Cash amount which would be available for satisfaction of Unsecured Claims and Equity Interests would consist of the proceeds resulting from the disposition of the unencumbered assets and properties of the Debtors, augmented by the unencumbered Cash held by the Debtors at the time of the commencement of the liquidation case. Such Cash amount would be reduced by the amount of the costs and expenses of the liquidation and by such additional Administrative Expense Claims and Priority Claims that might result from the termination of the Debtors' business and the use of chapter 7 for the purposes of liquidation. The Debtors' costs of liquidation under chapter 7 would include the fees payable to a trustee in bankruptcy, as well as those which might be payable to attorneys and other professionals that such a trustee might engage. In addition, Claims would arise by reason of the breach or rejection of obligations incurred and leases and executory contracts assumed or entered into by the Debtors during the pendency of the Chapter 11 Cases. The foregoing types of Claims and other Claims which might arise in a liquidation case or result from the pending Chapter 11 Cases, including any unpaid expenses incurred by the Debtors during the Chapter 11 Cases such as compensation for attorneys, financial advisors and accountants, would be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay prepetition Unsecured Claims. To determine if the Plan is in the best interests of each impaired class, the present value of the distributions from the proceeds of a liquidation of the Debtors' unencumbered assets and properties, after subtracting the amounts attributable to the foregoing claims, are then compared with the value of the property offered to such Classes of Claims and Equity Interests under the Plan. After considering the effects that a chapter 7 liquidation would have on the ultimate proceeds available for distribution to creditors in the Chapter 11 Cases, including (i) the 55 62 increased costs and expenses of a liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy and professional advisors to such trustee, (ii) the erosion in value of assets in a chapter 7 case in the context of the expeditious liquidation required under chapter 7 and the "forced sale" atmosphere that would prevail and (iii) the substantial increases in Claims which would be satisfied on a priority basis or on parity with creditors in the Chapter 11 Cases, the Debtors have determined that confirmation of the Plan will provide each holder of an Allowed Claim or Equity Interest with a recovery that is not less than such holder would receive pursuant to liquidation of the Debtors under chapter 7. The Debtors also believe that the value of any distributions to each Class of Allowed Claims in a chapter 7 case, including all Secured Claims, would be less than the value of distributions under the Plan because such distributions in a chapter 7 case would not occur for a substantial period of time. It is likely that distribution of the proceeds of the liquidation could be delayed for two years after the completion of such liquidation in order to resolve Claims and prepare for distributions. In the likely event litigation was necessary to resolve Claims asserted in the chapter 7 case, the delay could be prolonged. The Debtors' Liquidation Analysis is attached hereto as Exhibit E. The information set forth in Exhibit E provides a summary of the liquidation values of the Debtors' assets assuming a chapter 7 liquidation in which a trustee appointed by the Bankruptcy Court would liquidate the assets of the Debtors' Estates. Reference should be made to the Liquidation Analysis for a complete discussion and presentation of the Liquidation Analysis. The Liquidation Analysis was prepared by the Debtors with the assistance of DrKW. Underlying the Liquidation Analysis are a number of estimates and assumptions that, although developed and considered reasonable by management, are inherently subject to significant economic and competitive uncertainties and contingencies beyond the control of the Debtors and their management. The Liquidation Analysis is also based on assumptions with regard to liquidation decisions that are subject to change. Accordingly, the values reflected might not be realized if the Debtors were, in fact, to undergo such a liquidation. The chapter 7 liquidation period is assumed to be a period of more than one year, allowing for, among other things, the (i) discontinuation of operations, (ii) selling of assets and (iii) collection of receivables. D. Consummation. The Plan will be consummated on the Effective Date. The Effective Date of the Plan will occur on the first Business Day on which the conditions precedent to the effectiveness of the Plan, as set forth in Section 10.1 of the Plan, have been satisfied or waived pursuant to Section 10.3 of the Plan. For a more detailed discussion of the conditions precedent to the Plan and the consequences of the failure to meet such conditions, see Section V.J., "The Plan of Reorganization--Conditions Precedent to Effectiveness of the Plan." The Plan is to be implemented pursuant to its terms, consistent with the provisions of the Bankruptcy Code. 56 63 E. Exit Financing. As a condition to the effectiveness of the Plan, Pioneer must have credit availability under a working capital credit facility, in form and substance acceptable to the Debtors and reasonably acceptable to the Creditors' Committee, to provide the Reorganized Debtors with working capital sufficient to meet their ordinary and peak requirements (the "Exit Facility"). Based upon discussions with potential lenders, Pioneer believes that it will be able to negotiate and effectuate an Exit Facility that will satisfy the foregoing condition and that such facility will be a three-year secured revolving credit facility in the principal amount of $50,000,000, with a letter of credit subfacility providing for the issuance of letters of credit. VII. MANAGEMENT OF THE REORGANIZED DEBTORS A. Board of Directors and Management. 1. Composition of Boards of Directors a. Reorganized Pioneer The initial Board of Directors of Reorganized Pioneer will consist of five (5) individuals, four (4) of whom will be selected by the Ad Hoc Committee and one of whom shall be Michael J. Ferris, the Chief Executive Officer of Pioneer. The names of such individuals will be disclosed prior to the date of the Confirmation Hearing. Each of the members of the initial Pioneer Board of Directors shall serve until the first annual meeting of stockholders of Reorganized Pioneer and until their successors have been duly elected and qualified or their earlier resignation or removal in accordance with the Amended Pioneer Certificate of Incorporation or Amended Pioneer Bylaws, as the same may be amended from time to time. b. Reorganized Subsidiaries The initial Board of Directors of each of the Reorganized Subsidiaries will consist of officers or employees of Reorganized Pioneer whose names will be disclosed prior to the date of the Confirmation Hearing. Each of the members of each such initial Board of Directors shall serve until the first meeting of stockholders of the respective Reorganized Subsidiary or their earlier resignation or removal in accordance with the certificate of incorporation or bylaws of such Reorganized Subsidiary. 2. Identity of Officers The officers of the Debtors immediately prior to the Effective Date will continue in their then current positions as the officers of the Reorganized Debtors. Set forth below is the name, age and position with Pioneer of each executive officer of Pioneer, together with certain biographical information:
NAME AND AGE OFFICE ------------ ------ Michael J. Ferris (56)................. President and Chief Executive Officer Philip J. Ablove (61).................. Executive Vice President and Chief Financial Officer
57 64 Jerry B. Bradley (55).................. Vice President, Human Resources Samuel Z. Chamberlain (53)............. Vice President, Environmental, Health and Safety Ronald E. Ciora (60)................... Vice President, Western Regional Sales and Marketing John R. duManoir (53).................. Vice President, Technology James E. Glatty (54)................... Vice President, Sales and Marketing Pierre Prud'homme (43)................. Vice President, Controller David A. Scholes (55).................. Vice President, Manufacturing Kent R. Stephenson (52)................ Vice President, General Counsel and Secretary Roger A. Zampini (45).................. Vice President, Supply Chain Management
Michael J. Ferris has served as President and Chief Executive Officer and a director of PCI since January 1997. He was employed by Vulcan Materials Company, a company engaged in the production of industrial materials and commodities with significant positions in two industries, construction aggregates and chemicals, in various capacities from March 1974 to January 1997. His last position was Executive Vice President, Chemicals from 1996 to 1997. Philip J. Ablove has served as Executive Vice President and Chief Financial Officer of PCI since November 1999. He was Vice President and Chief Financial Officer of PCI from March 1996 to November 1999. He was a consultant and an officer and director specializing in high growth or financially distressed companies from 1983 to 1996. In a consulting role he served as Acting Chief Financial Officer of PCI from October 1995 to March 1996. He has also been a director of PCI since January 1991. Jerry B. Bradley has served as Vice President of Human Resources of PCI since October 1995. From May 1993 to October 1995, he was President of Tandem Partners, Inc., a human resources consulting firm. From 1978 to 1993, he was employed by Occidental Chemical Corporation, where he served as Vice President, Human Resources from 1978 to 1993. Samuel Z. Chamberlain has served as Vice President, Environmental, Health and Safety of PCI since April 1998. He served as Director--Environmental, Legislative and Regulatory Affairs for Sterling Chemicals, Inc. from 1986 to 1998. From 1972 to 1986, he was employed by Monsanto Company. Ronald E. Ciora has served as Vice President, Western Regional Sales and Marketing since September 2001. He was Vice President, Bleach and Repackaged Chlorine of PCI from June to September 2001, Vice President, Bleach and Repackaged Chlorine of PAI from January 1999 to June 2001, and President of All-Pure Chemical Co. from November 1995 until December 1999, when that subsidiary was merged into PAI. Prior to joining Pioneer, he was President and Chief Executive Officer of DPC Industries, Inc., DX Distribution, Inc. and DXI Industries, Inc., which are companies engaged in chemical distribution, chlorine repackaging and bleach manufacturing. 58 65 John R. duManoir has served as Vice President, Technology of PCI since November 1999. He was Vice President, Technology of PCICC from October 1997 to November 1999. Prior to October 1997, he was Vice President, Technology of ICI Canada, Inc., having served in that position since 1992 and with that company since 1974. James E. Glattly has served as Vice President, Sales and Marketing of PCI since August 2001, Vice President, Marketing of PCI from March 2001 to August 2001, Senior Vice President, Sales & Marketing--West of PCI from June 1999 to March 2001, and President of PAI from December 1996 to June 1999. He was Vice President, Sales and Marketing of PAI from 1988 to 1996. Pierre Prud'homme has served as Vice President and Controller of PCI since November 2000. He was Vice President, Business Planning and Development of PCICC from October 1997 to November 2000. Prior to October 1997, he was Controller of ICI Canada, Inc., after having served that company in various financial and marketing capacities. David A. Scholes has served as Vice President, Manufacturing of PCI since March 2001. He was Vice President, Manufacturing--U.S. of PCI from November 1999 to March 2001, and Vice President of Manufacturing of PAI from January 1997 to November 1999. Prior to joining Pioneer, he was manager of Occidental Chemical Corporation's Houston chemical complex. Kent R. Stephenson has served as Vice President, General Counsel and Secretary of PCI since June 1995. He served as Vice President, General Counsel and Secretary of PAI from November 1993 to June 1995. Prior to joining the predecessor Company, he served as Senior Vice President, General Counsel and Secretary of Zapata Corporation, then an oil and gas service company. Roger A. Zampini has served as Vice President, Supply Chain Management of PCI since March 2001. He was Vice President, Logistics and Product Management of PCI from June 1999 to March 2001, and Vice President, Marketing and Logistics of PCICC from November 1997 to June 1999. He served as Vice President, Marketing and Logistics of the forest products division of ICI Canada, Inc. prior to the acquisition of that business by Pioneer in 1997. B. Compensation of Executive Officers. The following table sets forth all cash compensation paid by Pioneer to each of the five most highly compensated executive officers of Pioneer (as then defined by Pioneer), exclusive of incentive compensation (see Section VII.C., "Management of the Reorganized Debtors--Management Equity Incentive Plan"), for services rendered in their respective capacities in fiscal year 2000:
Name of Individual Capacities in Which Served Compensation ------------------ -------------------------- ------------ Michael J. Ferris President and Chief Executive $400,000
59 66
Name of Individual Capacities in Which Served Compensation ------------------ -------------------------- ------------ Norman E. Thogersen Executive Vice President and Chief Operating Officer $244,540 Philip J. Ablove Executive Vice President and Chief Financial Officer $225,009 Kent R. Stephenson Vice President, General Counsel and Secretary $174,307 Pierre Prud'homme Vice President and Controller $82,069
C. Management Equity Incentive Plan. Unissued shares of New Common Stock equal to ten percent (10%) of the total number of shares of New Common Stock outstanding immediately after the Effective Date shall be reserved for issuance under the MEIP. The New Board of Directors shall make individual awards of stock options exercisable into shares of New Common Stock under the MEIP, and the New Board of Directors shall establish the terms relating thereto (e.g., among other things, the number of options granted to each participant in the MEIP, exercise price, and vesting). D. Continuation of Existing Severance Plans and D&O Insurance. All employment and severance practices and policies, and all compensation and benefit plans, policies and programs of the Debtors applicable to their directors, officers or employees, are treated as executory contracts and assumed under the Plan. The Debtors have maintained and will continue to maintain appropriate insurance on behalf of their officers and directors. VIII. SECURITIES LAWS MATTERS A. Initial Offer and Distribution of the New Securities. No registration statement will be filed under the Securities Act of 1933, as amended (the "Securities Act") or any state securities or "blue sky" laws with respect to the offer and distribution by the Reorganized Debtors under the Plan of the New Common Stock, New Tranche B Notes and Guarantees (collectively, the "New Securities"). Generally, section 1145 of the Bankruptcy Code exempts the offer and sale of securities by a debtor under a plan of reorganization from registration under the Securities Act and the state securities and "blue sky" laws if the recipient of such securities (i) holds a prepetition or administrative expense claim against the debtor or an interest in the debtor and (ii) the securities are issued in exchange for the recipient's claim against or interest in the debtor. The Debtors believe that section 1145(a)(1) of the Bankruptcy Code exempts the offer and distribution of the New Securities from the registration requirements of the Securities Act and state securities and "blue sky" laws. The views of the SEC on these matters have not been sought by the Debtors, nor do the Debtors presently intend to submit a request for a recommendation of no action or with respect to the interpretation of any securities laws matters. 60 67 B. Subsequent Transfers of the New Securities. Pursuant to section 1145 of the Bankruptcy Code, the New Securities issued on the Effective Date will be deemed to have been issued in a public offering in compliance with the requirements of the Securities Act. In general, the New Securities distributed pursuant to the Plan may be resold by any holder without registration under the Securities Act or other Federal securities laws pursuant to the exemption provided by section 4(1) of the Securities Act, unless the holder is an "underwriter" with respect to such securities, as that term is defined in the Bankruptcy Code (a "statutory underwriter"). In addition, such securities generally may be resold by the recipients thereof without registration on the state level pursuant to various exemptions provided by the respective laws of the several states. However, recipients of New Securities issued to holders of Allowed Claims under the Plan are advised to consult with their own counsel as to the availability of any such exemption from registration under Federal or state law in any given instance and as to any applicable requirements or conditions to the availability thereof. Section 1145(b) of the Bankruptcy Code defines a statutory underwriter for purposes of the Securities Act as one who, except with respect to an "ordinary trading transaction" of an entity that is not an "issuer," (i) purchases a claim with a view to distribution of any security to be received in exchange for the claim, (ii) offers to sell securities issued under a plan for the holders of such securities, (iii) offers to buy securities issued under a plan from persons receiving such securities, if the offer to buy is made with a view to distribution of such securities or (iv) is an issuer, in this case, Reorganized PCI and Reorganized PCICC, of securities within the meaning of Section 2(11) of the Securities Act. The term "issuer" is defined in Section 2(4) of the Securities Act; however, the reference (contained in section 1145(b)(1)(D) of the Bankruptcy Code) to Section 2(11) of the Securities Act purports to include as statutory underwriters all persons who, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with, an issuer of securities. "Control" (as defined in Rule 405 promulgated under the Securities Act) means the possession, direct or indirect, of the power to direct or cause the direction of the policies of a person, whether through the ownership of voting securities, by contract, or otherwise. Accordingly, an officer or director of a reorganized debtor or its successor, under a plan of reorganization (e.g., Reorganized PCI) may be deemed to be a "control person" of such debtor or successor, particularly if the management position or directorship is coupled with ownership of a significant percentage of the reorganized debtor's or its successor's voting securities. Moreover, the legislative history of section 1145 of the Bankruptcy Code suggests that a creditor who, in exchange for its claims against a debtor, receives and holds at least ten percent (10%) of the voting securities of a reorganized debtor is a presumptive "control person" of the such debtor. To the extent that persons deemed to be control persons and thus "underwriters" receive the New Securities pursuant to the Plan, resales by such persons would not be exempted by section 1145 of the Bankruptcy Code from registration under the Securities Act and the various state securities and "blue sky" laws. However, entities deemed to be statutory underwriters may be able to sell securities without registration pursuant to the resale provisions of Rule 144 promulgated under the Securities Act. 61 68 Rule 144 permits the resale of securities received pursuant to the Plan by, among other persons, statutory underwriters subject to applicable holding period requirements, volume limitations, notice and manner of sale requirements, availability of current information about the issuer and certain other conditions. Generally, Rule 144 provides that if such conditions are met, specified persons who resell "restricted securities" or who resell securities that are not restricted but who are "affiliates" of the issuer of the securities sought to be resold, will not be deemed to be "underwriters" as defined in Section 2(11) of the Securities Act. Under Rule 144(k), a person who is not deemed to have been an affiliate of the issuer at any time during the ninety (90) days preceding a sale, and who has beneficially owned the securities proposed to be sold for at least two (2) years, is entitled to sell such securities without having to comply with the manner of sale, public information, volume limitation or notice filing provisions of Rule 144. Whether or not any particular person would be deemed to be a "statutory underwriter" of the New Securities to be issued pursuant to the Plan, or an "affiliate" of the Reorganized Debtors, would depend upon various facts and circumstances applicable to that person. Accordingly, the Debtors express no view as to whether any person would be such an "underwriter" or an "affiliate". IN VIEW OF THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A PARTICULAR PERSON MAY BE AN UNDERWRITER OR AN AFFILIATE OF THE REORGANIZED DEBTORS, THE DEBTORS MAKE NO REPRESENTATIONS OR AGREEMENTS CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE NEW SECURITIES TO BE DISTRIBUTED PURSUANT TO THE PLAN. ACCORDINGLY, THE DEBTORS RECOMMEND THAT POTENTIAL RECIPIENTS OF SECURITIES CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES. Pursuant to the Plan, (i) holders of Allowed Claims who do not certify that they are not underwriters within the meaning of section 345 of the Bankruptcy Code and (ii) until such time as the Shelf Registration Statement for the benefit of such persons has been declared effective under the Securities Act, the holders of Allowed Claims that receive ten percent (10%) or more of the outstanding New Common Stock calculated on a fully-diluted basis will receive certificated shares of New Common Stock and, as applicable, New Tranche B Notes bearing a legend substantially in the form below: [THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE] [THIS NOTE AND THE GUARANTEE HEREOF HAVE] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR UNLESS [PCI] [PCICC] RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED. 62 69 Any entity that would receive legended securities as provided above may instead receive such securities without such legend if, prior to the Effective Date, such entity delivers to the Debtors (i) an opinion of counsel reasonably satisfactory to the Debtors to the effect that the securities to be received by such entity are not subject to the restrictions applicable to "underwriters" under section 1145 of the Bankruptcy Code and may be sold without registration under the Securities Act and (ii) a certification that it is not an "underwriter" within the meaning of section 1145 of the Bankruptcy Code. Any holder of such securities may present such certificates or notes to the transfer agent for exchange for one or more new certificates or notes, as the case may be, not bearing such legend or for transfer to a new holder without such legend at such time as (i) such shares and/or notes are sold pursuant to an effective registration statement under the Securities Act or (ii) such holder delivers to the Reorganized Debtors an opinion of counsel reasonably satisfactory to the Reorganized Debtors to the effect that such shares and/or notes are no longer subject to the restrictions applicable to "underwriters" under section 1145 of the Bankruptcy Code and may be sold without registration under the Securities Act or to the effect that such transfer is exempt from registration under the Securities Act, in which event the certificate and/or note issued to the transferee will not bear such legend, unless otherwise specified in such opinion. C. Shelf Registration Statement. Prior to the Effective Date, and in order to facilitate the offer and resales of New Securities held by (i) persons deemed statutory underwriters within the meaning of section 1145 of the Bankruptcy Code and (ii) persons who own five percent (5%) or more of the New Common Stock; provided, such persons may be deemed to be statutory underwriters (provided, however, that such persons notify the Debtors of their election to have their New Securities included in the Shelf Registration Statement and provide to the Reorganized Debtors certain information required to be included in the Shelf Registration Statement) (such New Securities collectively referred to as the "Registerable Securities"), the Debtors shall file with the SEC, at their expense, the Shelf Registration Statement for the registration of the offer and resales of such securities. The Reorganized Debtors shall use their best efforts to keep the Shelf Registration Statement effective for the Three-Year Period and supplement or make amendments to the Shelf Registration Statement, if required under the Securities Act or by the rules and regulations promulgated thereunder, or in accordance with the terms of the Registration Rights Agreement, and have such supplements and amendments declared effective as soon practicable after filing. D. Registration Rights Agreements. The Registration Rights Agreement, in substantially the form contained in the Plan Supplement, will be executed among the Reorganized Debtors and holders of Allowed Claims who, pursuant to the terms of the Plan, are entitled to receive five percent (5%) or more of any class of Registerable Securities on the Effective Date. The Registration Rights Agreement will provide that any party thereto which continues to hold five percent (5%) or more of the New Common Stock at the expiration the Three-Year Period shall be granted customary demand and piggy back registration rights with respect to all Registerable Securities held by such 63 70 person at such time; provided, however, that in no event shall such holders of Registerable Securities have more than two (2) demand registration rights in any 12-month period nor more than a total of seven (7) demand registration rights in the aggregate. E. Applicability of Canadian Securities Laws. The issuance by the Reorganized Debtors of the New Securities will be subject to the securities laws of every province of Canada (the "Canadian Securities Laws") in which persons entitled to receive such New Securities reside. The issuance and subsequent transfer of such New Securities will be made pursuant to exemptions from applicable dealer registration and prospectus requirements of applicable Canadian Securities Laws or pursuant to discretionary orders and/or rulings from applicable Canadian provincial securities regulatory authorities. Application will be made to obtain the appropriate exemptions from the applicable Canadian provincial securities regulatory authorities. Such application will namely request to permit the resale of the New Securities without restrictions (except where the seller holds a sufficient number of securities of the issuer to affect materially its control), provided that no unusual effort is made to prepare the market for any such resale or to create a demand for the securities which are the subject of any such resale and no extraordinary commission or consideration is paid in respect thereof. For these purposes, the holding by any person or combination of persons of more than twenty percent (20%) of the voting securities of an issuer is deemed to affect materially the control of such issuer. There can be no assurance that the required discretionary orders or rulings will be obtained, however, based on relief granted in connection with similar CCAA restructurings in the past to other public companies, the Reorganized Debtors believe that such discretionary relief or rulings are obtainable. Persons resident in a province of Canada who are entitled to receive such securities pursuant to such exemptions or discretionary relief are advised that they will not be entitled to rights that would have been afforded to them had such securities been distributed pursuant to a prospectus including rights of rescission and damages. IX. VALUATION A. Reorganization Value. The Debtors have been advised by DrKW with respect to the value of Reorganized Pioneer. At the request of the Debtors, DrKW performed a valuation analysis for the purpose of determining the value available to distribute to holders of Claims and Equity Interests pursuant to the Plan and to analyze the relative recoveries to holders of Claims and Equity Interests thereunder. This analysis was based on the Debtors' financial projections, as well as current market conditions and statistics. The values are as of an assumed Effective Date of September 30, 2001, and are based upon information available to and analyses undertaken by DrKW in April and May 2001. The reorganization value of the Reorganized Debtors was assumed for the purposes of the Plan by the Debtors, based on advice from DrKW, to be approximately 64 71 $350,000,000 to $400,000,000, with a midpoint of $375,000,000. Based upon the going concern value of the Debtors' business and an assumed total debt of approximately $241,000,000 (expected at an assumed Effective Date of September 30, 2001), the Debtors have employed an assumed range of equity values for Reorganized Pioneer of approximately $109,000,000 to $159,000,000, with a midpoint of $134,000,000. In performing its analysis, DrKW used discounted cash flow and comparable company multiple methodologies to arrive at the going concern value of the Debtors' business. These valuation techniques reflect both the market's current view of the Debtors' business plan and operations, as well as a longer-term focus on the intrinsic value of the cash flow projections in the Debtors' business plan. The valuation multiples and discount rates used by DrKW to arrive at the going concern value of the Debtors' business were based on the public market valuation of selected public companies deemed generally comparable to the operating businesses of Pioneer. In selecting such companies, DrKW considered factors such as the focus of the comparable companies' businesses as well as such companies' current and projected operating performance relative to the Debtors and the turnaround required for Pioneer's businesses to perform as projected. The foregoing valuation is based on a number of measured assumptions, including a successful reorganization of the Debtors' business and finances in a timely manner, the achievement of the forecasts reflected in the financial projections, the outcome of certain expectations regarding market conditions and the Plan becoming effective in accordance with its terms. The estimates of value represent hypothetical reorganization values of the Reorganized Debtors as the continuing operator of their business and assets, and do not purport to reflect or constitute appraisals, liquidation values, or estimates of the actual market value that may be realized through the sale of any securities to be issued pursuant to the Plan, which may be significantly different than the amounts set forth herein. The value of an operating business such as the Debtors' business is subject to uncertainties and contingencies that are difficult to predict, and will fluctuate with changes in factors affecting the financial condition and prospects of such a business. In preparing a range of the estimated reorganization value of Reorganized Pioneer and the going concern value of the Debtors' business, DrKW: (i) reviewed certain historical financial information of the Debtors for recent years and interim periods; (ii) reviewed certain internal financial and operating data of the Debtors, including financial and operating projections developed by management relating to its business and prospects; (iii) met with certain members of senior management of the Debtors to discuss operations and future prospects; (iv) reviewed publicly available financial data and considered the market values of pubic companies deemed generally comparable to the operating business of the Debtors; (v) considered certain economic and industry information relevant to the operating business; and (vi) conducted such other analyses as DrKW deemed appropriate such as sensitivity analyses to help assess the volatility associated with the Debtors' financial results and projections. Although DrKW conducted a review and analysis of the Debtors' business, operating assets and liabilities and business plans, DrKW assumed and relied on the accuracy and completeness of all the financial and other information furnished to it by the Debtors and publicly available information. 65 72 X. CERTAIN RISK FACTORS TO BE CONSIDERED HOLDERS OF CLAIMS AGAINST THE DEBTORS SHOULD READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE), PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION. A. Overall Risks to Recovery by Holders of Claims. The ultimate recoveries under the Plan to holders of Claims (other than those holders who are paid solely in Cash under the Plan) depend upon the realizable value of the New Notes and the New Common Stock. The securities to be issued pursuant to the Plan are subject to a number of material risks, including, but not limited to, those specified below. The factors specified below assume that the Plan is approved by the Bankruptcy Court and that the Effective Date occurs in the fourth quarter of 2001. 1. Ability to Refinance Certain Indebtedness Following the Effective Date of the Plan, the Reorganized Debtors' seasonal working capital borrowings and letters of credit requirements are anticipated to be funded under the Exit Facility. There can be no assurance that the Reorganized Debtors, upon expiration of the Exit Facility, will be able to obtain replacement financing to fund future seasonable borrowings and letters of credit, or that such replacement financing, if obtained, would be on terms equally favorable to the Reorganized Debtors. 2. Significant Holders Upon the consummation of the Plan, certain holders of Claims will receive distributions of shares of the New Common Stock representing in excess of five percent (5%) of the outstanding shares of the New Common Stock. If holders of significant numbers of shares of the New Common Stock were to act as a group, such holders could be in a position to control the outcome of actions requiring stockholder approval, including the election of directors. This concentration of ownership could also facilitate or hinder a negotiated change of control of the Reorganized Debtors and, consequently, have an impact upon the value of the New Common Stock. Further, the possibility that one or more of the holders of significant numbers of shares of the New Common Stock may determine to sell all or a large portion of their shares of the New Common Stock in a short period of time may adversely affect the market price of the New Common Stock. 66 73 3. Lack of Established Market for the New Common Stock Reorganized Pioneer shall use reasonable commercial efforts to cause the New Common Stock and New Notes to be listed on a national securities exchange or the Nasdaq National Market. There can be no assurance that such an application will be approved. The New Common Stock will be issued to holders of pre-Commencement Date Claims, some or all of whom may prefer to liquidate their investment rather than to hold it on a long-term basis. There currently is no trading market for the New Common Stock nor is it known whether or when one would develop. Further, there can be no assurance as to the degree of price volatility in any such market. While the Plan was developed based on an assumed reorganization value of $6.00 to $11.00 per share of the New Common Stock, such valuation is not an estimate of the price at which the New Common Stock may trade in the market. The Debtors have not attempted to make any such estimate in connection with the development of the Plan. No assurance can be given as to the market prices that will prevail following the Effective Date. 4. Lack of Trading Market for the New Tranche B Notes After the issuance of the New Tranche B Notes pursuant to the Plan, there can be no assurance that an active trading market will develop therefor. Further, there can be no assurance as to the degree of price volatility in any such market. Accordingly, no assurance can be given that any holder of such securities will be able to sell such securities or as to the price at which any sale may occur. If such market were to exist, such securities could trade at prices higher or lower than the value attributed to such securities hereunder, depending upon many factors, including, without limitation, the prevailing interest rates, markets for similar securities, industry conditions and the performance of, and investor expectations for, the Reorganized Debtors. 5. Dividend Policies Reorganized Pioneer does not anticipate paying any dividends on the New Common Stock in the foreseeable future. In addition, the covenants in certain debt instruments to which Reorganized Pioneer will be a party may limit the ability of Reorganized Pioneer to pay dividends. Certain institutional investors may only invest in dividend-paying equity securities or may operate under other restrictions which may prohibit or limit their ability to invest in the New Common Stock. 6. Preferred Stock Until such time (if any) as the Board of Directors of Reorganized Pioneer determines that Reorganized Pioneer should issue preferred stock and establishes the respective rights of the holders of one or more series thereof, it is not possible to state the actual effect of authorization of the preferred stock upon the rights of holders of the New Common Stock. The effects of such issuance could include, however: (i) reduction of the amount of cash otherwise available for payment of dividends on the New Common Stock if dividends were also payable on the preferred stock; (ii) restrictions on dividends on the New Common Stock if dividends on the preferred stock were in arrears; (iii) dilution of the voting power of the New Common Stock (if 67 74 the preferred stock were to have voting rights (including, without limitation, votes pertaining to the removal of directors)); and (iv) restriction of the rights of holders of the New Common Stock to share in Reorganized Pioneer's assets upon liquidation until satisfaction of any liquidation preference granted to the holders of preferred stock. In addition, so-called "blank check" preferred stock may be viewed as having possible anti-takeover effects, if it were used to make a third party's attempt to gain control of Reorganized Pioneer more difficult, time consuming or costly. Pioneer has no current plans pursuant to which preferred stock would be issued as an anti-takeover device or otherwise. 7. Projected Financial Information The financial projections included in this Disclosure Statement are dependent upon the successful implementation of the business plan and the validity of the other assumptions contained therein. These projections reflect numerous assumptions, including confirmation and consummation of the Plan in accordance with its terms, the anticipated future performance of the Debtors, chlor-alkali industry performance, certain assumptions with respect to competitors of the Debtors, general business and economic conditions and other matters, many of which are beyond the control of the Debtors. In addition, unanticipated events and circumstances occurring subsequent to the preparation of the projections may affect the actual financial results of the Debtors. Although the Debtors believe that the projections are reasonably attainable, variations between the actual financial results and those projected may occur and be material. 8. Business Factors and Competitive Conditions The chlor-alkali industry is highly competitive. Many of Pioneer's competitors, including The Dow Chemical Company ("Dow"), Occidental Chemical Corporation ("OxyChem"), and PPG Industries, Inc. are larger and have greater financial resources than Pioneer. There are also several regional companies that specialize in a smaller number of chemical products. While a significant portion of Pioneer's business is based upon widely available technology, the difficulty in obtaining permits for the production of chlor-alkali and chlor-alkali related products may be a barrier to entry. Pioneer's ability to compete effectively depends on its ability to maintain competitive prices, to provide reliable and responsive service to its customers and to operate in a safe and environmentally responsible manner. North America represents approximately 32% of world chlor-alkali production capacity, with approximately 15.1 million tons of chlorine and 16.6 million tons of caustic soda production capacity. OxyChem and Dow are the two largest chlor-alkali producers in North America, together representing approximately 45% of North American capacity. The remaining capacity is held by approximately 20 companies. Approximately 65% of North American chlor-alkali capacity is located on the Gulf Coast of Texas and Louisiana. Pioneer's chlor-alkali capacity represents approximately 5% of total North American capacity. The chlorine and caustic soda currently produced at Pioneer's Tacoma and Henderson facilities provide a significant source of supply for the West Coast region, where Pioneer is the largest supplier of chlorine and bleach for water treatment purposes. The Tacoma, St. Gabriel and Dalhousie 68 75 facilities are leading suppliers of premium, low-salt grade caustic soda in their respective regions. Pioneer believes its strong regional presence in eastern Canada and the western United States has enhanced the competitiveness of Pioneer's operations. 9. U.S. Environmental Laws Air Quality. Pioneer's U.S. operations are subject to the federal Clean Air Act ("CAA") and the amendments to that act which were enacted in 1990. Pioneer will be subject to some of the additional environmental regulations required to be adopted by the federal Environmental Protection Agency ("EPA") and state environmental agencies to implement the CAA Amendments of 1990. Among the requirements that are potentially applicable to Pioneer are those that require the EPA to establish hazardous air pollutant emissions requirements for chlorine production facilities. Although Pioneer cannot estimate the cost of complying with these requirements until such regulations are proposed, at this time Pioneer does not believe that such requirements will have a material adverse effect on it. Most of Pioneer's plants manufacture or use chlorine, which is in gaseous form if released into the air. Chlorine gas in relatively low concentrations can irritate the eyes, nose and skin and in large quantities or high concentrations can cause permanent injury or death. From 1995 to date, there have been minor releases at Pioneer's plants, none of which is believed to have had any impact on human health or the environment. Those releases were controlled by plant personnel, in some cases with the assistance of local emergency response personnel, and there were no material claims against Pioneer as a result of those incidents. Pioneer maintains systems to detect emissions of chlorine at its plants, and all of the plants are members of their local industrial emergency response networks. Pioneer believes that its insurance coverage is adequate with respect to costs that might be incurred in connection with any future release, although there can be no assurance that Pioneer will not incur substantial expenditures that are not covered by insurance if a major release does occur in the future. Water Quality. Pioneer maintains waste water discharge permits for many of its facilities pursuant to the U.S. Federal Water Pollution Control Act of 1972, as amended, and comparable state laws. Where required, Pioneer has also applied for permits to discharge stormwater under such laws. In order to meet the discharge requirements applicable to stormwater, it will be necessary to modify surface drainage or make other changes at certain plants. Pioneer spent approximately $2.6 million during the combined 1997 through 1999 period for modifications to the stormwater system at the Henderson plant, and believes that any additional costs associated with stormwater discharge at Henderson and its other plants will not have a material adverse effect on its financial condition, liquidity or operating results. The various states in which Pioneer operates also have water pollution control statutes and regulatory programs which include groundwater and surface water protection provisions. The requirements of these laws vary and are generally implemented through a state regulatory agency. These water protection programs typically require site discharge permits, spill notification and prevention and corrective action plans. Investigation or monitoring activities are ongoing at the Henderson, St. Gabriel, Tacoma, and Tracy plant sites, as well as at sites in Antioch, Pittsburg and Marysville, California, where Pioneer previously conducted operations. Regulatory agencies are considering whether additional actions are necessary to 69 76 protect or remediate surface or groundwater resources at these sites, and Pioneer could be required to incur additional costs to construct and operate remediation systems in the future. The state regulatory agency has indicated that the installation of a groundwater treatment system at the Antioch site might be proposed, and it has requested a Feasibility Study to determine if a groundwater recovery and treatment system should be required for the Tracy Facility. Each of the systems could cost $2,000,000 or more, such that they would not represent cost-effective solutions to any problems resulting from Pioneer's operations at the facilities, and they will be resisted on those grounds. There is an existing groundwater treatment system at the Henderson site, the operating costs of which are shared equally with a previous site tenant. It is possible that Pioneer and previous site owners will be required to upgrade the system to provide additional treatment of groundwater, but there is no present requirement for any such upgrade, nor has any regulatory agency requested an evaluation of a potential upgrade. Pioneer expects that any such cost would be covered by the ZENECA indemnity discussed below. In addition to these groundwater issues, an aboveground soil cap over two former operating areas at the Henderson facility has been proposed, the cost of which would also be covered by the ZENECA indemnity. In addition, Pioneer plans to spend approximately $3.0 million during the next three years on improvements to discontinue the use of three chlor-alkali waste water disposal ponds at its Henderson plant, replacing them with systems to recycle wastewater. Pioneer operates a groundwater treatment system at the Tacoma plant that treats contaminants derived from the operations of the prior owner. Pioneer expects that in accordance with the OCC Tacoma indemnity discussed below, the prior owner will pay for all of the material costs relating to the existing system, which is still owned by the prior owner, and for investigations proposed by the state regulatory agency. State and federal regulatory agencies have also identified Pioneer as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund" law, in connection with remediation that will occur near the Tacoma facility in connection with the Commencement Bay/Nearshore Tideflats Superfund site. Identified work includes remediation of waterway sediments and the embankment adjacent to Pioneer's plant site. Pioneer has been named solely as a result of its current ownership of the property, and the remediation of historical contamination, and any Pioneer liability in connection with that remediation, is subject to the OCC Tacoma indemnity. Hazardous and Solid Wastes. Pioneer's manufacturing facilities generate hazardous and non-hazardous solid wastes which are subject to the requirements of the federal Solid Waste Disposal Act, including the federal Resource Conservation and Recovery Act and the Hazardous and Solid Waste Amendments and comparable state statutes. The EPA has adopted regulations banning the land disposal of certain hazardous wastes unless the wastes meet defined treatment or disposal standards, including certain mercury-containing wastes generated by Pioneer's St. Gabriel plant. In response to these regulations, the St. Gabriel plant has substantially reduced the quantity of wastes that are subject to the land ban through the installation of an in-plant mercury recovery and recycling system that reduces the level of mercury in its wastes below the hazardous classification. In 1999, the EPA issued a 70 77 Determination of Equivalent Technology to Pioneer, evidencing its agreement that the system meets or exceeds the mercury reduction capability of the alternative incineration process for mercury removal, such that the system meets the applicable standard for treatment of mercury wastes. The system generates a savings of $175,000 per year compared to the alternative process. Pioneer believes that it will be able to continue to dispose of hazardous and non-hazardous solid wastes generated by its facilities, without material adverse effect. Superfund. In the ordinary course of Pioneer's operations, substances are generated that fall within the definition of "hazardous substances," and Pioneer is the owner or operator of several sites at which hazardous substances have or may have been released into soil or groundwater. Under CERCLA, regulatory agencies or third parties may incur costs to investigate or remediate such conditions and seek reimbursement from Pioneer for such costs. The only site that is currently subject to Superfund activity is the Tacoma facility, as discussed above, and Pioneer believes that any liabilities it may have under CERCLA are either covered by the ZENECA indemnity or the OCC Tacoma indemnity, or will not have a material adverse effect. 10. Canadian Environmental Laws Pioneer's Canadian facilities are governed by federal environmental laws adopted by the Canadian parliament and administered by Environment Canada and by provincial environmental laws adopted by the respective provincial legislatures and enforced by administrative agencies. Many of these laws are comparable to the U.S. laws described above. In particular, the Canadian environmental laws generally provide for control and/or prohibition of pollution, for the issuance of certificates of authority or certificates of authorization which permit the operation of regulated facilities and prescribe limits on the discharge of pollutants, and for penalties for the failure to comply with applicable laws. These laws include the substantive areas of air pollution, water pollution, solid and hazardous waste generation and disposal, toxic substances, petroleum storage tanks, protection of surface and subsurface waters, and protection of other natural resources. However, there is no Canadian law similar to CERCLA that would make a company liable for legal off-site disposal, and Pioneer believes that Canadian law and practice as well as the nature of historical disposal practices at Pioneer's Canadian facilities makes any common law claims for liability remote. The Canadian Environmental Protection Act ("CEPA") is the primary federal statute which governs environmental matters throughout the provinces. The federal Fisheries Act is the principal federal water pollution control statute. This law would apply in the event of a spill of caustic soda or another deleterious substance that adversely impacts marine life in a waterway. The Becancour, Dalhousie and Cornwall facilities are all located adjacent to major waterways and are therefore subject to the requirements of this statute. The Chlor-Alkali Mercury Release Regulations and the Chlor-Alkali Mercury Liquid Effluent Regulations, adopted under the CEPA, regulate the operation of the Dalhousie facility. In particular, these regulations provide for the quantity of mercury a chlor-alkali plant may release into the ambient air and the quantity of mercury that may be released with liquid effluent. Pioneer believes it has operated and is currently operating in compliance with applicable Canadian laws and regulations. 71 78 The primary provincial environmental laws include the Environmental Protection Act in the province of Ontario, the Quebec Environment Quality Act in Quebec and the Clean Environment Act in New Brunswick. In general, each of these acts regulates the discharge of a contaminant into the natural environment if such discharge causes or is likely to cause an adverse effect. Pioneer is in substantial compliance with all requirements, with the exception of discharges of total dissolved solids at the Becancour facility. The provincial regulatory authority has been receptive to the adoption of long-term compliance measures that will not involve material expenditures by Pioneer. 11. Indemnities ZENECA indemnity. Pioneer's Henderson plant is located within what is known as the "Black Mountain Industrial Park." Soil and groundwater contamination have been identified within and adjoining the Black Mountain Industrial Park, including on and under land owned by Pioneer. A groundwater treatment system has been installed at the facility and, pursuant to a consent agreement with the state regulatory agency, studies are being conducted to further evaluate soil and groundwater contamination at the facility and other properties within the Black Mountain Industrial Park and to determine whether additional remediation will be necessary with respect to Pioneer's property. In connection with the 1988 acquisition of the St. Gabriel and Henderson properties, the sellers agreed to indemnify Pioneer's predecessor company with respect to, among other things, certain environmental liabilities associated with historical operations at the Henderson site. ZENECA Delaware Holdings, Inc. and ZENECA, Inc. (collectively, the "ZENECA Companies") assumed the indemnity obligations. In general, PCA is indemnified against environmental costs which arise from or relate to pre-closing actions which involved disposal, discharge or release of materials resulting from the former agricultural chemical and other non-chlor-alkali manufacturing operations at the Henderson plant. The ZENECA Companies are also responsible for costs arising out of the pre-closing actions at the Black Mountain Industrial Park. Under the ZENECA Indemnity, PCA may only recover indemnified amounts for environmental work to the extent that such work is required to comply with environmental laws or is reasonably required to prevent an interruption in the production of chlor-alkali products. PCA is responsible for environmental costs relating to the chlor-alkali manufacturing operations at the Henderson plant, both pre- and post-acquisition, for certain actions taken without ZENECA's consent and for certain operation and maintenance costs of the groundwater treatment system at the facility. The current costs incurred by Pioneer with respect to the groundwater treatment system do not exceed $100,000 per year. The Debtors do not believe that other environmental costs for which Pioneer is responsible in connection with chlor-alkali manufacturing operations at the Henderson plant and for certain actions taken without Zeneca's consent are material. Payments for environmental liabilities under the ZENECA Indemnity, together with other non-environmental liabilities for which the ZENECA Companies agreed to indemnify PCA, cannot exceed approximately $65 million. To date, Pioneer has been reimbursed for approximately $12 million of costs covered by the ZENECA Indemnity, but the ZENECA Companies have directly incurred additional costs that would further reduce the total amount 72 79 remaining under the ZENECA Indemnity. Pioneer does not expect that the amount that will be incurred to address indemnified liabilities will exceed the ZENECA indemnity limit. The ZENECA Indemnity continues to cover claims after the April 20, 1999 expiration of the term of the indemnity to the extent that, prior to the expiration of the indemnity, proper notice to the ZENECA Companies was given and either the ZENECA Companies have assumed control of such claims or Pioneer was contesting the legal requirements that gave rise to such claims, or had commenced removal, remedial or maintenance work with respect to such claims, or commenced an investigation which resulted in the commencement of such work within ninety days. Management believes proper notice was provided to the ZENECA Companies with respect to outstanding claims under the ZENECA Indemnity, but the amount of such claims has not yet been determined given the ongoing nature of the environmental work at Henderson. Pioneer believes that the ZENECA Companies will continue to honor their obligations under the ZENECA Indemnity for claims properly presented by Pioneer. It is possible, however, that disputes could arise between the parties concerning the effect of contractual language and that Pioneer would have to subject its claims for cleanup expenses, which could be substantial, to the contractually-established arbitration process. OCC Tacoma Indemnity. Pioneer acquired the chlor-alkali facility in Tacoma from OCC Tacoma, Inc. ("OCC Tacoma"), a subsidiary of OxyChem, in June 1997. In connection with the acquisition, OCC Tacoma agreed to indemnify Pioneer with respect to certain environmental matters, which indemnity is guaranteed by OxyChem. In general, Pioneer will be indemnified against damages incurred for remediation of certain environmental conditions, for certain environmental violations caused by pre-closing operations at the site and for certain common law claims. The conditions subject to the indemnity are sites at which hazardous materials have been released prior to closing as a result of pre-closing operations at the site. In addition, OCC Tacoma will indemnify Pioneer for certain costs relating to releases of hazardous materials from pre-closing operations at the site into the Hylebos Waterway, site groundwater containing certain volatile organic compounds that must be remediated under an RCRA permit, and historical disposal areas on the embankment adjacent to the site for maximum periods of 24 or 30 years, depending upon the particular condition, after which Pioneer will have full responsibility for any remaining liabilities with respect to such conditions. OCC Tacoma may obtain an early expiration date for certain conditions by obtaining a discharge of liability or an approval letter from a governmental authority. Although there can be no assurance that presently anticipated remediation work will be completed prior to the expiration of the indemnity, or that additional remedial requirements will not be imposed thereafter, Pioneer believes that the residual liabilities, if any, will not have a material adverse effect on Pioneer. OCC Tacoma will also indemnify Pioneer against certain other environmental conditions and environmental violations caused by pre-closing operations that are identified after June 17, 1997. Environmental conditions that are subject to formal agency action within five years after June 17, 1997 or to an administrative or court order within ten years after June 17, 1997, and environmental violations that are subject to an administrative or court order within five years after June 17, 1997, will be covered by the indemnity up to certain dollar amounts and time limits. Pioneer will indemnify OCC Tacoma for environmental conditions and environmental violations identified after June 17, 1997 if (i) an order or agency action is not imposed within the relevant time frames or (ii) applicable expiration dates or dollar limits are 73 80 reached. No relevant conditions or violations have been identified, and the applicable expiration dates and dollar limits are such that Pioneer does not believe it will bear any material amount of residual liability. Pioneer has reviewed the time frames currently estimated for remediation of the known environmental conditions associated with the plant and adjacent areas, and Pioneer presently believes that it will have no material liability upon the termination of OCC Tacoma's indemnity. However, the OCC Tacoma indemnity is subject to limitations as to dollar amount and duration, as well as certain other conditions, and there can be no assurance that such indemnity will be adequate to protect Pioneer, that remediation will proceed on the present schedule, that it will involve the presently anticipated remedial methods, or that unanticipated conditions will not be identified. If these or other changes occur, Pioneer could incur a material liability for which it is not insured or indemnified. PCICC Acquisition Indemnity. In connection, with the acquisition by Pioneer of the assets of PCICC in 1997, Imperial Chemical Industrials PLC ("ICI") and its affiliates (together, the "ICI Indemnitors") agreed to indemnify Pioneer for certain liabilities associated with environmental matters arising from pre-closing operations of the Canadian facilities. In particular, the ICI Indemnitors will retain unlimited responsibility for environmental liabilities associated with the Cornwall site, liabilities arising out of the discharge of contaminants into rivers and marine sediments and liabilities arising out of any off-site disposal sites. The ICI Indemnitors are also subject to a general environmental indemnity for other pre-closing environmental matters. This indemnity will terminate on October 31, 2007, and is subject to a limit of $25 million (Cdn). Pioneer may not recover under the environmental indemnity until it has incurred cumulative costs of $1 million (Cdn), at which point Pioneer may recover costs in excess of $1 million (Cdn). As of December 31, 1999, Pioneer had incurred no cumulative costs towards the $25 million (Cdn) indemnity. With respect to the Becancour and Dalhousie facilities, the ICI Indemnitors will be responsible under the general environmental indemnity for 100% of the costs incurred in the first five years after October 31, 1997 and for a decreasing percentage of such costs incurred in the following five years. Thereafter, Pioneer will be responsible for environmental liabilities at such facilities (other than liabilities arising out of the discharge of contaminants into rivers and marine sediments and liabilities arising out of off-site disposal sites). Pioneer will indemnify ICI for environmental liabilities arising out of post-closing operations and for liabilities arising out of pre-closing operations that are not indemnified by the ICI Indemnitors. There are no known material liabilities arising out of post-closing operations at these sites. Pioneer believes that the indemnity provided by ICI will be adequate to address the known environmental liabilities at the acquired facilities, and that any residual liabilities incurred by Pioneer will not be material. 12. Hart-Scott-Rodino Act Requirements Holders of Claims that acquired such Claims after the Commencement Date and that are to receive the New Common Stock under the Plan on account of such Claims may have to observe the filing and waiting period requirements of the Hart-Scott-Rodino Antitrust 74 81 Improvements Act of 1976 (the "HSR Act"). Holders required to make HSR Act filings cannot receive any such distribution of the New Common Stock until the expiration or early termination of the waiting periods under the HSR Act. Such holders should consult their own counsel regarding their potential responsibilities under the HSR Act. 13. Market Volatility Chlorine is used to manufacture over 15,000 products, including approximately 60% of all commercial chemistry, 85% of all pharmaceutical chemistry and 95% of all crop protection chemistry. Products manufactured with chlorine as a raw material include water treatment chemicals, plastics, detergents, pharmaceuticals, disinfectants and agricultural chemicals. Chlorine is also used directly in water disinfection applications. In the United States and Canada, virtually all public drinking water is made safe to drink by chlorination, and a significant portion of industrial and municipal waste water is treated with chlorine or chlorine derivatives to kill water-borne pathogens and remove solids. Caustic soda is a versatile chemical alkali used in a diverse range of manufacturing processes, including metal smelting, oil production and refining and pulp and paper production. Caustic soda is combined with chlorine to produce bleach. Caustic soda is also used as an active ingredient in a wide variety of other end use products, including detergents, rayon and cellophane. The chlorine and caustic soda markets have been, and are likely to continue to be, cyclical. Periods of high demand, high capacity utilization and increasing operating margins tend to result in new plant investments and increased production until supply exceeds demand, followed by a period of declining prices and declining capacity utilization until the cycle is repeated. Historically, chlorine demand has followed growth trends in polyvinyl chloride ("PVC"), non-vinyl polymers and water treatment markets, reduced by decreased chlorine use in the pulp and paper industry and as a feedstock in the production of chlorofluorocarbons ("CFCs") due to regulatory pressures. The markets for chlorine and caustic soda are affected by general economic conditions, both in North America and elsewhere in the world. During 1998, with the growing economic crisis in Asia, and subsequently South America, supply of chlor-alkali products exceeded demand, resulting in reduced pricing. These markets had experienced steady growth through early 1998. Chlorine prices were approximately $195 at the end of 1997 and then, as a result of market pressures, dropped to approximately $65 per ton at the end of 1998. The decline in chlorine market pricing continued into early 1998, contributing to a material adverse effect on Pioneers operating results and cash flows during the period. Chlorine demand has improved as the economies of Asia and South America strengthened and the market has begun to absorb the output of industry capacity increases, fueled by healthier end-use markets such as PVC resin. Chlorine pricing improved significantly during the latter half of 1999 and early 2000 as major price increases were announced, resulting in contract prices approaching $180 per ton. Typically, as chlorine demand falls, the industry's operating rate decreases. This results in demand for chlorine's cc-product, caustic soda, to exceed production, creating price increases for caustic soda. However, due to the world-wide economic conditions, particularly in 75 82 the pulp and paper markets, demand for caustic soda fell in 1998, and continued to fall through some of 1999 due to low overall demand. In spite of short supply in some segments due to low industry production rates, caustic prices declined before stabilization in pulp and paper segments, low inventories and widespread regional supply shortages began to have a favorable impact on pricing towards the end of the year. At the end of 1999, caustic soda prices were approximately $135 per ton; however, spot pricing was somewhat higher, indicative of positive pressure or prices. Large quantities of chlorine are not typically stored, and therefore chlor-alkali production rates are based on short-term chlorine demand (typically one month). However, chlor-alkali plants do not achieve optimum cost efficiency if production rates are cycled. The maintenance of steady production rates is made difficult by the cyclical nature of the chlor-alkali business, which is at times exacerbated because the market demand for chlorine differs from that of caustic soda. The chlor-alkali market has shifted from ECU buyers to independent markets, unlinking the markets for these two products. Peak and trough demand for chlorine and caustic soda rarely coincide and caustic soda demand, in the past and as experienced during 1999, has tended to trail chlorine demand into and out of economic growth cycles. XI. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN A. Introduction THE FOLLOWING DISCUSSION IS A SUMMARY OF CERTAIN OF THE SIGNIFICANT U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN TO THE DEBTORS AND TO HOLDERS OF CLAIMS WHO ACQUIRED SUCH CLAIMS ON ORIGINAL ISSUE AND EQUITY INTERESTS AND IS BASED ON THE INTERNAL REVENUE CODE OF 1986, AS AMENDED TO THE DATE HEREOF (THE "TAX CODE"), TREASURY REGULATIONS PROMULGATED AND PROPOSED THEREUNDER, JUDICIAL DECISIONS AND PUBLISHED ADMINISTRATIVE RULES AND PRONOUNCEMENTS OF THE INTERNAL REVENUE SERVICE ("IRS") AS IN EFFECT ON THE DATE HEREOF. CHANGES IN SUCH RULES OR NEW INTERPRETATIONS THEREOF COULD SIGNIFICANTLY AFFECT THE TAX CONSEQUENCES DESCRIBED BELOW. NO RULINGS HAVE BEEN REQUESTED FROM THE IRS. MOREOVER, NO LEGAL OPINIONS HAVE BEEN REQUESTED FROM COUNSEL WITH RESPECT TO ANY OF THE TAX ASPECTS OF THE PLAN. THE U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PLAN TO THE HOLDERS OF CLAIMS AND EQUITY INTERESTS MAY VARY BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER. IN ADDITION, THIS DISCUSSION DOES NOT COVER ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO THE DEBTORS OR THE HOLDERS OF CLAIMS OR EQUITY INTERESTS, NOR DOES THE DISCUSSION DEAL WITH TAX ISSUES PECULIAR TO CERTAIN TYPES OF TAXPAYERS (SUCH AS DEALERS IN SECURITIES, S CORPORATIONS, LIFE INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, TAX-EXEMPT ORGANIZATIONS AND FOREIGN TAXPAYERS). NO ASPECT OF FOREIGN, STATE, LOCAL OR ESTATE AND GIFT TAXATION IS ADDRESSED IN THE FOLLOWING DISCUSSION. 76 83 THE FOLLOWING SUMMARY IS, THEREFORE, NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR EQUITY INTEREST. HOLDERS OF CLAIMS OR EQUITY INTERESTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES PECULIAR TO THEM UNDER THE PLAN. B. Consequences to Holders of Claims 1. Realization and Recognition of Gain or Loss in General The federal income tax consequences of the implementation of the Plan to a holder of a Claim will depend, among other things, upon the origin of the holder's Claim, when the holder's Claim becomes an Allowed Claim, when the holder receives payment in respect of such Claim, whether the holder reports income using the accrual or cash method of accounting, whether the holder has taken a bad debt deduction or worthless security deduction with respect to such Claim and whether the holder's Claim constitutes a "security" for federal income tax purposes. Generally, a holder of an Allowed Claim will realize gain or loss on the exchange under the Plan of its Allowed Claim for stock and other property (such as Cash and new debt instruments), in an amount equal to the difference between (i) the sum of the amount of any Cash, the issue price of any debt instrument, and the fair market value on the date of the exchange of any other property received by the holder (other than any consideration attributable to a Claim for accrued but unpaid interest) and (ii) the adjusted basis of the Allowed Claim exchanged therefor (other than basis attributable to accrued but unpaid interest previously included in the holder's taxable income). With respect to the treatment of accrued but unpaid interest and amounts allocable thereto, see Section XI.B.9, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Allocation of Consideration to Interest." Whether or not such realized gain or loss will be recognized (i.e., taken into account) for federal income tax purposes will depend in part upon whether such exchange qualifies as a recapitalization or other "reorganization" as defined in the Tax Code, which may in turn depend upon whether the Claim exchanged is classified as a "security" for federal income tax purposes. The term "security" is not defined in the Tax Code or in the Treasury Regulations. One of the most significant factors considered in determining whether a particular debt instrument is a security is the original term thereof. In general, the longer the term of an instrument, the greater the likelihood that it will be considered a security. As a general rule, a debt instrument having an original term of 10 years or more will be classified as a security, and a debt instrument having an original term of fewer than five years will not. Debt instruments having a term of at least five years but less than 10 years are likely to be treated as securities, but may not be, depending upon their resemblance to ordinary promissory notes, whether they are publicly traded, whether the instruments are secured, the financial condition of the debtor at the time the debt instruments are issued and other factors. Each holder of an Allowed Claim should consult its own tax advisor to determine whether such Allowed Claim constitutes a security for federal income tax purposes. 77 84 2. Holders of Allowed Administrative Expense Claims (Unclassified), and Allowed Other Priority Claims (Class 1) Holders of Allowed Administrative Expense Claims (Unclassified) and Allowed Other Priority Claims (Class 1) generally will be paid in full in Cash on, or subsequent to, the Effective Date. Such holders must include amounts received in excess of their adjusted tax basis in their Claim (if any) in gross income in the taxable year in which such amounts are actually or constructively received by them. Where appropriate, income tax and employment tax will be withheld from such payments as required by law. With respect to the treatment of accrued but unpaid interest (if any) and amounts allocable thereto, see Section XI.B.9, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Allocation of Consideration to Interest." 3. Holders of Congress Secured Claims (Class 2) The holders of Congress Secured Claims will be treated in accordance with the DIP Facility and/or the Exit Facility. Such holders will not realize any gain or loss for federal income tax purposes upon implementation of the Plan because such treatment will not give rise to a significant modification of a debt instrument within the meaning of the Treasury Regulations. Such holders will be deemed to be in receipt of interest income for federal income tax purposes to the extent that (a) any amounts received are paid to such holders in respect of a Claim for accrued but unpaid interest and (b) such holders have not previously included such amounts in income under its method of accounting. See Section XI.B.9, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Allocation of Consideration to Interest." 4. Holders of Allowed PCA U.S. Secured Term and Note Claims (Class 3) and Allowed Canadian Secured Term and Note Claims (Class 4) a. Gain or Loss Holders of Allowed PCA US Secured Term and Note Claims (Class 3) and Canadian Secured Term and Note Claims (Class 4) will receive New Tranche A Term Notes, the New Tranche B Notes and the New Common Stock pursuant to the Plan. The Debtors believe that the New Tranche B Notes will constitute "securities" for federal income tax purposes and the New Tranche A Term Notes and the New Tranche B Notes will constitute "securities," although these conclusions are not free from doubt. See Section XI.B.1, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Realization and Recognition of Gain or Loss in General." Certain Allowed PCA U.S. Secured Term and Note Claims and Allowed Canadian Secured Term and Note Claims may be considered "securities" for federal income tax purposes. See Section XI.B.1, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Realization and Recognition of Gain or Loss in General." Each holder of an Allowed Claim should consult its own tax advisor to determine whether such Allowed Claim constitutes a "security" for federal income tax purposes. 78 85 In addition, the discussion below is based upon the Debtors' belief that notwithstanding the series of transactions outlined in the Plan to effectuate distribution of the New Tranche A Term Notes, the New Tranche B Notes and the New Common Stock to holders of Allowed Class 3 and Class 4 Claims, the federal income tax consequences to such holders will be determined as if they had exchanged their Allowed Claims with the Debtors for such consideration in a single transaction, thus reflecting the end result of the series of transactions. Notwithstanding the foregoing, it is possible that the IRS may take the position that each of the transactions should be accorded independent significance and therefore the extent to which income, gain or loss should be recognized, and the amount thereof, should be determined separately for each transaction. Whether such treatment would be favorable or adverse to any holder would depend on such holder's own tax circumstances. Holders should consult their own tax advisors. A. PCA U.S. Secured Term and Note Claims and Canadian Secured Term and Note Claims Constituting Securities The Debtors believe that the deemed transfer of assets by PCA to PCI pursuant to a conversion of PCA into a limited liability company wholly owned by PCI will constitute a reorganization described in Section 368(a)(1)(G) of the Tax Code. The Debtors also believe that the subsequent transfer of assets by PCICC to PCI pursuant to an amalgamation of PCICC with a Nova Scotia unlimited liability company wholly owned by PCI will constitute a reorganization described in Section 368(a)(1)(G) of the Tax Code or a liquidation described in Section 332 of the Tax Code. If a holder's Allowed PCA U.S. Secured Term and Note Claim and Allowed Canadian Secured Term and Note Claim are considered securities for federal income tax purposes, then the receipt of the New Tranche A Term Notes, the New Tranche B Notes and the New Common Stock in satisfaction of such Claims will be made in pursuance of a plan of reorganization for federal income tax purposes. Therefore, any loss realized by such a holder will not be recognized. Assuming the New Tranche A Term Notes and the New Tranche B Notes constitute securities for federal income tax purposes, no gain will be recognized. If either the New Tranche A Term Notes or the New Tranche B Notes are not considered securities, then no realized loss will be recognized and any gain realized will be recognized, but the amount of gain recognized will not exceed the sum of the issue prices of the New Tranche A Term Notes and the New Tranche B Notes that do not constitute securities and are received in excess of the amount allocated to accrued but unpaid interest. A holder's aggregate tax basis in the New Common Stock, the New Tranche A Term Notes and the New Tranche B Notes received in satisfaction of its Claim will equal the holder's aggregate adjusted tax basis in its Claim (including any Claim for accrued but unpaid interest), increased by any gain or interest income recognized in respect of its Allowed Claim. Any amounts received in respect of Claims for accrued interest on the Allowed PCA U.S. Secured Term and Note Claims or the Allowed Canadian Secured Term and Note Claims will be taxed as ordinary income, except to the extent previously included by a holder under its method of accounting. See Section XI.B.9, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Allocation of Consideration to Interest." 79 86 B. PCA U.S. Secured Term and Note Claims and Allowed Canadian Secured Term and Note Claims That Do Not Constitute Securities If an Allowed PCA U.S. Secured Term and Note Claim or an Allowed Canadian Secured Term and Note Claim, as the case may be, is not considered a security for federal income tax purposes, a holder of such an Allowed Claim generally will realize and recognize gain or loss in an amount equal to the difference between (a) the holder's basis in the Allowed Claim and (b) the sum of (x) the fair market value of the New Common Stock, (y) the issue price of the New Tranche A Term Notes and (z) the issue price of the New Tranche B Notes received in excess of amounts allocable to accrued but unpaid interest. A holder's tax basis in the New Tranche A Term Notes and New Tranche B Notes received would equal their respective issue prices. A holder's tax basis in the New Common Stock received would equal its fair market value. Any amounts received in respect of Claims for accrued interest on the Allowed PCA U.S. Secured Term and Note Claims or the Allowed Canadian Secured Term and Note Claims will be taxed as ordinary income, except to the extent previously included by a holder under its method of accounting. See Section XI.B.9, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Allocation of Consideration to Interest." b. Interest Income A. Qualified Stated Interest. "Qualified stated interest" on the New Tranche A Term Notes and the New Tranche B Notes will be taxable to a holder of the New Tranche A Term Notes and the New Tranche B Notes as ordinary interest income either at the time it accrues or is received, depending upon such holder's method of accounting for federal income tax purposes. Qualified stated interest means any stated interest that is unconditionally payable in Cash or property (other than additional debt instruments), based on a fixed rate, and payable unconditionally at fixed periodic intervals of one year or less during the entire term of the debt instrument. The interest payments on the New Tranche A Term Notes and New Tranche B Notes will constitute qualified stated interest. In addition to tax on qualified stated interest, a holder of the New Tranche A Term Notes and the New Tranche B Notes may be subject to rules requiring such holder to include in gross income the amount of original issue discount ("OID") with respect to its notes. The Reorganized Debtors will report to holders of the New Tranche A Term Notes and the New Tranche B Notes, on a timely basis, the amount of reportable OID, if any, and qualified stated interest income with respect to such notes. B. Original Issue Discount. The New Tranche A Term Notes and the New Tranche B Notes may be issued with OID. As a result, each holder of such notes could be required to include OID in income in advance of the receipt of Cash attributable to that income. The amount of OID, if any, with respect to such notes would equal the excess of (i) its "stated redemption price at maturity" over (ii) its "issue price." The issue price of a New Tranche A Term Note and a New Tranche B 80 87 Note will equal its fair market value on the issue date. The "stated redemption price at maturity" of such notes generally will equal the sum of all payments (other than payments constituting "qualified stated interest" as defined above) required to be made on such notes. Such OID would be includable in the income of a holder on a ratable daily basis as described below, assuming the de minimis exception described below does not apply. Under the de minimis exception, a holder would not be required to include OID in income in advance of the receipt of Cash attributable to that income if the OID on such note is less than 0.25% of the note's stated redemption price at maturity multiplied by the number of complete years to the date such note matures. A holder will be required to include in gross income for federal income tax purposes an amount equal to the sum of the "daily portions" of such OID for all days during the taxable year on which such holder holds a note issued with OID. The daily portions of OID required to be included in a holder's gross income in a taxable year will be determined under a constant yield method by allocating to each day during the taxable year on which the holder holds such note a pro rata portion of the OID which is attributable to the "accrual period" in which such day is included. An "accrual period" may be of any length and may vary in length over the term of the note, provided that each accrual period is not longer than one year and each scheduled payment of principal or interest occurs either on the final day or the first day of an accrual period. The amount of the OID attributable to each accrual period will be determined by (1) multiplying the "adjusted issue price" of the note issued with OID at the beginning of such accrual period by the "yield to maturity" of such note (properly adjusted for the length of the accrual period) and (2) subtracting the amount of any qualified stated interest allocable to the accrual period. The "adjusted issue price" of a note issued with OID at the beginning of an accrual period will generally be its issue price plus the aggregate amount of OID that accrued in all prior accrual periods less any Cash payments (other than Cash payments of qualified stated interest) on such note. The "yield to maturity" is that discount rate which, when used in computing the present value of all principal and stated interest payments (including any premium deemed paid by the issuer) to be made under a note issued with OID, produces an amount equal to the issue price of such note. A holder of a note issued with OID may elect to include in income all interest that accrues on such note, including qualified stated interest and OID. If such an election is made, the rules discussed above would not apply. This election must be made for the taxable year that the holder acquires such note. The election may be revoked only with the consent of the IRS. 5. Holders of Other Secured Claims (Class 6) On, or subsequent to, the Effective Date, holders of Other Secured Claims will either have their Claims reinstated or will receive a New Secured Note. Such holders will not realize any gain or loss for federal income tax purposes upon implementation of the Plan because the transactions will not give rise to a significant modification of a debt instrument within the meaning of the Treasury Regulations. Such a holder will be deemed to be in receipt of interest 81 88 income for federal income tax purposes to the extent that (a) any amounts received are paid to such holder in respect of a claim for accrued but unpaid interest and (b) such holder has not previously included such amounts in income under his method of accounting. See Section XI.B.9, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Allocation of Consideration to Interest." 6. Holders of Allowed Convenience Claims (Class 7) Holders of Allowed Convenience Claims (Class 7) will receive Cash on, or subsequent to, the Effective Date. Such holders will recognize gain or loss in an amount equal to the difference between (i) the amount of Cash received (other than any amount received in respect of a Claim for accrued but unpaid interest) and (ii) the holder's adjusted tax basis in its Allowed Claim (other than any Claim for accrued but unpaid interest). Amounts received in respect of Claims for accrued but unpaid interest with respect to a holder's Allowed Convenience Claims will be taxed as ordinary income, except to the extent previously included by a holder under his method of accounting. See Section XI.B.9, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Allocation of Consideration to Interest." 7. Holders of Allowed General Unsecured Claims (Class 8) and Allowed Canadian Deficiency Claims and U.S. Deficiency Claims (Class 9) Holders of Allowed General Unsecured Claims (Class 8) and Allowed Canadian Deficiency Claims and U.S. Deficiency Claims (Class 9) will receive New Common Stock pursuant to the Plan. If such an Allowed Claim constitutes a "security" for U.S. federal income tax purposes, then no gain or loss will be recognized, and the holder's basis in its Allowed Claim will carry over to its New Common Stock. See Section XI.B.1, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Realization and Recognition of Gain or Loss in General." If a holder's Allowed Claim does not constitute a security, then such holder generally would recognize gain or loss in an amount equal to the difference between (i) the fair market value of the New Common Stock received by such holder (other than any amount received in respect of a Claim for accrued but unpaid interest) and (ii) the holder's adjusted tax basis in its Allowed Claim (other than any Claim for accrued but unpaid interest). A holder's tax basis in the New Common Stock would equal its fair market value. Amounts received in respect of Claims for accrued but unpaid interest with respect to a holder's Allowed Claims will be taxed as ordinary income, except to the extent previously included by a holder under its method of accounting. See Section XI.B.9, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Allocation of Consideration to Interest." 8. Holders of Subordinated Claims (Class 10) and PCI Equity Interests (Class 11) On the Effective Date, all Subordinated Claims (Class 10) and PCI Equity Interests (Class 11) will be extinguished and holders of Subordinated Claims and PCI Equity Interests will not receive any Distributions pursuant to the Plan. Accordingly, holders of 82 89 Subordinated Claims and PCI Equity Interests will realize a loss equal to their adjusted tax basis in their Subordinated Claims and PCI Equity Interests upon implementation of the Plan. 9. Allocation of Consideration to Interest Pursuant to the Plan, all Distributions in respect of Allowed Claims will be allocated first to the principal amount of the Allowed Claim, with any excess allocated to unpaid accrued interest. However, there is no assurance that such allocation would be respected by the IRS for federal income tax purposes. In general, to the extent any amount received (whether stock, Cash or other property) by a holder of a debt is received in satisfaction of accrued interest during its holding period, such amount will be taxable to the holder as interest income (if not previously included in the holder's gross income). Conversely, a holder generally recognizes a deductible loss to the extent any accrued interest claimed was previously included in its gross income and is not paid in full. Each holder of an Allowed Claim is urged to consult his or her own tax advisor regarding the allocation of consideration and the deductibility of unpaid interest for tax purposes. 10. U.S. Withholding All Distributions under the Plan are subject to any applicable withholding. Under federal income tax law, interest, dividends, and other reportable payments may, under certain circumstances, be subject to "backup withholding" at the fourth-lowest tax rate applicable to unmarried individuals. That rate is currently 30.5 percent. Backup withholding generally applies if the holder (a) fails to furnish its social security number or other taxpayer identification number ("TIN"), (b) furnishes an incorrect TIN, (c) fails properly to report interest or dividends, or (d) under certain circumstances, fails to provide a certified statement, signed under penalty of perjury, that the TIN provided is its correct number and that it is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons are exempt from backup withholding, including, in certain circumstances, corporations and financial institutions. In general, Non-U.S. holders of the New Common Stock, the New Tranche A Term Notes and the New Tranche B Notes may be subject to U.S. withholding tax at a maximum rate of 30% on any dividends or interest received with respect to such stock or debt. It is anticipated, however, that any interest payments generally will be exempt from such tax pursuant to the rules applicable to "portfolio interest". Furthermore, the rate of withholding tax with respect to any dividend payments by PCI may be reduced to 15% (or lower in certain limited cases) pursuant to an applicable U.S. income tax treaty, such as the treaty between Canada and the United States, if the recipient is a qualified resident for purposes of such treaty and certain other requirements are otherwise satisfied. C. Consequences to the Debtors or the Reorganized Debtors 1. Discharge-of-Indebtedness Income Generally In general, the discharge of a debt obligation by a debtor for an amount less than the adjusted issue price (generally, the amount received upon incurring the obligation plus the 83 90 amount of any previously amortized original issue discount and less the amount of any previously amortized bond issue premium) gives rise to cancellation-of-indebtedness ("COD") income which must be included in a debtor's income for federal income tax purposes, unless, in accordance with Section 108(e)(2) of the Tax Code, payment of the liability would have given rise to a deduction. A corporate debtor that issues its own stock or its own debt in satisfaction of its debt is treated as realizing COD income to the extent the fair market value of the stock or the issue price of new debt issued is less than the adjusted issue price of the old debt. COD income is not recognized by a taxpayer that is a debtor in a title 11 (bankruptcy) case if a discharge is granted by the court or pursuant to a plan approved by the court (the "bankruptcy exclusion rules"). Pursuant to the Plan, Administrative Expense Claims, Secured Tax Claims, Other Priority Claims, Congress Secured Claims, and Other Secured Claims generally will be paid in full and, therefore, treatment of such Claims should not give rise to COD income. With respect to other Claims, there could be COD income if such Claims are not satisfied in full. Based upon current estimates of value, the Debtors believe that consummation of the Plan will give rise to approximately $207 million of COD income that will be excluded from gross income as described above, but will reduce attributes as described below. 2. Attribute Reduction The relief accorded to COD income by the bankruptcy exclusion rules is not without cost. If a taxpayer excludes COD income because of the bankruptcy exclusion rules, it is required to reduce prescribed tax attributes in the following order and at the following rates: (i) net operating losses ("NOLs") for the taxable year of the discharge and NOL carryovers to such taxable year, dollar for dollar; (ii) general business credit carryovers, 33-1/3 cents for each dollar of excluded income; (iii) the minimum tax credit available under Section 53(b) of the Tax Code as of the beginning of the taxable year immediately following the taxable year of the discharge, 33-1/3 cents for each dollar of excluded income; (iv) any capital losses for the taxable year of the discharge and any capital loss carryovers to such taxable year, dollar for dollar; (v) the basis of the taxpayer's assets, both depreciable and nondepreciable, dollar for dollar, but the basis cannot be reduced below an amount based on the taxpayer's aggregate liabilities immediately after the discharge; (vi) passive activity loss or credit carryovers of the taxpayer under Section 469(b) of the Tax Code from the taxable year of the discharge, dollar for dollar in the case of loss carryovers and 33-1/3 cents for each dollar of excludible income in the case of any passive activity credit carryovers; and (vii) foreign tax credit carryovers, 33-1/3 cents for each dollar of excluded income. However, under Section 108(b)(5) of the Tax Code, the taxpayer may elect to avoid the prescribed order of attribute reduction and instead reduce the basis of depreciable property first, without regard to the "aggregate liabilities" limitation. This election extends to stock of a subsidiary if the subsidiary consents to reduce the basis of its depreciable property. If the Reorganized Debtors make this election, the limitation prohibiting the reduction of asset basis below the amount of its remaining undischarged liabilities does not apply. The Debtors or the Reorganized Debtors do not expect to make the election to reduce the basis of their depreciable assets first under Section 108(b)(5) of the Tax Code. It is not clear whether, in the case of affiliated corporations filing a consolidated return (such as the Debtors or the Reorganized Debtors), the attribute reduction rules apply 84 91 separately to the particular corporation whose debt is being discharged, and not to the entire group without regard to the identity of the debtor. The IRS has informally taken the position that net operating losses are reduced on a consolidated basis, but many reputable tax practitioners question whether this position is correct. The Debtors are unable to determine at this time whether application of the informal position of the IRS could have a detrimental impact on the Reorganized Debtors. If it does, the Reorganized Debtors will decide whether to take a contrary position on their tax returns. 3. Utilization of Net Operating Loss Carryovers In general, whenever there is a 50% ownership change of a debtor corporation during a three-year period, the ownership change rules in Section 382 of the Tax Code limit the utility of NOLs on an annual basis to the product of the fair market value of the corporate equity immediately before the ownership change, multiplied by a hypothetical interest rate published monthly by the IRS called the "long-term tax-exempt rate." The long-term tax-exempt rate as of the date of this Disclosure Statement is 5%. In any given year, this limitation may be increased by certain built-in gains recognized after, but accruing economically before, the ownership change and the carryover of unused Section 382 limitations from prior years. On the other hand, if at the date of an ownership change the adjusted basis for federal income tax purposes of a debtor's assets exceeds the fair market value of such assets by prescribed amounts, (a "net unrealized built-in loss") then, upon the recognition of such built-in losses during a five-year period beginning on the date of the ownership change, such losses are treated as if they were part of the net operating loss carryover, rather than as a current deduction, and are also subject to the Section 382 limitation. Based on their returns as filed and upon estimates at the close of the taxable year ending December 31, 2000, the Debtors estimate that they will have an NOL carryforward of approximately $219 million. The Debtors believe that on January 1, 2001 they may have undergone an ownership change because a shareholder owning more than 50% of PCI took a worthless stock deduction on his federal income tax return in respect of such stock. As a result, the Debtors would be unable to utilize the estimated $219 million of net operating loss carryforwards ("Restricted NOLs") to offset operating income. This limitation could be increased to the extent the Debtors or the Reorganized Debtors realize gain on disposition of assets subsequent to the ownership change, provided that such gain accrued with respect to those assets prior to the ownership change and certain mathematical tests are met. The Debtors believe that they had approximately $100 million of built-in gain that had accrued in their assets prior to the ownership change date. The COD amount arising in connection with the consummation of the plan of reorganization may also be a built-in gain as of December 31, 2000. The Debtors expect to generate approximately $30 million of net operating losses in the current taxable year ("Current NOLs"). Implementation of the Plan will create a second Section 382 change of ownership that would limit the Reorganized Debtors' use of the Current NOLs. The effects of the ownership change rules can be ameliorated in the case of the Current NOLs by an exception that applies to reorganizations under the Bankruptcy Code. This exception is unavailable in respect of the Restricted NOLs because the Debtors were not in bankruptcy when the first ownership change occurred. 85 92 Under the so-called "Section 382(1)(5) bankruptcy exception" to Section 382 of the Tax Code, if the reorganization results in an exchange by qualifying creditors and stockholders of their claims and interests for at least 50% of the debtor's stock (by vote and value), then the general ownership change rules will not apply. Instead, the debtor will be subject to a different tax regime under which the NOL is not limited on an annual basis but is reduced by the amount of interest deductions claimed during the three taxable years preceding the taxable year in which the ownership change occurred plus the portion of such taxable year prior to the change date, in respect of debt converted into stock in the reorganization. Moreover, if the Section 382(1)(5) bankruptcy exception applies, any further ownership change of the debtor within a two-year period will result in forfeiture of all of the debtor's NOLs incurred prior to the date of the second ownership change. If the debtor would otherwise qualify for the Section 382(1)(5) bankruptcy exception, but the NOL reduction rules mandated thereby would greatly reduce the NOL, the debtor may elect instead to be subject to the annual limitation rules of Section 382 of the Tax Code, but is permitted to value the equity of the corporation for purposes of applying the formula by using the value immediately after the ownership change (by increasing the value of the old loss corporation to reflect any surrender or cancellation of creditors' claims) instead of immediately before the ownership change (the "Section 382(1)(6) limitation"). Alternatively, if the debtor does not qualify for the Section 382(1)(5) bankruptcy exception, the utility of its NOL would automatically be governed by the Section 382(1)(6) limitation. The Debtors' NOLs will be reduced as a result of the attribute reduction rules described above before application of the ownership change rules. See Section XI.C.2, "Certain U.S. Federal Income Tax Consequences of the Plan--Consequences to Holders of Claims--Attribute Reduction." To the extent NOLs remain after attribute reduction, the Debtors anticipate that they will elect application of Section 382(l)(6). It should be noted that both the Restricted NOLs and the Current NOLs are estimates. The amount of NOLs available to the Debtors or the Reorganized Debtors is based on factual and legal issues with respect to which there can be no certainty. For example, these NOLs could be reduced or eliminated because of audit adjustments by the IRS that result from IRS examinations of the Debtors' returns, or any COD income as a result of the attribute reduction rules discussed above in Section XI.C.2, "Certain Federal Income Tax Consequences of the Plan--Consequences to the Debtors or the Reorganized Debtors--Attribute Reduction." The actual annual utility of the NOL carryovers (if any) will be determined by actual market value and the actual long-term tax-exempt rate at the date of reorganization and may be different from amounts described herein. In addition, if the valuation placed on the Debtors' assets is less than their adjusted tax basis, the Debtors could have a net unrealized built-in loss, although the Debtors do not believe that this is the case. 4. Consolidated Return Items The confirmation of the Plan may result in the recognition of income or loss attributable to the existence of deferred intercompany transactions, excess loss accounts or similar items. The Debtors, however, do not believe that the consequence of such items (if any) would have a material effect on them. 86 93 5. Restructuring Transactions Pursuant to the Plan, the Debtors will engage in a series of transactions in a prescribed order that will result in the following economic and structural consequences: (1) PCICC will be amalgamated with a Nova Scotia Unlimited Liability Company (PCICC ULC) and will be wholly owned by PCI; as such, PCICC ULC, although treated as a corporation for Canadian income tax purposes, will be disregarded for federal income tax purposes and its assets will be treated as owned directly by PCI; (2) PCA will become a limited liability company wholly owned by PCICC ULC; as such, the limited liability company will be disregarded for federal income tax purposes and its assets will be treated as owned directly by PCI; (3) PAI will merge into PCA LLC (to be known as PAI LLC); a limited liability company that will be disregarded for federal income tax purposes and its assets (including the assets of PCA LLC and PAI) will be treated as owned directly by PCI; and (4) certain creditors of the Debtors will own stock of PCI and new indebtedness of PCICC ULC and PAI LLC, which will be treated as indebtedness of PCI for federal income tax purposes. The Debtors believe that no income, gain or loss will be recognized by the Debtors as a result of the consummation of these transactions, or that if recognized, no material federal income tax liability will be incurred, except to the extent of reduction of certain tax attributes as a result of discharge of indebtedness described above. After the consummation of these transactions, the income of the entire group will be subject to federal income tax, reduced by foreign tax credits as allowed by U.S. tax law. The income of PCICC ULC will also be subject to Canadian income tax. In addition, U.S. and Canadian withholding taxes will apply to certain intercompany distributions as required by law. 6. Alternative Minimum Tax A corporation is required to pay alternative minimum tax to the extent that 20% of "alternative minimum taxable income" ("AMTI") exceeds the corporation's regular tax liability for the year. AMTI is generally equal to regular taxable income with certain adjustments. For purposes of computing AMTI, a corporation is entitled to offset no more than 90% of its AMTI with NOLs (as computed for alternative minimum tax purposes). Thus, if the Reorganized Debtors' consolidated group is subject to the alternative minimum tax in future years, a federal tax of 2% (20% of the 10% of AMTI not offset by NOLs) will apply to any AMTI earned by the Reorganized Debtors' consolidated group in future years that is otherwise offset by NOLs. 7. Special Considerations Applicable to PCICC As a Canadian corporation, PCICC is not generally subject to U.S. federal income tax, except to the extent that in any taxable year it has income that is effectively connected with the conduct of a trade or business in the United States. As a Canadian corporation, PCICC is not included in PCI's consolidated federal income tax return ("PCI Group"). However, because PCICC is a "controlled foreign corporation," certain of PCICC's income is directly included in the PCI Group's consolidated federal income tax return. It is unclear how the controlled foreign corporation rules, the bankruptcy exclusion rules, the attribute reduction rules and the change of ownership rules apply to this set of facts. The Debtors believe, however, either that the amount of COD of PCICC, if any, to the extent, if any, required to be included in the current year's consolidated federal income tax return will be offset by current NOLs (or perhaps NOL carryovers). However, it is possible, depending upon the outcome of several legal and factual 87 94 questions that cannot be determined at this time, either that the basis of PCICC's assets for U.S. federal income tax purposes will have to be reduced or that there will be some U.S. federal income tax liability for the current year attributable to COD of PCICC. XII. CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES. A. Introduction THE FOLLOWING DISCUSSION IS A SUMMARY OF CERTAIN OF THE SIGNIFICANT CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN TO THE DEBTORS AND TO HOLDERS OF CLAIMS WHO ACQUIRED SUCH CLAIMS ON ORIGINAL ISSUE AND EQUITY INTERESTS AND IS BASED ON THE CURRENT PROVISIONS OF THE CANADIAN INCOME TAX ACT (THE "TAX ACT"), THE REGULATIONS THEREUNDER, ALL SPECIFIC PROPOSALS TO AMEND THE TAX ACT AND REGULATIONS PUBLICLY ANNOUNCED BY THE CANADIAN MINISTER OF FINANCE PRIOR TO THE DATE HEREOF AND ON THE CURRENT PUBLISHED ADMINISTRATIVE PRACTICES OF THE CANADA CUSTOMS AND REVENUE AGENCY (THE "CCRA"). THIS SUMMARY DOES NOT OTHERWISE TAKE INTO ACCOUNT OR ANTICIPATE ANY CHANGES IN THE LAW WHETHER BY WAY OF JUDICIAL DECISION OR LEGISLATIVE ACTION, NOR DOES IT TAKE INTO ACCOUNT TAX LEGISLATION OF COUNTRIES OTHER THAN CANADA OR ANY PROVINCIAL TAX LEGISLATION. NO RULINGS HAVE BEEN REQUESTED FROM THE CCRA. THE SUMMARY IN PARAGRAPH B BELOW ONLY ADDRESSES THE TAX CONSEQUENCES TO HOLDERS ("NONRESIDENT HOLDERS"), WHO FOR PURPOSES OF THE TAX ACT AND ANY APPLICABLE TREATY OR CONVENTION AND AT ALL RELEVANT TIMES, ARE NEITHER A RESIDENT NOR DEEMED TO BE RESIDENT IN CANADA, HOLD THEIR CLAIMS AS CAPITAL PROPERTY, DEAL AT ARM'S LENGTH WITH THE DEBTORS, AND ARE NOT DEEMED TO HOLD THEIR CLAIMS IN, OR IN THE COURSE OF, CARRYING ON A BUSINESS IN CANADA AND ARE NOT INSURERS THAT CARRY ON AN INSURANCE BUSINESS IN CANADA OR ELSEWHERE. MOREOVER, NO LEGAL OPINIONS HAVE BEEN REQUESTED FROM COUNSEL WITH RESPECT TO ANY OF THE TAX ASPECTS OF THE PLAN. THE FOLLOWING SUMMARY IS THEREFORE NOT A SUBSTITUTE FOR CAREFUL TAX PLANING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR EQUITY INTEREST. HOLDERS OF CLAIMS OR EQUITY INTERESTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE CANADIAN FEDERAL INCOME TAX CONSEQUENCES, INCLUDING PROVINCIAL AND OTHER TAX CONSEQUENCES PECULIAR TO THEM UNDER THE PLAN. B. Consequences to Nonresident Holders of Claims Under the Tax Act, PCICC will not be required to withhold tax from interest paid to Nonresident Holders of the New Tranche B Notes. 88 95 No other tax on income (including taxable capital gains) will be payable by a Nonresident Holder of an Allowed Claim upon implementation of the Plan or in respect of the receipt of interest thereon by such Nonresident Holders with whom the Debtors deal at arm's length. C. Consequences to the Debtors and the Reorganized Debtors The Debtors believe that the Canadian debt forgiveness rules will apply to PCICC as a result of the implementation of the Plan. Under such rules, no immediate Canadian federal income tax liabilities would result to PCICC but the forgiven amount computed under such rules would reduce PCICC ULC's tax attributes, which may result in a future higher tax liability, depending on PCICC ULC's future taxable income. The Debtors believe that pursuant to the implementation of the Plan (1) the interest on the New Tranche B Notes should be deductible under the Tax Act and (2) the issuance of the New Tranche B Notes should not be viewed as giving rise to a benefit to the Debtors (which benefit would be treated as a dividend subject to Canadian withholding tax at a 5% or 15% rate depending on whether the applicable Debtor is the direct shareholder of PCICC) provided that, in both cases, the New Tranche B Notes are issued by PCICC ULC in exchange for the PCICC Senior Notes as provided under Section 7.1 of the Plan. Any gain realized by PCA on the transfer of PCICC to Newco and by Newco upon its liquidation pursuant to the implementation of the Plan should be exempt from Canadian federal income taxes under Article XIII of the Canada-United States Tax Convention. In addition, neither PCI nor Newco will be required to remit any amounts to the CCRA in accordance with withholding obligations under the Tax Act provided that PCA and Newco each obtain a certificate pursuant to Section 116 of the Tax Act at the appropriate time. XIII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN If the Plan is not confirmed and consummated, the Debtors' alternatives include (i) liquidation of the Debtors under chapter 7 of the Bankruptcy Code and (ii) the preparation and presentation of an alternative plan or plans of reorganization. A. Liquidation Under Chapter 7. If no chapter 11 plan can be confirmed, the Chapter 11 Cases may be converted to cases under chapter 7 of the Bankruptcy Code in which a trustee would be elected or appointed to liquidate the assets of the Debtors. In addition, in such circumstances, the holders of Secured Claims against PCICC may be entitled to enforce their security interest against PCICC in Canada under applicable Canadian law. A discussion of the effect that a chapter 7 liquidation would have on the recovery of holders of Claims and Equity Interests is set forth in Section VI.C.4., "Confirmation and Consummation Procedure--Confirmation--Best Interests Test." The Debtors believe that liquidation under chapter 7 would result in (i) smaller distributions being made to creditors than those provided for in the Plan because of the additional administrative expenses involved in the appointment of a trustee and attorneys and other professionals to assist such trustee, (ii) additional expenses and claims, some of which would be entitled to priority, 89 96 which would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of the Debtors' operations and (iii) the failure to realize the greater, going concern value of the Debtors' assets. B. Alternative Plan of Reorganization. If the Plan is not confirmed, the Debtors or any other party in interest could attempt to formulate a different plan of reorganization. Such a plan might involve either a reorganization and continuation of the Debtors' business or an orderly liquidation of their assets. During the course of negotiation of the Plan, the Debtors explored various other alternatives and concluded that the Plan represented the best alternative to protect the interests of creditors and other parties in interest. The Debtors have not changed their conclusions. The Debtors believe that the Plan enables the Debtors to successfully and expeditiously emerge from chapter 11, preserves their business and allows creditors and equity interest holders to realize the highest recoveries under the circumstances. In a liquidation under chapter 11 of the Bankruptcy Code, the assets of the Debtors would be sold in an orderly fashion which could occur over a more extended period of time than in a liquidation under chapter 7 and a trustee need not be appointed. Accordingly, creditors would receive greater recoveries than in a chapter 7 liquidation. Although a chapter 11 liquidation is preferable to a chapter 7 liquidation, the Debtors believe that a liquidation under chapter 11 is a much less attractive alternative to creditors and equity interest holders because a greater return to creditors and equity interest holders is provided for in the Plan. XIV. CONCLUSION AND RECOMMENDATION The Debtors believe that confirmation and implementation of the Plan is preferable to any of the alternatives described above because it will provide the greatest recoveries to holders of Claims. Other alternatives would involve significant delay, uncertainty and substantial additional administrative costs. The Debtors urge holders of impaired Claims and Equity Interests entitled to vote on the Plan to vote to accept the Plan and to evidence such acceptance by returning their Ballots so that they will be received not later than 4:30 p.m., (Central Time), on October 30, 2001. Dated: Houston, Texas September 21, 2001 PIONEER COMPANIES, INC., a Delaware corporation (for itself and on behalf of each of the Subsidiaries) By: /s/ Michael J. Ferris ------------------------------------ Name: Michael J. Ferris Title: President and Chief Executive Officer 90 97 EXHIBIT A TO DISCLOSURE STATEMENT Plan of Reorganization 98 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION --------------------------------------- : In re: : CHAPTER 11 : PIONEER COMPANIES, INC., : PIONEER CORPORATION OF AMERICA, : IMPERIAL WEST CHEMICAL CO., : KEMWATER NORTH AMERICA CO., : PCI CHEMICALS CANADA INC./PCI, : Case No. 01-38259-H3-11 CHIMIE CANADA INC., : PIONEER AMERICAS, INC., : PIONEER (EAST), INC., : PIONEER WATER TECHNOLOGIES, INC., : PIONEER LICENSING, INC., and : KWT, INC., : JOINTLY ADMINISTERED : Debtors. : : --------------------------------------- DEBTORS' AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE WEIL, GOTSHAL & MANGES LLP Attorneys for the Debtors 700 Louisiana, Suite 1600 Houston, Texas 77002 (713) 546-5000 and 100 Crescent Court, Suite 1300 Dallas, Texas 75201 (214) 746-7700 Dated: Houston, Texas September 21, 2001 99 ARTICLE I. DEFINITIONS AND CONSTRUCTION OF TERMS.................................................................1 1.1 Ad Hoc Committee...............................................................................1 1.2 Administrative Expense Claim...................................................................1 1.3 Allowed........................................................................................2 1.4 Amended PCI Bylaws.............................................................................2 1.5 Amended PCI Certificate of Incorporation.......................................................2 1.6 Avoidance Claims...............................................................................2 1.7 Ballot.........................................................................................2 1.8 Balloting Agent................................................................................2 1.9 Balloting Deadline.............................................................................2 1.10 Bankruptcy Code................................................................................2 1.11 Bankruptcy Court...............................................................................3 1.12 Bankruptcy Rules...............................................................................3 1.13 BNY............................................................................................3 1.14 Business Day...................................................................................3 1.15 Canadian Court.................................................................................3 1.16 Canadian Deficiency Claims.....................................................................3 1.17 Canadian Plan..................................................................................3 1.18 Canadian Proceedings...........................................................................3 1.19 Canadian Secured Term and Note Claims..........................................................3 1.20 Cash...........................................................................................3 1.21 Causes of Action...............................................................................3 1.22 CCAA...........................................................................................3 1.23 CCAA Order.....................................................................................3 1.24 Chapter 11 Cases...............................................................................4 1.25 Claim..........................................................................................4 1.26 Class..........................................................................................4 1.27 Class 8 and Class 9 Distribution...............................................................4 1.28 Class 9 Distribution...........................................................................4 1.29 Clerk..........................................................................................4 1.30 Collateral.....................................................................................4 1.31 Commencement Date..............................................................................4 1.32 Confirmation Date..............................................................................4
100 1.33 Confirmation Hearing...........................................................................4 1.34 Confirmation Order.............................................................................4 1.35 Congress.......................................................................................4 1.36 Congress Secured Claim.........................................................................4 1.37 Convenience Claim..............................................................................4 1.38 Creditors' Committee...........................................................................5 1.39 Debtors........................................................................................5 1.40 Debtors in Possession..........................................................................5 1.41 DIP Facility...................................................................................5 1.42 Disbursing Agents..............................................................................5 1.43 Disclosure Statement...........................................................................5 1.44 Disputed.......................................................................................5 1.45 Disputed Claim Amount..........................................................................5 1.46 Docket.........................................................................................5 1.47 Effective Date.................................................................................5 1.48 Environmental Claim............................................................................6 1.49 Equity Interest................................................................................6 1.50 ERISA..........................................................................................6 1.51 Estates........................................................................................6 1.52 Existing Credit Facility.......................................................................6 1.53 Exit Facility..................................................................................6 1.54 Exit Facility Lenders..........................................................................6 1.55 File, Filed, or Filing.........................................................................6 1.56 Final Order....................................................................................6 1.57 General Unsecured Claim........................................................................7 1.58 Guarantees.....................................................................................7 1.59 Imperial.......................................................................................7 1.60 Indenture Trustees.............................................................................7 1.61 Indenture Trustees' Expenses...................................................................7 1.62 Initial Distribution Date......................................................................7 1.63 Insured Claim..................................................................................7 1.64 Intercompany Claim.............................................................................7 1.65 KNA............................................................................................7
101 1.66 KWT............................................................................................7 1.67 LIBOR Rate.....................................................................................7 1.68 Lien...........................................................................................8 1.69 MEIP...........................................................................................8 1.70 New Board of Directors.........................................................................8 1.71 New Common Stock...............................................................................8 1.72 New Indenture Trustees.........................................................................8 1.73 New Notes......................................................................................8 1.74 New Other Secured Notes........................................................................8 1.75 New Tranche A Term Notes.......................................................................8 1.76 New Tranche A Term Loan Agreement..............................................................8 1.77 New Tranche A Term Notes Agent.................................................................8 1.78 New Tranche B Notes............................................................................8 1.79 New Tranche B Notes Indenture..................................................................8 1.80 New Tranche B Notes Indenture Trustee..........................................................8 1.81 Order..........................................................................................9 1.82 Other Priority Claim...........................................................................9 1.83 Other Secured Claim............................................................................9 1.84 PAI............................................................................................9 1.85 PBGC...........................................................................................9 1.86 PCA............................................................................................9 1.87 PCA Canadian Term Loan Agreement...............................................................9 1.88 PCA Canadian Term Loan Agreement Administrative Agent..........................................9 1.89 PCA U.S. Secured Term and Note Claims..........................................................9 1.90 PCA Senior Notes...............................................................................9 1.91 PCA Senior Notes Indenture.....................................................................9 1.92 PCA Senior Notes Indenture Trustee.............................................................9 1.93 PCA U.S. Term Loan Agreement...................................................................9 1.94 PCA U.S. Term Loan Agreement Administrative Agent..............................................9 1.95 PCI............................................................................................9 1.96 PCI Equity Interest...........................................................................10 1.97 PCICC.........................................................................................10 1.98 PCICC Senior Notes............................................................................10
102 1.99 PCICC Senior Notes Indenture..................................................................10 1.100 PCICC Senior Notes Indenture Trustee..........................................................10 1.101 Pioneer.......................................................................................10 1.102 Pioneer 2000 Group............................................................................10 1.103 Pioneer 2000 Group Claims.....................................................................10 1.104 Pioneer East..................................................................................10 1.105 Pioneer Licensing.............................................................................10 1.106 Plan..........................................................................................10 1.107 Plan Documents................................................................................10 1.108 Plan Supplement...............................................................................10 1.109 Priority Tax Claim............................................................................10 1.110 Pro Rata Share................................................................................10 1.111 Professionals.................................................................................11 1.112 Protocol......................................................................................11 1.113 PWT...........................................................................................11 1.114 Quarter.......................................................................................11 1.115 Record Date...................................................................................11 1.116 Registration Rights Agreement.................................................................11 1.117 Reorganized Debtors...........................................................................11 1.118 Reorganized PAI...............................................................................11 1.119 Reorganized PCI...............................................................................11 1.120 Reorganized PCICC.............................................................................11 1.121 Reorganized Pioneer...........................................................................11 1.122 Reorganized Subsidiaries......................................................................11 1.123 Reserve.......................................................................................11 1.124 Retirement Plans..............................................................................12 1.125 Schedules.....................................................................................12 1.126 Secured Claim.................................................................................12 1.127 Secured Tax Claim.............................................................................12 1.128 Subordinated Claim............................................................................12 1.129 Subsequent Distribution Date..................................................................12 1.130 Subsidiary....................................................................................12 1.131 Subsidiary Equity Interest....................................................................12
103 1.132 Surplus Distributions.........................................................................12 1.133 Tort Claim....................................................................................12 1.134 Unsecured Claim...............................................................................12 1.135 U.S. Deficiency Claims........................................................................13 1.136 U.S. Trust....................................................................................13 1.137 Voting Deadline...............................................................................13 1.138 Interpretation; Application of Definitions and Rules of Construction..........................13 ARTICLE II. TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS.................................13 2.1 Administrative Expense Claims.................................................................13 2.2 Professional Compensation and Reimbursement Claims............................................13 2.3 Priority Tax Claims...........................................................................14 ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS......................................................14 ARTICLE IV. TREATMENT OF CLAIMS AND EQUITY INTERESTS............................................................15 4.1 CLASS 1 - OTHER PRIORITY CLAIMS...............................................................15 4.2 CLASS 2 - CONGRESS SECURED CLAIMS.............................................................15 4.3 CLASS 3 - PCA U.S. SECURED TERM AND NOTE CLAIMS...............................................15 4.4 CLASS 4 - CANADIAN SECURED TERM AND NOTE CLAIMS...............................................16 4.5 CLASS 5 - SECURED TAX CLAIMS..................................................................16 4.6 CLASS 6 - OTHER SECURED CLAIMS................................................................17 4.7 CLASS 7 - CONVENIENCE CLAIMS..................................................................17 4.8 CLASS 8 - GENERAL UNSECURED CLAIMS............................................................18 4.9 CLASS 9 - CANADIAN DEFICIENCY CLAIMS AND U.S. DEFICIENCY CLAIMS...............................18 4.10 CLASS 10 - SUBORDINATED CLAIMS................................................................18 4.11 CLASS 11 - PCI EQUITY INTERESTS...............................................................18 4.12 Modification of Treatment of Claims...........................................................19 ARTICLE V. PROVISIONS REGARDING VOTING AND DISTRIBUTIONS UNDER THE PLAN AND TREATMENT OF DISPUTED, CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE EXPENSE CLAIMS, CLAIMS AND EQUITY INTERESTS.................19 5.1 Voting of Claims..............................................................................19 5.2 Nonconsensual Confirmation....................................................................19
104 5.3 Method of Distributions Under the Plan........................................................19 5.4 Objections to and Resolution of Administrative Expense Claims, Claims and Equity Interests....22 5.5 Distributions Relating to Allowed Insured Claims..............................................23 ARTICLE VI. EXECUTORY CONTRACTS AND UNEXPIRED LEASES............................................................23 6.1 Assumption or Rejection of Executory Contracts and Unexpired Leases...........................23 6.2 Indemnification Obligations...................................................................25 6.3 Modified Compensation and Benefit Programs....................................................25 6.4 Retiree Benefits..............................................................................25 ARTICLE VII. CONSOLIDATION OF PCI AND THE SUBSIDIARIES..........................................................26 7.1 Restructuring Transactions....................................................................26 7.2 Order of Transactions.........................................................................29 7.3 Approval and Acknowledgment...................................................................29 7.4 Substantive Consolidation.....................................................................29 7.5 Issuance and Transfers of Common Stock of the Subsidiaries....................................30 7.6 Merger of Corporate Entities..................................................................30 ARTICLE VIII. PROVISIONS REGARDING CORPORATE GOVERNANCE AND MANAGEMENT OF THE REORGANIZED DEBTORS.............30 8.1 General.......................................................................................30 8.2 Meetings of Reorganized PCI Stockholders......................................................30 8.3 Directors and Officers of Reorganized Debtors.................................................31 8.4 Amended Bylaws and Amended Certificates of Incorporation......................................31 8.5 Issuance of New Securities....................................................................31 8.6 Management Equity Incentive Plan..............................................................32 ARTICLE IX. IMPLEMENTATION AND EFFECT OF CONFIRMATION OF PLAN..................................................32 9.1 Means for Implementation of the Plan..........................................................32 9.2 Term of Bankruptcy Injunction or Stays........................................................37 9.3 Revesting of Assets...........................................................................37 9.4 Causes of Action..............................................................................37 9.5 Discharge of Debtors..........................................................................37 9.6 Injunction....................................................................................38 ARTICLE X. EFFECTIVENESS OF THE PLAN............................................................................38 10.1 Conditions Precedent to Effectiveness.........................................................38
105 10.2 Effect of Failure of Conditions...............................................................39 10.3 Waiver of Conditions to Confirmation and Effective Date.......................................39 10.4 Effects of Plan Confirmation..................................................................39 ARTICLE XI. RETENTION OF JURISDICTION..........................................................................41 ARTICLE XII. MISCELLANEOUS PROVISIONS...........................................................................42 12.1 Effectuating Documents and Further Transactions...............................................42 12.2 Exemption from Transfer Taxes.................................................................42 12.3 Termination of Committee......................................................................43 12.4 Post-Confirmation Date Fees and Expenses......................................................43 12.5 Payment of Statutory Fees.....................................................................43 12.6 Amendment or Modification of the Plan.........................................................43 12.7 Severability..................................................................................43 12.8 Revocation or Withdrawal of the Plan..........................................................43 12.9 Binding Effect................................................................................44 12.10 Notices.......................................................................................44 12.11 Governing Law.................................................................................44 12.12 Withholding and Reporting Requirements........................................................44 12.13 Plan Supplement...............................................................................45 12.14 Voting for Purposes of the Canadian Plan......................................................45 12.15 Allocation of Plan Distributions Between Principal and Interest...............................45 12.16 Headings......................................................................................45 12.17 Exhibits/Schedules............................................................................45 12.18 Filing of Additional Documents................................................................46 12.19 No Admissions.................................................................................46
106 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION ------------------------------------------- : In re: : CHAPTER 11 : PIONEER COMPANIES, INC., : PIONEER CORPORATION OF AMERICA, : IMPERIAL WEST CHEMICAL CO., : KEMWATER NORTH AMERICA CO., : PCI CHEMICALS CANADA INC./PCI, : Case No. 01-38259-H3-11 CHIMIE CANADA INC., : PIONEER AMERICAS, INC., : PIONEER (EAST), INC., : PIONEER WATER TECHNOLOGIES, INC., : PIONEER LICENSING, INC., and : KWT, INC., : : Debtors. : JOINTLY ADMINISTERED : ------------------------------------------- DEBTORS' AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE Pioneer Companies, Inc. and its affiliate Debtors propose the following amended joint plan of reorganization under section 1121(a) of title 11 of the United States Code: ARTICLE I. DEFINITIONS AND CONSTRUCTION OF TERMS Definitions. As used herein, the following terms have the respective meanings specified below, unless the context otherwise requires: 1.1 Ad Hoc Committee means the unofficial committee of certain holders of PCA U.S. Secured Term and Note Claims and Canadian Secured Term and Note Claims, and as described in the Disclosure Statement. 1.2 Administrative Expense Claim means any right to payment constituting a cost or expense of administration of any of the Chapter 11 Cases under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without limitation, any Claims arising under the DIP Facility, any actual and necessary costs and expenses of preserving the Estates of the Debtors, any actual and necessary costs and expenses of operating the 107 business of the Debtors, any indebtedness or obligations incurred or assumed by the Debtors in Possession in connection with the conduct of their business, including, without limitation, for the acquisition or lease of property or an interest in property or the rendition of services, all compensation and reimbursement of expenses to the extent Allowed by the Bankruptcy Court under section 330 or 503 of the Bankruptcy Code, and any fees or charges assessed against the Estates of the Debtors under section 1930 of chapter 123 of title 28 of the United States Code. 1.3 Allowed means, with reference to any Claim, (a) any Claim against the Debtors which has been listed by the Debtors in their Schedules, as such Schedules may be amended by the Debtors from time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount and not disputed or contingent and for which no contrary proof of claim or interest has been filed, (b) any Claim allowed hereunder, (c) any Claim which is not Disputed, or (d) any Claim which, if Disputed, (i) as to which, pursuant to the Plan or a Final Order of the Bankruptcy Court, the liability of the Debtors and the amount thereof are determined by a final order of a court of competent jurisdiction other than the Bankruptcy Court, or (ii) has been Allowed by Final Order; provided, however, that any Claims allowed solely for the purpose of voting to accept or reject the Plan pursuant to an order of the Bankruptcy Court shall not be considered "Allowed Claims" hereunder. Unless otherwise specified herein or by order of the Bankruptcy Court, "Allowed Administrative Expense Claim," or "Allowed Claim," shall not, for purposes of computation of distributions under the Plan, include interest on such Administrative Expense Claim or Claim from and after the Commencement Date. 1.4 Amended PCI Bylaws means the amended and restated Bylaws of Reorganized PCI, which shall be in substantially the form contained in the Plan Supplement. 1.5 Amended PCI Certificate of Incorporation means the amended and restated Certificate of Incorporation of Reorganized PCI, which shall be in substantially the form contained in the Plan Supplement. 1.6 Avoidance Claims means all fraudulent transfer Causes of Action under sections 544, 548 and 550 of the Bankruptcy Code or otherwise applicable state law. 1.7 Ballot means the form to be distributed with the Disclosure Statement to each holder of an impaired Claim on which is to be indicated acceptance or rejection of the Plan. 1.8 Balloting Agent means the entity retained by the Debtors as balloting agent under the Plan. 1.9 Balloting Deadline means the date and time, as set by an Order and set forth in the Disclosure Statement, by which all Ballots must be received by the Balloting Agent at the address set forth on the applicable ballot used for voting on the Plan, as such date may be extended by an Order. 108 1.10 Bankruptcy Code means title 11 of the United States Code, as amended from time to time, as applicable to the Chapter 11 Cases. 1.11 Bankruptcy Court means the United States Bankruptcy Court for the Southern District of Texas, Houston Division, having jurisdiction over the Chapter 11 Cases, or if such Court ceases to exercise jurisdiction over the Chapter 11 Cases, such court or adjunct thereof that exercises jurisdiction over the Chapter 11 Cases in lieu of the United States Bankruptcy Court for such district. 1.12 Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure as promulgated by the United States Supreme Court under section 2075 of title 28 of the United States Code, and any Local Rules of the Bankruptcy Court. 1.13 BNY means BNY Asset Solutions LLC. 1.14 Business Day means any day other than a Saturday, Sunday or any other day on which commercial banks in New York, New York are required or authorized to close by law or executive order. 1.15 Canadian Court means the Quebec Superior Court (Bankruptcy Division), in Montreal, Canada. 1.16 Canadian Deficiency Claims means Claims equal to the difference between (i) the aggregate amount of all Claims relating to or arising under the PCA Canadian Term Loan Agreement and/or the PCICC Senior Notes, and (ii) the value of the Collateral securing such Claims. 1.17 Canadian Plan means the plan of arrangement and compromise filed under the CCAA proposed by PCICC, as Applicant, and Richter & Associes Inc., as Monitor, and attached hereto as "Exhibit A," as the same may be modified or amended from time to time with the consent of PCICC and the Creditors' Committee. 1.18 Canadian Proceedings means the proceedings commenced by PCICC before the Canadian Court under the CCAA. 1.19 Canadian Secured Term and Note Claims means the Secured Claims relating to the PCA Canadian Term Loan Agreement and the PCICC Senior Notes. 1.20 Cash means legal tender of the United States of America and equivalents thereof. 1.21 Causes of Action means, without limitation, any and all actions, causes of action, liabilities, obligations, rights, suits, debts, sums of money, damages, judgments, claims and demands whatsoever, whether known or unknown, in law, equity or otherwise. 1.22 CCAA means the Companies' Creditors Arrangement Act of Canada. 109 1.23 CCAA Order means one or more orders of the Canadian Court sanctioning and giving effect to the Canadian Plan pursuant to Section 6 of the CCAA. 1.24 Chapter 11 Cases means each and all of the cases under chapter 11 of the Bankruptcy Code commenced by the Debtors, styled In re Pioneer Companies, Inc. et al., Chapter 11 Case No. 01-38259-H3-11, Jointly Administered, currently pending in the Bankruptcy Court. 1.25 Claim has the meaning set forth in section 101(5) of the Bankruptcy Code. 1.26 Class means a category of holders of Claims or Equity Interests as set forth in Article III of the Plan. 1.27 Class 8 and Class 9 Distribution means 300,000 shares of the New Common Stock. 1.28 Class 9 Distribution means the aggregate Pro Rata Shares of all holders of Allowed Canadian Deficiency Claims and/or Allowed U.S. Deficiency Claims of the Class 8 and Class 9 Distribution. 1.29 Clerk means the clerk of the Bankruptcy Court. 1.30 Collateral means any property or interest in property of the Estates of the Debtors subject to a Lien to secure the payment or performance of a Claim, which Lien is not subject to avoidance under the Bankruptcy Code or otherwise invalid under the Bankruptcy Code, applicable state law, or applicable Canadian or provincial law. 1.31 Commencement Date means July 31, 2001, the date on which the Debtors commenced the Chapter 11 Cases. 1.32 Confirmation Date means the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order on the Docket. 1.33 Confirmation Hearing means the hearing held by the Bankruptcy Court to consider confirmation of the Plan pursuant to section 1129 of the Bankruptcy Code, as such hearing may be adjourned or continued from time to time. 1.34 Confirmation Order means the order of the Bankruptcy Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code. 1.35 Congress means Congress Financial Corporation (Southwest) as U.S. Lender, Congress Financial Corporation (Canada) as Canadian Lender, and Congress Financial Corporation (Southwest) as Agent under the Existing Credit Facility. 1.36 Congress Secured Claim means a Secured Claim of Congress and the other lenders party to the Existing Credit Facility. 110 1.37 Convenience Claim means any Unsecured Claim in the amount of $500.00 or less and any Unsecured Claim that is reduced to $500.00 by the election of the holder thereof on such holder's Ballot. 1.38 Creditors' Committee means the statutory committee of unsecured creditors appointed in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code. 1.39 Debtors means, collectively, PCI, PAI, PCICC, Imperial, PCA, Pioneer East, Pioneer Licensing, KNA, KWT, and PWT. 1.40 Debtors in Possession means the Debtors in their capacity as debtors in possession in the Chapter 11 Cases pursuant to sections 1101, 1107(a) and 1108 of the Bankruptcy Code. 1.41 DIP Facility means that certain commitment for a revolving credit facility in the aggregate principal amount of up to $50 million provided by the agent and the lenders party thereto, and evidenced by that certain Debtor-in-Possession Credit Agreement dated as of July 31, 2001, as amended, supplemented, or modified from time to time. 1.42 Disbursing Agents shall have the meaning set forth in Section 5.3(m) of the Plan. 1.43 Disclosure Statement means the disclosure statement relating to the Plan, including, without limitation, all exhibits and schedules thereto, as approved by the Bankruptcy Court pursuant to section 1125 of the Bankruptcy Code. 1.44 Disputed means, with reference to any Claim or Equity Interest, any Claim or Equity Interest proof of which was timely and properly filed and which has been or hereafter is listed on the Schedules as unliquidated, disputed or contingent, and in either case or in the case of an Administrative Expense Claim, any Administrative Expense Claim, Claim or Equity Interest which is disputed under the Plan or as to which the Debtors or, if not prohibited by the Plan, any other party in interest has interposed a timely objection and/or request for estimation in accordance with section 502(c) of the Bankruptcy Code and Bankruptcy Rule 3018, which objection and/or request for estimation has not been withdrawn or determined by a Final Order, and any Claim or Equity Interest proof of which was required to be filed by order of the Bankruptcy Court but as to which a proof of claim or interest was not timely or properly filed. 1.45 Disputed Claim Amount means the amount set forth in the proof of claim relating to a Disputed Claim or, if an amount is estimated in respect of a Disputed Claim in accordance with section 502(c) of the Bankruptcy Code and Bankruptcy Rule 3018 for purposes of, among other things, Section 5.3(i)(i) of the Plan, the amount so estimated pursuant to an order of the Bankruptcy Court. 1.46 Docket means the docket in the Chapter 11 Cases maintained by the Clerk. 111 1.47 Effective Date means the first Business Day on which the conditions specified in Section 10.1 of the Plan have been satisfied or waived. 1.48 Environmental Claim means any Claim, including, but not limited to, actions, suits, judgments, or orders under any federal, state, or local environmental law or regulation for any damages (including contribution claims and natural resource damages), injunctive relief, losses, fines, penalties, fees, expenses (including financial assurance obligations and reasonable fees and expenses of attorneys and consultants) or costs relating to (a) the release or threatened release of hazardous materials or substances to the environment, (b) any actual or alleged violation or non-compliance with any applicable federal, state, or local environmental statute, regulation, or order, or (c) other similar Claim asserted against any of the Debtors that has not been compromised and settled or otherwise resolved. 1.49 Equity Interest means any share of preferred stock, common stock or other instrument evidencing an ownership interest in any of the Debtors, whether or not transferable, and any option, warrant or right, contractual or otherwise, to acquire any such interest, other than any such instrument or right held by PCI or any Subsidiary. 1.50 ERISA means Title IV of the Employee Retirement Income Security Act, as amended, 29 U.S.C.ss. 1301 et. seq. (1994 & Supp. V 1999). 1.51 Estates means the estates created upon the commencement of the Chapter 11 Cases by section 541 of the Bankruptcy Code. 1.52 Existing Credit Facility means the $50 million secured revolving credit and term loan facility provided pursuant to the Amended and Restated Loan and Security Agreement by and among Congress, the other lenders thereto, and Pioneer Chlor Alkali Company, Inc., All-Pure Chemical Co., KNA, PCICC, PCI Carolina, Inc., and T.C. Products, Inc., as Borrowers, and PAI, Imperial, Black Mountain Power Company, T.C. Holdings, Inc., Pioneer Licensing and Pioneer East, as Guarantors, dated as of September 24, 1999. 1.53 Exit Facility means the credit facility to be entered into, as of the Effective Date, among the Reorganized Debtors and the Exit Facility Lenders, and all ancillary agreements and instruments thereto, in the form Filed at least ten (10) days prior to the Voting Deadline. 1.54 Exit Facility Lenders means those certain lenders (together with their successors or assigns), as parties to the Exit Facility, by original execution or assignment thereof. 1.55 File, Filed, or Filing means file, filed, or filing with the Bankruptcy Court in the Chapter 11 Cases. 1.56 Final Order means an Order of the Bankruptcy Court as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or 112 rehearing shall then be pending or as to which any right to appeal, petition for certiorari, reargue, or rehear shall have been waived in writing in form and substance satisfactory to the Debtors or the Reorganized Debtors or, in the event that an appeal, writ of certiorari, or reargument or rehearing thereof has been sought, such order of the Bankruptcy Court shall have been determined by the highest court to which such order was appealed, or certiorari, reargument or rehearing shall have been denied and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired; provided, however, that the possibility that a motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any analogous rule under the Bankruptcy Rules, may be filed with respect to such order shall not cause such order not to be a Final Order. 1.57 General Unsecured Claim means any Unsecured Claim other than a Convenience Claim, a Subordinated Claim, a Canadian Deficiency Claim, a U.S. Deficiency Claim, or an Intercompany Claim. General Unsecured Claim shall also include any Pioneer 2000 Group Claim. 1.58 Guarantees has the meaning assigned to such term in Section 9.1(m) of the Plan. 1.59 Imperial means Imperial West Chemical Co., a Nevada corporation. 1.60 Indenture Trustees means, collectively, (i) U.S. Trust, in its capacity as PCA Senior Notes Indenture Trustee and as PCICC Senior Notes Indenture Trustee, and (ii) BNY, in its capacity as PCA U.S. Term Loan Agreement Administrative Agent and as PCA Canadian Term Loan Agreement Administrative Agent. 1.61 Indenture Trustees' Expenses means any unpaid Indenture Trustees' fees, and reasonable unpaid out-of-pocket costs or expenses incurred through the Effective Date by the Indenture Trustees, which are secured or which are entitled to be secured under, as the case may be, the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA Canadian Term Loan Agreement, or the PCA U.S. Term Loan Agreement by a Lien or other priority in payment against distributions to be made to holders of Claims under the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA Canadian Term Loan Agreement, or the PCA U.S. Term Loan Agreement. 1.62 Initial Distribution Date means the date that is sixty (60) days after the Effective Date, or as soon thereafter as is practicable. 1.63 Insured Claim means any Claim arising from an incident or occurrence that is covered under the Debtors' insurance policies. 1.64 Intercompany Claim means any Claim of one Debtor against another Debtor on account of intercompany indebtedness. 1.65 KNA means Kemwater North America Company, a Delaware corporation. 1.66 KWT means KWT, Inc., a Delaware corporation. 113 1.67 LIBOR Rate means the rate per annum offered to major banks in the London interbank eurodollar market as it appears on the Dow Jones Markets Telerate Page 3750, or, if such rate does not appear on this service, such other comparable publicly available service for displaying eurodollar rates, as of 11:00 a.m., London time, on the Effective Date, for deposits in U.S. dollars for a one-year interest period. 1.68 Lien has the meaning set forth in section 101(37) of the Bankruptcy Code. 1.69 MEIP means an equity incentive plan that will become effective on the Effective Date or as soon thereafter as is reasonably practicable, which shall be in substantially the form contained in the Plan Supplement. 1.70 New Board of Directors means the board of directors of Reorganized PCI. 1.71 New Common Stock means the common stock of Reorganized PCI authorized and to be issued pursuant to the Plan. 1.72 New Indenture Trustees means, collectively, (i) the New Tranche A Term Notes Agent and (ii) the New Tranche B Notes Indenture Trustee. 1.73 New Notes means, collectively, the New Tranche A Term Notes, the New Tranche B Notes, and the New Other Secured Notes. 1.74 New Other Secured Notes means, with respect to the holder of an Other Secured Claim, the term note authorized and to be issued pursuant to section 4.6 of the Plan, in a principal amount equal to the amount of such holder's Allowed Other Secured Claim and containing all other material economic terms the same as the original instrument evidencing such holder's Other Secured Claim. 1.75 New Tranche A Term Notes has the meaning assigned to such term in section 9.1(j) of the Plan. The New Tranche A Term Notes shall be in substantially the form contained in the Plan Supplement. 1.76 New Tranche A Term Loan Agreement means the term loan agreement pursuant to which the New Tranche A Term Notes are issued, and which shall be in substantially the form contained in the Plan Supplement. 1.77 New Tranche A Term Notes Agent means the administrative agent under the New Tranche A Term Loan Agreement. 1.78 New Tranche B Notes has the meaning assigned to such term in Section 9.1(k) of the Plan. The New Tranche B Notes shall be in substantially the form contained in the Plan Supplement. 1.79 New Tranche B Notes Indenture means the indenture pursuant to which the New Tranche B Notes are issued, and which shall be in substantially the form contained in the Plan Supplement. 114 1.80 New Tranche B Notes Indenture Trustee means the indenture trustee under the New Tranche B Notes Indenture. 1.81 Order means an order or judgment of the Bankruptcy Court as entered on the Docket. 1.82 Other Priority Claim means any Claim, other than an Administrative Expense Claim or a Priority Tax Claim, entitled to priority in right of payment under section 507(a) of the Bankruptcy Code. 1.83 Other Secured Claim means any Secured Claim, other than a Congress Secured Claim, a PCA U.S. Secured Term and Note Claim, a Canadian Secured Term and Note Claim, or a Secured Tax Claim. 1.84 PAI means Pioneer Americas, Inc., a Delaware corporation. 1.85 PBGC means Pension Benefit Guaranty Corporation. 1.86 PCA means Pioneer Corporation of America, a Delaware corporation. 1.87 PCA Canadian Term Loan Agreement means that certain Term Loan Agreement, dated as of October 30, 1997, as amended, among PCA, the Lenders (as defined therein), certain other parties, and BNY, in its capacity as administrative agent. 1.88 PCA Canadian Term Loan Agreement Administrative Agent means BNY in its capacity as administrative agent under the PCA Canadian Term Loan Agreement. 1.89 PCA U.S. Secured Term and Note Claims means the Secured Claims relating to the PCA U.S. Term Loan Agreement and PCA Senior Notes. 1.90 PCA Senior Notes means the $200 million in original aggregate principal amount of 9 1/4% Senior Secured Notes due June 2007 by PCA pursuant to the PCA Senior Notes Indenture. 1.91 PCA Senior Notes Indenture means that certain Indenture, dated as of June 17, 1997, as amended, among PCA, the Subsidiary Guarantors (as defined therein), and U.S. Trust, in its capacity as trustee and as collateral agent. 1.92 PCA Senior Notes Indenture Trustee means U.S. Trust in its capacity as trustee and as collateral agent under the PCA Senior Notes Indenture. 1.93 PCA U.S. Term Loan Agreement means that certain Term Loan Agreement, dated as of June 17, 1997, as amended, among PCA, the Lenders (as defined therein), certain other parties, and BNY, in its capacity as administrative agent. 1.94 PCA U.S. Term Loan Agreement Administrative Agent means BNY in its capacity as administrative agent under the PCA U.S. Term Loan Agreement. 115 1.95 PCI means Pioneer Companies, Inc., a Delaware corporation. 1.96 PCI Equity Interest means any share of common or preferred stock or other instrument evidencing a present ownership interest in PCI, whether or not transferable, and any option, warrant or right, contractual or otherwise, to acquire any such interest. 1.97 PCICC means PCI Chemicals Canada Inc./ PCI Chimie Canada Inc., a New Brunswick, Canada corporation. 1.98 PCICC Senior Notes means the $175 million in original aggregate principal amount of 9 1/4% Senior Secured Notes due October 2007 issued by PCICC pursuant to the PCCIC Senior Notes Indenture. 1.99 PCICC Senior Notes Indenture means that certain Indenture, dated as of October 30, 1997, as amended, among PCICC, the Guarantors (as such term is defined therein), and U.S. Trust, in its capacity as trustee and as collateral agent. 1.100 PCICC Senior Notes Indenture Trustee means U.S. Trust in its capacity as trustee and as collateral agent under the PCICC Senior Notes Indenture. 1.101 Pioneer means, collectively, the Debtors. 1.102 Pioneer 2000 Group means Pioneer Partners 2000, L.L.C. and the members and managers of Pioneer Partners 2000, L.L.C. 1.103 Pioneer 2000 Group Claims means the Claims of the Pioneer 2000 Group. 1.104 Pioneer East means Pioneer (East), Inc., a Delaware corporation. 1.105 Pioneer Licensing means Pioneer Licensing, Inc., a Delaware corporation. 1.106 Plan means this chapter 11 plan of reorganization, including, without limitation, the Plan Supplement and all exhibits, supplements, appendices and schedules hereto, either in its present form or as the same may be altered, amended or modified from time to time. 1.107 Plan Documents means the agreements, documents and instruments entered into on or as of the Effective Date as contemplated by, and in furtherance of, the Plan. 1.108 Plan Supplement means the forms of documents specified in Section 12.13 of the Plan. 1.109 Priority Tax Claim means any Claim of a governmental unit of the kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code. 116 1.110 Pro Rata Share means a proportionate share, so that the ratio of the consideration distributed on account of an Allowed Claim in a Class to the amount of such Allowed Claim is the same as the ratio of the amount of the consideration distributed on account of all Allowed Claims in such Class; provided, however, that with respect to Class 8 and Class 9, such ratios shall be computed by using the aggregate amount of Allowed Claims in Class 8 and Class 9. 1.111 Professionals means (a) any professional employed in the Chapter 11 Cases pursuant to section 327 or 1103 of the Bankruptcy Code or otherwise pursuant to an order of the Bankruptcy Court and (b) any professional or other entity seeking compensation or reimbursement of expenses in connection with the Chapter 11 Cases pursuant to section 503(b)(4) of the Bankruptcy Code. 1.112 Protocol means the cross-border insolvency protocol approved by the Bankruptcy Court. 1.113 PWT means Pioneer Water Technologies, Inc., a Delaware corporation. 1.114 Quarter means the period beginning on the Effective Date and ending on the next of October 31, January 31, April 30 and July 31, and each three month period thereafter. 1.115 Record Date means the day that is five (5) days from and after the Confirmation Date. 1.116 Registration Rights Agreement means the registration rights agreement relating to the resale of the New Tranche B Notes and the New Common Stock distributed pursuant to the Plan, to be entered into as of the Effective Date by the Reorganized Debtors for the benefit of certain holders of the New Tranche B Notes and shares of the New Common Stock. The Registration Rights Agreement shall be in substantially the form contained in the Plan Supplement. 1.117 Reorganized Debtors means Reorganized PCI and each of the Reorganized Subsidiaries, as reorganized on and after the Effective Date. 1.118 Reorganized PAI means PAI, or any successor thereto by merger, consolidation or otherwise, on and after the Effective Date. 1.119 Reorganized PCI means PCI, or any successor thereto by merger, consolidation or otherwise, on and after the Effective Date. 1.120 Reorganized PCICC means PCICC, or any successor thereto by merger, consolidation or otherwise, on and after the Effective Date. 1.121 Reorganized Pioneer means Pioneer, or any successor thereto by merger, consolidation or otherwise, on and after the Effective Date. 117 1.122 Reorganized Subsidiaries means each of the Subsidiaries, or any successors thereto by merger, consolidation or otherwise, on and after the Effective Date. 1.123 Reserve shall have the meaning set forth in Section 5.3(i)(i) of the Plan. 1.124 Retirement Plans means the Pioneer Americas, Inc. Retirement Plan, the Pioneer Americas, Inc. Retirement Plan for Bargaining Employees, and the Pioneer Americas, Inc. Tacoma Union Pension Plan. 1.125 Schedules means the schedules of assets and liabilities, the list of holders of Equity Interests and the statements of financial affairs filed by the Debtors under section 521 of the Bankruptcy Code and Bankruptcy Rule 1007, and all amendments and modifications thereto through the Confirmation Date. 1.126 Secured Claim means any Claim, to the extent reflected in the Schedules or a proof of claim as a Secured Claim, which is secured by a Lien on Collateral to the extent of the value of such Collateral, as determined in accordance with section 506(a) of the Bankruptcy Code, or, in the event that such Claim is subject to setoff under section 553 of the Bankruptcy Code, to the extent of such setoff. 1.127 Secured Tax Claim means any Secured Claim which, absent its secured status, would be entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code. 1.128 Subordinated Claim means any Claim that is subordinated pursuant to section 510 of the Bankruptcy Code. 1.129 Subsequent Distribution Date means the twentieth (20th) day after the end of the Quarter following the Quarter in which the Initial Distribution Date occurs and the twentieth (20th) day after the end of each subsequent Quarter; provided, however, that the first and second Subsequent Distribution Dates shall occur on the twentieth (20th) day after the end of the second and fourth Quarters, respectively, following the Quarter in which the Initial Distribution Date occurs. 1.130 Subsidiary means any Debtor of which PCI owns directly or indirectly all of the outstanding capital stock. 1.131 Subsidiary Equity Interest means any share of common stock or other instrument evidencing a present ownership interest in any of the Subsidiaries, whether or not transferable, and any option, warrant or right, contractual or otherwise, to acquire any such interest. 1.132 Surplus Distributions shall have the meaning set forth in Section 5.3(k) of the Plan. 1.133 Tort Claim means any Claim relating to personal injury, property damage or products liability or other similar Claim asserted against any of the Debtors that has not been compromised and settled or otherwise resolved. 118 1.134 Unsecured Claim means any Claim that is not a Secured Claim, Administrative Expense Claim, Priority Tax Claim or Other Priority Claim. 1.135 U.S. Deficiency Claims means Claims equal to the difference between (i) the aggregate amount of all Claims relating to or arising under the PCA U.S. Term Loan Agreement and/or the PCA Senior Notes, and (ii) the value of the Collateral securing such Claims. 1.136 U.S. Trust means the United States Trust Company of New York or its successor. 1.137 Voting Deadline means the last day upon which holders of Claims may vote to accept or reject the Plan. 1.138 Interpretation; Application of Definitions and Rules of Construction. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include both the singular and the plural and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. Unless otherwise specified, all section, article, schedule or exhibit references in the Plan are to the respective Section in, Article of, Schedule to, or Exhibit to the Plan. The words "herein," "hereof," "hereto," "hereunder" and other words of similar import refer to the Plan as a whole and not to any particular section, subsection or clause contained in the Plan. The rules of construction contained in section 102 of the Bankruptcy Code shall apply to the construction of the Plan. A term used herein that is not defined herein, but that is used in the Bankruptcy Code, shall have the meaning ascribed to that term in the Bankruptcy Code. The headings in the Plan are for convenience of reference only and shall not limit or otherwise affect the provisions of the Plan. ARTICLE II. TREATMENT OF ADMINISTRATIVE EXPENSE CLAIMS AND PRIORITY TAX CLAIMS 2.1 Administrative Expense Claims. Except to the extent that any entity entitled to payment of any Allowed Administrative Expense Claim agrees to a different treatment, each holder of an Allowed Administrative Expense Claim shall receive Cash in an amount equal to such Allowed Administrative Expense Claim on the later of the Effective Date and the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or as soon thereafter as is practicable; provided, however, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtors in Possession or liabilities arising under loans or advances to or other obligations incurred by the Debtors in Possession, to the extent authorized and approved by the Bankruptcy Court if such authorization and approval was required under the Bankruptcy Code, shall be paid in full and performed by the Reorganized Debtors in the ordinary course of business in accordance with the terms and subject to the conditions of any agreements governing, instruments evidencing or other documents relating to, such transactions. 119 2.2 Professional Compensation and Reimbursement Claims. All entities seeking an award by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Confirmation Date under sections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy Code (a) shall file their respective final applications for allowances of compensation for services rendered and reimbursement of expenses incurred through the Confirmation Date by the date that is sixty (60) days after the Effective Date or such other date as may be fixed by the Bankruptcy Court and, (b) if granted such an award by the Bankruptcy Court, shall be paid in full in such amounts as are Allowed by the Bankruptcy Court (i) on the date such Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or as soon thereafter as is practicable or (ii) upon such other terms as may be mutually agreed upon between such holder of an Administrative Expense Claim and the Debtors in Possession or, on and after the Effective Date, the Reorganized Debtors. 2.3 Priority Tax Claims. Except to the extent that a holder of an Allowed Priority Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Priority Tax Claim shall receive, at the sole option of Reorganized Pioneer, (a) Cash in an amount equal to such Allowed Priority Tax Claim on the later of the Effective Date and the date such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon thereafter as is practicable, or (b) equal annual Cash payments in an aggregate amount equal to such Allowed Priority Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth (6th) anniversary of the date of assessment of such Allowed Priority Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Priority Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Priority Tax Claim. ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS Claims, other than Administrative Expense Claims, Priority Tax Claims, and Equity Interests are classified for all purposes, including voting, confirmation and distribution pursuant to the Plan, as follows:
Class Status ----- ------ Class 1 - Other Priority Claims..............................Unimpaired Class 2 - Congress Secured Claims............................Unimpaired Class 3 - PCA U.S. Secured Term and Note Claims..............Impaired Class 4 - Canadian Secured Term and Note Claims..............Impaired Class 5 - Secured Tax Claims.................................Impaired Class 6 - Other Secured Claims...............................Unimpaired
120 Class 7 - Convenience Claims.................................Impaired Class 8 - General Unsecured Claims...........................Impaired Class 9 - Canadian Deficiency Claims and U.S. Deficiency Claims...............................Impaired Class 10 - Subordinated Claims................................Impaired Class 11 - PCI Equity Interests...............................Impaired
ARTICLE IV. TREATMENT OF CLAIMS AND EQUITY INTERESTS 4.1 CLASS 1 - OTHER PRIORITY CLAIMS. (a) Impairment and Voting. Class 1 is unimpaired by the Plan. Each holder of an Allowed Other Priority Claim is conclusively presumed to have accepted the Plan and is not entitled to vote to accept or reject the Plan. (b) Distributions. Each holder of an Allowed Other Priority Claim shall receive Cash in an amount equal to such Allowed Other Priority Claim on the later of the Effective Date and the date such Allowed Other Priority Claim becomes an Allowed Other Priority Claim, or as soon thereafter as is practicable. 4.2 CLASS 2 - CONGRESS SECURED CLAIMS. (a) Impairment and Voting. Class 2 is unimpaired by the Plan. Each holder of an Allowed Congress Secured Claim is conclusively presumed to have accepted the Plan and is not entitled to vote to accept or reject the Plan. (b) Distributions. Each holder of an Allowed Congress Secured Claim shall be treated in accordance with the terms of the DIP Facility and/or the Exit Facility. 4.3 CLASS 3 - PCA U.S. SECURED TERM AND NOTE CLAIMS. (a) Impairment and Voting. Class 3 PCA U.S. Secured Term and Note Claims are deemed Allowed in an amount equal to the principal amount of such respective Claims, together with all accrued and unpaid non-default interest arising under the terms of the PCA U.S. Term Loan Agreement and the PCA Senior Notes, respectively, through and including the Effective Date. Class 3 is impaired by the Plan. Each holder of an Allowed PCA U.S. Secured Term and Note Claim shall be entitled to vote to accept or reject the Plan. (b) Distributions. On the Effective Date, each holder of an Allowed PCA U.S. Secured Term and Note Claim as of the Record Date shall receive, pursuant to the implementation of the transactions set forth in Section 7.1 of the Plan (including, without 121 limitation, the exchanges provided in Section 7.1(i) of the Plan) and on account of such holder's Allowed PCA U.S. Secured Term and Note Claim, such holder's Pro Rata Share of forty-three percent (43%) of (i) the New Tranche A Term Notes (including the Guarantees thereof), (ii) the New Tranche B Notes (including the Guarantees thereof), and (iii) 9,700,000 shares of the New Common Stock. (c) Instructions. Acceptance of the Plan by Class 3 shall constitute an instruction by the holders of Class 3 PCA U.S. Secured Term and Note Claims to the respective Indenture Trustees and New Indenture Trustees, as the case may be, to take all actions necessary to effectuate the Plan. 4.4 CLASS 4 - CANADIAN SECURED TERM AND NOTE CLAIMS. (a) Impairment and Voting. Class 4 Canadian Secured Term and Note Claims are deemed Allowed in an amount equal to principal amount of such respective Claims, together with all accrued and unpaid non-default interest arising under the terms of the PCA Canadian Term Loan Agreement and the PCICC Senior Notes, respectively, through and including the Effective Date. Class 4 is impaired by the Plan. Each holder of an Allowed Canadian Secured Term and Note Claim shall be entitled to vote to accept or reject the Plan. (b) Distributions. On the Effective Date, each holder of an Allowed Canadian Secured Term and Note Claim as of the Record Date shall receive, pursuant to the implementation of the transactions set forth in Section 7.1 of the Plan (including, without limitation, the exchanges provided in Sections 7.1(i) and (j) of the Plan) and on account of such holder's Allowed Canadian Secured Term and Note Claim, such holder's Pro Rata Share of fifty-seven (57%) of (i) the New Tranche A Term Notes (including the Guarantees thereof), (ii) the New Tranche B Notes (including the Guarantees thereof), and (iii) 9,700,000 shares of the New Common Stock. (c) Instructions. Acceptance of the Plan by Class 4 shall constitute an instruction by the holders of Class 4 Canadian Secured Term and Note Claims to the respective Indenture Trustees and New Indenture Trustees, as the case may be, to take all actions necessary to effectuate the Plan. 4.5 CLASS 5 - SECURED TAX CLAIMS. (a) Impairment and Voting. Class 5 is impaired by the Plan. Each holder of an Allowed Secured Tax Claim is entitled to vote to accept or reject the Plan. (b) Distributions. Except to the extent that a holder of an Allowed Secured Tax Claim has been paid by the Debtors prior to the Effective Date or agrees to a different treatment, each holder of an Allowed Secured Tax Claim shall receive, at the sole option of Reorganized Pioneer, (i) Cash in an amount equal to such Allowed Secured Tax Claim, including any interest on such Allowed Secured Tax Claim required to be paid pursuant to section 506(b) of the Bankruptcy Code, on the later of the Effective Date and the date such Allowed Secured Tax Claim becomes an Allowed Secured Tax Claim, or as soon thereafter as is practicable, or (ii) equal annual Cash payments in an aggregate 122 amount equal to such Allowed Secured Tax Claim, together with interest at a fixed annual rate equal to 8.0%, over a period through the sixth (6th) anniversary of the date of assessment of such Allowed Secured Tax Claim, or upon such other terms determined by the Bankruptcy Court to provide the holder of such Allowed Secured Tax Claim deferred Cash payments having a value, as of the Effective Date, equal to such Allowed Secured Tax Claim. (c) Retention of Liens. Each holder of an Allowed Secured Tax Claim shall retain the Liens (or replacement Liens as may be contemplated under nonbankruptcy law) securing its Allowed Secured Tax Claim as of the Effective Date until full payment of such Allowed Secured Tax Claim is made as provided herein, and upon such full payment, such Liens shall be deemed null and void and shall be unenforceable for all purposes. 4.6 CLASS 6 - OTHER SECURED CLAIMS. (a) Impairment and Voting. Class 6 is unimpaired by the Plan, subject to a determination by the Creditors' Committee that the value of the Collateral subject to an Other Secured Claim is equal to or greater than the amount of such Claim. Each holder of an Allowed Other Secured Claim is conclusively presumed to have accepted the Plan and is not entitled to vote to accept or reject the Plan. (b) Distributions/Reinstatement of Claims. Except to the extent that a holder of an Allowed Other Secured Claim agrees to a different treatment, at the sole option of Reorganized Pioneer, (i) each Allowed Other Secured Claim shall be reinstated and rendered unimpaired in accordance with section 1124(2) of the Bankruptcy Code, notwithstanding any contractual provision or applicable nonbankruptcy law that entitles the holder of an Allowed Other Secured Claim to demand or receive payment of such Allowed Other Secured Claim prior to the stated maturity of such Allowed Other Secured Claim from and after the occurrence of a default, or (ii) each holder of an Allowed Other Secured Claim shall receive a New Other Secured Note, on the later of the Effective Date and the date such Allowed Other Secured Claim becomes an Allowed Other Secured Claim, or as soon thereafter as is practicable. (c) Deficiency Claims. To the extent that the Creditors' Committee determines that the value of the Collateral is less than the amount of an Other Secured Claim, the undersecured portion of such Claim shall be treated as a Class 8 General Unsecured Claim. 4.7 CLASS 7 - CONVENIENCE CLAIMS. (a) Impairment and Voting. Class 7 is impaired by the Plan. Each holder of an Allowed Convenience Claim is entitled to vote to accept or reject the Plan. (b) Distributions. Each holder of an Allowed Convenience Claim as of the Record Date shall receive Cash in an amount equal to 100% of such Allowed Convenience Claim on the later of the Effective Date and the date such Allowed 123 Convenience Claim becomes an Allowed Convenience Claim, or as soon thereafter as is practicable. 4.8 CLASS 8 - GENERAL UNSECURED CLAIMS. (a) Impairment and Voting. Class 8 is impaired by the Plan. Each holder of an Allowed General Unsecured Claim is entitled to vote to accept or reject the Plan. (b) Distributions. Each holder of an Allowed General Unsecured Claim shall receive on account of such holder's Allowed General Unsecured Claim such holder's Pro Rata Share of the Class 8 and Class 9 Distribution. 4.9 CLASS 9 - CANADIAN DEFICIENCY CLAIMS AND U.S. DEFICIENCY CLAIMS. (a) Impairment and Voting. Class 9 Canadian Deficiency Claims and U.S. Deficiency Claims are deemed Allowed in the amount of $92,341,928.00 and $177,947,118.00, respectively, for purposes of the Plan and assuming confirmation hereof. Each holder of an Allowed Canadian Deficiency Claim or an Allowed U.S. Deficiency Claim is entitled to vote to accept or reject the Plan. (b) Distributions. Each holder of an Allowed Canadian Deficiency Claim and/or an Allowed U.S. Deficiency Claim as of the Record Date shall be entitled to receive such holder's Pro Rata Share of the Class 8 and Class 9 Distribution; provided, however, that the acceptance by Class 9 of the Plan shall constitute a waiver of the right of the holders of Allowed Canadian Deficiency Claims and/or Allowed U.S. Deficiency Claims to receive their Pro Rata Share of the Class 9 Distribution. The Debtors shall distribute the Class 9 Distribution on a pro rata basis to the holders of Class 8 Allowed General Unsecured Claims, and not to the holders of Allowed Canadian Deficiency Claims and/or Allowed U.S. Deficiency Claims. 4.10 CLASS 10 - SUBORDINATED CLAIMS. (a) Impairment and Voting. Class 10 is impaired by the Plan. Each holder of an Allowed Subordinated Claim is conclusively presumed to have rejected the Plan and is not entitled to vote to accept or reject the Plan. (b) Distributions. The holders of Subordinated Claims shall receive no distributions on account of such Subordinated Claims. 4.11 CLASS 11 - PCI EQUITY INTERESTS. (a) Impairment and Voting. Class 11 is impaired by the Plan. Each holder of a PCI Equity Interest is conclusively presumed to have rejected the Plan and is not entitled to vote to accept or reject the Plan. (b) Distributions. The holders of PCI Equity Interests shall receive no distributions on account of such PCI Equity Interests. On the Effective Date, all PCI 124 Equity Interests shall be cancelled, extinguished, and of no further force and effect as of the Effective Date. 4.12 Modification of Treatment of Claims. The Debtors reserve the right to modify the treatment of any Allowed Claim in any manner adverse only to the holder of such Claim at any time after the Effective Date upon the consent of the Creditors' Committee and the creditor whose Allowed Claim is being adversely affected. ARTICLE V. PROVISIONS REGARDING VOTING AND DISTRIBUTIONS UNDER THE PLAN AND TREATMENT OF DISPUTED, CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE EXPENSE CLAIMS, CLAIMS AND EQUITY INTERESTS 5.1 Voting of Claims. Each holder of an Allowed Claim in an impaired Class of Claims shall be entitled to vote separately to accept or reject the Plan as provided in such Order as is entered by the Bankruptcy Court establishing certain procedures with respect to the solicitation and tabulation of votes to accept or reject the Plan, or any other Order or Orders of the Bankruptcy Court. 5.2 Nonconsensual Confirmation. If any impaired Class of Claims entitled to vote shall not accept the Plan by the requisite statutory majorities provided in sections 1126(c) or 1126(d) of the Bankruptcy Code, as applicable, the Debtors reserve the right to amend the Plan in accordance with Section 12.6 of the Plan, or undertake to have the Bankruptcy Court confirm the Plan under section 1129(b) of the Bankruptcy Code, or both. 5.3 Method of Distributions Under the Plan. (a) In General. Subject to Bankruptcy Rule 9010, and except as otherwise provided in this Section 5.3, all distributions under the Plan shall be made by or on behalf of Reorganized Pioneer to the holder of each Allowed Claim at the address of such holder as listed on the Schedules as of the Record Date unless the Debtors or Reorganized Debtors have been notified in writing of a change of address, including, without limitation, by the filing of a proof of claim by such holder that provides an address for such holder different from the address reflected on the Schedules. (b) Distributions of Cash. Any payment of Cash made by Reorganized Pioneer pursuant to the Plan shall be made by check drawn on a domestic bank, by electronic wire, or by other form of wire transfer. (c) Timing of Distributions. Any payment or distribution required to be made under the Plan on a day other than a Business Day shall be made on the next succeeding Business Day. (d) Hart-Scott-Rodino Compliance. Any shares of New Common Stock to be distributed under the Plan to any entity required to file a Premerger Notification and 125 Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall not be distributed until the notification and waiting periods applicable under such Act to such entity shall have expired or been terminated. (e) Minimum Distributions. No payment of Cash less than one hundred dollars ($100.00) shall be made by Reorganized Pioneer to any holder of a Claim unless a request therefor is made in writing to Reorganized Pioneer. (f) Fractional Shares; Multiples of New Notes. No fractional shares of New Common Stock or Cash in lieu thereof shall be distributed under the Plan. When any distribution on account of an Allowed Claim pursuant to the Plan would otherwise result in the issuance of a number of shares of New Common Stock that is not a whole number, the actual distribution of shares of New Common Stock shall be rounded as follows: (i) fractions of 1/2 or greater shall be rounded to the next higher whole number and (ii) fractions of less than 1/2 shall be rounded to the next lower whole number. The total number of shares of New Common Stock to be distributed to a Class of Claims shall be adjusted as necessary to account for the rounding provided in this Section 5.3(f). New Tranche A Term Notes and New Tranche B Notes shall only be issued in multiples of $1,000. Any New Tranche A Term Notes and New Tranche B Notes that would otherwise have been distributed in multiples of other than $1,000 shall be rounded as follows: (i) amounts less than $500.00 shall be reduced to $0.00 and (ii) amounts equal to or greater than $500.00 shall be increased to $1,000.00. (g) Unclaimed Distributions. Except with respect to distributions under the Plan to holders of Allowed General Unsecured Claims, any distributions under the Plan that are unclaimed for a period of one year after distribution thereof shall be revested in Reorganized Pioneer and any entitlement of any holder of any Claim to such distributions shall be extinguished and forever barred. Distributions under the Plan to holders of Allowed General Unsecured Claims that are unclaimed for a period of one year after distribution thereof shall be added to the Reserve and any entitlement of such holders of Allowed General Unsecured Claims to such distributions shall be extinguished and forever barred. (h) Distributions to Holders as of the Record Date. As of the close of business on the Record Date, the claims register shall be closed, and there shall be no further changes in the record holders of any Claims. Pioneer and Reorganized Pioneer shall have no obligation to recognize any transfer of any Claims occurring after the Record Date. Pioneer and Reorganized Pioneer shall instead be entitled to recognize and deal for all purposes under the Plan (except as to voting to accept or reject the Plan pursuant to Section 5.1 of the Plan) with only those record holders stated on the claims register as of the close of business on the Record Date. (i) Distributions Withheld for Disputed General Unsecured Claims. (i) Establishment and Maintenance of Reserve. On the Initial Distribution Date and each Subsequent Distribution Date, Reorganized Pioneer shall reserve from the distributions to be made on such dates to 126 the holders of Allowed General Unsecured Claims, an amount of New Common Stock equal to one-hundred percent (100%) of the distributions to which holders of Disputed General Unsecured Claims would be entitled under the Plan as of such dates if such Disputed General Unsecured Claims were Allowed Claims in their Disputed Claim Amounts (the "Reserve"). (ii) Property Held in Reserve. New Common Stock held in the Reserve shall be held in trust by the Reorganized Debtors for the benefit of the potential claimants of such securities and shall not constitute property of the Reorganized Debtors. (j) Distributions Upon Allowance of Disputed General Unsecured Claims. The holder of a Disputed General Unsecured Claim that becomes an Allowed Claim subsequent to the Initial Distribution Date shall receive distributions of New Common Stock from the Reserve and on the next Subsequent Distribution Date that follows the Quarter during which such Disputed General Unsecured Claim becomes an Allowed Claim pursuant to a Final Order. Such distributions shall be made in accordance with the Plan based upon the distributions that would have been made to such holder under the Plan if the Disputed General Unsecured Claim had been an Allowed Claim on or prior to the Effective Date. (k) Surplus Distributions to Holders of Allowed General Unsecured Claims. The following consideration shall constitute surplus distributions (the "Surplus Distributions") pursuant to the Plan: (i) pursuant to Section 5.3(g) of the Plan, distributions under the Plan to holders of Allowed General Unsecured Claims that are unclaimed for a period of one year after distribution thereof; and (ii) to the extent that a Disputed General Unsecured Claim is not Allowed or becomes an Allowed Claim in an amount less than the Disputed Claim Amount, the excess of the amount of Cash and New Common Stock in the Reserve over the amount of Cash and New Common Stock actually distributed on account of such Disputed General Unsecured Claim. The Surplus Distributions shall be distributed to the holders of Allowed General Unsecured Claims pursuant to Section 5.3(j) of the Plan; provided, however, that Reorganized PCI shall not be under any obligation to make any Surplus Distributions on a Subsequent Distribution Date unless the number of shares of New Common Stock to be distributed aggregates 30,000 or more, unless the distribution is the last distribution under the Plan. (l) Personal Injury Tort Claims and Environmental Claims. All personal injury Tort Claims and Environmental Claims are Disputed Claims. Any personal injury Tort Claim or Environmental Claim as to which a proof of claim was timely filed in the Chapter 11 Cases shall be determined and liquidated in the administrative or judicial tribunal(s) in which it is pending on the Effective Date or, if no action was pending on the Effective Date, in any administrative or judicial tribunal of appropriate jurisdiction, or in accordance with any alternative dispute resolution or similar proceeding as same may be approved by Order of the Bankruptcy Court. Any personal injury Tort Claim or Environmental Claim determined and liquidated (i) pursuant to a judgment obtained in accordance with this Section 5.3(l) and applicable nonbankruptcy law which is no longer 127 appealable or subject to review, or (ii) in any alternative dispute resolution or similar proceeding as same may be approved by Order of the Bankruptcy Court, shall be deemed an Allowed Claim in such liquidated amount and satisfied in accordance with the Plan. Nothing contained in this Section 5.3(l) shall impair the Debtors' right to seek estimation of any and all personal injury Tort Claims and Environmental Claims in a court or courts of competent jurisdiction or constitute or be deemed a waiver of any Cause of Action that the Debtors may hold against any entity, including, without limitation, in connection with or arising out of any personal injury Tort Claim or Environmental Claim. (m) Disbursing Agents. The Indenture Trustees, or such Person(s) as the Indenture Trustees may designate, will act as Disbursing Agents under the Plan with respect to distributions to holders of Claims in Classes 3 and 4, and will make all distributions required to be distributed under the applicable provisions of the Plan. The PCA Senior Notes Indenture Trustee and the PCICC Senior Notes Indenture Trustee shall make all distributions in respect of Allowed Claims relating to the PCA Senior Notes Indenture and the PCICC Senior Notes Indenture, respectively. The PCA Canadian Term Loan Agreement Administrative Agent and the PCA U.S. Term Loan Agreement Administrative Agent shall make all distributions in respect of Allowed Claims relating to the PCA Canadian Term Loan Agreement and the PCA U.S. Term Loan Agreement, respectively. Reorganized Pioneer, or such Person(s) as Reorganized Pioneer may designate, will act as Disbursing Agent under the Plan with respect to all distributions to holders of Claims other than Class 3 and 4 Claims and will make all distributions required to be distributed under the applicable provisions of the Plan. Any Disbursing Agent may employ or contract with other entities to assist in or make the distributions required by the Plan. Each Disbursing Agent will serve without bond, and each Disbursing Agent, other than the Reorganized Debtors, will receive, without further Bankruptcy Court approval, reasonable compensation for distribution services rendered pursuant to the Plan and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services from the Reorganized Debtors on terms acceptable to the Reorganized Debtors. The Disbursing Agents shall hold all reserves and accounts pursuant to the Plan, including the Reserve. (n) Setoffs and Recoupment. Other than with respect to the PCA U.S. Secured Term and Note Claims, the Canadian Secured Term and Note Claims, the Canadian Deficiency Claims, and the U.S. Deficiency Claims, the Debtors may but shall not be required to, set off against or recoup from any Claim and the payments to be made pursuant to the Plan in respect of such Claim, any Claims of any nature whatsoever that the Debtors may have against the claimant, but neither the failure to do so nor the allowance of any Claim hereunder shall constitute a waiver or release by the Debtors of any such Claim or right it may have against such claimant. 5.4 Objections to and Resolution of Administrative Expense Claims, Claims and Equity Interests. Except as to applications for allowances of compensation and reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code, the 128 Debtors or Reorganized Debtors shall have the exclusive right to make and File objections to Administrative Expense Claims, Claims and Equity Interests subsequent to the Confirmation Date. All objections shall be litigated to Final Order; provided, however, that the Reorganized Debtors shall have the authority to compromise, settle, otherwise resolve or withdraw any objections, without approval of the Bankruptcy Court. Unless otherwise ordered by the Bankruptcy Court, the Debtors or Reorganized Debtors shall File all objections to Administrative Expense Claims that are the subject of proofs of claim or requests for payment Filed with the Bankruptcy Court (other than applications for allowances of compensation and reimbursement of expenses), Claims and Equity Interests and serve such objections upon the holder of the Administrative Expense Claim, Claim or Equity Interest as to which the objection is made as soon as is practicable, but in no event later than sixty (60) days after the Effective Date or such later date as may be approved by the Bankruptcy Court. 5.5 Distributions Relating to Allowed Insured Claims. Distributions under the Plan to each holder of an Allowed Insured Claim shall be in accordance with the treatment provided under the Plan for the Class in which such Allowed Insured Claim is classified, but solely to the extent that such Allowed Insured Claim is not satisfied from proceeds payable to the holder thereof under any pertinent insurance policies and applicable law. Nothing contained in this Section 5.5 shall constitute or be deemed a waiver of any Cause of Action that the Debtors or any entity may hold against any other entity, including, without limitation, insurers under any policies of insurance. ARTICLE VI. EXECUTORY CONTRACTS AND UNEXPIRED LEASES 6.1 Assumption or Rejection of Executory Contracts and Unexpired Leases. (a) Executory Contracts and Unexpired Leases. Pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, all executory contracts and unexpired leases that exist between the Debtors and any person shall be deemed assumed by the Reorganized Debtors as of the Effective Date, except for any executory contract or unexpired lease (i) which has been assumed pursuant to an order of the Bankruptcy Court entered prior to the Confirmation Date, (ii) which has been rejected pursuant to an order of the Bankruptcy Court entered prior to the Confirmation Date, (iii) as to which a motion for approval of the rejection of such executory contract or unexpired lease has been Filed and served prior to the Confirmation Date or (iv) which is set forth in Schedule 6.1(a)(x) (executory contracts) or Schedule 6.1(a)(y) (unexpired leases), which Schedules shall be included in the Plan Supplement; provided, however, that the Debtors or Reorganized Debtors reserve the right, on or prior to the Confirmation Date, to amend Schedules 6.1(a)(x) or 6.1(a)(y) to delete any executory contract or unexpired lease therefrom or add any executory contract or unexpired lease thereto, in which event such executory contract(s) or unexpired lease(s) shall be deemed to be, respectively, assumed or rejected. The Debtors or Reorganized Debtors shall provide notice of any amendments to Schedules 6.1(a)(x) or 6.1(a)(y) to the parties to the executory contracts and unexpired leases affected thereby. The listing of a document on Schedules 6.1(a)(x) and 6.1(a)(y) 129 shall not constitute an admission by the Debtors or Reorganized Debtors that such document is an executory contract or an unexpired lease or that the Debtors or Reorganized Debtors have any liability thereunder. (b) Schedules of Rejected Executory Contracts and Unexpired Leases; Inclusiveness. Each executory contract and unexpired lease listed or to be listed on Schedules 6.1(a)(x) or 6.1(a)(y) that relates to the use or occupancy of real property shall include (i) modifications, amendments, supplements, restatements, or other agreements made directly or indirectly by any agreement, instrument, or other document that in any manner affects such executory contract or unexpired lease, without regard to whether such agreement, instrument or other document is listed on Schedules 6.1(a)(x) or 6.1(a)(y) and (ii) executory contracts or unexpired leases appurtenant to the premises listed on Schedules 6.1(a)(x) or 6.1(a)(y), including, without limitation, all easements, licenses, permits, rights, privileges, immunities, options, rights of first refusal, powers, uses, usufructs, reciprocal easement agreements, vault, tunnel or bridge agreements or franchises, and any other interests in real estate or rights in rem relating to such premises to the extent any of the foregoing are executory contracts or unexpired leases, unless any of the foregoing agreements previously have been assumed. (c) Insurance Policies. Each of the Debtors' insurance policies and any agreements, documents or instruments relating thereto, including, without limitation, any retrospective premium rating plans relating to such policies, are treated as executory contracts under the Plan. Notwithstanding the foregoing, distributions under the Plan to any holder of a Claim covered by any of such insurance policies and related agreements, documents or instruments that are assumed hereunder, shall be in accordance with the treatment provided under Article IV and Section 5.5 of the Plan. Nothing contained in this Section 6.1(c) shall constitute or be deemed a waiver of any Cause of Action that the Debtors may hold against any entity, including, without limitation, the insurer under any of the Debtors' policies of insurance. (d) Approval of Assumption or Rejection of Executory Contracts and Unexpired Leases. Entry of the Confirmation Order shall constitute (i) the approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the assumption of the executory contracts and unexpired leases assumed pursuant to Section 6.1(a) hereof, (ii) the extension of time, pursuant to section 365(d)(4) of the Bankruptcy Code, within which the Debtors may assume or reject the unexpired leases specified in Section 6.1(a) hereof through the date of entry of an order approving the assumption or rejection of such unexpired leases and (iii) the approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of the rejection of the executory contracts and unexpired leases rejected pursuant to Section 6.1(a) hereof. (e) Cure of Defaults. Except as may otherwise be agreed to by the parties, within sixty (60) days after the Effective Date, the Reorganized Debtors shall cure any and all undisputed defaults under any executory contract or unexpired lease assumed pursuant to the Plan in accordance with section 365(b)(1) of the Bankruptcy Code or in accordance with agreements previously negotiated by the parties in respect of the reduction of prepetition Claims, as applicable. All disputed defaults that are required to 130 be cured shall be cured either within thirty (30) days of the entry of a Final Order determining the amount, if any, of the Debtors' or Reorganized Debtors' liability with respect thereto, or as may otherwise be agreed to by the parties. (f) Bar Date for Filing Proofs of Claim Relating to Executory Contracts and Unexpired Leases Rejected Pursuant to the Plan. Claims arising out of the rejection of an executory contract or unexpired lease pursuant to Section 6.1 of the Plan must be Filed with the Bankruptcy Court and/or served upon the Debtors or Reorganized Debtors or as otherwise may be provided in the Confirmation Order, by no later than thirty (30) days after the later of (i) notice of entry of an order approving the rejection of such executory contract or unexpired lease, (ii) notice of entry of the Confirmation Order and (iii) notice of an amendment to Schedules 6.1(a)(x) or 6.1(a)(y). Any Claims not filed within such time will be forever barred from assertion against the Debtors, their Estates, the Reorganized Debtors and their property. Unless otherwise ordered by the Bankruptcy Court, all Claims arising from the rejection of executory contracts and unexpired leases shall be treated as General Unsecured Claims under the Plan. 6.2 Indemnification Obligations. For purposes of the Plan, the obligations of the Debtors to defend, indemnify, reimburse or limit the liability of their present and any former directors, officers or employees who were directors, officers or employees, respectively, on or after the Commencement Date against any Claims or obligations pursuant to the Debtors' certificates of incorporation or bylaws, applicable state law, Canadian law, provincial law, or specific agreement, or any combination of the foregoing, shall survive confirmation of the Plan, remain unaffected thereby, and not be discharged irrespective of whether indemnification, defense, reimbursement or limitation is owed in connection with an event occurring before, on or after the Commencement Date. 6.3 Modified Compensation and Benefit Programs. Except as provided in Section 6.1(a) of the Plan, all employment and severance practices and policies, and all compensation and benefit plans, policies, and programs of the Debtors applicable to their directors, officers or employees, including, without limitation, all savings plans, retirement plans, health care plans, severance benefit plans, incentive plans, workers' compensation programs and life, disability and other insurance plans are treated as executory contracts under the Plan and are hereby assumed pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code; provided, however, that the Debtors reserve the right to modify, subject to the prior approval of the Creditors' Committee, any and all such compensation and benefit practices, plans, policies, and programs. 6.4 Retiree Benefits. Payments, if any, due to any person for the purpose of providing or reimbursing payments for retired employees and their spouses and dependents for medical, surgical, or hospital care benefits, or benefits in the event of sickness, accident, disability, or death under any plan, fund, or program (through the purchase of insurance or otherwise) maintained or established in whole or in part by the Debtors prior to the Commencement Date shall be continued for the duration of the period the Debtors have obligated themselves to provide such benefits. Pursuant to the 131 terms of the Debtors' retiree benefit plans, the Debtors reserve the right to modify or terminate benefits under such plans at any time, or from time to time. The Debtors will continue to be contributing sponsors of the Retirement Plans. The Debtors intend to fund the Retirement Plans in accordance with the minimum funding standards under ERISA, 29 U.S.C. ss. 1082, pay all required PBGC insurance premiums, 29 U.S.C. ss. 1307, and comply with all requirements of the Retirement Plans and ERISA. The Retirement Plans are defined benefit pension plans insured by PBGC under Title IV of ERISA, 29 U.S.C. ss.ss. 1301-1461. No provision of or proceeding within the Debtors' Chapter 11 Cases, the Plan, or the Confirmation Order shall in any way be construed as discharging, releasing or relieving the Debtors, the Reorganized Debtors, or any other party in any capacity, from any liability with respect to the Retirement Plans or any other defined benefit pension plan under any law, governmental policy or regulatory provision. PBGC and the Retirement Plans shall not be enjoined or precluded from enforcing liability resulting from any of the provisions of the Plan or the Plan's confirmation. ARTICLE VII. CONSOLIDATION OF PCI AND THE SUBSIDIARIES 7.1 Restructuring Transactions. On or prior to the Effective Date, the following transactions will be consummated by the Debtors in the order set forth below; provided, however, that none of the following steps shall occur unless all of the following steps occur and, provided, however, that the holders of Claims shall receive the distributions provided for in Sections 4.3 and 4.4 of the Plan. (a) On or prior to the Effective Date, PCICC shall continue into a Nova Scotia company. (b) On or prior to the Effective Date, PCICC shall incorporate a Nova Scotia unlimited liability company as a subsidiary. (c) On or prior to the Effective Date, PCA shall form a new corporation ("Newco"), a Delaware corporation. (d) PCA shall contribute the stock of PCICC and all of its other subsidiaries (including PAI) to Newco for shares of Newco. (e) PCA shall file Articles of Conversion in Delaware, thus becoming a limited liability company. This entity will hereinafter be referred to as PCA LLC. (f) PCA LLC shall distribute the stock of Newco to PCI. (g) Newco shall be merged into PCI, the survivor being PCI. Pursuant to the merger, Newco's assets, consisting of the stock of PCICC and the other Subsidiaries, shall be transferred to PCI. 132 (h) PCI shall contribute the stock of PAI to PCA LLC for a membership interest in PCA LLC having an equivalent value. (i) Allowed PCA U.S. Secured Term and Note Claims as of the Record Date, shall be exchanged for Allowed Secured Claims as of the Record Date relating to the PCICC Senior Notes, based on the proportion of their Allowed PCA U.S. Secured Term and Note Claim determined by the formula A x [B/C x 57%] where A is the amount of a particular holder's Allowed PCA U.S. Secured Term and Note Claims; B is the aggregate amount of the Allowed Secured Claims relating to PCICC Senior Notes and C is the aggregate amount of the Allowed Canadian Secured Term and Note Claims (the exchanged Claims are referred to as the "Exchanged Allowed PCA U.S. Secured Term and Note Claims" and the Claims which are retained by the initial holders are referred to as the "Retained Initial Allowed PCA U.S. Secured Term and Note Claims"), and the holders of Allowed Secured Claims relating to the PCICC Senior Notes as of the Record Date shall receive their Pro Rata Share of the Exchanged Allowed PCA U.S. Secured Term and Note Claims and the holders of the Allowed PCA U.S. Secured Term and Note Claims shall receive on the exchange from the holders of the Allowed Secured Claims relating to the PCICC Senior Notes, their Pro Rata Share of the proportion of the Allowed Secured Claims relating to the PCICC Senior Notes determined by the formula E x 43% where E is the aggregate Allowed Secured Claims relating to the PCICC Senior Notes. (j) Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement shall be exchanged for Allowed Secured Claims relating to the PCICC Senior Notes as of the Record Date, based on the proportion of the Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement determined by the formula A x [B/C x 57%] where A is the amount of a particular holder's Allowed Secured Claim relating to the PCA Canadian Term Loan Agreement, B is the aggregate amount of the Allowed Secured Claims relating to the PCICC Senior Notes and C is the aggregate amount of the Allowed Canadian Secured Term and Note Claims (the exchanged Claims are referred to as the "Exchanged Allowed PCA Canadian Term Loan Claims" and the Claims which are retained by the initial holders are referred to as the "Retained Initial Allowed Secured PCA Canadian Term Loan Claims"), and the holders of the Allowed Secured Claims relating to the PCICC Senior Notes as of the Record Date shall receive their Pro Rata Share of the Exchanged PCA Canadian Term Loan Claims and the holders of the Exchanged PCA Canadian Term Loan Claims shall receive on the exchange from the holders of the Allowed Secured Claims relating to the PCICC Senior Notes their Pro Rata Share of the proportion of the Allowed Secured Claims relating to the PCICC Senior Notes determined by the formula D x [E/F x 57%] where D is the amount of the Allowed Claims relating to the PCICC Senior Notes, E is the aggregate amount of the Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement and F is the aggregate amount of the Allowed Canadian Secured Term and Note Claims. (k) PCI shall contribute to PCA LLC 9,700,000 shares of the New Common Stock. 133 (l) Subject to giving effect to the exchanges provided for in clauses (i) and (j) above, Allowed PCA U.S. Secured Term and Note Claims shall be transferred to PCA LLC. (m) Holders of the Retained Initial Allowed PCA U.S. Secured Term and Note Claims shall receive in exchange for those Claims, their proportionate share of the balance of the 9,700,000 shares of New Common Stock of PCI and New Tranche A Term Notes that will not be distributed in the distributions provided for in clauses (o) and (r) below. (n) Subject to giving effect to the exchanges provided for in clauses (i) and (j) above, Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement shall be transferred to PCA LLC. (o) Holders of the Retained Initial Allowed Secured Claims relating to the PCA Canadian Term Loan Agreement shall receive in exchange for those Claims, their proportionate share of the (i) 9,700,000 shares of New Common Stock (to be delivered by PCA LLC) and (ii) the New Tranche A Term Notes (to be issued by PCA LLC) determined by the formula A/(A+43%) where A is the amount determined by the formula C/D x 57%, C is the aggregate amount of the Allowed Secured Claims in respect of the PCA Canadian Term Loan and D is the aggregate amount of the Allowed Canadian Secured Term and Note Claims. (p) PCICC and the subsidiary incorporated in clause (b) above shall amalgamate to form PCICC ULC. The transactions occurring subsequent to the amalgamation described in this clause (p) are conditioned upon the occurrence of such amalgamation. (q) Subject to giving effect to the exchanges provided for in clauses (i) and (j) above, PCICC ULC shall issue the New Tranche B Notes in exchange for the Allowed Secured Claims relating to the PCICC Senior Notes. (r) Former holders of Exchanged Allowed PCA Canadian Term Loan Claims that did not receive shares of the New Common Stock and the New Tranche A Term Notes pursuant to clause (o) above shall receive their proportionate share of the New Common Stock and the New Tranche A Term Notes based on the same formula used in clause (o) above to determine the proportionate share received by the holders mentioned in clause (o) above. Former holders of the Exchanged Allowed PCA U.S. Secured Term and Note Claims that did not receive shares of the New Common Stock and the New Tranche A Term Notes pursuant to clause (m) above shall receive their proportionate share of the New Common Stock and New Tranche A debt after subtracting the distributions to be made to both the holders of the Retained Initial Allowed Secured Claims relating to the PCA Canadian Term Loan and the holders of the Exchanged Allowed PCA Canadian Term Loan Claims. (s) PCI shall contribute PCA LLC to PCICC ULC in exchange for preference stock of PCICC ULC having a fair market value equal to the value of PCA LLC. 134 (t) PAI shall be merged into PCA LLC, the survivor being PCA LLC which shall change its name to PAI LLC. (u) All inter-company debts owing by PAI LLC to PCICC ULC shall remain outstanding and be paid in the ordinary course of business. 7.2 Order of Transactions. For greater certainty, the approval and confirmation of the Plan shall constitute the approval of each holder of an Allowed PCA U.S. Secured Term and Note Claim and of an Allowed Canadian Secured Term and Note Claim to each transaction listed above (provided, however, that all such transactions occur) in the order set forth above including, without limitation, the exchanges provided for in Sections 7.1(i), (j), (l), (m), (n), (o), (q), and (r) of the Plan without any further action required to be taken by such holder and each holder irrevocably appoints the Debtors as his agent to give effect to all of the transactions described in Section 7.1 of the Plan. 7.3 Approval and Acknowledgment. The approval and confirmation of the Plan shall constitute an approval and acknowledgement by each of the parties that it intends that: (a) Section 7.1(a) of the Plan constitutes a plan of reorganization for U.S. federal income tax purposes; (b) Sections 7.1(e), (i), (j), (l), (m), (n), (o), (q), and (r) of the Plan are integrated and constitute a plan of reorganization for U.S. federal income tax purposes pursuant to which the holders of PCA U.S. Secured Term and Note Claims and PCA Canadian Term Loan Claims exchange directly with the Debtors their Initial Allowed Claims(6) for PCI New Common Stock, New Tranche A Term Notes, and New Tranche B Notes (in each case, which notes are issued by PCI for U.S. federal income tax purposes); (c) Sections 7.1(i), (j), (l), (n), (p), (q), and (r) of the Plan are integrated and constitute a plan of reorganization for U.S. federal income tax purposes pursuant to which the holders of PCICC Senior Note Claims exchange directly with the Debtors their Initial Allowed Claims for PCI New Common Stock, New Tranche A Term Notes and New Tranche B Notes (in each case, which notes are issued by PCI for U.S. federal income tax purposes); (d) Section 7.1(t) of the Plan constitutes the adoption of a plan of complete liquidation of PAI into PCI for U.S. federal income tax purposes; and (e) Newco is a corporation that will engage in no activities other than as related to the Plan and should be treated in accordance with the principles of Rev. Rul. 73-427. Confirmation of the Plan constitutes the agreement and acknowledgement by PCI, its Subsidiaries, each of the holders of Allowed PCA U.S. Secured Term and Note Claims, and each of the holders of Allowed Canadian Secured Term and Note Claims not to report the transaction for U.S. federal income tax purposes in a manner that is inconsistent with the prior sentence. 7.4 Substantive Consolidation. Entry of the Confirmation Order shall constitute the approval, pursuant to section 105(a) of the Bankruptcy Code, effective as ---------- (6) Initial Allowed Claim means, with respect to each creditor, the Allowed Claim(s) owned by such creditor prior to the consummation of the transactions set forth in Section 7.1 of the Plan. 135 of the Effective Date, of the substantive consolidation of the Chapter 11 Cases for all purposes related to the Plan, including, without limitation, for purposes of voting, confirmation, and distribution. Pursuant to such order, (i) all assets and liabilities of the Subsidiaries shall be deemed merged or treated as though they were merged into and with the assets and liabilities of PCI, (ii) no distributions shall be made under the Plan on account of Intercompany Claims among the Debtors except as provided in Section 7.1 of the Plan, (iii) all guarantees of the Debtors of the obligations of any other Debtor shall be deemed eliminated so that any Claim against any Debtor and any guarantee thereof executed by any other Debtor and any joint or several liability of any of the Debtors shall be deemed to be one obligation of the consolidated Debtors, and (iv) each and every Claim filed or to be filed in the Chapter 11 Case of any of the Debtors shall be deemed filed against the consolidated Debtors, and shall be deemed one Claim against and obligation of the consolidated Debtors. Such substantive consolidation shall not (other than for purposes related to the Plan) affect (i) the legal and corporate structures of the Reorganized Debtors, subject to the right of the Debtors or Reorganized Debtors to effect restructurings as provided in Section 7.1 of the Plan, (ii) Intercompany Claims by and among the Debtors or Reorganized Debtors, (iii) Subsidiary Equity Interests, and (iv) pre- and post-Commencement Date guarantees that are required to be maintained (a) in connection with executory contracts or unexpired leases that were entered into during the Chapter 11 Cases or that have been or will be assumed or (b) pursuant to the Plan. 7.5 Issuance and Transfers of Common Stock of the Subsidiaries. On the Effective Date, shares of new common stock of the Reorganized Subsidiaries shall be issued to Reorganized PCI directly or indirectly so as to recreate the prepetition corporate structure, subject to Section 7.1 of the Plan. 7.6 Merger of Corporate Entities. On or as of the Effective Date, as determined by the Debtors with the consent of the Creditors' Committee, any or all of the Subsidiaries may be merged into one or more of the Debtors or dissolved. Upon the occurrence of any such merger, all assets of the merged entities shall be transferred to and become the assets of the surviving corporation, and all liabilities of the merged entities, except to the extent discharged, released or extinguished pursuant to the Plan and the Confirmation Order, shall be assumed by and shall become the liabilities of the surviving corporation. All mergers and dissolutions shall be effective as of the Effective Date pursuant to the Confirmation Order without any further action by the stockholders or directors of any of the Debtors, the Debtors in Possession or the Reorganized Debtors. ARTICLE VIII. PROVISIONS REGARDING CORPORATE GOVERNANCE AND MANAGEMENT OF THE REORGANIZED DEBTORS 8.1 General. On the Effective Date, the management, control and operation of the Reorganized Debtors shall become the general responsibility of the respective Boards of Directors of the Reorganized Debtors, which shall, thereafter, have the responsibility for the management, control and operation of the Reorganized Debtors. 136 8.2 Meetings of Reorganized PCI Stockholders. In accordance with the Amended PCI Certificate of Incorporation and the Amended PCI Bylaws, as the same may be amended from time to time, the first annual meeting of the stockholders of Reorganized PCI shall be held on a date in 2002 selected by the Board of Directors of Reorganized PCI, and subsequent meetings of the stockholders of Reorganized PCI shall be held at least once annually each year thereafter. 8.3 Directors and Officers of Reorganized Debtors. (a) Boards of Directors. (i) Reorganized PCI. The New Board of Directors of Reorganized PCI shall initially comprise five (5) members, with a non-executive chairman. Four (4) members of the New Board of Directors shall be appointed by the Ad Hoc Committee. The fifth member shall be Michael J. Ferris, the Chief Executive Officer of the Reorganized Debtors. The size and composition of the New Board of Directors may be adjusted to comply with NASDAQ listing requirements. Each of the members of the New Board of Directors shall serve until the first annual meeting of stockholders of Reorganized PCI or their earlier resignation or removal in accordance with the Amended PCI Certificate of Incorporation or Amended PCI Bylaws, as the same may be amended from time to time. (ii) Reorganized Subsidiaries. The initial Board of Directors of each of the Reorganized Subsidiaries shall consist of officers or employees of Reorganized PCI whose names shall be disclosed prior to the date of the Confirmation Hearing. Each of the members of each such initial Board of Directors shall serve until the first meeting of stockholders of the respective Reorganized Subsidiary or their earlier resignation or removal in accordance with the certificate of incorporation or bylaws of such Reorganized Subsidiary. (b) Officers. The officers of the respective Debtors immediately prior to the Effective Date shall serve as the initial officers of the respective Reorganized Debtors on and after the Effective Date. Such officers shall serve in accordance with any employment agreement with the Reorganized Debtors and applicable nonbankruptcy law. 8.4 Amended Bylaws and Amended Certificates of Incorporation. The Amended PCI Bylaws, the Amended PCI Certificate of Incorporation, and the bylaws and certificates of incorporation of each of the Reorganized Subsidiaries shall be amended and restated as of the Effective Date to the extent necessary (a) to prohibit the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code, subject to further amendment of such certificates of incorporation and bylaws as permitted by applicable law and (b) to effectuate the provisions of the Plan, in each case without any further action by the stockholders or directors of the Debtors, the Debtors in Possession or the Reorganized Debtors. 137 8.5 Issuance of New Securities. The issuance of the following securities and notes by Reorganized PCI, Reorganized PCA, or Reorganized PCICC, as applicable, is hereby authorized without further act or action under applicable law, regulation, order or rule. The Confirmation Order shall provide that the issuance of the following securities and notes shall be exempt from the registration requirements of the Securities Act of 1933, as amended, in accordance with section 1145 of the Bankruptcy Code: (a) 10,000,000 shares of New Common Stock; (b) the New Tranche A Term Notes; (c) the New Tranche B Notes; (d) the Guarantees; and (e) the New Other Secured Notes. 8.6 Management Equity Incentive Plan. The MEIP will become effective on the Effective Date or as soon thereafter as is reasonably practicable and shall be in substantially the form contained in the Plan Supplement. Unissued shares of New Common Stock equal to ten percent (10%) of the total number of shares of New Common Stock outstanding immediately after the Effective Date shall be reserved for issuance under the MEIP. The New Board of Directors shall make individual awards of stock options exercisable into shares of New Common Stock under the MEIP, and the New Board of Directors shall establish the terms relating thereto (e.g., among other things, the number of options granted to each participant in the MEIP, exercise price, and vesting). ARTICLE IX. IMPLEMENTATION AND EFFECT OF CONFIRMATION OF PLAN 9.1 Means for Implementation of the Plan. In addition to the provisions set forth elsewhere in the Plan, the following shall constitute the means for implementation of the Plan: (a) Exit Financing. On the Effective Date, the transactions contemplated by the Exit Facility shall be consummated and thereupon become effective. (b) Effectiveness of Securities, Instruments and Agreements. On the Effective Date, all documents set forth in the Plan Supplement and all other agreements entered into or documents issued pursuant to the Plan, including, without limitation, the New Tranche A Term Loan Agreement, the New Tranche A Term Notes, the New Tranche B Notes Indenture, the New Tranche B Notes, the Guarantees, the MEIP, the New Common Stock, and/or any agreement entered into or instrument issued or in connection with any of the foregoing shall become effective and binding in accordance with their respective terms and conditions upon the parties thereto and shall be deemed to become effective simultaneously. 138 (c) Corporate Action for Reorganized Debtors. On the Effective Date, all matters provided for under the Plan that would otherwise require approval of the stockholders, directors or members of one or more of the Debtors or Reorganized Debtors or their successors in interest under the Plan, including, without limitation, the issue of preferred stock, the New Common Stock, the New Notes, the Guarantees, and documents relating thereto, options pursuant to the MEIP, the amendment and restatement of certificates of incorporation and bylaws of the Reorganized Debtors, corporate mergers or dissolutions effectuated pursuant to the Plan, and the election or appointment, as the case may be, of directors and officers of the Debtors pursuant to the Plan, shall be taken without such authorizations pursuant to section 303 of the General Corporation Law of the State of Delaware, in the case of the Debtors and Reorganized Debtors incorporated in the State of Delaware, and, in the case of Debtors and Reorganized Debtors organized outside the State of Delaware, pursuant to the applicable general corporation law of such other jurisdictions. On the Effective Date or as soon thereafter as is practicable, the Reorganized Debtors shall, if required, file their amended certificates of incorporation with the Secretary of State of the state in which each Reorganized Debtor is incorporated, in accordance with the applicable general corporation law of such states. (d) Approval of Agreements. The solicitation of votes on the Plan shall be deemed a solicitation for the approval of the Plan Documents and all transactions contemplated by the Plan. Entry of the Confirmation Order shall constitute approval of the Plan Documents and such transactions, including, without limitation, the transactions listed in Section 7.1 of the Plan. (e) Shelf Registration Statements. Prior to the Effective Date, the Reorganized Debtors shall file with the Securities and Exchange Commission, at their expense, a "shelf" registration statement or registration statements on the applicable registration forms (the "Shelf Registration Statements") under the Securities Act for the offering for resale on a continuous or delayed basis (the "Shelf Registration" or "Shelf Registrations") of the New Tranche B Notes (and the Guarantees thereof) and the New Common Stock held by persons who may be deemed to be "underwriters" (such New Tranche B Notes, Guarantees and New Common Stock are hereinafter referred to collectively as the "Registerable Securities"). Each person who is to receive, pursuant to the Plan, an aggregate of ten percent (10%) or more of the New Common Stock shall be named as a "selling securityholder" in the prospectus or prospectuses to be included in such Shelf Registration Statements subject only to the provision of certain information required to be included therein. Each person who, pursuant to the Plan, is to receive an aggregate of greater than five percent (5%), but less than ten percent (10%) of New Common Stock shall be named as a "selling securityholder" in such prospectus upon written notice to the Debtors, received prior to the effectiveness of such Shelf Registration Statements, stating such person's election to be so named and providing certain information required to be included therein. The Reorganized Debtors shall use their best efforts to have the Shelf Registration declared effective on the Effective Date, and the Reorganized Debtors shall use their best efforts to keep the Shelf Registration effective for a three-year period from the Effective Date (the "Three-Year Period") and supplement or make amendments to the Shelf Registration, if required under the Securities Act or by the rules and regulations promulgated thereunder, or in accordance with the terms of the Registration Rights 139 Agreement, and have such supplements and amendments declared effective as soon as practicable after filing. Any person that holds five percent (5%) or more of any Registerable Security at the expiration of effectiveness of the Shelf Registration or Shelf Registrations after the Three-Year Period, but who has not sold such Registerable Security pursuant to the Shelf Registration Statements shall be granted customary demand and piggyback registration rights by the Debtors with respect to all Registerable Securities held by such person at such time; provided, however, that in no event shall holders of Registerable Securities have more than two (2) demand registration rights in any 12-month period nor more than seven (7) demand registration rights in the aggregate. Prior to the Effective Date, the Reorganized Debtors shall enter into a registration rights agreement with respect to the matters described in this Section 9.1(e), which registration rights agreement shall be in substantially the form contained in the Plan Supplement. (f) Cancellation of Existing Securities and Agreements. On the Effective Date, the PCICC Senior Notes, the PCA Senior Notes, and any or all instruments evidencing Canadian Secured Term and Note Claims or PCA U.S. Secured Term and Notes Claims shall be cancelled and extinguished, and the holders thereof shall have no rights and such instruments shall evidence no rights, except the right to receive the distributions, if any, to be made to holders of such instruments under the Plan and pursuant to the implementation of the transactions set forth in Section 7.1 of the Plan. Except with respect to the performance by the Indenture Trustees or their agents of the obligations of the Indenture Trustees under the Plan or in connection with any distribution to be made under the Plan, effective as of the Effective Date, the Indenture Trustees and their agents, successors and assigns shall be discharged of all of their obligations associated with, as the case may be, the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA U.S. Term Loan Agreement, the PCA Canadian Term Loan Agreement and related agreements and released from all Claims arising in the Chapter 11 Cases and, effective as of the Effective Date, the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA U.S. Term Loan Agreement, and the PCA Canadian Term Loan Agreement shall be deemed cancelled, except that such cancellation shall not impair the rights of either (i) the holders of PCICC Senior Notes and/or PCA Senior Notes or (ii) the holders of debt under the PCA U.S. Term Loan Agreement and/or the PCA Canadian Term Loan Agreement to receive distributions under the Plan or the rights of the Indenture Trustees under their respective charging liens, if any, pursuant to, as the case may be, the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA U.S. Term Loan Agreement, and the PCA Canadian Term Loan Agreement to the extent that any of the Indenture Trustees have not received payment. (g) Rights of the Indenture Trustees. The Indenture Trustees shall be entitled to Administrative Expense Claims as provided for in, and subject to the restrictions of, this section of the Plan and no Reorganized Debtor shall have any obligations to any indenture trustee, including the Indenture Trustees, agent or servicer (or to any Disbursing Agent replacing such indenture trustee, agent or servicer) for any fees, costs or expenses except as expressly set forth in this Section 9.1(g). Prior to the Effective Date, the Indenture Trustees shall provide the Debtors with a statement of the Indenture Trustee Expenses projected through the Effective Date. Upon the timely receipt of one or more invoices in accordance with the preceding sentence, the Reorganized Debtors shall, 140 on the Effective Date, pay the Indenture Trustees' Expenses, in full, in Cash. Notwithstanding the foregoing, to the extent that the Reorganized Debtors dispute any portion of the Indenture Trustees' Expenses, the Reorganized Debtors shall reserve Cash on the Effective Date in such Disputed amount and such dispute shall be presented to the Bankruptcy Court for adjudication. On the Effective Date, subject to the payment of the non-Disputed portion of the Indenture Trustees' Expenses and the establishment of the reserve set forth in the preceding sentence with respect to any Disputed portion of the Indenture Trustee Expenses, all Liens of the Indenture Trustees in any distributions shall be forever released and discharged. Once the Indenture Trustees have completed performance of all of their duties set forth in the Plan or in connection with any distributions to be made under the Plan, if any, the Indenture Trustees, and their successors and assigns, shall be relieved of all obligations as the Indenture Trustees, respectively, effective as of the Effective Date. (h) Surrender of Existing Securities. As a condition precedent to receiving any distribution pursuant to the Plan, each holder of a Canadian Secured Term and Note Claim and/or a PCA U.S. Secured Term and Note Claim who holds such securities in certificated form must surrender such PCICC Senior Note, PCA Senior Note or other instrument evidencing such Canadian Secured Term and Note Claim or PCA U.S. Secured Term and Note Claim to the appropriate Disbursing Agents pursuant to a letter of transmittal furnished by the Disbursing Agents. Any New Notes to be distributed pursuant to the Plan on account of any such Claim will, pending such surrender, be treated as an undeliverable distribution. (i) Special Procedures for Lost, Stolen, Mutilated or Destroyed Instruments. In addition to any requirements under the Debtors' certificate of incorporation or bylaws, any holder of a Claim evidenced by an instrument that has been lost, stolen, mutilated or destroyed will, in lieu of surrendering such instrument, deliver to the Disbursing Agents: (a) evidence satisfactory to the Disbursing Agents and the Debtors of the loss, theft, mutilation or destruction and (b) such security or indemnity as may be required by the Disbursing Agents to hold the Disbursing Agents and the Debtors harmless from any damages, liabilities or costs incurred in treating such individual as a holder of an instrument. Upon compliance with this Section 9.1(i), the holder of a Claim evidenced by any such lost, stolen, mutilated or destroyed instrument will, for all purposes under the Plan, be deemed to have surrendered such instrument. (j) New Tranche A Term Notes. The New Tranche A Term Notes shall be in the aggregate principal amount of $50 million, shall be issued by PCA or its successor in interest pursuant to the New Tranche A Term Loan Agreement, shall bear interest at the LIBOR Rate plus 350 basis points, shall be payable monthly, shall be prepayable with excess cash flow and shall mature on the date five (5) years after the Effective Date (the "New Tranche A Term Notes"). (k) New Tranche B Notes. The New Tranche B Notes shall be in the aggregate principal amount of $150 million, shall be issued by PCICC or its successor in interest pursuant to the New Tranche B Notes Indenture, shall bear interest at ten percent (10.0%) per annum, shall be payable semi-annually and shall mature on the date seven (7) years 141 after the Effective Date (the "New Tranche B Notes"). The New Tranche B Notes shall be redeemable at a price equal to 105% of the principal amount thereof until the fourth (4th) anniversary of the Effective Date, at a price equal to 102.5% of the principal amount thereof from the fourth (4th) anniversary of the Effective Date until the fifth (5th) anniversary of the Effective Date, and at 100% of the principal amount thereof thereafter. Any such redemption shall include accrued and unpaid interest. (l) Liens Securing New Tranche A Term Notes and New Tranche B Notes. The New Tranche A Term Notes and the New Tranche B Notes shall be secured by (i) first priority Liens on all of the Reorganized Debtors' real and personal property, tangible and intangible assets, rights, titles, and interests now owned or hereinafter acquired, with the exception of (a) those assets of the Reorganized Debtors that are subject to Liens on accounts receivable, inventory, and general intangibles that relate thereto pursuant to the Exit Facility, and (b) those assets of the Reorganized Debtors that are subject to Liens relating to or arising under the Other Secured Claims; and (ii) second priority Liens on all assets of the Reorganized Debtors that are subject to other prior Liens (other than assets of the Reorganized Debtors that are subject to Liens to secure the Exit Facility, unless the Exit Facility allows for the grant of such Liens) as of the Effective Date, provided, however, that any such second priority Liens shall be subject and subordinate to the enforcement rights of the senior lienholder under the Exit Facility. The New Tranche A Term Notes and the New Tranche B Notes shall rank senior in right of payment to all other indebtedness and obligations of the Reorganized Debtors, with the exception of the Exit Facility, with respect to which the New Tranche A Term Notes and the New Tranche B Notes shall rank pari passu. On the Effective Date, the Reorganized Debtors shall execute and deliver to the appropriate New Indenture Trustee in connection with the New Tranche A Term Loan Agreement and in connection with the New Tranche B Notes Indenture such documents, instruments, and agreements entered into in connection therewith. On the Effective Date, the Reorganized Debtors shall execute and deliver such further documents, instruments, and agreements necessary to effectuate and further evidence the terms and conditions of the Plan. (m) Guarantees. On the Effective Date, each of the Reorganized Debtors, other than the applicable issuer, will guarantee payment in full when due, whether at maturity, by acceleration, redemption, or otherwise, and all other obligations of the respective issuers under the New Tranche A Term Notes and the New Tranche B Notes (collectively, the "Guarantees"). (n) New Common Stock. The New Common Stock shall have a par value of $.01 per share and such rights with respect to dividends, liquidation, voting and other matters as are provided for by applicable nonbankruptcy law or in the Amended PCI Certificate of Incorporation and the Amended PCI Bylaws. (o) Listing of New Common Stock. Reorganized PCI shall use reasonable commercial efforts to cause the shares of New Common Stock to be listed on a national securities exchange or the Nasdaq National Market. 142 (p) Operation of the Debtors in Possession Between the Confirmation Date and the Effective Date. The Debtors shall continue to operate as Debtors in Possession, subject to the supervision of the Bankruptcy Court, pursuant to the Bankruptcy Code during the period from the Confirmation Date through and until the Effective Date, and any obligation incurred by the Debtors in Possession during that period shall constitute an Administrative Expense Claim. (q) Administration After the Effective Date. After the Effective Date, the Reorganized Debtors may operate their businesses, and may use, acquire, and dispose of their property, free of any restrictions of the Bankruptcy Code and Bankruptcy Rules, but subject to the continuing jurisdiction of the Bankruptcy Court as set forth in Article XI of the Plan. 9.2 Term of Bankruptcy Injunction or Stays. All injunctions or stays provided for in the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until the Effective Date. 9.3 Revesting of Assets. (a) The property of the Estates of the Debtors shall revest in the Reorganized Debtors on the Effective Date. (b) From and after the Effective Date, the Reorganized Debtors may operate their businesses, and may use, acquire and dispose of property free of any restrictions imposed under the Bankruptcy Code. (c) As of the Effective Date, all property of the Debtors and Reorganized Debtors shall be free and clear of all Liens, Claims and interests of holders of Claims and Equity Interests, except as provided in the Plan. 9.4 Causes of Action. As of the Effective Date, pursuant to section 1123(b)(3)(B) of the Bankruptcy Code, any and all Causes of Action and avoidance Claims the Debtors and Debtors in Possession are empowered to bring under sections 502(d), 544, 545, 547, 548, 549, 550, 551, and 553 of the Bankruptcy Code or applicable non-bankruptcy law, shall become assets of the Reorganized Debtors, and the Reorganized Debtors shall have the authority to prosecute such Causes of Action and Avoidance Claims for the benefit of the Estates of the Debtors. Specifically, the Debtors are reviewing their Schedules, including payments made in the ninety (90) days prior to the Commencement Date as listed in Section 3(a) of their Statement of Financial Affairs, and the Debtors and the Reorganized Debtors reserve the right to identify, pursue and prosecute all Causes of Action and Avoidance Claims thereunder. The Reorganized Debtors shall have the authority to compromise and settle, otherwise resolve, discontinue, abandon or dismiss all Causes of Action and Avoidance Claims without approval of the Bankruptcy Court. 9.5 Discharge of Debtors. The rights afforded herein and the treatment of all Claims and Equity Interests herein shall be in exchange for and in complete satisfaction, 143 discharge and release of Claims and Equity Interests of any nature whatsoever, including any interest accrued on such Claims from and after the Commencement Date, against the Debtors and the Debtors in Possession, or any of their assets or properties. Except as otherwise provided herein, (a) on the Effective Date, all such Claims against and Equity Interests in the Debtors shall be satisfied, discharged and released in full, and (b) all persons shall be precluded from asserting against the Reorganized Debtors, their successors, or their assets or properties any other or further Claims or Equity Interests based upon any act or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. 9.6 Injunction. Except as otherwise expressly provided in the Plan, the Confirmation Order or a separate Order of the Bankruptcy Court, all entities who have held, hold or may hold Claims against or Equity Interests in any or all of the Debtors, are permanently enjoined, on and after the Effective Date, from (a) commencing or continuing in any manner any action or other proceeding of any kind with respect to any such Claim or Equity Interest; (b) the enforcement, attachment, collection or recovery by any manner or means of any judgment, award, decree or order against the Debtors on account of any such Claim or Equity Interest; (c) creating, perfecting or enforcing any encumbrance of any kind against the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest; and (d) asserting any right of setoff, subrogation or recoupment of any kind against any obligation due from the Debtors or against the property or interests in property of the Debtors on account of any such Claim or Equity Interest. Such injunction shall extend to successors of the Debtors (including, without limitation, the Reorganized Debtors) and their respective properties and interests in property. ARTICLE X. EFFECTIVENESS OF THE PLAN 10.1 Conditions Precedent to Effectiveness. The Plan shall not become effective unless and until the following conditions shall have been satisfied or waived pursuant to Section 10.3 of the Plan: (a) The Confirmation Order shall authorize and direct that the Debtors and the Reorganized Debtors take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases and other agreements or documents created in connection with the Plan, including those actions contemplated by the provisions of the Plan set forth in Section 9.1 of the Plan. (b) The Confirmation Order shall be in form and substance reasonably satisfactory to the Creditors' Committee and shall have become a Final Order. (c) The statutory fees owing to the United States Trustee shall have been paid in full. 144 (d) All Plan Documents shall be in a form reasonably satisfactory to the Debtors, the Reorganized Debtors, and the Creditors' Committee. (e) The Exit Facility shall have been entered into by all parties thereto and all conditions to the initial draw thereunder shall have been satisfied in accordance with the terms thereof. (f) The CCAA Order shall have been issued in a form and substance reasonably acceptable to the Creditors' Committee, shall not have been reversed, stayed, modified or amended, and shall have become final, binding, and nonappealable. (g) The Shelf Registration Statements shall have become effective. (h) All other actions, authorizations, consents and regulatory approvals required (if any) and all Plan Documents necessary to implement the provisions of the Plan shall have been obtained, effected or executed in a manner acceptable to the Debtors and the Creditors' Committee or, if waivable, waived by the Person or Persons entitled to the benefit thereof. 10.2 Effect of Failure of Conditions. If each condition to the Effective Date has not been satisfied or duly waived within sixty (60) days after the Confirmation Date, then (unless the period for satisfaction or waiver of conditions has been extended at the option of the Debtors for a period not exceeding 120 days) upon motion by any party in interest, made before the time that each of the conditions has been satisfied or duly waived and upon notice to such parties in interest as the Bankruptcy Court may direct, the Confirmation Order will be vacated by the Bankruptcy Court; provided, however, that notwithstanding the Filing of such motion, the Confirmation Order may not be vacated if each of the conditions to the Effective Date is either satisfied or duly waived before the Clerk enters a Final Order granting such motion. If the Confirmation Order is vacated pursuant to this Section 10.2, the Plan shall be deemed null and void in all respects, including without limitation the discharge of Claims pursuant to section 1141 of the Bankruptcy Code and the assumptions or rejections of executory contracts and unexpired leases provided for herein, and nothing contained herein shall (1) constitute a waiver or release of any Claims by, or Claims against, the Debtors or (2) prejudice in any manner the rights of the Debtor. 10.3 Waiver of Conditions to Confirmation and Effective Date. Each of the conditions to Confirmation and the Effective Date, other than the conditions set forth in Section 10.1 of the Plan, may be waived in whole or in part by the Debtors and the Creditors' Committee at any time, without notice or an Order of the Bankruptcy Court. The failure to satisfy or to waive any condition may be asserted by the Debtors or the Creditors' Committee regardless of the circumstances giving rise to failure of such condition to be satisfied (including any action or inaction by the Debtors). The failure of the Debtors or the Creditors' Committee to exercise any of the foregoing rights will not be deemed a waiver of any other rights, and each such right will be deemed an ongoing right that may be asserted at any time. 145 10.4 Effects of Plan Confirmation. (a) Limitation of Liability. Neither the Debtors, the Reorganized Debtors, the Creditors' Committee, the Ad Hoc Committee, U.S. Trustee nor any of their respective post-Commencement Date employees, officers, directors, agents or representatives, or any Professional (which, for the purposes of this Section 10.4(a), shall include any Canadian counsel of the Debtors, the Reorganized Debtors, the Ad Hoc Committee, or the Creditors' Committee) employed by any of them, shall have or incur any liability to any Person whatsoever, including, specifically, any holder of a Claim, under any theory of liability (except for any Claim based upon willful misconduct or gross negligence), for any act taken or omission made in good faith directly related to formulating, preparing, disseminating, implementing, confirming or consummating the Plan, the Confirmation Order, or any contract, instrument, release, or other agreement or document created or entered into, or any other act taken or omitted to be taken in connection with the Plan, provided that nothing in this paragraph shall limit the liability of any Person for breach of any express obligation it has under the terms of the Plan or under any agreement or other document entered into by such Person either after the Commencement Date or in accordance with the terms of the Plan or for any breach of a duty of care owed to any other Person occurring after the Effective Date. In all respects, the Debtors, the Reorganized Debtors, the Creditors' Committee, the Ad Hoc Committee, and each of their respective members, officers, directors, employees, advisors and agents shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Plan. Nothing contained herein shall bar public investors from bringing direct, rather than derivative, claims against officers, directors, and other third parties. (b) Releases. Except as otherwise provided in the Plan or the Confirmation Order, on the Effective Date, the Debtors will release unconditionally, and hereby are deemed to release unconditionally (i) each of the Debtors' officers, directors, shareholders, employees, consultants, attorneys, accountants, financial advisors and other representatives, (ii) the Creditors' Committee and, solely in their capacity as members of representatives of the Creditors' Committee, each member, consultant, attorney, accountant or other representative of the Creditors' Committee, (iii) the Ad Hoc Committee and, solely in their capacity as members or representatives of the Ad Hoc Committee, each member, consultant, attorney, accountant or other representative of the Ad Hoc Committee, (iv) the Indenture Trustees, (v) all holders of Canadian Secured Term and Note Claims and/or PCA U.S. Secured Term and Notes Claims who may be entitled to receive distribution of property pursuant to the Plan, and (vi) if a holder votes its Claim to accept the Plan, such holder of a Pioneer 2000 Group Claim and, in each case, any affiliate of such persons (the persons specified in clauses (i), (ii), (iii), (iv), (v), and (vi) are referred to collectively as the "Debtors' Releasees"), from any and all Claims, direct actions, causes of action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees), whether fixed or contingent, liquidated or unliquidated, direct or indirect, known or unknown which the Debtors ever had, now have, or hereafter can, shall or may have, in law, equity or otherwise, for, upon or arising out of or by reason of any fact, event, circumstance, matter, cause or thing whatsoever taking place on or prior to the Effective Date in any 146 way relating to the Debtors' Releasees, the Debtors, the Chapter 11 Cases or the Plan, including Claims or Causes of Action under Chapter 5 of the Bankruptcy Code. If and to the extent that the Bankruptcy Court concludes that the Plan cannot be confirmed with any portion of the foregoing releases, then the Debtors, with the prior consent of the Creditors' Committee, reserve the right to amend the Plan so as to give effect as much as possible to the foregoing releases, or to delete them; provided, however, that the foregoing releases shall not apply to any Claims, direct actions, Causes of Action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees) in the case of fraud. (c) Mutual Releases. On the Effective Date, the Debtors, the Debtors in Possession, the members of the Creditors' Committee, the members of the Ad Hoc Committee, and the Indenture Trustees shall be deemed to have released each other, its, and such other's affiliates, principals, officers, directors, attorneys, accountants, financial advisors, advisory affiliates, employees, and agents from any and all Claims, direct actions, Causes of Action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees), whether fixed or contingent, liquidated or unliquidated, direct or indirect, known or unknown which they ever had, now have, or hereafter can, shall or may have, in law, equity or otherwise, for, upon or arising out of or by reason of any fact, event, circumstance, matter, cause or thing whatsoever taking place on or prior to the Effective Date in any way relating to the Debtors, the Debtors in Possession, the members of the Creditors' Committee, the Ad Hoc Committee, the Indenture Trustees, the Chapter 11 Cases, or the Plan; provided, however, that the foregoing mutual release shall not apply to any Claims, direct actions, Causes of Action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees) (i) arising under or based on the Plan, the Plan Documents, or any other document, instrument or agreement to be executed or delivered thereunder or (ii) in the case of fraud. If and to the extent that the Bankruptcy Court concludes that the Plan cannot be confirmed with any portion of the foregoing releases, then the Debtors, with the prior consent of the Creditors' Committee, reserve the right to amend the Plan so as to give effect as much as possible to the foregoing mutual releases, or to delete them. ARTICLE XI. RETENTION OF JURISDICTION The Bankruptcy Court shall have exclusive jurisdiction of all matters arising out of, and related to, the Chapter 11 Cases and the Plan pursuant to, and for the purposes of, sections 105(a) and 1142 of the Bankruptcy Code and for, among other things, the following purposes: 147 (a) To hear and determine pending applications for the assumption or rejection of executory contracts or unexpired leases, if any are pending, and the allowance of Claims resulting therefrom; (b) To determine any and all adversary proceedings, applications and contested matters, including, without limitation, adversary proceedings and contested matters arising in connection with the prosecution of Avoidance Claims; (c) To hear and determine any objection to Administrative Expense Claims, Claims or Equity Interests; (d) To enter and implement such Orders as may be appropriate in the event the Confirmation Order is for any reason stayed, revoked, modified or vacated; (e) To issue such Orders in aid of execution and consummation of the Plan, to the extent authorized by section 1142 of the Bankruptcy Code; (f) To consider any amendments to or modifications of the Plan, to cure any defect or omission, or reconcile any inconsistency in any order of the Bankruptcy Court, including, without limitation, the Confirmation Order; (g) To hear and determine all applications for compensation and reimbursement of expenses of Professionals under sections 330, 331 and 503(b) of the Bankruptcy Code; (h) To hear and determine disputes arising in connection with the interpretation, implementation or enforcement of the Plan; (i) To recover all assets of the Debtors and property of the Debtors' Estates, wherever located; (j) To hear and determine matters concerning state, local and federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code; (k) To make any determinations relating to or enforce any provisions of the Plan governed by the Protocol; (l) To hear any other matter not inconsistent with the Bankruptcy Code; and (m) To enter a final decree closing the Chapter 11 Cases. ARTICLE XII. MISCELLANEOUS PROVISIONS 12.1 Effectuating Documents and Further Transactions. Each of the Debtors or Reorganized Debtors is authorized to execute, deliver, file or record such contracts, instruments, releases, indentures and other agreements or documents and take such 148 actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan and any notes or securities issued pursuant to the Plan. 12.2 Exemption from Transfer Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer or exchange of notes or equity securities under the Plan, the creation of any mortgage, deed of trust or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan, including, without limitation, any merger agreements or agreements of consolidation, deeds, bills of sale or assignments executed in connection with any of the transactions contemplated under the Plan shall not be subject to any stamp, real estate transfer, mortgage recording or other similar tax. 12.3 Termination of Committee. The appointment of the Creditors' Committee shall terminate on the later of the Effective Date and the date of the hearing to consider applications for final allowances of compensation and reimbursement of expenses. 12.4 Post-Confirmation Date Fees and Expenses. From and after the Confirmation Date, the Debtors and Reorganized Debtors shall, in the ordinary course of business and without the necessity for any approval by the Bankruptcy Court, pay the reasonable fees and expenses of Professional persons thereafter incurred by the Debtors and Reorganized Debtors, including, without limitation, those fees and expenses incurred in connection with the implementation and consummation of the Plan. 12.5 Payment of Statutory Fees. All fees payable pursuant to section 1930 of the title 28 of the United States Code, as determined by the Bankruptcy Court at the Confirmation Hearing, shall be paid in Cash equal to the amount of such fees on the Effective Date. The Reorganized Debtors shall timely pay post-confirmation quarterly fees assessed pursuant to 28 U.S.C. ss. 1930(a)(6) until such time as the Bankruptcy Court enters a final decree closing these Chapter 11 Cases, or enters an Order either converting these Chapter 11 Cases to cases under Chapter 7 or dismissing these Chapter 11 Cases. After confirmation, the Reorganized Debtors shall file with the Bankruptcy Court and shall transmit to the United States Trustee a true and correct statement of all disbursements made by the Reorganized Debtors for each month, or portion thereof, that these Chapter 11 Cases remain open in a format prescribed by the United States Trustee. 12.6 Amendment or Modification of the Plan. Alterations, amendments or modifications of the Plan may be proposed in writing by the Debtors, subject to the prior approval of the Creditors' Committee, at any time prior to the Confirmation Date, provided that the Plan, as altered, amended or modified, satisfies the conditions of sections 1122 and 1123 of the Bankruptcy Code, and the Debtors shall have complied with section 1125 of the Bankruptcy Code. 12.7 Severability. In the event that the Bankruptcy Court determines, prior to the Confirmation Date, that any provision in the Plan is invalid, void or unenforceable, such provision shall be invalid, void or unenforceable with respect to the holder or holders of such Claims or Equity Interests as to which the provision is determined to be 149 invalid, void or unenforceable. The invalidity, voidness or unenforceability of any such provision shall in no way limit or affect the enforceability and operative effect of any other provision of the Plan. 12.8 Revocation or Withdrawal of the Plan. The Debtors, subject to the prior approval of the Creditors' Committee, reserve the right to revoke or withdraw the Plan prior to the Confirmation Date. If the Debtors revoke or withdraw the Plan prior to the Confirmation Date, then the Plan shall be deemed null and void. In such event, nothing contained herein shall constitute or be deemed a waiver or release of any claims by or against the Debtors or any other person or to prejudice in any manner the rights of the Debtors or any person in any further proceedings involving the Debtors. 12.9 Binding Effect. The Plan shall be binding upon and inure to the benefit of the Debtors, the holders of Claims and Equity Interests, and their respective successors and assigns, including, without limitation, the Reorganized Debtors. 12.10 Notices. All notices, requests and demands to or upon the Debtors or the Reorganized Debtors to be effective shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows: If to the Debtors: Pioneer Companies, Inc. 700 Louisiana Street, Suite 4300 Houston, Texas 77002 Attn: Kent Stephenson, Esq. Telephone: (713) 570-3257 Facsimile: (713) 223-9202 with copies to: Weil, Gotshal & Manges LLP Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600 100 Crescent Court, Suite 1300 Houston, Texas 77002 Dallas, Texas 75201 Attn: Alan Shore Gover, Esq. Attn: Robert C. Feldman, Esq. Telephone: (713) 546-5000 Telephone: (214) 746-7700 Facsimile: (713) 224-9511 Facsimile: (214) 746-7777 Dewey Ballantine LLP Kaye Scholer LLP 1301 Avenue of the Americas 311 S. Wacker Drive, Suite 6200 New York, New York 10019-6092 Chicago, IL 60606 Attn: Michael J. Sage, Esq. Attn: Richard G. Smolev, Esq. Telephone: (212) 259-8000 Telephone: (312) 583-2330 Facsimile: (212) 259-6333 Facsimile: (312) 583-2360 150 12.11 Governing Law. Except to the extent the Bankruptcy Code, Bankruptcy Rules or other federal law is applicable, or to the extent an exhibit to the Plan provides otherwise, the rights and obligations arising under the Plan shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of law of such jurisdiction. 12.12 Withholding and Reporting Requirements. In connection with the consummation of the Plan, the Debtors or the Reorganized Debtors, as the case may be, shall comply with all withholding and reporting requirements imposed by any federal, state, local or foreign taxing authority and all distributions hereunder shall be subject to any such withholding and reporting requirements. 12.13 Plan Supplement. Forms of the documents relating to the Amended PCI Certificate of Incorporation, the Amended PCI Bylaws, the New Notes, the New Tranche A Term Loan Agreement, the New Tranche B Notes Indenture, Schedules 6.1(a)(x) and 6.1(a)(y) referred to in Section 6.1 of the Plan, the MEIP, and all other material agreements related thereto, shall be contained in the Plan Supplement and Filed with the Clerk of the Bankruptcy Court at least five (5) days prior to the Voting Deadline. Forms of the documents relating to the Exit Facility shall be contained in the Plan Supplement and Filed with the Clerk of the Bankruptcy Court at least ten (10) days prior to the Voting Deadline. Upon its filing with the Bankruptcy Court, the Plan Supplement may be inspected in the office of the Clerk of the Bankruptcy Court during normal court hours. Holders of Claims or Equity Interests may obtain a copy of the Plan Supplement upon written request to PCI in accordance with Section 12.12 of the Plan or by telephonic request as set forth in the notice to be served in conjunction with the Filing of the Plan Supplement. 12.14 Voting for Purposes of the Canadian Plan. The holders of Allowed PCA U.S. Secured Term and Note Claims and Allowed U.S. Deficiency Claims voting on the Plan shall be deemed to have cast the same vote (whether accepting or rejecting the Plan) on the Canadian Plan in the same aggregate amount as an Unsecured Creditor (as defined in the Canadian Plan) under the Canadian Plan. The holders of Allowed Canadian Secured Term and Note Claims voting on the Plan shall be deemed to have cast the same vote (whether accepting or rejecting the Plan) on the Canadian Plan in the same amount as a Secured Creditor (as defined in the Canadian Plan) under the Canadian Plan. The holders of Allowed Canadian Deficiency Claims voting on the Plan shall be deemed to have cast the same vote (whether accepting or rejecting the Plan) on the Canadian Plan in the same amount as an Unsecured Creditor (as defined in the Canadian Plan) under the Canadian Plan. The holders of Allowed Unsecured Claims against PCICC voting on the Plan shall be deemed to have cast the same vote (whether accepting or rejecting the Plan) for the Canadian Plan in the same amount as an Unsecured Creditor (as defined in the Canadian Plan) under the Canadian Plan. 12.15 Allocation of Plan Distributions Between Principal and Interest. To the extent that any Allowed Claim entitled to a distribution under the Plan is comprised of indebtedness and accrued but unpaid interest thereon, such distribution shall be allocated 151 to the principal amount of the Claim first and then, to the extent the consideration exceeds the principal amount of the Claim, to accrued but unpaid interest. 12.16 Headings. Headings are used in the Plan for convenience and reference only, and shall not constitute a part of the Plan for any other purpose. 12.17 Exhibits/Schedules. All exhibits and schedules to the Plan, including the Plan Supplement, are incorporated into and are a part of the Plan as if set forth in full herein. 12.18 Filing of Additional Documents. On or before substantial consummation of the Plan, the Debtors, subject to the prior approval of the Creditors' Committee, shall File with the Bankruptcy Court such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan. 12.19 No Admissions. Notwithstanding anything herein to the contrary, nothing contained in the Plan shall be deemed as an admission by any entity with respect to any matter set forth herein. Dated: Houston, Texas September 21, 2001 PIONEER COMPANIES, INC., a Delaware corporation (for itself and on behalf of each of the Subsidiaries) By: /s/ Michael J. Ferris ----------------------------------------------- Name: Michael J. Ferris Title: President and Chief Executive Officer 152 EXHIBIT A TO PLAN CANADIAN PLAN 153 C A N A D A S U P E R I O R C O U R T (BANKRUPTCY AND INSOLVENCY DIVISION) -------------------------------------------------------- PROVINCE OF QUEBEC IN THE MATTER OF A DISTRICT OF MONTREAL PLAN OF COMPROMISE OR ARRANGEMENT OF: NO: 500-05-066677-012 PCI CHEMICALS CANADA INC., a legal person duly constituted under the laws of New Brunswick, having its principal place of business at 630 Blvd. Rene-Levesque West, in the City and District of Montreal, Province of Quebec, E2L 4S6; APPLICANT -AND- RICHTER & ASSOCIES INC., a legal person duly constituted under the laws of Quebec, having its principal place of business at 2 Place Alexis-Nihon, in the City and District of Montreal, Province of Quebec, H3Z 3C2; MONITOR -------------------------------------------------------------------------------- AMENDED PLAN OF ARRANGEMENT AND COMPROMISE UNDER THE COMPANIES' CREDITORS ARRANGEMENT ACT (SECTIONS 4, 5 AND 5.1 OF THE C.C.A.A.) -------------------------------------------------------------------------------- INTERPRETATION SECTION 1.1 DEFINITIONS In the Plan (including the Schedule hereto), unless otherwise stated or the context otherwise requires: "AFFECTED CREDITOR" means any Creditor with a Claim, with the exception only of an Unaffected Creditor; "BNY" means BNY Asset Solutions LLC as administrative agent under the PCA Term Loan Agreement and the PCA Canadian Term Loan Agreement; 154 "BUSINESS DAY" means a day which is not (i) a Saturday or a Sunday; or (ii) a day observed as a holiday under the laws of the Province of Quebec or the applicable federal laws of Canada; "CANADIAN SECURED TERM AND NOTE CLAIMS " means the Secured Claims (as defined in the US Plan) relating to the PCA Canadian Term Loan Agreement and the PCICC Senior Notes; "CCAA PROCEEDINGS" means the proceedings in respect of PCICC before the Court commenced pursuant to the CCAA; "CCAA" means the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended; "CHARGE" means a hypothec, mortgage, pledge, lien, privilege or charge on or against a property to secure payment of debt or performance of an obligation, but only to the extent of the value of such property on the day that the Initial Order was made; "CLAIM" means any right of any Person against the Applicant in connection with any indebtedness, liability or obligation of any kind of the Applicant whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, unsecured, present, future, known, unknown, by guarantee, by surety or otherwise and whether or not such a right is executory in nature, including, without limitation, the right or ability of any person to advance a claim, including a Tax Claim, for contribution or indemnity or otherwise with respect to any matter, action, cause or chose in action whether existing at present or commenced in the future based in whole or in part on facts which existed prior to or at July 31, 2001 or based or resulting from the Plan or the restructuring and reorganization transactions implemented as a result of or pursuant to the Plan, the US Plan or any Order; "CLASS" means any category consisting of any of the Affected Creditors as set forth in Section 3.1 hereunder; "CONFIRMATION DATE" means the date that the Confirmation Order is made; "CONFIRMATION ORDER" means a final and executory Order sanctioning and approving the Plan , including the restructuring transactions set forth in Article 6 of the Plan, pursuant to Section 6 of the CCAA; "COURT" means the Superior Court of Quebec and, if applicable, the Court of Appeal of Quebec; "CREDITOR" means any Person having a Claim and may, if the context requires, mean an assignee of a Claim or a trustee, receiver, receiver manager or other Person acting on behalf of such Person; "CREDITORS' COMMITTEE" means the statutory committee of unsecured creditors appointed in the US Proceedings; "CREDITORS' MEETING(S)" means a meeting(s) of a Class of Affected Creditors called for the purpose of considering and voting upon the Plan and includes any adjournment of such meeting(s); "DEFICIENCY CLAIM" means any unsecured Claim of a Secured Creditor or of a holder of the PCA US Secured Term and Note Claims; "DOLLARS" or "$" means lawful money of Canada unless otherwise indicated; "DISBURSING AGENTS" shall have the meaning set forth in Section 5.13 of the Plan; "EFFECTIVE DATE" means the Effective Date as defined in the US Plan; "GUARANTEE" has the meaning assigned to such term in Section 6.7 of the Plan; 155 "INDENTURE TRUSTEES" means, collectively, (i) US Trust, in its capacity as PCA Senior Notes Indenture Trustee and as PCICC Senior Notes Indenture Trustee, and (ii) BNY, in its capacity as PCA Term Loan Agreement Administrative Agent and as PCA Canadian Term Loan Agreement Administrative Agent; "INITIAL DISTRIBUTION DATE" means the date that is sixty (60) days after the Effective Date, or as soon thereafter as is practicable; "INITIAL ORDER" means the Order of the Court as amended from time to time, pursuant to which, among other things, the Applicant was granted certain relief on its initial application pursuant to the CCAA; "MONITOR" means Richter & Associes Inc. and any successor thereto appointed in accordance with the Initial Order or any further Order; "NEW COMMON STOCK" means the common stock of Reorganized PCI authorized and to be issued pursuant to the Plan and/or the US Plan; "NEW INDENTURE TRUSTEES" means, collectively, (i) the New Tranche A Term Notes Agent and (ii) the New Tranche B Notes Indenture Trustee; "NEW NOTES " means, collectively, the New Tranche A Term Notes, the New Tranche B Notes and the New Other Secured Notes (as defined in the US Plan); "NEW TRANCHE A TERM NOTES" has the meaning assigned to such term in Section 6.4 of the Plan; "NEW TRANCHE A TERM LOAN AGREEMENT" means the term loan agreement pursuant to which the New Tranche A Term Notes are issued; "NEW TRANCHE A TERM NOTES AGENT" means the administrative agent under the New Tranche A Term Loan Agreement; "NEW TRANCHE B NOTES" has the meaning assigned to such term in Section 6.5 of the Plan; "NEW TRANCHE B NOTES INDENTURE" means the indenture pursuant to which the New Tranche B Notes are issued; "NEW TRANCHE B NOTES INDENTURE TRUSTEE" means the indenture trustees under the New Tranche B Notes Indenture; "ORDER" means any order of the Court in the CCAA Proceedings; "PAI" means Pioneer Americas, Inc.; "PCA" means Pioneer Corporation of America; "PCA CANADIAN TERM LOAN AGREEMENT" means that certain Term Loan Agreement, dated as of October 30, 1997, as amended, among PCA, the Lenders (as defined therein), certain other parties, and BNY; "PCA CANADIAN TERM LOAN AGREEMENT ADMINISTRATIVE AGENT" means BNY in its capacity as administrative agent under the PCA Canadian Term Loan Agreement; "PCA SENIOR NOTES" means the US$200 million in original aggregate principal amount of 91/4% Senior Secured Notes due June 2007 issued by PCA pursuant to the PCA Senior Notes Indenture; "PCA SENIOR NOTES INDENTURE" means that certain Indenture, dated as of June 17, 1997, as amended, among PCA, the Subsidiary Guarantors (as defined therein), and the US Trust; "PCA SENIOR NOTES INDENTURE TRUSTEE" means the US Trust, in its capacity as trustee and as collateral agent under the PCA Senior Notes Indenture; 156 "PCA US SECURED TERM AND NOTE CLAIMS" means the Secured Claims (as defined in the US Plan) relating to the PCA Term Loan Agreement and PCA Senior Notes; "PCA TERM LOAN AGREEMENT" means that certain Term Loan Agreement dated as of June 17, 1997, as amended, among PCA, the Lenders (as defined therein), certain other parties, and BNY; "PCA TERM LOAN AGREEMENT ADMINISTRATIVE AGENT" means BNY in its capacity as administrative agent under the PCA Term Loan Agreement; "PERSON" means any individual, partnership, joint venture, trust, corporation, unincorporated organization, government or any agency or instrumentality thereof, or any other juridical entity howsoever designated or constituted; "PCI" means Pioneer Companies Inc.; "PCICC" means PCI Chemicals Canada Inc. or any successor thereto by merger, consolidation or otherwise, on and after the Effective Date, including PCICC ULC; "PCICC ULC" means the corporation resulting from the amalgamation referred to in Section 6.1(xvi) in respect of the implementation of the Plan; "PCICC SENIOR NOTES" means the US$175 million in original aggregate principal amount of 91/4% Senior Secured Notes due October 2007 issued by PCICC pursuant to the PCICC Senior Notes Indenture; "PCICC SENIOR NOTES INDENTURE" means that certain Indenture, dated as of October 30, 1997, as amended, among PCICC, the Guarantors (as such term is defined therein), and the US Trust, in its capacity as trustee and as collateral agent; "PCICC SENIOR NOTES INDENTURE TRUSTEE" means the US Trust, in its capacity as trustee and as collateral agent under the PCICC Senior Notes Indenture; "PIONEER" means, collectively, PCI, PCA, PAI, PCICC and their other subsidiaries and other affiliates; "PLAN" means this Plan of arrangement and compromise of the Applicant under the CCAA, as same may hereafter be amended or supplemented from time to time in accordance with the terms hereof; "PROTOCOL" means the cross-border insolvency protocol approved by the Court in the CCAA Proceedings and by the US Bankruptcy Court in the US Proceedings; "PROVEN CLAIM" of an Affected Creditor means the amount of a Claim of such Affected Creditor as accepted by the Monitor or as determined by a final and executory judgment for voting and distribution purposes in the CCAA Proceedings or in the US Proceedings, as applicable; "QUARTER" means the period beginning on the Effective Date and ending on the next of October 31, January 31, April 30 and July 31, and each three-month period thereafter; "RECORD DATE" means the day that is five days from and after the Confirmation Date (as defined in the US Plan); "REORGANIZED PAI" means PAI, or any successor thereto by merger, consolidation or otherwise, on and after the Effective Date; "REORGANIZED PCI" means PCI, or any successor thereto by merger, consolidation or otherwise, on and after the Effective Date; "REORGANIZED PIONEER" means Pioneer, or any successor thereto by merger, consolidation or otherwise, on and after the Effective Date; 157 "REQUIRED MAJORITY" means, in respect of each Class, an affirmative vote of two-thirds in value of all Proven Claims of such Class for voting purposes voted in accordance with the voting procedures applicable to the Plan (whether in person or by proxy) and a majority in number of all such voting Creditors of such Class; "RESERVE" shall have the meaning set forth in Section 5.10 of the Plan; "SECURED CREDITOR" means a holder of a Canadian Secured Term and Note Claim; "SECURED CROWN CLAIMS" means the crown claims described in subsection 18.2(1) of the CCAA; "SUBSEQUENT DISTRIBUTION DATE " means the twentieth day after the end of the Quarter following the Quarter in which the Initial Distribution Date occurs and the twentieth day after the end of each subsequent Quarter; provided, however, that the first and second Subsequent Distribution Dates shall occur on the twentieth day after the end of the second and fourth Quarters, respectively, following the Quarter in which the Initial Distribution Date occurs; "TAX" or "TAXES" shall mean any and all federal, provincial, municipal, local and foreign taxes, assessments, reassessments and other governmental charges, duties, impositions and liabilities including for greater certainty taxes based upon or measured by reference to gross receipts, income, profits, sales, capital, use and occupation, goods and services, and value added, ad valorem, transfer, franchise, withholding, custom duties, payroll, recapture, employment, excise and property taxes, together with all interest, penalties, fines and additions with respect to such amounts; "TAX CLAIMS" means any and all Claims for Taxes by any federal, provincial, territorial, municipal, local or foreign authority, agency or government (including, without limitation, any and all Claims for Taxes by Her Majesty the Queen, Her Majesty the Queen in right of Canada, Her Majesty the Queen in right of any province or territory of Canada, the Customs and Revenue Agency of Canada and any similar revenue or taxing authority of any province or territory of Canada) in respect of any taxation year or period ending on or before the Effective Date including, without limitation, any Taxes arising out of or attributable to any transaction to be completed in accordance with the Plan and, in the case where a current taxation year does not end on the Effective Date, any Taxes due in respect of or attributable to that portion of the period commencing at the beginning of such current taxation year up to and including the Effective Date; "UNAFFECTED CREDITOR" means a holder of a Claim in respect of which PCICC is authorized by the Initial Order to pay and has paid or made arrangement in writing prior to the Creditors' Meetings(s), and includes Congress Financial Corporation (Southwest) and Congress Financial Corporation (Canada) as per the US Plan; "UNSECURED CREDITOR" means a holder, other than a Secured Creditor or an Unaffected Creditor, of any Claim (including a Deficiency Claim) including, for greater certainty, all Claims of the nature described in Section 18.4(1) of the CCAA; "US BANKRUPTCY COURT" means the United States Bankruptcy Court for the Southern District of Texas, Houston Division, having jurisdiction over the US Proceedings, or if such Court ceases to exercise jurisdiction over the US Proceedings, such Court or adjunct thereof that exercises jurisdiction over the US Proceedings in lieu of the United States Bankruptcy Court for such district; 158 "US PLAN" means the joint Plan of reorganization filed by Pioneer in the US Proceedings and attached as Schedule "A" as the same may be modified or amended, prior to the Creditors' Meeting(s); "US PROCEEDINGS" means each and all of the bankruptcy cases commenced by Pioneer under Chapter 11 of title 11 of the United States Code by filing voluntary petitions for relief with the US Bankruptcy Court, case no. 0138259-H3-11; "US TRUST" means United States Trust Company of New York. SECTION 1.2 INTERPRETATION, ETC. For purposes of the Plan: ANY REFERENCE IN THE PLAN TO A CONTRACT, INSTRUMENT, RELEASE, INDENTURE, OR OTHER AGREEMENT OR DOCUMENT'S BEING IN A PARTICULAR FORM OR ON PARTICULAR TERMS AND CONDITIONS MEANS THAT SUCH DOCUMENT SHALL BE SUBSTANTIALLY IN SUCH FORM OR SUBSTANTIALLY ON SUCH TERMS AND CONDITIONS; ANY REFERENCE IN THE PLAN TO AN EXISTING DOCUMENT OR EXHIBIT FILED OR TO BE FILED MEANS SUCH DOCUMENT OR EXHIBIT AS IT MAY HAVE BEEN OR MAY BE AMENDED, MODIFIED, OR SUPPLEMENTED; UNLESS OTHERWISE SPECIFIED, ALL REFERENCES IN THE PLAN TO SECTIONS, ARTICLES AND SCHEDULES ARE REFERENCES TO SECTIONS, ARTICLES AND SCHEDULES OF OR TO THE PLAN; THE WORDS "HEREIN" AND "HERETO" REFER TO THE PLAN IN ITS ENTIRETY RATHER THAN TO A PARTICULAR PORTION OF THE PLAN; CAPTIONS AND HEADINGS TO ARTICLES AND SECTIONS ARE INSERTED FOR CONVENIENCE OF REFERENCE ONLY AND ARE NOT INTENDED TO BE A PART OF OR TO AFFECT THE INTERPRETATION OF THE PLAN; WHERE THE CONTEXT REQUIRES, A WORD OR WORDS IMPORTING THE SINGULAR SHALL INCLUDE THE PLURAL AND VICE VERSA; THE WORDS "INCLUDES" AND "INCLUDING" ARE NOT LIMITING; THE PHRASE "MAY NOT" IS PROHIBITIVE AND NOT PERMISSIVE; AND THE WORD "OR" IS NOT EXCLUSIVE. SECTION 1.3 DATE FOR ANY ACTION In the event that any date on which any action is required to be taken under the Plan by any of the parties is not a Business Day, that action shall be required to be taken on the next succeeding day which is a Business Day. 159 SECTION 1.4 TIME All times expressed in the Plan are local time Montreal, Quebec, Canada unless otherwise stipulated. SECTION 1.5 STATUTORY REFERENCES Any reference in the Plan to a statute includes all regulations made thereunder and all amendments to such statute or regulations in force from time to time. SECTION 1.6 SUCCESSORS AND ASSIGNS The Plan shall be binding upon and shall enure to the benefit of the heirs, administrators, executors, legal personal representatives, successors and assigns of any Person named or referred to in the Plan. SECTION 1.7 SCHEDULE(S) Schedule "A" to the Plan is incorporated by reference into the Plan and forms an integral part of it. ARTICLE 2 PURPOSE AND EFFECT OF THE PLAN SECTION 2.1 BACKGROUND The circumstances and events leading up to the Plan are summarized in the initial application made by PCICC in the CCAA Proceedings pursuant to which the Initial Order was granted. SECTION 2.2 PERSONS AFFECTED The Plan provides for a coordinated restructuring of the Claims of Affected Creditors of PCICC. The Plan will become effective on the Effective Date and shall be binding on and enure to the benefit of the Applicant and the Affected Creditors. SECTION 2.3 PERSONS NOT AFFECTED For greater certainty the Plan does not affect Unaffected Creditors. Nothing in the Plan shall affect the Applicant's rights and defences, both legal and equitable, with respect to any Claims of Unaffected Creditors including, but not limited to, all rights with respect to legal and equitable defences or entitlements to setoffs or recoupments against such Claims. SECTION 2.4 SECURED CROWN CLAIMS Secured Crown Claims shall be paid in full within six (6) months after the Confirmation Order. 160 SECTION 2.5 APPROVAL OF RESTRUCTURING TRANSACTIONS The solicitation of votes on the Plan shall be deemed a solicitation for the approval of all the restructuring transactions contemplated in Article 6 of the Plan. Entry of the Confirmation Order shall constitute approval of such transactions and all implementing documents. ARTICLE 3 CLASSIFICATION OF CREDITORS, VALUATION OF CLAIMS AND RELATED MATTERS SECTION 3.1 CLASSES OF AFFECTED CREDITORS The Classes of Affected Creditors for the purpose of considering and voting on the Plan shall be the following: - Class 1 : Secured Creditors and - Class 2 : Unsecured Creditors. SECTION 3.2 PROCEDURE FOR VALUING CLAIMS (i) The procedure for valuing Claims and resolving disputes is set forth in the Initial Order and the Protocol; (ii) For greater certainty, the Initial Order and the Protocol provide that the filing, valuation and treatment of Claims of the Secured Creditors and the holders of Deficiency Claims shall be made and done in the US Proceedings (in accordance with the US Plan). SECTION 3.3 CREDITORS' MEETING(S) (i) The Creditors' Meeting(s) shall be held in accordance with the Plan, the Initial Order and any further Order. The only persons entitled to attend such Creditors' Meeting(s) are those persons, including the holders of proxies, entitled to vote at the Creditors' Meeting(s), and their legal counsel, the Monitor, the Creditors' Committee and the officers, directors and legal counsel of the Applicant; (ii) After the time for voting on the US Plan has expired, but prior to the Creditors' Meeting(s), PCICC shall cause to be filed with the Court an affidavit from the Balloting Agent (as defined in the US Plan) which shall set forth the identity and amount of Claim of each Secured Creditor and Unsecured Creditor (including a holder of Deficiency Claims), as well as a statement as to the manner in which each such person voted on the US Plan. All votes of Secured Creditors and of Unsecured Creditors (including holders of Deficiency Claims) identified in such affidavit shall be treated as proxies given to the Monitor for the purposes of casting a similar vote in respectively Class 1 and Class 2 of the Plan. 161 SECTION 3.4 CLAIMS FOR VOTING PURPOSES Each Affected Creditor who is entitled to vote shall be entitled to that number of votes for such Class as is equal to the dollar value of its Proven Claim. SECTION 3.5 APPROVAL BY EACH CLASS The Applicant will seek approval of the Plan by the affirmative vote of the Required Majority of each Class, the whole in accordance with the provisions of the Initial Order, the Protocol and any further Order. ARTICLE 4 TREATMENT OF AFFECTED CREDITORS SECTION 4.1 CLASS 1 : SECURED CREDITORS Subject to the approval by the Required Majority in each Class and to the distribution provisions and as set forth in Article 5 hereof, (i) On the Effective Date, each Secured Creditor shall receive, pursuant to the implementation of the transactions set forth in Section 6.1 of the Plan (including, without limitation, the exchanges provided for in Sections 6.1(ix) and (x) of the Plan) and on account of its Proven Claim as of the Record Date its pro rata share of 57% of (i) the New Tranche A Term Notes, (ii) the New Tranche B Notes and (iii) the 9,700,000 shares of the New Common Stock, the whole as per the US Plan; (ii) Acceptance of the Plan by the Secured Creditors shall constitute an instruction by the Secured Creditors to the respective Indenture Trustees and New Indenture Trustees, as the case may be, to take all actions necessary to effectuate the Plan. SECTION 4.2 CLASS 2 : UNSECURED CREDITORS Subject to the approval by the Required Majority in each Class and to the distribution provisions as set forth in Article 5 hereof, (i) Each Unsecured Creditor, excluding a holder of Deficiency Claims, may elect to receive, in full satisfaction, settlement, release and discharge of and in exchange for his Claim, either (i) the lesser of $750 or the amount of his Proven Claim; or (ii) on account of his Proven Claim his pro rata share of 300,000 shares of the New Common Stock, the whole as per the US Plan; (ii) Holders of Deficiency Claims shall receive no distribution under the Plan. ARTICLE 5 PROVISIONS GOVERNING DISTRIBUTIONS 162 SECTION 5.1 PROVEN CLAIMS Notwithstanding any other provision of the Plan, no payment or distribution shall be made with respect to all or any portion of a Claim of an Affected Creditor unless and until some portion hereof has become a Proven Claim. SECTION 5.2 SURRENDER OF EXISTING SECURITIES As a condition precedent to receiving any distribution pursuant to the Plan, each Secured Creditor who holds securities in certificated form must surrender such PCICC Senior Note or other instrument evidencing such Canadian Secured Term and Note Claim to the appropriate Disbursing Agents pursuant to a letter of transmittal furnished by the appropriate Disbursing Agents. Any New Notes to be distributed pursuant to the Plan on account of any such Canadian Secured Term and Note Claim will, pending such surrender, be treated as an undeliverable distribution. SECTION 5.3 DISTRIBUTION DATE Except as otherwise provided herein or as ordered by the Court, distributions to be made on account of a Proven Claim shall be made on the Initial Distribution Date or as soon thereafter as is practicable. Distributions on account of Claims that become Proven Claims after the Effective Date shall be made on the relevant Subsequent Distribution Date. SECTION 5.4 INTEREST Interest shall not accrue or be paid on Claims after the date of the Initial Order, and no holder of a Claim shall be entitled to interest accruing on or after the date of the Initial Order on any such Claim. Interest shall not accrue or be paid upon any disputed Claim in respect of the period from the date of the Initial Order to the date a final distribution is made thereon if and after such disputed Claim becomes a Proven Claim. SECTION 5.5 MINIMUM DISTRIBUTIONS No payment of cash less than one-hundred dollars shall be made by PCICC to any holder of a Claim unless a request therefor is made in writing to the Applicant. SECTION 5.6 FRACTIONAL SHARES; MULTIPLE OF NEW NOTES No fractional shares of New Common Stock or cash in lieu thereof shall be distributed under the Plan. When any distribution pursuant to the Plan would otherwise result in the issuance of a number of shares of New Common Stock that is not a whole number, the actual distribution of shares of New Common Stock shall be rounded as follows: (i) fractions of 1/2 or greater shall be rounded to the next higher whole number and (ii) fractions of less than 1/2 shall be rounded to the next lower whole number. The total number of shares of New Common Stock to be distributed to a Class of Claims shall be adjusted as necessary to account for the rounding provided in this subsection. New Tranche A Term Notes and New Tranche B Notes shall only be issued in multiples of US$1000. Any New Tranche A Term Notes and New Tranche B Notes 163 that would otherwise have been distributed in multiples of other than US$1000. shall be rounded as follows: (i) amounts less than US$500 shall be reduced to $0 and (ii) amounts equal to or greater than US$500 shall be increased to US$1,000; SECTION 5.7 UNCLAIMED DISTRIBUTIONS IN CASH Any distributions in cash under the Plan to Unsecured Creditors that are unclaimed for a period of one year after distribution thereof shall be revested in PCICC and any entitlement of any such holder shall be extinguished and forever barred. SECTION 5.8 UNCLAIMED DISTRIBUTIONS OF NEW COMMON STOCK Distributions under the Plan of New Common Stock to Unsecured Creditors holding a Proven Claim that are unclaimed for a period of one year after distribution shall be added to the Reserve and any entitlement of such Unsecured Creditors to such distributions shall be extinguished and forever barred. Any other distributions under the Plan that are unclaimed for a period of one year after distribution thereof shall be revested in Reorganized Pioneer and any entitlement of any holder of any Claim shall be extinguished and forever barred. SECTION 5.9 DISTRIBUTIONS TO HOLDERS AS OF THE RECORD DATE As at the close of business on the Record Date, the claims register shall be closed, and there shall be no further changes in the record holders of any Claims. PCICC shall have no obligation to recognize any transfer of any Claims occurring after the Record Date. PCICC shall instead be entitled to recognize and deal for all purposes under the Plan (except as to voting to accept or reject the Plan) with only those record holders stated on the claims register as of the close of business on the Record Date. SECTION 5.10 DISTRIBUTIONS OF NEW COMMON STOCK WITHHELD FOR DISPUTED CLAIMS OF UNSECURED CREDITORS (i) Establishment and Maintenance of Reserve. On the Initial Distribution Date and each Subsequent Distribution Date, Reorganized Pioneer shall reserve from the distributions of New Common Stock to be made on such dates to Unsecured Creditors holding a Proven Claim, an amount of New Common Stock equal to one hundred percent (100%) of the distributions to which Unsecured Creditors with a disputed Claim would be entitled under the Plan as of such dates if such Unsecured Creditors had a Proven Claim (the "RESERVE"); (ii) Property Held in Reserve. New Common Stock held in the Reserve shall be held in trust by Reorganized Pioneer and each of its reorganized subsidiaries, including PCICC, for the benefit of the potential claimants of such securities and shall not constitute property of Reorganized PCI or of any of its reorganized subsidiaries, including PCICC. SECTION 5.11 DISTRIBUTIONS OF NEW COMMON STOCK UPON ALLOWANCE OF DISPUTED CLAIMS OF UNSECURED CREDITORS Unsecured Creditors with a disputed Claim that becomes a Proven Claim subsequent to the Initial Distribution Date shall receive distributions of New Common Stock 164 from the Reserve and on the next Subsequent Distribution Date that follows the Quarter during which such disputed Claim becomes a Proven Claim. Such distributions of New Common Stock shall be made in accordance with the Plan based upon the distributions that would have been made to such Unsecured Creditor under the Plan if his Claim had been a Proven Claim on or prior to the Effective Date. SECTION 5.12 SURPLUS DISTRIBUTIONS OF NEW COMMON STOCK TO UNSECURED CREDITORS HOLDING A PROVEN CLAIM The following consideration shall constitute surplus distributions (the "Surplus Distributions") pursuant to the Plan: (i) pursuant to Section 5.8 of the Plan, distributions of New Common Stock under the Plan to Unsecured Creditors holding a Proven Claim that are unclaimed for a period of one year after distribution thereof; and (ii) to the extent that a disputed Claim of an Unsecured Creditor is not a Proven Claim or becomes a Proven Claim in an amount less than the amount of the disputed Claim, the excess of New Common Stock in the Reserve over the New Common Stock actually distributed on account of such disputed Claim of an Unsecured Creditor. The Surplus Distributions of New Common Stock shall be distributed to the Unsecured Creditors holding a Proven Claim pursuant to Section 5.11; provided, however, that Reorganized PCI and PCICC shall not be under any obligation to make any Surplus Distributions of New Common Stock on a Subsequent Distribution Date unless the number of shares of New Common Stock to be distributed aggregates 30,000 or more, unless the distribution is the last distribution under the Plan. SECTION 5.13 DISBURSING AGENTS The Indenture Trustees, or such Person(s) as the Indenture Trustees may designate, will act as Disbursing Agents under the Plan with respect to distributions to Secured Creditors, and will make all distributions required to be distributed under the applicable provisions of the Plan. The PCICC Senior Notes Indenture Trustee shall make all distributions in respect of Proven Claims relating to the PCICC Senior Notes Indenture. The PCA Canadian Term Loan Agreement Administrative Agent shall make all distributions in respect of Proven Claims relating to the PCA Canadian Term Loan Agreement. Any Disbursing Agent may employ or contract with other entities to assist in or make the distributions required by the Plan. Each Disbursing Agent will serve without bond, and each Disbursing Agent, other than Reorganized PCI and each of its subsidiaries, including PCICC, will receive, without further Court approval, reasonable compensation for distribution services rendered pursuant to the Plan and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services from Reorganized PCI and each of its subsidiaries, including PCICC, on terms acceptable to Reorganized PCI and each of its subsidiaries, including PCICC. The Disbursing Agents shall hold all reserves and accounts pursuant to the Plan, including the Reserve. 165 ARTICLE 6 MEANS FOR IMPLEMENTATION OF THE PLAN SECTION 6.1 RESTRUCTURING TRANSACTIONS On or prior to the Effective Date, the following transactions shall be consummated, in accordance with the US Plan, by PCI, Reorganized PCI and each of their subsidiaries, including PCICC, and the holders as of the Record Date of the Allowed (as defined in the US Plan) PCA US Secured Term and Note Claims and the Secured Creditors holding a Proven Claim as of the Record Date, in the order set forth below; provided, however, that none of the following transactions shall occur unless all of the following transactions occur, and provided that the Secured Creditors shall receive the distributions provided for in Section 4.1 of the Plan: (i) On or prior to the Effective Date, PCICC shall continue into a Nova Scotia company; (ii) On or prior to the Effective Date, PCICC shall incorporate a Nova Scotia unlimited liability company as a subsidiary; (iii) On or prior to the Effective Date, PCA shall form a new corporation ("NEWCO"), a Delaware corporation; (iv) PCA shall contribute the stock of PCICC and all of its other subsidiaries (including PAI) to Newco for shares of Newco; (v) PCA shall file Articles of Conversion in Delaware, thus becoming a limited liability company. This entity will hereinafter be referred to as PCA LLC; (vi) PCA LLC shall distribute the stock of Newco to PCI; (vii) Newco shall be merged into PCI, the survivor being PCI. Pursuant to the merger, Newco's assets, consisting of the stock of PCICC and its other subsidiaries, shall be transferred to PCI; (viii) PCI shall contribute the stock of PAI to PCA LLC for a membership interest in PCA LLC having an equivalent value; (ix) Allowed (as defined in the US Plan) PCA US Secured Term and Note Claims as of the Record Date, shall be exchanged for Proven Claims relating to the PCICC Senior Notes, based on the proportion of their Allowed (as defined in the US Plan) PCA US Secured Term and Note Claim determined by the formula A x [B/C x 57%] where A is the amount of a particular holder's Allowed (as defined in the US Plan) PCA US Secured Term and Note Claims; B is the aggregate amount of the Proven Claims relating to the PCICC Senior Notes and C is the aggregate amount of the Canadian Secured Term and Note Claims (that are Proven Claims) (the exchanged Claims are referred to as the "Exchanged Allowed PCA US Secured Term and Note Claims" and the Claims which are retained by 166 the initial holders are referred to as the "Retained Initial Allowed PCA US Secured Term and Note Claims"), and the holders of Proven Claims relating to the PCICC Senior Notes shall receive their pro rata share of the Exchanged Allowed PCA US Secured Term and Note Claims and the holders of the Allowed (as defined in the US Plan) PCA US Secured Term and Note Claims shall receive on the exchange from the holders of the Proven Claims relating to the PCICC Senior Notes, their pro rata share of the proportion of Proven Claims relating to the PCICC Senior Notes determined by the formula E x 43% where E is the aggregate Proven Claims relating to the PCICC Senior Notes; (x) Proven Claims relating to the PCA Canadian Term Loan Agreement shall be exchanged for Proven Claims relating to the PCICC Senior Notes as of the Record Date, based on the proportion of the Proven Claims relating to the PCA Canadian Term Loan Agreement determined by the formula A x [B/C x 57%] where A is the amount of a particular holder's Proven Claim relating to the PCA Canadian Term Loan Agreement, B is the aggregate amount of the Proven Claims relating to the PCICC Senior Notes and C is the aggregate amount of the Canadian Secured Term and Note Claims (that are Proven Claims) (the exchanged Claims are referred to as the "Exchanged PCA Canadian Term Loan Claims" and the Claims which are retained by the initial holders are referred to as the "Retained Initial Allowed Secured PCA Canadian Term Loan Claims"), and the holders of Proven Claims relating to the PCICC Senior Notes shall receive their pro rata share of the Exchanged PCA Canadian Term Loan Claims and the holders of the Exchanged PCA Canadian Term Loan Claims shall receive on the exchange from the holders of Proven Claims relating to the PCICC Senior Notes their pro rata share of the proportion of the Proven Claims relating to the PCICC Senior Notes determined by the formula D x [E/F x 57%] where D is the amount of the Proven Claims relating to the PCICC Senior Notes, E is the aggregate amount of the Proven Claims relating to the PCA Canadian Term Loan Agreement and F is the aggregate amount of the Canadian Secured Term and Note Claims (that are Proven Claims); (xi) PCI shall contribute to PCA LLC 9,700,000 shares of the New Common Stock; (xii) Subject to giving effect to the exchanges provided for in Sections 6.1(ix) and (x) of the Plan, Allowed (as defined in the US Plan) PCA US Secured Term and Note Claims shall be transferred to PCA LLC. (xiii) Holders of the Retained Initial Allowed PCA US Secured Term and Note Claims shall receive in exchange for such Claims, their proportionate share of the balance of the 9,700,000 shares of New Common Stock and New Tranche A Term Notes that will not be distributed in the distributions provided for in Sections 6.1(xv) and (xviii)of the Plan; (xiv) Subject to giving effect to the exchanges provided for in Sections 6.1(ix) and (x) of the Plan, Proven Claims relating to the PCA Canadian Term Loan Agreement shall be transferred to PCA LLC. 167 (xv) Holders of the Retained Initial Allowed Secured PCA Canadian Term Loan Claims shall receive in exchange for those Claims, their proportionate share of (i) 9,700,000 shares of the New Common Stock (to be delivered by PCA LLC) and (ii) the New Tranche A Term Notes (to be issued by PCA LLC) determined by the formula A/(A+43%) where A is the amount determined by the formula C/D x 57%, where C is the aggregate amount of the Proven Claims in respect of the PCA Canadian Term Loan Agreement and D is the aggregate amount of the Canadian Secured Term and Note Claims (that are Proven Claims); (xvi) PCICC and the subsidiary incorporated in Section 6.1(ii) of the Plan shall amalgamate to form PCICC ULC; (xvii) Subject to giving effect to the exchanges provided for in Sections 6.1(ix) and (x) of the Plan, PCICC ULC shall issue the New Tranche B Notes in exchange for the Proven Claims relating to the PCICC Senior Notes; (xviii) Former holders of the Exchanged Secured PCA Canadian Term Loan Claims who did not receive shares of the New Common Stock and the New Tranche A Term Notes pursuant to Section 6.1(xv) of the Plan shall receive their proportionate share of the New Common Stock and the New Tranche A Term Notes based on the same formula used in Section 6.1(xv) of the Plan to determine the proportionate share received by the holders mentioned in Section 6.1(xv) of the Plan. Former holders of the Exchanged Allowed PCA US Secured Term and Note Claims who did not receive shares of the New Common Stock and the New Tranche A Term Notes pursuant to Section 6.1(xv) of the Plan above shall receive their proportionate share of the New Common Stock and the New Tranche A Term Notes after subtracting the distributions to be made to both the holders of the Retained Initial Allowed Secured PCA Canadian Term Loan Claims and the Exchanged PCA Canadian Term Loan Claims. (xix) PCI shall contribute PCA LLC to PCICC ULC in exchange for preference stock of PCICC ULC having a fair market value equal to the value of PCA LLC; (xx) PAI shall be merged into PCA LLC, the survivor being PCA LLC which shall change its name to PAI LLC; (xxi) All inter-company debts owing by PAI LLC to PCICC ULC shall remain outstanding and be paid in the ordinary course of business. (xxii) For greater certainty, the approval and confirmation of the Plan shall constitute the approval of each Secured Creditor holding a Proven Claim as of the Record Date to each transaction listed above in the order set forth above including, without limitation, the exchanges provided for in Sections 6.1(ix), (x), (xii), (xiii), (xiv), (xv), (xvii) and (xviii) of the Plan without any further action required to be taken by such Secured Creditor and each Secured Creditor irrevocably appoints PCI, Reorganized PCI and each of their subsidiaries, including PCICC, as his agent to give effect to all of the transactions described above. 168 SECTION 6.2 CHARGES SECURING NEW TRANCHE A TERM LOAN AND NEW TRANCHE B NOTES The New Tranche A Term Notes and the New Tranche B Notes shall be secured by (i) first priority Charges on all of Reorganized PCI and each of its subsidiaries, including PCICC's real and personal property, tangible and intangible assets, rights, titles, and interests now owned or hereinafter acquired, with the exception of (a) those assets of all of Reorganized PCI and each of its subsidiaries, including PCICC's that are subject to Charges on accounts receivable, inventory, and general intangibles that relate thereto pursuant to the Existing Credit Facility (as defined in the US Plan) and (b) those assets of all of Reorganized PCI and each of its subsidiaries, including PCICC's that are subject to Charges relating to or arising under the Other Secured Claims (as defined in the US Plan); and (ii) second priority Charges on all assets of Reorganized PCI and each of its subsidiaries, including PCICC, that are subject to other Charges (other than assets that are subject to Charges to secure the Exit Facility (as defined in the US Plan), unless the Exit Facility (as defined in the US Plan) allows for the grant of such Charges) as of the Effective Date, provided, however, that such second priority Charges shall be subject and subordinate to the enforcement rights of the senior chargeholder under the Exit Facility (as defined in the US Plan). The New Tranche A Term Notes and the New Tranche B Notes shall rank senior in right of payment to all other indebtedness and obligations of all of Reorganized PCI and each of its subsidiaries, including PCICC's, with the exception of the Exit Facility (as defined in the US Plan) with respect to which the New Tranche A Term Notes and the New Tranche B Notes shall rank pari passu. On the Effective Date, PCICC shall execute and deliver to the appropriate New Indenture Trustee, in connection with the New Tranche A Term Loan Agreement and in connection with the New Tranche B Notes Indenture, such documents, instruments, and agreements entered into in connection therewith. On the Effective Date, PCICC shall execute and deliver such further documents, instruments, and agreements necessary to effectuate and further evidence the terms and conditions of the Plan. SECTION 6.3 CANCELLATION OF EXISTING SECURITIES AND AGREEMENTS On the Effective Date, the PCICC Senior Notes, PCA Senior Notes, and any or all instruments evidencing Canadian Secured Term and Note Claims and PCA US Secured Term and Notes Claims shall be cancelled and extinguished, and the holders thereof shall have no rights and such instruments shall evidence no rights, except the right to receive the distributions, if any, to be made to holders of such instruments under the Plan and pursuant to the implementation of the transactions set forth in Section 6.1 of the Plan. Except with respect to the performance by the Indenture Trustees or their agents of the obligations of the Indenture Trustees under the Plan or in connection with any distribution to be made under the Plan, effective as of the Effective Date, the Indenture Trustees and their agents, successors and assigns shall be discharged of all of their obligations associated with, as the case may be, the PCA Senior Notes Indenture, the PCICC Senior Notes Indenture, the PCA Term Loan Agreement, the PCA Canadian Term Loan Agreement and related agreements and released from all Claims arising in the CCAA Proceedings and, effective as of the Effective Date, the PCICC Senior Notes Indenture, the PCA Senior Notes Indenture, the PCA Term Loan Agreement, and the PCA Canadian Term Loan Agreement shall be deemed cancelled, except that such cancellation shall not impair the rights of either (i) the holders of PCICC Senior Notes or (ii) the holders of debt 169 under the PCA Canadian Term Loan Agreement to receive distributions under the Plan or the rights of Indenture Trustees under their respective Charges, if any, pursuant to, as the case may be, the PCICC Senior Notes Indenture or the PCA Canadian Term Loan Agreement to the extent that any of the Indenture Trustees have not received payment. SECTION 6.4 NEW TRANCHE A TERM NOTES The New Tranche A Term Notes shall be in the aggregate principal amount of US$50 million, shall be issued by PCA or its successor in interest pursuant to the New Tranche A Term Loan Agreement, shall bear interest at the LIBOR Rate (as defined in the US Plan) plus 350 basis points, shall be payable monthly, shall be prepayable with excess cash flow and shall mature on the date five (5) years after the Effective Date (the "NEW TRANCHE A TERM NOTES"). SECTION 6.5 NEW TRANCHE B NOTES The New Tranche B Notes shall be in the aggregate principal amount of US$150 million, shall be issued by PCICC or its successor in interest pursuant to the New Tranche B Notes Indentures, shall bear interest at 10% per annum, shall be payable semi-annually and shall mature on the date seven (7) years after the Effective Date (the "NEW TRANCHE B NOTES"). The New Tranche B Notes shall be redeemable at a price equal to 105% of the principal amount thereof until the fourth anniversary of the Effective Date, at a price equal to 102.5% of the principal amount from the fourth anniversary of the Effective Date until the fifth anniversary of the Effective Date, and at a price equal to 100% of the principal amount thereof thereafter. Any such redemption shall include accrued and unpaid interest. SECTION 6.6 NEW COMMON STOCK The New Common Stock shall have a par value of US$.01 per share and such rights with respect to dividends, liquidation, voting and other matters as are provided for by applicable non bankruptcy law or in the Amended PCI Certificate of Incorporation (as defined in the US Plan) and the Amended PCI Bylaws (as defined in the US Plan). SECTION 6.7 GUARANTEE On the Effective Date, PCICC will guarantee payment in full when due, whether at maturity, by acceleration, redemption, or otherwise, of all other obligations under the New Tranche A Term Notes ("GUARANTEE"). ARTICLE 7 CONDITIONS PRECEDENT TO EFFECTIVENESS OF THE PLAN 170 SECTION 7.1 CONFIRMATION OF US PLAN (i) Provided that the Plan is approved by the Required Majority in each Class and provided that the Confirmation Order (as defined in the US Plan) in the US Proceedings has been issued, the Applicant will seek the Confirmation Order for the sanction and approval of the Plan, with conclusions under Section 18.6 of the CCAA giving effect to the US Plan in Canada; (ii) If the US Plan is revoked or withdrawn, or if the Confirmation Order (as defined in the US Plan) is vacated in the US Proceedings, the Plan shall be deemed null and void in all respects. SECTION 7.2 IMPLEMENTATION OF TRANSACTIONS The Applicant shall substantially implement and consummate, before and/or after the Confirmation Order, the restructuring and reorganization transactions contemplated in the Plan. The Confirmation Order shall authorize and direct that PCICC take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases and other agreements or documents created in connection with the Plan, including those actions contemplated by the provisions of the Plan set forth in Article 6 hereof. SECTION 7.3 EFFECTIVENESS OF THE US PLAN The Plan is subject to all conditions precedent to effectiveness set forth in the US Plan and, for greater certainty, shall not become effective unless and until the US Plan has become effective as per the terms of the US Plan. ARTICLE 8 EFFECTIVENESS OF PLAN SECTION 8.1 DISCHARGE OF PCICC AND ITS DIRECTORS The rights afforded herein and the treatment of all Claims shall be in exchange for and in complete satisfaction, discharge and release of claims of any nature whatsoever, including any interest accrued on such claims from and after the Initial Order, against PCICC and its directors as per the provisions of Section 5.1 of the CCAA, or any of their assets or properties. Except as otherwise provided in the Plan, on the Effective Date, all such Claims, including Tax Claims, against PCICC and its directors shall be satisfied, discharged and released in full, and all assets and properties of PCICC shall be free and clear of all Claims and Charges. Notwithstanding anything contained herein, the Claims of Congress Financial Corporation (Southwest) and Congress Financial Corporation (Canada) and all Charges relating thereto, shall survive the Effective Date and implementation of the Plan, and shall not hereby be released, discharged or otherwise compromised. 171 SECTION 8.2 LIMITATION OF LIABILITY Neither PCICC, the Creditors' Committee, the Ad Hoc Committee (as defined in the US Plan), US Trust nor any of their respective post-Initial Order employees, officers, directors, agents or representatives, or any professional (which, for the purpose of this Section, shall include any Canadian counsel of PCI, Reorganized PCI and each of their subsidiaries, including PCICC, the Ad Hoc Committee (as defined in the US Plan) or the Creditors' Committee) employed by any of them (a "PLAN PARTICIPANT"), shall have or incur any liability to any Person whatsoever, including, specifically, any holder of a Claim, under any theory of liability (except for any claim based upon wilful misconduct or gross negligence), for any act taken or omission made in good faith directly related to formulating, preparing, disseminating, implementing, confirming or consummating the Plan, the Confirmation Order, or any contract, instrument, release, or other agreement or document created or entered into, or any other act taken or omitted to be taken in connection with the Plan, provided that nothing in this paragraph shall limit the liability of any Person for breach of any express obligation it has under the terms of the Plan or under any agreement or other document entered into by such Person either post-Initial Order or in accordance with the terms of the Plan or for any breach of a duty of care owed to any other Person occurring after the Effective Date. In all respects, PCICC, the Creditors' Committee, the Ad Hoc Committee (as defined in the US Plan), and each of their respective members, officers, directors, employees, advisors and agents shall be entitled to rely upon the advice of counsel with respect to their duties and responsibilities under the Plan. Nothing contained herein shall bar public investors from bringing direct, rather than derivative, claims against officers, directors and other third parties. SECTION 8.3 RELEASES Except as otherwise provided in the Plan or the Confirmation Order, on the Effective Date, PCICC will release unconditionally, and hereby is deemed to release unconditionally (i) PCICC's officers, directors, shareholders, employees, consultants, attorneys, accountants, financial advisors and other representatives, (ii) the Creditors' Committee and, solely in their capacity as members or representatives of the Creditors' Committee, each member, consultant, attorney, accountant or other representative of the Creditors' Committee, (iii) the Ad Hoc Committee (as defined in the US Plan) and, solely in their capacity as members or representatives of the Ad Hoc Committee, each member, consultant, attorney, accountant or other representative of the Ad Hoc Committee (as defined in the US Plan), (iv) the Indenture Trustees and (v) all Secured Creditors who may be entitled to receive distribution of property pursuant to the Plan, (the entities specified in clauses (i), (ii), (iii), (iv) and (v) are referred to collectively as the "PCICC's Releasees"), from any and all claims, direct actions, causes of action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees), whether fixed or contingent, liquidated or unliquidated, direct or indirect, known or unknown which PCICC ever had, now have, or hereafter can, shall or may have, in law, equity or otherwise, for, upon or arising out of or by reason of any fact, event, circumstance, matter, cause or thing whatsoever taking place on or prior to the Effective Date in any way relating to PCICC's Releasees, PCICC, the CCAA Proceedings or the Plan; provided, however, that the foregoing releases shall not apply in the case of fraud. If and to the extent that the Court concludes that the Plan cannot be confirmed with any portion of the foregoing releases, then 172 PCICC, with the prior consent of the Creditors' Committee, reserve the right to amend the Plan so as to give effect as much as possible to the foregoing releases, or to delete them. SECTION 8.4 MUTUAL RELEASES On the Effective Date, PCICC, the members of the Creditors' Committee, the members of the Ad Hoc Committee (as defined in the US Plan), and the Indenture Trustees shall be deemed to have released each other, its, and such other's affiliates, principals, officers, directors, attorneys, accountants, financial advisors, advisory affiliates, employees, and agents from any and all claims, Claims, direct actions, causes of action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees), whether fixed or contingent, liquidated or unliquidated, direct or indirect, known or unknown which they ever had, now have, or hereafter can, shall or may have, in law, equity or otherwise, for, upon or arising out of or by reason of any fact, event, circumstance, matter, cause or thing whatsoever taking place on or prior to the Effective Date in any way relating to PCICC, the members of the Creditors Committee, the Ad Hoc Committee (as defined in the US Plan), the Indenture Trustees, the CCAA Proceedings, or the Plan; provided, however, that the foregoing mutual release shall not apply to any claims, direct actions, causes of action, demands, rights, damages, judgments, debts, obligations, assessments, compensations, costs, deficiencies or other expenses of any nature whatsoever (including, without limitation, attorneys' fees) (i) arising under or are based on the Plan, or any other document, instrument or agreement to be executed or delivered thereunder or (ii) in the case of fraud. If and to the extent that the Court concludes that the Plan cannot be confirmed with any portion of the foregoing releases, then PCICC, with the prior consent of the Creditors' Committee, reserve the right to amend the Plan so as to give effect as much as possible to the foregoing mutual releases, or to delete them. ARTICLE 9 MISCELLANEOUS SECTION 9.1 PARAMOUNTCY From and after the Effective Date, any conflict between the Plan and the covenants, warranties, representations, terms, conditions, provisions or obligations, expressed or implied, of any contract, mortgage, security agreement, indenture, trust indenture, loan agreement, commitment letter, agreement for sale, by-laws of the Applicant, lease or other agreement, written or oral and any and all amendments or supplements thereto existing between one or more of the Affected Creditors and the Applicant as at the Effective Date will be deemed to be governed by the terms, conditions and provisions of the Plan and the Confirmation Order, which shall take precedence and priority. For greater certainty, all Affected Creditors shall be deemed to consent to all transactions contemplated in the Plan. The implementation of the transactions contemplated in the Plan shall, in all respects, be subject to the implementation and effectiveness of the US Plan. To the extent that there is any inconsistency between the provisions of the Plan and the US Plan, the provisions of the US Plan shall prevail. 173 SECTION 9.2 WAIVER OF DEFAULTS From and after the Effective Date, each Affected Creditor shall be deemed to have waived any and all defaults then existing or previously committed by the Applicant in any covenant, warranty, representation, term, provision, condition or obligation, expressed or implied, in any contract, agreement, mortgage, security agreement, indenture, trust indenture, loan agreement, commitment letter, agreement for sale, lease or other agreement, written or oral and any and all amendments or supplements thereto, existing between any such Affected Creditor and the Applicant and any and all notices of default and demands for payment under any instrument, including, without limitation any guarantee, shall be deemed to have been rescinded. SECTION 9.3 COMPROMISE EFFECTIVE FOR ALL PURPOSES The payment, compromise or other satisfaction of any Claim under the Plan, if sanctioned and approved by the Court, shall be binding upon such Affected Creditor, its heirs, executors, administrators, successors and assigns, for all purposes. SECTION 9.4 PARTICIPATION IN DIFFERENT CAPACITIES Affected Creditors whose Claims are affected by the Plan may be affected in more than one capacity. Each such Affected Creditor shall be entitled to participate hereunder in each such capacity. Any action taken by an Affected Creditor in any one capacity shall not affect the Affected Creditor in any other capacity unless the Affected Creditor agrees in writing. SECTION 9.5 MODIFICATION OF PLAN The Applicant reserves the right to file any modification of, amendment or supplement to the Plan by way of a supplementary Plan or Plans of compromise or arrangement or both filed with the Court at any time or from time to time prior to the Creditors' Meeting(s) or at a Creditors' Meeting, in which case any such supplementary Plan or Plans of compromise or arrangement or both shall, for all purposes, be and be deemed to be a part of and incorporated into the Plan. The Applicant shall give notice by publication or otherwise to all creditors in an affected Class of the details of any modifications or amendments prior to the vote being taken to approve the Plan. The Applicant may give notice of a proposed amendment or amendments to the Plan at the Creditors' Meeting(s) by notice in writing which shall be sufficient if given to those Creditors present at such meeting in person or by proxy. After such Creditors' Meeting(s) (and both prior to and subsequent to the Confirmation Order), the Applicant may at any time and from time to time vary, amend, modify or supplement the Plan if the Court determines that such variation, amendment, modification or supplement is of a minor, immaterial or technical nature that would not be materially prejudicial to the interests of any of the Affected Creditors under the Plan or the Confirmation Order and is necessary in order to give effect to the substance of the Plan or the Confirmation Order. 174 SECTION 9.6 DEEMING PROVISIONS In the Plan, the deeming provisions are not rebuttable and are conclusive and irrevocable. SECTION 9.7 NOTICES Any notices or communication to be made or given hereunder shall be in writing and shall refer to the Plan and may, subject as hereinafter provided, be made or given by personal delivery, by courier, by prepaid mail or by telecopier addressed to the respective parties as follows: IF TO THE APPLICANT: PCI Chemicals Canada Inc. c/o Stikeman Elliott 1155 Rene-Levesque Blvd. West, 40th floor Montreal, Quebec H3B 3V2 Attention: C. Jean Fontaine Fax: (514) 397-3487 IF TO A CREDITOR: (i) to the address for such Creditor specified in the proof of Claim filed by a Creditor or, if no proof of Claim has been filed, to such other address at which the notifying party may reasonably believe that the Creditor may be contacted. IF TO THE MONITOR: Richter & Associes Inc. 2, Place Alexis-Nihon Montreal, Quebec H3Z 3C2 Attention: Mr. Gilles Robillard Fax: (514) 934-3484 or to such other address as any party may from time to time notify the others in accordance with this 0. In the event of any strike, lock-out or other event which interrupts postal service in any part of Canada, all notices and communications during such interruption may only be given or made by personal delivery or by telecopier and any notice or other communication given or made by prepaid mail within the five (5) Business Day period immediately preceding the commencement of such interruption, unless actually received, shall be deemed not to have been given or made. All such notices and communications shall be deemed to have been received, in the case of notice by telecopier or by delivery prior to 5:00 p.m. (local time) on a Business Day, when received or if received after 5:00 p.m. (local time) on a Business Day or at any time on a non-Business Day, on the next following Business Day and, in the case of notice mailed as aforesaid, on the fourth Business Day following the date on which such notice or other communication is mailed. The unintentional failure by the Applicant to give notice 175 contemplated hereunder to any particular creditor shall not invalidate the Plan or any action taken by any Person pursuant to the Plan. SECTION 9.8 SEVERABILITY OF PLAN PROVISIONS If, prior to the Confirmation Date, any term or provision of the Plan is held by the Court to be invalid, void or unenforceable, the Court, at the request of the Applicant, shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated by such holding, alteration or interpretation. SECTION 9.9 REVOCATION, WITHDRAWAL, OR NON-CONSUMMATION The Applicant reserves the right to revoke or withdraw the Plan at any time prior to the Confirmation Date and to file subsequent plans of reorganization or arrangement. If the Applicant revokes or withdraws the Plan, or if the Confirmation Order is not issued, (i) the Plan shall be null and void in all respects, (ii) any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount certain any Claim or Class of Claims) shall be deemed null and void, and (iii) nothing contained in the Plan, and no acts taken in preparation for consummation of the Plan, shall prejudice in any manner the rights of the Applicant or any Person in any further proceedings involving the Applicant. Montreal, September 20, 2001 (SGD) STIKEMAN ELLIOTT ------------------------------------------------ STIKEMAN ELLIOTT Attorneys for PCI Chemicals Canada Inc. 176 EXHIBIT B TO DISCLOSURE STATEMENT Disclosure Statement Order 177 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION ----------------------------------------- : IN RE: : CHAPTER 11 : PIONEER COMPANIES, INC., : PIONEER CORPORATION OF AMERICA, : IMPERIAL WEST CHEMICAL CO., : KEMWATER NORTH AMERICA CO., : PCI CHEMICALS CANADA INC./PCI : CASE NO. 01-38259-H3-11 CHIMIE CANADA INC., : PIONEER AMERICAS, INC., : PIONEER (EAST), INC., : PIONEER WATER TECHNOLOGIES, INC., : PIONEER LICENSING, INC., AND : KWT, INC., : : DEBTORS. : JOINTLY ADMINISTERED : ----------------------------------------- ORDER (I) APPROVING DISCLOSURE STATEMENT; (II) APPROVING FORM OF BALLOTS, AND SOLICITATION AND TABULATION PROCEDURES; (III) FIXING DATE, TIME, AND PLACE FOR A HEARING TO CONSIDER CONFIRMATION OF PLAN OF REORGANIZATION; (IV) FIXING DATE, TIME AND PLACE FOR VOTING ON PLAN OF REORGANIZATION; (V) FIXING LAST DATE FOR FILING OBJECTIONS TO PLAN OF REORGANIZATION; AND (VI) PRESCRIBING THE FORM AND MANNER OF NOTICE THEREOF A hearing having been held on September 21, 2001 (the "Hearing") to consider the motion ("Motion") filed by Pioneer Companies, Inc. and nine (9) of its direct and indirect wholly-owned subsidiaries (collectively, the "Debtors"), as debtors and debtors in possession, seeking, inter alia, approval pursuant to section 1125 of title 11 of the United States Code (the "Bankruptcy Code") of the proposed Debtors' Joint Disclosure Statement Pursuant to Section 1125 of the Bankruptcy Code heretofore filed with the Court and approval of certain forms of ballots and solicitation and tabulation procedures with respect to confirmation of the Debtors' Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (as modified 178 and amended, the "Plan");(7) and it appearing from the certificates of service and/or affidavits of service on file with this Court that proper and timely notice of the Hearing has been given; and it appearing that notice was adequate and sufficient and that no further notice is required; and the appearances of all interested parties having been duly noted on the record of the Hearing; and it appearing that no objections were filed to the Disclosure Statement or the Motion; and the Debtors having made the conforming additions, changes, corrections and deletions to the Disclosure Statement necessary to comport with the record of the Hearing and the agreements reached with certain parties, a copy of which revised Disclosure Statement is attached hereto as Exhibit A (the "Disclosure Statement"); and upon the Motion, the Disclosure Statement, the record of the Hearing and all of the proceedings heretofore had before the Court and after due deliberation, and sufficient cause appearing therefor; it is ORDERED, FOUND AND DETERMINED THAT: 1. The Disclosure Statement contains adequate information within the meaning of section 1125 of the Bankruptcy Code. 2. The Disclosure Statement and the Motion are hereby approved. 3. The forms of ballots annexed hereto as Exhibit B and Exhibit C are hereby approved. 4. The Debtors shall mail a ballot, substantially in the form of the ballots annexed hereto as Exhibit B, to each holder of a claim in the classes entitled to vote under the Plan (the "Individual Ballots"); provided, however, that the Individual Ballots for holders of claims based on the 9 1/4% Senior Secured Notes due June 2007 (the "PCA Senior Notes") (CUSIP NO. 723551-AF-4) and the 9 1/4% Senior Secured Notes due October 2007 (the "PCICC ---------- (7) All capitalized terms that are not defined herein shall have the meaning ascribed to them in the Plan. 172 179 Senior Notes") (CUSIP NO. 693204-AB-5), shall not be mailed directly to the beneficial holders of such notes, as described more fully herein. 5. With respect to the PCA Senior Notes and PCICC Senior Notes, United States Trust Company of New York is the trustee and collateral agent (the "Senior Notes Trustee") and the records maintained by the Senior Notes Trustee or the Depository Trust Company reflect the brokers, dealers, commercial banks, trust companies or other nominees (collectively, the "Nominee Holders") through which many of the beneficial owners (collectively, the "Beneficial Holders") hold the PCA Senior Notes and the PCICC Senior Notes, although in some instances, the beneficial owners of the PCA Senior Notes and PCICC Senior Notes may also be the record owner of such notes. To the extent applicable, the Debtors shall mail ballots, substantially in the form annexed hereto as Exhibit C (the "Master Ballots"), to each of the Nominee Holders for the purpose of summarizing the votes of their respective Beneficial Holders. Hereinafter, the Individual Ballots and Master Ballots shall be referred to collectively as the "Ballots." 6. Further, the Court hereby directs as follows: (a) the Nominee Holders shall forward the Solicitation Package (as defined below) or copies thereof (including a return envelope provided by and addressed to the Nominee Holders and including the Individual Ballots described above) to the Beneficial Holders within three (3) business days of the receipt of such Solicitation Package by the Nominee Holders; (b) the Beneficial Holders shall return the Individual Ballots to the respective Nominee Holders prior to the Voting Deadline (defined below); (c) the Nominee Holders shall summarize the votes of their respective Beneficial Holders on the Master Ballots, in accordance with the instructions for the Master Ballots; (d) the Nominee Holders shall return the Master Ballots to the Balloting Agent on or before the Voting Deadline; and 173 180 (e) the Debtors shall provide the Nominee Holders with sufficient copies of the Solicitation Package to forward to the Beneficial Holders. 7. For voting purposes, September 7, 2001 shall be the "Voting Record Date" with respect to holders of claims entitled to vote under the Plan. It should be noted that the establishment of this Voting Record Date is for voting purposes only and shall have no preclusive effect with regard to who is entitled to receive distributions under the Plan. 8. As set forth in detail in the Plan and the Disclosure Statement, (a) Classes 1, 2 and 6 are unimpaired and, accordingly, deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code; (b) Classes 10 and 11 are receiving no distributions under the Plan and, thus, deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code; and (c) Classes 3, 4, 5, 7, 8 and 9 are impaired and receiving distributions under the Plan and, therefore, the Debtors will solicit acceptances from holders of claims in these Classes only. Hereinafter, Classes 3, 4, 5, 7, 8 and 9 shall be referred to as the "Voting Classes" and Classes 1, 2, 6, 10 and 11 shall be referred to as the "Non-Voting Classes." 9. On or before October 1, 2001, the Debtors shall mail the following solicitation materials (collectively, a "Solicitation Package") to each of the Deliverees (as hereinafter defined): (a) the Plan; (b) the Disclosure Statement; (c) the Disclosure Statement Order; (d) notice of the approval of the Disclosure Statement, the dates fixed by the Court as the Voting Record Date and the Voting Deadline (as defined below), the last date for filing objections to confirmation of the Plan, and the scheduling of the confirmation hearing, in substantially the form attached hereto as Exhibit D (the "Confirmation Hearing Notice"); 174 181 (e) appropriate Ballot(s) and voting instructions; and (f) a pre-addressed return envelope. 10. The Debtors shall serve the Solicitation Packages on the following holders of claims in the Voting Classes under the Plan (the "Deliverees"): (a) holders of claims, as of the Voting Record Date, that are listed in the Debtors' Schedules of Assets and Liabilities in an amount greater than $0.00 and not scheduled as contingent, unliquidated or disputed (excluding scheduled claims that have been superseded by filed proofs of claim); provided, however, that the assignee of a transferred and assigned scheduled claim shall be permitted to vote such claim only if (i) such claim was listed in the Debtors' Schedules of Assets and Liabilities as not contingent, unliquidated or disputed, and (ii) notice of the transfer has been received and docketed by the Balloting Agent as of the Record Date or such assignee includes proof of assignment with the executed Ballot; (b) subject to subsection (c) below, holders of liquidated claims, as of the Voting Record Date, that are the subject of filed proofs of claim which have not been disallowed, disqualified or suspended prior to the Voting Record Date and which are not the subject of a pending objection on the Voting Record Date (unless, on or before the Voting Record Date, a final order is entered temporarily allowing such claim for voting purposes); provided, however, that the assignee of a transferred and assigned proof of claim shall be permitted to vote such claim only if (i) the proof of claim has not been disallowed, disqualified or suspended prior to the Voting Record Date and such claim is not the subject of a pending objection on the Voting Record Date (unless, on or before the Voting Record Date, a final order is entered temporarily allowing such claim for voting purposes), and (ii) notice of the transfer has been received and docketed by the Balloting Agent as of the Record Date or such assignee includes proof of assignment with the executed Ballot; and (c) with respect to the PCA Senior Notes and PCICC Senior Notes, the Nominee and/or Beneficial Holders (as applicable) reflected in the records of the Senior Notes Trustee or the Depository Trust Company as of the Voting Record Date; provided, however, that the Debtors shall provide the Nominee Holders with sufficient copies of the Solicitation Packages to enable the Nominee Holders to distribute the Solicitation Packages to the Beneficial Holders. 175 182 11. Rather than mail a Solicitation Package to the parties listed below, the Debtors shall mail a Notice of Non-Voting Status, substantially in the form attached hereto as Exhibit E, which includes a brief summary of the Plan and sets forth the manner in which a copy of the Plan and Disclosure Statement may be obtained, to the following: (a) holders of claims and interests in the Non-Voting Classes; (b) all known parties to executory contracts and unexpired leases who do not hold filed or scheduled claims (excluding claims scheduled as contingent, unliquidated or disputed); (c) holders of claims, as of the Voting Record Date, that are listed in the Debtors' Schedules of Assets and Liabilities as contingent, unliquidated and/or disputed (excluding scheduled claims that have been superseded by filed proofs of claim); (d) holders of claims, as of the Voting Record Date, that are scheduled in the amount of $0.00 in the Debtors' Schedule of Assets and Liabilities (excluding scheduled claims that have been superseded by filed proofs of claim); (e) holders of unliquidated claims, as of the Voting Record Date, that are the subject of filed proofs of claim (unless, on or before the Voting Record Date, a final order is entered temporarily allowing such claim for voting purposes); and (f) holders of claims, as of the Voting Record Date, which have been disallowed, disqualified or suspended prior to the Voting Record Date and/or which are the subject of a pending objection on the Voting Record Date (unless, on or before the Voting Record Date, a final order is entered temporarily allowing such claim for voting purposes). 12. The Debtors are hereby authorized to reimburse the reasonable, actual and necessary out-of-pocket expenses incurred by the Depository Trust Company and/or any nominee holder in connection with the distribution of the Solicitation Package or Notice of Non-Voting Status. 13. The following procedures regarding the tabulation of votes cast with respect to the Plan are hereby approved: 176 183 (a) A vote may be disregarded if the Court determines, after notice and a hearing, that a vote was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code; (b) All votes to accept or reject the Plan must be cast by using the appropriate Ballot utilizing the voting instructions attached thereto and votes that are cast in any other manner shall not be counted; (c) A holder of claims in more than one class or subclass must use separate Ballots for each class of claims; provided, however, that holders of claims in Class 3 or Class 4 may use their Ballots to also vote in Class 9; (d) A holder of claims shall be deemed to have voted the full amount of its claim in each class and shall not be entitled to split its vote within a particular class; (e) Any Individual Ballot that partially accepts and partially rejects the Plan shall not be counted; (f) If a holder of claims casts more than one Ballot voting the same claim prior to the Voting Deadline, only the latest dated Ballot received by the Balloting Agent shall be counted; (g) If a holder of claims casts Ballots received by the Balloting Agent which bear the same date, but which are voted inconsistently, such Ballots shall be deemed to constitute an acceptance of the Plan; (h) Any executed Ballot received by the Balloting Agent that does not indicate either an acceptance or rejection of the Plan shall be deemed to constitute an acceptance of the Plan; (i) Any executed Ballot received by the Balloting Agent that indicates both acceptance and rejection of the Plan shall be deemed to constitute an acceptance of the Plan; (j) Any executed Ballot for Class 3 and Class 9 or Class 4 and Class 9 which is received by the Balloting Agent or the respective Nominee Holder (as applicable) and which indicates acceptance of the Plan in one Class, but indicates neither acceptance nor rejection of the Plan in the other Class, shall be deemed to constitute an acceptance of the Plan in both Classes; and (k) Except as provided below regarding Master Ballots, the Balloting Agent shall not accept a vote by facsimile or telecopy transmission. 177 184 14. The deadline for Ballots to be actually received by the Balloting Agent shall be October 30, 2001 at 4:30 p.m. (Central Time) (the "Voting Deadline"); provided, however, that the Debtors may extend the Voting Deadline in their discretion and without further notice; and further provided that the Nominee Holders may submit Master Ballots by facsimile so long as an original is received by the Balloting Agent within forty-eight (48) hours following transmittal of the facsimile and no other Ballots shall be accepted by facsimile. 15. With respect to Master Ballots submitted by Nominee Holders for Classes 3, 4 and 9, the Court directs as follows: (a) all Nominee Holders to which Beneficial Holders return their Individual Ballots shall summarize on the Master Ballot all Individual Ballots cast by the Beneficial Holders and return the Master Ballot to the Balloting Agent; provided, however, that each Nominee Holder shall be required to retain the Individual Ballots cast by the respective Beneficial Holders for inspection for a period of one (1) year following submission of a Master Ballot; (b) votes cast by the Beneficial Holders through a Nominee Holder by means of a Master Ballot shall be applied against the positions held by such Nominee Holder as evidenced by a list of record holders provided by the Depository Trust Company and compiled as of the Record Date; provided, however, that votes submitted by a Nominee Holder on a Master Ballot shall not be counted in excess of the position maintained by such Nominee Holder as of the Record Date; (c) to the extent that there are over-votes submitted by a Nominee Holder on a Master Ballot, votes to accept and to reject the Plan shall be applied by the Balloting Agent in the same proportion as the votes to accept or reject the Plan submitted on the Master Ballot that contains the over-vote, but only to the extent of the position maintained by such Nominee Holder as of the Record Date; (d) multiple Master Ballots may be completed by a single Nominee Holder and delivered to the Balloting Agent and such votes shall be counted, except to the extent that such votes are inconsistent with or are duplicative of other Master Ballots, in which case the latest dated Master Ballot received before the Voting Deadline shall supersede and revoke any prior Master Ballot; and 178 185 (e) each Beneficial Holder shall be deemed to have voted the full amount of its claim held through a particular Nominee Holder submitting a Master Ballot. 16. With respect to Ballots distributed for Classes 5, 7 and 8, the amount of claim to be used for tabulation purposes shall be the amount of claim set forth on each pre-printed Ballot and such amount shall represent: (a) with respect to Ballots based on scheduled claims, the amount listed, as of the Voting Record Date, in the Debtors' Schedules of Assets and Liabilities as not contingent, unliquidated or disputed; (b) with respect to Ballots based on filed claims, the liquidated amount set forth on such proof of claim as of the Voting Record Date; or (c) with respect to Ballots based on claims temporarily allowed for voting purposes only by order of this Court, the amount so ordered by the Court. 17. Any entity entitled to vote to accept or reject the Plan may change its vote before the Voting Deadline by casting a superseding Ballot so that it is received on or before such deadline. 18. A holder of any Claim that is (a) scheduled by the Debtors as unliquidated, disputed or contingent; (b) in a class that is entitled to vote on the Plan, but an objection has been filed with respect to such Claim; or (c) in a class that is entitled to vote, but such Claim was asserted in an unliquidated amount and the amount of such Claim has not been determined by final order of this Court shall not be entitled to vote, provided, however, that, upon application of the holder of any such Claims described in (a), (b) and (c) above, the Court may temporarily allow such Claim, for voting purposes only, in an amount and to the extent that the Court deems proper for the purpose of accepting or rejecting the Plan. Any such application must be heard and determined by a final order of the Court on or before September 24, 2001. 179 186 Voting Instructions, substantially in the form of Exhibit F, shall be included with each Ballot. The Debtors are authorized to continue to retain The Altman Group, an unaffiliated and independent entity, to act as their Solicitation and Balloting Agent. 19. A hearing shall be held on November 7, 2001 at 2:00 p.m. (Central Time) to consider confirmation of the Plan, and such hearing may be adjourned from time to time without further notice, other than an announcement of the adjourned date(s) at the hearing. 20. Any objections to the Plan shall be filed with the Court and actually received by the Notice Parties (as defined below) on or before October 30, 2001 at 4:30 p.m. (Central Time). 21. Any objections to confirmation of the Plan must (a) be in writing; (b) comply with the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules") and the local rules and order of this Court; (c) state the name of the objector and the nature and amount of its claim against or interest in the Debtors; (d) state the nature of the objection and the legal basis therefor; (e) reference with specificity the text of the Plan to which the objection is made; (f) be filed with and received by the Court by October 30, 2001 at 4:30 p.m. (Central Time); and (g) served upon and received by the parties listed below (the "Notice Parties") by October 30, 2001 at 4:30 p.m. (Central Time): (a) Pioneer Companies, Inc. 700 Louisiana Street, Suite 4300 Houston, Texas 77002 Attn: Kent Stephenson, Esq. 180 187 (b) Weil, Gotshal & Manges LLP Attorneys for Pioneer 100 Crescent Court, Suite 1300 Dallas, Texas 75201 Attn: Stephen A. Youngman, Esq. (c) Weil, Gotshal & Manges LLP Attorneys for Pioneer 700 Louisiana Street, Suite 1600 Houston, Texas 77002 Attn: Sylvia Mayer Baker, Esq. (d) Office Of The United States Trustee (Region 7) 515 Rusk Street, Suite 3516 Houston, Texas 77002 Attn: Hector Duran, Esq. (e) Dewey Ballantine LLP Attorneys for Creditors' Committee 1301 Avenue of the Americas New York, New York 10019-6092 Attn: Michael J. Sage, Esq. (f) Bracewell & Patterson, L.L.P. Attorneys for Creditors' Committee South Tower Pennzoil Place 711 Louisiana, Suite 2900 Houston, Texas 77002-2781 Attn: Alfredo Perez, Esq. (g) Kaye Scholer LLP Attorneys for Bank of New York 311 South Wacker Drive, Suite 6200 Chicago, IL 60606 Attn: Richard G. Smolev, Esq. 22. In addition to mailing the Solicitation Package to each of the Deliverees as described above, the Debtors shall mail Solicitation Packages (excluding Ballots and return envelopes) to: (a) the United States Trustee; (b) the Securities and Exchange Commission; (c) the Regional and District Directors of the Internal Revenue Service for the Southern District of Texas; (d) Office of the United States Attorney for the Southern District of Texas; (e) all persons 181 188 or entities that have filed a notice of appearance in these chapter 11 cases pursuant to Bankruptcy Rule 2002(e); and (f) the Debtors' postpetition lenders. 23. With respect to all holders of impaired claims and equity interests that cannot be identified or located by the Debtors or the Balloting Agent as of the Voting Record Date, the Debtors shall publish the Confirmation Hearing Notice in each of The Wall Street Journal (National Edition), the Houston Chronicle, the Globe and Mail (Toronto) and Le Devoir (Montreal) on at least one occasion on or before October 5, 2001. The Balloting Agent, upon being contacted by such holders, will promptly provide each such holder with a Solicitation Package after such holder has adequately evidenced its claim against the Debtors. 24. The requirements of Bankruptcy Local Rule 3017, which provides that the proponent of a plan of reorganization shall transmit notices obtained from the clerk, is hereby waived except as may be otherwise provided in this Order 25. Any requirement that the Debtors serve upon their customers the Confirmation Hearing Notice is hereby waived. 182 189 26. The Debtors are hereby authorized and empowered to effect such actions as may be necessary to implement the terms of this Order. The Debtors are further authorized to make non-substantive modifications to the Disclosure Statement, other documents in the Solicitation Package, and the Notice of Non-Voting Status so long as such modifications are of a typographical, conforming and/or ministerial nature and are approved by the Creditors' Committee. Any proposed substantive modification to the Disclosure Statement, other documents in the Solicitation Package, and/or the Notice of Non-Voting Status occurring after entry of this Order shall be heard by this Court upon twenty-four (24) hour telephonic notice to the parties listed above in paragraph 23. Dated: September 21, 2001 Houston, Texas /S/ Letitia Z. Clark ------------------------------ UNITED STATES BANKRUPTCY JUDGE EXHIBITS NOT ATTACHED 183 190 EXHIBIT C TO DISCLOSURE STATEMENT Form 10-K 191 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-9859 PIONEER COMPANIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-1215192 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.)
700 LOUISIANA STREET, SUITE 4300 HOUSTON, TEXAS (713) 570-3200 77002 (Address of principal executive offices) (Zip Code)
--------------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: CLASS A COMMON STOCK, $.01 PAR VALUE (Title of Class)
On March 30, 2001, there were outstanding 10,678,893 shares of the Company's Class A Common Stock, $.01 par value. The aggregate market value of the Company's voting stock held by non-affiliates of the Company is $2,476,584 based on the closing price for the Class A Common Stock in consolidated trading on March 30, 2001. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] DOCUMENTS INCORPORATED BY REFERENCE: Portions of the proxy statement to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report pursuant to Regulation 14A under the Securities Exchange Act of 1934 in connection with the Company's 2001 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 192 PIONEER COMPANIES, INC. TABLE OF CONTENTS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000
PAGE ---- PART I Item 1. Business.................................................... 1 Item 2. Properties.................................................. 7 Item 3 Legal Proceedings........................................... 9 Item 4. Submission of Matters to a Vote of Security Holders......... 9 Item 4a. Executive Officers of the Registrant........................ 9 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................... 11 Item 6. Selected Financial Data..................................... 12 Item Management's Discussion and Analysis of Financial Condition 7..... and Results of Operations................................... 13 Item 7a. Quantitative and Qualitative Disclosures About Market Risk...................................................... 20 Item 8. Financial Statements and Supplementary Data................. 21 Item Changes in and Disagreements with Accountants on Accounting 9..... and Financial Disclosure.................................... 48 PART III Item 10. Directors and Executive Officers of the Registrant.......... 48 Item 11. Executive Compensation...................................... 48 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................ 48 Item 13. Certain Relationships and Related Transactions.............. 48 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....................................................... 48
193 PART I Unless the context otherwise requires, (i) the term "Pioneer" refers to Pioneer Companies, Inc. and its consolidated subsidiaries, (ii) the term "Company" refers to Pioneer Companies, Inc., (iii) the term "PCA" refers to Pioneer Corporation of America, a wholly-owned subsidiary of the Company, and (iv) the term "Predecessor Company" refers to PCA and its subsidiaries as they existed on April 20, 1995, the date they were acquired by the Company. Certain statements in this Form 10-K are "forward looking statements' within the meaning of the Securities Litigation Reform Act. Forward looking statements relate to matters that are not historical facts. Such statements involve risks and uncertainties, including, but not limited to, the Company's high financial leverage, the status and possible outcomes of restructuring efforts, global economic conditions, Company and industry production problems, competitive prices, the cyclical nature of the markets for many of the Company's products and raw materials, and other risks and uncertainties discussed in detail. Actual outcomes may vary materially from those indicated by the forward looking statements. ITEM 1. BUSINESS. Pioneer manufactures and markets chlorine and caustic soda and several related products. Pioneer conducts its primary business through its operating subsidiaries: Pioneer Americas, Inc. (formerly known as Pioneer Chlor-Alkali Company, Inc.) ("PAI"), and PCI Chemicals Canada Inc. ("PCI Canada"). In August 2000 Pioneer completed the disposal of substantially all of the assets of two former operating subsidiaries, Kemwater North America Company ("KNA") and KWT, Inc. ("KWT," and together with KNA, "Kemwater"). Pioneer owns and operates five chlor-alkali plants in North America with aggregate production capacity of approximately 950,000 electrochemical units ("ECUs," each consisting of 1 ton of chlorine and 1.1 tons of caustic soda), as well as certain related product manufacturing facilities. Management believes that Pioneer is one of the six largest chlor-alkali producers in North America, with approximately 6% of North American production capacity. In addition to its chlor-alkali capacity, Pioneer manufactures hydrochloric acid, bleach, sodium chlorate and other products. As of December 31, 2000, Interlaken Investment Partners, L.P., a Delaware limited partnership (the "Interlaken Partnership") beneficially owned approximately 34.9% of the voting power of Pioneer and William R. Berkley (who may be deemed to beneficially own all shares of Pioneer common stock held by the Interlaken Partnership) beneficially owned approximately 59.8% of the voting power of Pioneer. Pioneer's five chlor-alkali production facilities are located in Becancour, Quebec; Tacoma, Washington; St. Gabriel, Louisiana; Henderson, Nevada; and Dalhousie, New Brunswick. The five facilities produce chlorine and caustic soda for sale in the merchant markets and for use as raw materials in the manufacture of downstream products. The Becancour and Henderson facilities also produce hydrochloric acid and bleach, and the Tacoma facility also produces hydrochloric acid and calcium chloride. The Dalhousie facility also produces sodium chlorate. During 2000 Pioneer's U.S. plants faced substantially higher energy costs, and in March 2001 Pioneer announced a fifty percent curtailment in the capacity of the Tacoma plant due to an inability to obtain sufficient power at reasonable prices. Pioneer also operates three bleach production and chlorine repackaging facilities in California and Washington, and distributes these products to municipalities and selected commercial markets in the western United States through various distribution channels. All of the chlorine and caustic soda used as raw materials at these facilities is supplied by the Henderson and Tacoma chlor-alkali facilities. Additional production units at Cornwall, Ontario produce hydrochloric acid, bleach, chlorinated paraffins sold under the brand name Cereclor(R), and proprietary pulping additives, PSR 2000(R) and IMPAQT(R). No material gain or loss was recognized upon completion of the sale of the Kemwater assets. Kemwater manufactured and supplied polyaluminum chlorides to certain potable and waste water markets in the United States. The products were used primarily to remove solids from waste water streams and to control hydrogen sulfide emissions. Kemwater also manufactured and marketed aluminum sulfate to the waste water and pulp 1 194 and paper industries. Also in 2000, an unusual charge of $0.9 million was recorded, relating to the disposition of Kemwater's alum coagulant business at Antioch, California. In early 1999, Kemwater sold its iron chlorides business, which was located in the western U.S. This disposal resulted in a pretax loss of approximately $0.9 million. Debt Restructuring In December 2000 the Company's subsidiary, PCA, delayed making payments on various debt obligations due to lack of sufficient liquidity. As a result, at December 31, 2000 Pioneer was not in compliance with the terms of certain of its debt agreements. Accordingly, $597.7 million of debt outstanding under various agreements is classified as a current liability on the Company's consolidated balance sheet. Pioneer's cash flows and liquidity have been substantially reduced due to the steep decline in ECU prices in 1999 and extraordinarily high power costs in 2000. Decreased liquidity warranted the suspension of debt service in favor of funding ongoing operations. Pioneer is developing a comprehensive financial restructuring program for which it will solicit the consent of its lenders at the earliest practical time. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Competition The chlor-alkali industry is highly competitive. Many of Pioneer's competitors, including The Dow Chemical Company ("Dow"), Occidental Chemical Corporation ("OxyChem"), and PPG Industries, Inc. are larger and have greater financial resources than Pioneer. There are also several regional companies that specialize in a smaller number of chemical products. While a significant portion of Pioneer's business is based upon widely available technology, the difficulty in obtaining permits for the production of chlor-alkali and chlor-alkali related products may be a barrier to entry. Pioneer's ability to compete effectively depends on its ability to maintain competitive prices, to provide reliable and responsive service to its customers and to operate in a safe and environmentally responsible manner. North America represents approximately 32% of world chlor-alkali production capacity, with approximately 15.1 million tons of chlorine and 16.6 million tons of caustic soda production capacity. OxyChem and Dow are the two largest chlor-alkali producers in North America, together representing approximately 45% of North American capacity. The remaining capacity is held by approximately 20 companies. Approximately 65% of North American chlor-alkali capacity is located on the Gulf Coast of Texas and Louisiana. Pioneer's chlor-alkali capacity represents approximately 6% of total North American capacity. The chlorine and caustic soda currently produced at Pioneer's Tacoma and Henderson facilities provide a significant source of supply for the West Coast region, where Pioneer is the largest supplier of chlorine and bleach for water treatment purposes. The Tacoma, St. Gabriel and Dalhousie facilities are leading suppliers of premium, low-salt grade caustic soda in their respective regions. Pioneer believes its strong regional presence in eastern Canada and the western United States has enhanced the competitiveness of Pioneer's operations. Employees As of December 31, 2000, Pioneer had 895 employees. Ninety of Pioneer's employees at the Henderson, Nevada plant are covered by collective bargaining agreements with the United Steelworkers of America and with the International Association of Machinists and Aerospace Workers that are in effect until March 13, 2004, and 112 of Pioneer's employees at the Tacoma facility are covered by collective bargaining agreements with the International Chemical Workers Union Council and the International Operating Engineers that are both in effect until June 11, 2003. At Pioneer's Becancour facility, 137 employees are covered by collective bargaining agreements with the Energy and Paper Workers Union that are in effect until April 30, 2006, and 32 employees at Pioneer's Cornwall facility are represented by the United Steelworkers Union, with a collective bargaining agreement that expires on October 31, 2002. Ten employees at Pioneer's Tacoma bleach facility are covered by a collective bargaining agreement with the Teamsters Union that is in effect until December 1, 2002. Pioneer is currently negotiating a collective bargaining agreement with 60 employees at the Dalhousie facility who are members of the Communication, Energy and Paperworkers Union of Canada. Pioneer's employees at other production facilities are not covered by union contracts or collective bargaining 2 195 agreements. Pioneer considers its relationship with its employees to be good and it has not experienced any strikes or work stoppages. Environmental Regulation U.S. ENVIRONMENTAL LAWS Air Quality. Pioneer's U.S. operations are subject to the federal Clean Air Act and the amendments to that act which were enacted in 1990. Pioneer will be subject to some of the additional environmental regulations adopted by the federal EPA and state environmental agencies to implement the Clean Air Act Amendments of 1990. Among the requirements that are potentially applicable to Pioneer are those that require the EPA to establish hazardous air pollutant emissions requirements for chlorine production facilities. Although Pioneer cannot estimate the cost of complying with these requirements until such regulations are proposed, at this time Pioneer does not believe that such requirements will have a material adverse effect on it. Most of Pioneer's plants manufacture or use chlorine, which is in gaseous form if released into the air. Chlorine gas in relatively low concentrations can irritate the eyes, nose and skin and in large quantities or high concentrations can cause permanent injury or death. From 1995 to date, there have been minor releases at Pioneer's plants, none of which has had any impact on human health or the environment. Those releases were controlled by plant personnel, in some cases with the assistance of local emergency response personnel, and there were no material claims against Pioneer as a result of those incidents. Pioneer maintains systems to detect emissions of chlorine at its plants, and the Tacoma, St. Gabriel and Henderson plants are members of their local industrial emergency response networks. Pioneer believes that its insurance coverage is adequate with respect to costs that might be incurred in connection with any future release, although there can be no assurance that Pioneer will not incur substantial expenditures that are not covered by insurance if a major release does occur in the future. Water Quality. Pioneer maintains waste water discharge permits for many of its facilities pursuant to the federal Water Pollution Control Act of 1972, as amended, and comparable state laws. Where required, Pioneer has also applied for permits to discharge stormwater under such laws. In order to meet the discharge requirements applicable to stormwater, it will be necessary to modify surface drainage or make other changes at certain plants. Pioneer has spent approximately $0.4 million during the combined 1998 through 2000 period for modifications to the stormwater system at the Henderson plant, and believes that any additional costs associated with stormwater discharge at Henderson and its other plants will not have a material adverse effect on Pioneer's financial condition, liquidity or operating results. The various states in which Pioneer operates also have water pollution control statutes and regulatory programs which include groundwater and surface water protection provisions. The requirements of these laws vary and are generally implemented through a state regulatory agency. These water protection programs typically require site discharge permits, spill notification and prevention and corrective action plans. At several of Pioneer's facilities and at certain sites where operations have been discontinued, investigations or remediations are underway, and at some of these locations regulatory agencies are considering whether additional actions are necessary to protect or remediate surface or groundwater resources. Pioneer could be required to incur additional costs to construct and operate remediation systems in the future. In addition, at several of its facilities, Pioneer is in the process of replacing or closing ponds used for the collection of wastewater. Pioneer plans to spend approximately $1.5 million during the next three years on improvements to discontinue the use of three chlor-alkali waste water disposal ponds at its Henderson plant, replacing them with systems to recycle wastewater. Hazardous and Solid Wastes. Pioneer's manufacturing facilities generate hazardous and non-hazardous solid wastes which are subject to the requirements of the federal Resource Conservation and Recovery Act ("RCRA") and comparable state statutes. The EPA has adopted regulations banning the land disposal of certain hazardous wastes unless the wastes meet defined treatment or disposal standards, including certain mercury-containing wastes generated by Pioneer's St. Gabriel plant. In response to these regulations, the St. Gabriel plant has substantially reduced the quantity of wastes that are subject to the land ban through the installation of an in-plant treatment system that reduces the level of mercury in its wastes below the hazardous classification. In 1999, the facility applied for and received a "Determination of Equivalency" from the EPA 3 196 for its mercury recovery/treatment process. Pioneer's disposal costs could increase substantially if its present disposal sites become unavailable due to capacity or regulatory restrictions. Pioneer presently believes, however, that its current disposal arrangements, together with the mercury recovery/treatment system and less stringent land disposal restrictions resulting from the "Determination of Equivalency," will allow Pioneer to continue to dispose of land-banned wastes with no material adverse effect on it. Superfund. In the ordinary course of Pioneer's operations, substances are generated that fall within the definition of "hazardous substances," and Pioneer is the owner or operator of several sites at which hazardous substances have been released into soil or groundwater. Under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as the "Superfund" law, regulatory agencies or third parties may incur costs to investigate or remediate such conditions and seek reimbursement from Pioneer for such costs. However, no investigations or remedial activities are currently being conducted under CERCLA by third parties at any of Pioneer's facilities, with the exception of the Tacoma facility, where the activities are covered by an indemnity from the previous owner. Such activities are being carried out at certain facilities under the other statutory authorities discussed above pursuant to provisions of indemnification agreements protecting Pioneer from liability. CANADIAN ENVIRONMENTAL LAWS General. Pioneer's Canadian facilities are governed by federal environmental laws administered by Environment Canada and by provincial environmental laws enforced by administrative agencies. Many of these laws are comparable to the U.S. laws described above. In particular, the Canadian environmental laws generally provide for control and/or prohibition of pollution, for the issuance of certificates of authority or certificates of authorization which permit the operation of regulated facilities and prescribe limits on the discharge of pollutants, and for penalties for the failure to comply with applicable laws. These laws include the substantive areas of air pollution, water pollution, solid and hazardous waste generation and disposal, toxic substances, petroleum storage tanks, protection of surface and subsurface waters, and protection of other natural resources. However, there is no Canadian law similar to CERCLA that would make a company liable for legal off-site disposal. The Canadian Environmental Protection Act ("CEPA") is the primary federal statute which governs environmental matters throughout the provinces. The federal Fisheries Act is the principal federal water pollution control statute. This law would apply in the event of a spill of caustic soda or another deleterious substance that adversely impacts marine life in a waterway. The Becancour, Dalhousie and Cornwall facilities are all adjacent to major waterways and are therefore subject to the requirements of this statute. The Chlor-Alkali Mercury Release Regulations and the Chlor-Alkali Mercury Liquid Effluent Regulations, adopted under the CEPA, regulate the operation of the Dalhousie facility. In particular, these regulations provide for the quantity of mercury a chlor-alkali plant may release into the ambient air and the quantity of mercury that may be released with liquid effluent. Pioneer believes it has operated and is currently operating in compliance with these statutes. The primary provincial environmental laws include the Environmental Protection Act in the province of Ontario, the Quebec Environment Quality Act in Quebec and the Clean Environment Act in New Brunswick. In general, each of these acts regulates the discharge of a contaminant into the natural environment if such discharge causes or is likely to cause an adverse effect. Indemnities ZENECA Indemnity. Pioneer's Henderson plant is located within what is known as the "Basic Complex." Soil and groundwater contamination have been identified within and adjoining the Basic Complex, including land owned by Pioneer. A groundwater treatment system has been installed at the facility and, pursuant to a consent agreement with the Nevada Division of Environmental Protection, studies are being conducted to further evaluate soil and groundwater contamination at the facility and other properties within the Basic Complex and to determine whether additional remediation will be necessary with respect to Pioneer's property. 4 197 In connection with the 1988 acquisition of the St. Gabriel and Henderson properties by the Predecessor Company, the sellers agreed to indemnify the Predecessor Company with respect to, among other things, certain environmental liabilities associated with historical operations at the Henderson site. ZENECA Delaware Holdings, Inc. and ZENECA, Inc. (collectively, the "ZENECA Companies") have assumed the indemnity obligations. In general, Pioneer is indemnified against environmental costs which arise from or relate to pre-closing actions which involved disposal, discharge or release of materials resulting from the former agricultural chemical and other non-chlor-alkali manufacturing operations at the Henderson plant. The ZENECA Companies are also responsible for costs arising out of the pre-closing actions at the Basic Complex. Under the ZENECA Indemnity, Pioneer may only recover indemnified amounts for environmental work to the extent that such work is required to comply with environmental laws or is reasonably required to prevent an interruption in the production of chlor-alkali products. Pioneer is responsible for environmental costs relating to the chlor-alkali manufacturing operations at the Henderson plant, both pre- and post-acquisition, for certain actions taken without ZENECA's consent and for certain operation and maintenance costs of the groundwater treatment system at the facility. Payments for environmental liabilities under the ZENECA Indemnity, together with other non-environmental liabilities for which the ZENECA Companies agreed to indemnify Pioneer, cannot exceed approximately $65 million. To date Pioneer has been reimbursed for approximately $12 million of costs covered by the ZENECA Indemnity, but the ZENECA Companies may have directly incurred additional costs that would further reduce the total amount remaining under the ZENECA Indemnity. In 1994, Pioneer recorded a $3.2 million environmental reserve related to pre-closing actions at sites that are the responsibility of ZENECA. At the same time a receivable was recorded from ZENECA for the same amount. It is Pioneer's policy to record such amounts when a liability can be reasonably estimated. In 2000, based on the results of a third party environmental analysis, the $3.2 million environmental reserve and offsetting receivable were adjusted to the discounted future cash flows for estimated environmental remediation, which was $2 million. The ZENECA Indemnity continues to cover claims after the April 20, 1999 expiration of the term of the indemnity to the extent that, prior to the expiration of the indemnity, proper notice to the ZENECA Companies was given and either the ZENECA Companies have assumed control of such claims or Pioneer was contesting the legal requirements that gave rise to such claims, or had commenced removal, remedial or maintenance work with respect to such claims, or commenced an investigation which resulted in the commencement of such work within ninety days. Management believes proper notice was provided to the ZENECA Companies with respect to outstanding claims under the ZENECA Indemnity, but the amount of such claims has not yet been determined given the ongoing nature of the environmental work at Henderson. Pioneer believes that the ZENECA Companies will continue to honor their obligations under the ZENECA Indemnity for claims properly presented by Pioneer. It is possible, however, that disputes could arise between the parties concerning the effect of contractual language and that Pioneer would have to subject its claims for cleanup expenses, which could be substantial, to the contractually-established arbitration process. Sellers' Indemnity. In connection with the 1995 transaction pursuant to which the Company acquired all of the outstanding common stock and other equity interests of the Predecessor Company from the holders of those interests (the "Sellers"), the Sellers agreed to indemnify Pioneer and its affiliates for certain environmental remediation obligations, arising prior to the closing date from or relating to certain plant sites or arising before or after the closing date with respect to certain environmental liabilities relating to certain properties and interests held by Pioneer for the benefit of the Sellers (the "Contingent Payment Properties"). Amounts payable in respect of such liabilities would generally be payable as follows: (i) out of certain reserves established on the Predecessor Company's balance sheet at December 31, 1994; (ii) either by offset against the amounts payable under the $11.5 million in notes payable by Pioneer to the Sellers, or from amounts held in an account (the "Contingent Payment Account") established for the deposit of proceeds from the Contingent Payment Properties; and (iii) in certain circumstances and subject to specified limitations, out of the personal assets of the Sellers. To the extent that liabilities exceeded proceeds from the Contingent Payment Properties, the Company would be limited, for a ten-year period, principally to its rights of offset against the Sellers' notes to cover such liabilities. 5 198 In 1999 disputes arose between Pioneer and the Sellers as to the proper scope of the indemnity. During June 2000, Pioneer and the Sellers effected an agreement, pursuant to which Pioneer, in exchange for cash and other consideration, relieved the Sellers from their environmental indemnity obligations and agreed to transfer to the Sellers the record title to the Contingent Payment Properties and the $800,000 remaining cash balance in the Contingent Payment Account that was determined to be in excess of anticipated environmental liability. The cash balance in the Contingent Payment Account at the time of this transaction was $6.1 million. This cash balance was not previously reflected on Pioneer's balance sheet since a right of setoff existed. A third-party environmental analysis that was performed on all of Pioneer's sites subject to the indemnity provided the basis for the anticipated environmental liability. Pioneer then adjusted the remediation reserve on its balance sheet to the discounted future cash flows for estimated environmental remediation. As a result of the above transaction and the new environmental analysis, Pioneer reported a pre-tax gain of $1.8 million during the second quarter of 2000, which was reflected as a reduction of cost of sales. OCC Tacoma Indemnity. Pioneer acquired the chlor-alkali facility in Tacoma from OCC Tacoma, Inc. ("OCC Tacoma"), a subsidiary of OxyChem, in June 1997. In connection with the acquisition, OCC Tacoma agreed to indemnify Pioneer with respect to certain environmental matters, which indemnity is guaranteed by OxyChem. In general, Pioneer will be indemnified against damages incurred for remediation of certain environmental conditions, for certain environmental violations caused by pre-closing operations at the site and for certain common law claims. The conditions subject to the indemnity are sites at which hazardous materials have been released prior to closing as a result of pre-closing operations at the site. In addition, OCC Tacoma will indemnify Pioneer for certain costs relating to releases of hazardous materials from pre-closing operations at the site into the Hylebos Waterway, site groundwater containing certain volatile organic compounds that must be remediated under an RCRA permit, and historical disposal areas on the embankment adjacent to the site for maximum periods of 24 or 30 years, depending upon the particular condition, after which Pioneer will have full responsibility for any remaining liabilities with respect to such conditions. OCC Tacoma may obtain an early expiration date for certain conditions by obtaining a discharge of liability or an approval letter from a governmental authority. Although there can be no assurance that presently anticipated remediation work will be completed prior to the expiration of the indemnity, or that additional remedial requirements will not be imposed thereafter, Pioneer believes that the residual liabilities, if any, can be managed in a manner that will not have a material adverse effect on Pioneer. OCC Tacoma will also indemnify Pioneer against certain other environmental conditions and environmental violations caused by pre-closing operations that are identified after the closing. Environmental conditions that are subject to formal agency action within five years after closing or to an administrative or court order within ten years after closing, and environmental violations that are subject to an administrative or court order within five years after closing, will be covered by the indemnity up to certain dollar amounts and time limits. Pioneer will indemnify OCC Tacoma for environmental conditions and environmental violations identified after the closing if (i) an order or agency action is not imposed within the relevant time frames or (ii) applicable expiration dates or dollar limits are reached. Pioneer has reviewed the time frames currently estimated for remediation of the known environmental conditions associated with the plant and adjacent areas and Pioneer presently believes that it will have no material liability upon the termination of OCC Tacoma's indemnity. However, the OCC Tacoma indemnity is subject to limitations as to dollar amount and duration, as well as certain other conditions, and there can be no assurance that such indemnity will be adequate to protect Pioneer, that remediation will proceed on the present schedule, that it will involve the presently anticipated remedial methods, or that unanticipated conditions will not be identified. If these or other changes occur, Pioneer could incur a material liability for which it is not insured or indemnified. PCI Canada Acquisition Indemnity. In connection with the acquisition by Pioneer of the assets of PCI Canada in 1997, Imperial Chemical Industrials PLC ("ICI") and its affiliates (together the "ICI Indemnitors") agreed to indemnify Pioneer for certain liabilities associated with environmental matters arising from pre-closing operations of the Canadian facilities. In particular, the ICI Indemnitors will retain unlimited responsibility for environmental liabilities associated with the Cornwall site, liabilities arising out of the 6 199 discharge of contaminants into rivers and marine sediments and liabilities arising out of off-site disposal sites. The ICI Indemnitors are also subject to a general environmental indemnity for other pre-closing environmental matters. This indemnity will terminate on October 31, 2007, and is subject to a limit of $25 million (Cdn). Pioneer may not recover under the environmental indemnity until it has incurred cumulative costs of $1 million (Cdn), at which point Pioneer may recover costs in excess of $1 million (Cdn). As of December 31, 2000, Pioneer had incurred no cumulative costs towards the $25 million (Cdn) indemnity. With respect to the Becancour and Dalhousie facilities, the ICI Indemnitors will be responsible under the general environmental indemnity for 100% of the costs incurred in the first five years after October 31, 1997 and for a decreasing percentage of such costs incurred in the following five years. Thereafter, Pioneer will be responsible for environmental liabilities at such facilities (other than liabilities arising out of the discharge of contaminants into rivers and marine sediments and liabilities arising out of off-site disposal sites). Pioneer will indemnify ICI for environmental liabilities arising out of post-closing operations and for liabilities arising out of pre-closing operations that are not indemnified by the ICI Indemnitors. Pioneer believes that the indemnity provided by ICI will be adequate to address the known environmental liabilities at the acquired facilities, and that any residual liabilities incurred by Pioneer will not be material. ITEM 2. PROPERTIES. Facilities The following table sets forth certain information regarding Pioneer's principal production, distribution and storage facilities as of March 31, 2001. All property is owned by Pioneer unless otherwise indicated.
LOCATION MANUFACTURED PRODUCTS -------- --------------------- Becancour, Quebec................ Chlorine and caustic soda Hydrochloric acid Bleach Hydrogen Tacoma, Washington............... Chlorine and caustic soda Hydrochloric acid Calcium chloride Hydrogen St. Gabriel, Louisiana........... Chlorine and caustic soda Hydrogen Henderson, Nevada................ Chlorine and caustic soda Hydrochloric acid Bleach Hydrogen Dalhousie, New Brunswick......... Chlorine and caustic soda Sodium chlorate Hydrogen Cornwall, Ontario*............... Bleach Cereclor(R) chlorinated paraffin PSR 2000(R) pulping additive IMPAQT(R) pulping additive Tracy, California*............... Bleach Chlorine repackaging Santa Fe Springs, California*.... Bleach Chlorine repackaging Tacoma, Washington............... Bleach Chlorine repackaging
--------------- * Leased property 7 200 Corporate headquarters for Pioneer is located in leased office space in Houston, Texas under a lease terminating in 2006. Pioneer also leases office space in Montreal, Quebec under a lease terminating in 2003 and owns a technology center in Mississauga, Ontario located on 1.2 acres of land in the Sheridan Park Research Center near Toronto, Ontario, which conducts applications research, particularly with respect to pulp and paper process technology. The acquisition of the chlor-alkali facility in Tacoma was financed with a portion of the proceeds of a nine and one-half year $100 million term facility provided to PCA (the "PCA Term Facility"), and with a portion of the proceeds of a $200 million offering of 9 1/4% Senior Secured Notes due 2007 issued by PCA (the "Senior Notes"). The Senior Notes and obligations outstanding under the PCA Term Facility are secured by first mortgages on PAI's Tacoma, St. Gabriel and Henderson facilities. The acquisition of the PCI Canada facilities was financed with the proceeds of a nine and one-quarter year $83 million term facility provided to Pioneer Americas (the "PCI Canada Term Facility"), and with the proceeds of a $175 million offering of 9 1/4% Senior Secured Notes due 2007 issued by PCI Canada (the "PCI Canada Senior Notes"). The PCI Canada Senior Notes and obligations outstanding under the PCI Canada Term Facility are secured by liens on and security interests in substantially all tangible and intangible property and assets used in PCI Canada's business in Canada. See further discussion regarding the status of the Senior Notes and the PCI Canada Senior Notes at "Managements Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and Note 10 to the Consolidated Financial Statements. Production Facilities Becancour, Quebec. The Becancour facility is located on a 100-acre site in an industrial park on the deep-water St. Lawrence Seaway. The plant was constructed in 1975, with additions in 1979 and 1997. Annual production capacity is 340,000 tons of chlorine, 383,000 tons of caustic soda and 150,000 tons of hydrochloric acid. In addition, the site has a bleach production facility. Tacoma, Washington. The Tacoma plant is located on a 31-acre site which is part of an industrial complex on the Hylebos Waterway in Tacoma, Washington. The plant was upgraded and expanded in the late 1970s and in 1988. The site has rail facilities as well as docks capable of handling ocean-going vessels. Annual capacity is currently 225,000 tons of chlorine, 247,500 tons of caustic soda, 44,000 tons of hydrochloric acid and 8,800 tons of calcium chloride. In March 2001 Pioneer announced that the capacity of the Tacoma plant is being reduced by fifty percent in response to high power costs in the Pacific Northwest. St. Gabriel, Louisiana. The St. Gabriel plant is located on a 100-acre site near Baton Rouge, Louisiana. Approximately 228 acres adjoining the site are available to Pioneer for future industrial development. The plant was completed in 1970 and is situated on the Mississippi River with river frontage and deepwater docking, loading and unloading facilities. Annual production capacity at St. Gabriel is 197,000 tons of chlorine and 216,700 tons of caustic soda. Henderson, Nevada. The Henderson plant is located on a 374-acre site near Las Vegas, Nevada. Approximately 70 acres are developed and used for production facilities. The original plant, which began operation in 1942, was upgraded and rebuilt in 1976-1977. Annual production capacity at the plant is 152,000 tons of chlorine, 167,200 tons of caustic soda and 130,000 tons of hydrochloric acid. In addition, the plant produces bleach. The Henderson plant is part of an industrial complex shared with three other manufacturing companies. Common facilities and property are owned and managed by subsidiaries of Basic Management, Inc. ("BMI"), which provide common services to the four site companies. BMI's facilities include extensive water and high voltage power distribution systems and access roads. Dalhousie, New Brunswick. The Dalhousie facility is located on a 36-acre site along the north shore of New Brunswick on the Restigouche River. The facility consists of a chlor-alkali plant built in 1963 and expanded in 1971 and a sodium chlorate plant built in 1992. Annual production capacity is 36,000 tons of chlorine, 40,000 tons of caustic soda and 22,000 tons of sodium chlorate. 8 201 Cornwall, Ontario. The Cornwall units are located on leased portions of a 36-acre site on the St. Lawrence River. The facilities consist of a bleach facility, Cereclor(R) chlorinated paraffin plant, a PSR 2000(R) pulping additive plant and an IMPAQT(R) pulping additive plant. Tracy, California. The Tracy plant includes a bleach production facility and a chlorine repackaging facility on a 15-acre tract. The land at the facility is leased under a lease expiring in the year 2005, with two five-year renewal options. Santa Fe Springs, California. The Santa Fe Springs plant includes a bleach production plant and a chlorine repackaging facility on a 4.5-acre tract. The land at the facility is leased under a lease expiring in 2008 with a five-year renewal option. Tacoma, Washington. The Tacoma bleach plant serves the Pacific Northwest market. The plant consists of a bleach production facility and a chlorine repackaging facility on a five-acre company-owned site. ITEM 3. LEGAL PROCEEDINGS. From time to time, Pioneer is involved in litigation relating to claims arising out of its operations in the normal course of its business. Pioneer maintains insurance coverage against potential claims in amounts which it believes to be adequate. In the opinion of management, uninsured losses, if any, resulting from these matters will not have a material adverse effect on Pioneer's results of operations, cash flow or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted during the fourth quarter of 2000 to a vote of holders of Pioneer's Common Stock. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT. The names, ages and current offices of the executive officers of the Company, who are to serve until the next annual meeting of the Board of Directors to be held on May 23, 2001, are set forth below.
NAME AND AGE OFFICE ------------ ------ Michael J. Ferris (56)................... President and Chief Executive Officer Philip J. Ablove (60).................... Executive Vice President and Chief Financial Officer G. Paul Donnini (48)..................... Vice President, Sales James E. Glattly (54).................... Vice President, Marketing Pierre Prud'homme (42)................... Vice President, Controller David A. Scholes (55).................... Vice President, Manufacturing Kent R. Stephenson (51).................. Vice President, General Counsel and Secretary Roger A. Zampini (45).................... Vice President, Supply Chain Management
Michael J. Ferris has served as President and Chief Executive Officer and a director of the Company since January 1997. He was employed by Vulcan Materials Company, a company engaged in the production of industrial materials and commodities with significant positions in two industries, construction aggregates and chemicals, in various capacities from March 1974 to January 1997. His last position was Executive Vice President, Chemicals from 1996 to 1997. Philip J. Ablove has served as Executive Vice President and Chief Financial Officer of the Company since November 1999. He was Vice President and Chief Financial Officer of the Company from March 1996 to November 1999. He was a consultant and an officer and director specializing in high growth or financially distressed companies from 1983 to 1996. In a consulting role he served as Acting Chief Financial Officer of Pioneer from October 1995 to March 1996. He has also been a director of the Company since January 1991. G. Paul Donnini has served as Vice President, Sales of the Company since March 2001. He was Vice President, Sales & Marketing -- East of the Company from June 1999 to March 2001, and Vice President, 9 202 Sales of PCI Canada from November 1997 to June 1999. He served as Vice President, Sales of the forest products division of ICI Canada Inc. prior to the acquisition of that business by the Company in 1997. James E. Glattly has served as Vice President, Marketing of the Company since March 2001. He was Senior Vice President, Sales & Marketing -- West of the Company from June 1999 to March 2001, and President of PAI from December 1996 to June 1999. He was Vice President, Sales and Marketing of the Predecessor Company and PAI from 1988 to 1996. Pierre Prud'homme has served as Vice President, Controller of the Company since November 2000. He was Vice President, Business Planning and Development of PCI Canada from October 1997 to November 2000. Prior to October 1997, Mr. Prud'homme was Controller of ICI Canada, after having served in various financial and marketing capacities. David A. Scholes has served as Vice President, Manufacturing of the Company since March 2001. He was Vice President, Manufacturing -- U.S. of the Company from November 1999 to March 2001, and Vice President -- Manufacturing of PAI from January 1997 to November 1999. Prior to joining the Company, he was manager of Occidental Chemical Corporation's Houston chemical complex. Kent R. Stephenson has served as Vice President, General Counsel and Secretary of the Company since June 1995, and as Vice President, General Counsel and Secretary of the Predecessor Company since 1993. Prior to joining the Predecessor Company, he was employed by Zapata Corporation, then an oil and gas services company. Roger A. Zampini has served as Vice President, Supply Chain Management of the Company since March 2001. He was Vice President, Logistics and Product Management from June 1999 to March 2001, and Vice President, Marketing and Logistics of PCI Canada from November 1997 to June 1999. He served as Vice President, Marketing and Logistics of the forest products division of ICI Canada Inc. prior to the acquisition of that business by the Company in 1997. 10 203 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. On March 31, 1995, the Company's stockholders approved a one-for-four reverse stock split which was effective on April 27, 1995 (the "Reverse Stock Split"). The number of authorized shares remained at 46.0 million for Class A Common Stock and 4.0 million for Class B Common Stock, and the par value of the Common Stock was unchanged. Unless the context otherwise requires, all references in this Report to Common Stock share and per share amounts reflect the Reverse Stock Split. The Company's Class A common stock was delisted from the NASDAQ SmallCap Market on January 12, 2001. This action occurred because the Company's Common Stock market capitalization no longer met the minimum amount required under NASDAQ's rules. The Company's Common Stock now trades on the NASD-regulated OTC Bulletin Board under the symbol "PIONA." There is no established trading market for Pioneer's Class B Common Stock. The price range for the Class A Common Stock, as adjusted to reflect the Reverse Stock Split and stock dividends, for each quarterly period for the last two fiscal years is shown in the following table:
HIGH LOW ----- ----- 2000 Fourth Quarter.............................................. $4.22 $0.62 Third Quarter............................................... 5.12 3.81 Second Quarter.............................................. 6.50 4.06 First Quarter............................................... 9.31 5.12 1999 Fourth Quarter.............................................. $7.13 $4.61 Third Quarter............................................... 7.13 4.21 Second Quarter.............................................. 5.61 3.97 First Quarter............................................... 4.56 3.04
Prices set forth in the table are as reported in the consolidated transaction reporting system. As of March 29, 2001, there were approximately 113 holders of record of the Class A Common Stock and there were two holders of record of the Class B Common Stock. No cash dividends have been declared or paid with respect to the Company's Common Stock during the three most recent fiscal years. Pursuant to the terms of certain debt instruments, there are restrictions on the ability of PCA to transfer funds to the Company, resulting in limitations on the Company's ability to declare dividends on its Common Stock. See Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 10 to the Consolidated Financial Statements. The Company issued 7% stock dividends on the Class A and Class B Common Stock in December 1999 and December 1998. 11 204 ITEM 6. SELECTED FINANCIAL DATA. The following table sets forth selected historical financial data of Pioneer for the years ended December 31, 2000, 1999, 1998, 1997, and 1996. Certain amounts have been reclassified in prior years to conform to the current year presentation. Per share information for all periods presented reflects 7% stock dividends on the Class A and Class B Common Stock in 1999, 1998, 1997 and 1996. The data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included elsewhere herein.
YEAR ENDED DECEMBER 31, ----------------------------------------------------- 2000 1999 1998 1997(1) 1996 --------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Statement of Operations Data: Revenues.................................................. $ 341,481 $296,642 $384,688 $270,341 $208,908 Cost of sales............................................. 309,570 285,909 301,793 207,906 150,464 --------- -------- -------- -------- -------- Gross profit.............................................. 31,911 10,733 82,895 62,435 58,444 Selling, general and administrative expenses.............. 43,424 49,580 50,162 36,192 29,860 Unusual charges........................................... -- -- 1,661 5,348 -- --------- -------- -------- -------- -------- Operating income (loss)................................... (11,513) (38,847) 31,072 20,895 28,584 Interest expense, net..................................... (56,328) (51,927) (50,521) (28,987) (19,212) Other income, net(2)...................................... 3,309 14,176 1,755 1,907 887 --------- -------- -------- -------- -------- Income (loss) before income taxes and extraordinary items................................................... (64,532) (76,598) (17,694) (6,185) 10,259 Income tax provision (benefit)(3)......................... 41,031 (26,214) (4,677) (289) 5,859 --------- -------- -------- -------- -------- Income (loss) before extraordinary Item................... (105,563) (50,384) (13,017) (5,896) 4,400 Extraordinary item, net of tax(4)......................... -- -- -- (18,658) -- --------- -------- -------- -------- -------- Net income (loss)........................................... $(105,563) $(50,384) $(13,017) $(24,554) $ 4,400 ========= ======== ======== ======== ======== Net income (loss) per share -- basic and diluted............ $ (9.15) $ (4.38) $ (1.14) $ (2.15) $ 0.39 ========= ======== ======== ======== ======== Other Financial Data: Capital expenditures...................................... $ 18,697 $ 28,318 $ 34,759 $ 28,091 $ 17,839 Depreciation and amortization............................. 50,242 54,713 50,316 27,655 18,213 Cash flows from operating activities...................... 13,137 (52,349) 39,337 27,320 29,234 Cash flows from investing activities...................... (15,819) (15,159) (34,424) (354,682) (25,120) Cash flows from financing activities...................... 4,486 17,658 (2,264) 363,495 72 Balance Sheet Data: Total assets.............................................. $ 590,037 $680,606 $731,442 $753,672 $301,568 Total long-term debt (exclusive of current maturities), and redeemable preferred stock(5)....................... 9,586 600,223 589,668 592,366 161,103 Stockholders' equity (deficiency in assets)............... (132,324) (26,702) 23,553 36,221 59,901 Additional Data: EBITDA(6)................................................. $ 42,571 $ 31,583 $ 86,649 $ 55,805 $ 47,684
--------------- (1) The chlor-alkali facility in Tacoma was acquired in June 1997, and the business of PCI Canada was acquired in October 1997. The results of operations for the year ended December 31, 1997 include results from the respective acquisition dates through December 31, 1997. (2) Other income in 1999 included a $12.0 million gain on the sale of Pioneer's 15% partnership interest in Saguaro Power Company ("Saguaro"). (3) Income taxes in 2000 includes a valuation allowance of $67.8 million reducing the deferred tax assets relating to net operating loss carryforwards. See Note 16 to the Consolidated Financial Statements included elsewhere herein. (4) An extraordinary item of $18.7 million in 1997, net of an income tax benefit of $12.4 million, consisted primarily of the 20% premium paid on the face value of notes and the write-off of debt placement fees pertaining to debt refinanced by Pioneer concurrent with the acquisition of the Tacoma chlor-alkali facility. (5) Because Pioneer is in default, $597.7 million of debt outstanding under various agreements is classified as a current liability on Pioneer's consolidated balance sheet. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." (6) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, unusual charges and extraordinary items. It is presented because it is a widely accepted financial indicator of a company's ability to incur and service debt. EBITDA should not be considered in isolation or as a substitute for net income (loss), cash flows from operating activities and other combined income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of Pioneer's profitability or liquidity. Pioneer's calculation of EBITDA may not be consistent with similarly captioned amounts used by other companies. 12 205 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion reviews Pioneer's operations for the years ended December 31, 2000, 1999 and 1998 and should be read in conjunction with the Pioneer's audited Consolidated Financial Statements and related notes thereto included elsewhere herein. Pioneer reports in US dollars and in accordance with accounting principles generally accepted in the United States of America. Pioneer has delayed making interest and principal payments required by various debt agreements due to insufficient liquidity. Pioneer is developing a comprehensive financial restructuring program for which it will solicit the consent of its lenders at the earliest practical time. Until the financial uncertainty surrounding Pioneer is removed and the new capital structure is in place, the reported financial information discussed herein may not be necessarily indicative of future operating results or future financial condition. Overview Pioneer manufactures and markets chlorine, caustic soda, hydrochloric acid and related products used in a variety of applications, including water treatment, plastics, pulp and paper, detergents, agricultural chemicals, pharmaceuticals, and medical disinfectants. Chlorine and caustic soda are the seventh and sixth most commonly produced chemicals, respectively, in the United States, based on volume, and are used in a wide variety of applications and chemical processes. Caustic soda and chlorine are co-products, concurrently produced in a ratio of approximately 1.1 to 1 through the electrolysis of salt water. An electrochemical unit ("ECU") consists of 1.1 tons of caustic soda and 1 ton of chlorine. Chlorine is used to manufacture over 15,000 products, including approximately 60% of all commercial chemistry, 85% of all pharmaceutical chemistry and 95% of all crop protection chemistry. Products manufactured with chlorine as a raw material include water treatment chemicals, plastics, detergents, pharmaceuticals, disinfectants and agricultural chemicals. Chlorine is also used directly in water disinfection applications. In the United States and Canada, virtually all public drinking water is made safe to drink by chlorination, and a significant portion of industrial and municipal waste water is treated with chlorine or chlorine derivatives to kill water-borne pathogens and remove solids. Caustic soda is a versatile chemical alkali used in a diverse range of manufacturing processes, including metal smelting, oil production and refining and pulp and paper production. Caustic soda is combined with chlorine to produce bleach. Caustic soda is also used as an active ingredient in a wide variety of other end use products, including detergents, rayon and cellophane. The chlorine and caustic soda markets have been, and are likely to continue to be, cyclical. Periods of high demand, high capacity utilization and increasing operating margins tend to result in new plant investments and increased production until supply exceeds demand, followed by a period of declining prices and declining capacity utilization until the cycle is repeated. During 1998 and 1999 supply of chlor-alkali products exceeded demand as a result of the Asian and South American financial crises and increased worldwide capacity. These conditions caused a severe downturn in the industry pricing cycle, reaching a 25-year industry low in the third quarter of 1999 and then moving up in the fourth quarter of 1999 and during the year in 2000. Average ECU netbacks in 2000 for Pioneer were $327 compared to $242 in 1999 and $336 in 1998. While the pricing cycle improved in 2000, demand for chlorine decreased dramatically in the second half primarily due to lower demand in the vinyl market. The weak demand for chlorine along with higher power prices caused industry operating rates to decline which reduced the availability of caustic soda. The short supply of caustic soda due to low production rates supported several price increases which more than offset the declining chlorine prices. During 2000, costs for power, a key raw material used for producing chlorine and caustic soda, increased dramatically and had a significant impact on Pioneer's operating rates and earnings. Power costs in 2000 were $18 million higher than in 1999. The Tacoma and St. Gabriel plants accounted for $12 million and $5 million, respectively, of the increase. St. Gabriel buys power on a firm contract tariff, which means that St. Gabriel's 13 206 power supply cannot be reduced or cut-off except in the case of an emergency and the price fluctuates based on a formula which takes into account prices for various energy sources. The energy used to generate electricity is primarily natural gas. Natural gas prices increased significantly during 2000, averaging $3.56 per MMBTU in 2000 compared with an average of $2.27 in 1999. Extraordinarily high power costs in the Pacific Northwest have adversely effected the Tacoma plant, resulting in negative cash flow. In response, in March 2001 Pioneer announced that it was curtailing production operations by fifty-percent at the Tacoma plant to reduce negative cash flow. Pioneer is currently working to obtain power supply contracts that would begin in October 2001 and would reduce the price Pioneer would pay for power. Whether the reduction at Tacoma is temporary or permanent will depend on the results of the contract negotiations, which cannot be estimated at this time. Liquidity and Capital Resources Debt Restructuring. In December 2000, Pioneer delayed making payments on various debt obligations due to insufficient liquidity. Pioneer's cash flows and liquidity have been substantially reduced due to the steep decline in ECU prices in 1999 and extraordinarily high power costs in 2000. Decreased liquidity warranted the suspension of debt service in favor of funding ongoing operations. Pioneer is developing a comprehensive financial restructuring program for which it will solicit the consent of its lenders at the earliest practical time. Pioneer has held discussions with an informal committee of holders of the senior notes and term facilities, as well as other creditors, about a financial restructuring plan. The objective of the restructuring is to establish a capital structure that is consistent with Pioneer's cash flows throughout the industry cycle, and that affords Pioneer adequate funding of capital expenditures, working capital needs, and debt service requirements. The proposed restructuring may have to occur under the supervision of a United States Bankruptcy Court. While the Company believes that these discussions have been productive, there can be no assurances that an agreement on the proposed restructuring can be timely completed. The accompanying financial statements present the liabilities at face value. The debt restructuring could result in debt being paid at less than 100% of its face value. Moreover, the carrying value of assets and equity could be changed, and the interests of existing preferred and common stockholders could, among other things, be very substantially diluted or even eliminated. The sufficiency of Pioneer's liquidity and capital resources is dependent upon the successful completion of the financial restructuring described above, generating sufficient positive cash flow from operations and obtaining financing as may be required. While Pioneer believes it may be able to complete a consensual restructuring during 2001, there can be no assurance that it will be successful in doing so. Pioneer is reviewing with its financial and legal advisors the financial alternatives available to Pioneer, including without limitation, the debt restructuring proposal described above and/or the filing of a petition under Chapter 11 of the United States Bankruptcy Code. Financial Leverage and Covenants. In December 2000, Pioneer suspended payments of interest and principal under various debt agreements, and as of December 31, 2000, Pioneer was not in compliance with certain covenants in the various debt agreements. As a result, the debt outstanding under these agreements is classified as a current liability on Pioneer's December 31, 2000 Consolidated Balance Sheet. At December 31, 2000, Pioneer had $601.8 million of long-term debt outstanding, of which $597.7 million is classified as a current liability. As part of the Tacoma acquisition in June 1997, Pioneer issued and sold $200 million of 9 1/4% Senior Secured Notes due June 15, 2007. Interest is payable semi-annually on June 15 and December 15. Effective December 15, 2000, Pioneer suspended payments of interest on the notes which, after a 30 day grace period, created a default under the indenture. Accordingly, the amount of the notes outstanding has been classified as a current liability on the Consolidated Balance Sheet at December 31, 2000. As part of the Tacoma acquisition in June 1997, Pioneer also entered into a nine and one-half year $100 million term facility, due in quarterly installments of $250,000 with the balance due in 2006. Pioneer did not make a principal payment that was due on December 28, 2000, which created an event of default under 14 207 the terms of the facility. Accordingly, the default interest rate is in effect and the amount outstanding under the facility has been classified as a current liability on the Consolidated Balance Sheet at December 31, 2000. As part of the PCI Canada acquisition in November 1997, Pioneer issued and sold $175 million of 9 1/4% Senior Secured Notes due October 15, 2007. Interest is payable semi-annually on April 15 and October 15. When Pioneer defaulted on the $200 million 9 1/4% Senior Secured Notes due June 15, 2007, it constituted an event of default under the indenture for the $175 million 9 1/4% Senior Secured Notes due October 15, 2007. Accordingly, the amount of the notes outstanding has been classified as a current liability on the Consolidated Balance Sheet at December 31, 2000. As part of the PCI Canada acquisition in November 1997, Pioneer also entered into a nine and one-quarter year $83 million term facility, due in quarterly installments of $250,000 with the balance due in 2006. Pioneer did not make a principal payment that was due on December 28, 2000, which created an event of default under the terms of the facility. Accordingly, the default interest rate is in effect and the amount outstanding under the facility has been classified as a current liability on the Consolidated Balance Sheet at December 31, 2000. In September 1999, PCA entered into a $50.0 million three-year revolving credit facility with Congress Financial Corporation (Southwest) (the "Revolving Facility") that replaced an existing $50.0 million revolving facility (the "Bank Credit Facility"). The Revolving Facility provides for revolving loans in an aggregate amount up to $50.0 million, subject to borrowing base limitations related to the level of accounts receivable and inventory, which, together with certain other collateral, secure borrowings under the facility. The total borrowing base at December 31, 2000 of $45.8 million was subject to a reserve of $5.0 million until the ratio of EBITDA to fixed charges, as defined in the Revolving Facility, exceeds 1.15:1 for a period of two consecutive quarters. As of December 31, 2000, there were letters of credit outstanding of $3.5 million and loans outstanding of $27.6 million. Based on the cross default provisions contained in the Revolving Facility Agreement, the Revolving Facility is currently in default, may be subject to the default interest rate and is classified as a current liability on the Consolidated Balance Sheet at December 31, 2000. Various unsecured notes totaling $17.7 million are in default at December 31, 2000 as these notes contain cross default provisions which were triggered when Pioneer defaulted on the senior notes and term facilities. These notes have been classified as a current liability on Pioneer's Consolidated Balance Sheet. Pioneer's cash obligations include payment of interest on the notes issued in connection with the acquisition of the Predecessor Company. PCA is restricted in paying dividends to the Company or funding cash to unrestricted subsidiaries, as defined, to the sum of $5.0 million plus 50% of the cumulative consolidated net income of PCA since June 1997. As of December 31, 2000, no distributions were allowable under this covenant. Pioneer does not expect to be able to pay dividends in 2001. PCA's ability to enter into new debt agreements is restricted by a debt covenant requiring a minimum interest coverage ratio (as defined) of at least 2.0 to 1.0 for the prior four fiscal quarters. Currently, PCA is unable to incur additional indebtedness as a result of this covenant, other than borrowing available under its revolving credit facility. Pioneer's debt agreements contain other restrictions on PCA's subsidiaries, which, among other things, limit the ability of PCA's subsidiaries to acquire or dispose of assets or operations. Annualized cash interest of approximately $60.1 million is payable on Pioneer's debt. To the extent that Pioneer draws additional funds under the Revolving Facility, due to adverse business conditions or for other corporate purposes, Pioneer's aggregate interest expense would be increased. The Company believes that cash generated from operations together with the amounts available under the Revolving Facility will be adequate to meet its capital expenditure and working capital needs, excluding debt service, although no assurance can be given in this regard. Dispositions. In March 2000 Pioneer sold its alum coagulant business at Antioch, California, and recorded a $0.9 million loss on the sale. On August 21, 2000, Pioneer sold its remaining coagulant business and transferred to the buyer fixed assets, including plants in Spokane, Washington, and Savannah, Georgia, certain technology-related assets 15 208 and liabilities associated with the Spokane operations, and all assets and liabilities of the Savannah operations, including $1.9 million of cash and notes payable of $8.0 million. Pioneer received cash of $0.9 million as payment for Spokane. This transaction did not have a material impact on Pioneer's statements of operations or cash flows. Capital and Environmental Expenditures. Total capital expenditures were approximately $18.7 million, $28.3 million and $34.8 million for the years ended December 31, 2000, 1999 and 1998, respectively. Capital expenditures for environmental-related matters at existing facilities were approximately $1.8 million, $1.2 million and $2.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. Pioneer anticipates that capital expenditures for 2001, excluding any acquisitions, will be approximately $25.7 million, including $4.9 million for environmental compliance matters. Pioneer routinely incurs operating expenditures associated with hazardous substance management and environmental compliance matters in ongoing operations. These operating expenses include items such as outside waste management, fuel, electricity and salaries. The amounts of these operating expenses were approximately $2.7 million, $2.8 million and $3.4 million in 2000, 1999 and 1998, respectively. Pioneer does not anticipate an increase in these types of expenses during 2001. Pioneer classifies these types of environmental expenditures within cost of sales. Net Operating Loss Carryforward. At December 31, 2000, Pioneer had, for income tax purposes, approximately $224 million of U.S. net operating loss carryforwards ("NOLs") which expires in 2009 through 2020, and $20 million (U.S.) of Canadian NOLs available expiring in 2004 through 2008. The NOLs are available for offset against future taxable income generated during the carryforward period. In 2000, a valuation allowance of $67.8 million was recorded reducing the deferred tax asset relating to net operating loss carryforwards. (See Note 16 to the Consolidated Financial Statements included elsewhere herein.) Foreign Operations and Exchange Rate Fluctuations. Pioneer, through PCI Canada, has operating activities in Canada and Pioneer engages in export sales to various countries. International operations and exports to foreign markets are subject to a number of risks, including currency exchange rate fluctuations, trade barriers, exchange controls, political risks and risks of increases in duties, taxes and governmental royalties, as well as changes in laws and policies governing foreign-based companies. In addition, earnings of foreign subsidiaries and intracompany payments are subject to foreign taxation rules. A portion of Pioneer's sales and expenditures are denominated in Canadian dollars, and accordingly, Pioneer's results of operations and cash flows may be affected by fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar. In addition, because a portion of Pioneer's revenues, cost of sales and other expenses are denominated in Canadian dollars, Pioneer has a translation exposure to fluctuation in the Canadian dollar against the U.S. dollar. Due to the significance of PCI Canada's U.S. dollar-denominated long-term debt (and related accrued interest payable) and certain other U.S. dollar-denominated assets and liabilities, the entity's functional accounting currency is the U.S. dollar. Currently, Pioneer is not engaged in forward foreign exchange contracts, but may enter into such hedging activities in the future. Preferred Stock. During 1997, 55,000 shares of the Company's Convertible Redeemable Preferred Stock, par value $0.01 per share, were issued in connection with the acquisition of the Tacoma facility. Each share of preferred stock is convertible at the option of the shareholder into 9.8 shares of the Company's Class A Common Stock. In addition, the stock may be redeemed at varying premiums either at the Company's option or upon the occurrence of certain designated events. Working Capital. At December 31, 2000, Pioneer's working capital deficiency was $600.9 million, representing a decrease in working capital of $611.6 million from December 31, 1999. The decrease was due primarily to outstanding debt that was classified as a current liability at December 31, 2000, as well as a $13.3 million increase in accounts payable and a $9.5 million increase in accrued liabilities during 2000 as compared to December 31, 1999. Net Cash Flows from Operating Activities. Although Pioneer incurred a net loss of $105.6 million during the year ended December 31, 2000, which included $50.2 million of non-cash depreciation and amortization expenses and $67.8 million of non-cash income tax expense recorded to establish a valuation 16 209 allowance related to Pioneer's deferred tax assets (See Note 16 to the Consolidated Financial Statements included elsewhere herein). Cash inflow from operating activities was $13.1 million for the year ended December 31, 2000 versus cash outflow from operating activities of $52.3 million in the year ended December 31, 1999. Net Cash Flows used in Investing Activities. Net cash used in investing activities was $15.8 million in 2000, as compared to $15.2 million in 1999. In 2000, investing activities consisted primarily of capital expenditures of $18.7 million. In 1999, investing activities consisted primarily of capital expenditures of $28.3 million and included a $12.0 million gain on the sale of Pioneer's 15% partnership interest in Saguaro. Net Cash Flows from Financing Activities. Cash inflows from financing activities in 2000 was $4.5 million, versus cash inflows of $17.7 million in 1999. The 2000 and 1999 cash inflows were due primarily to net borrowings under the Revolving Facility, offset by scheduled debt repayments. Scheduled payments on the term facilities totaling $500,000 were not made in December 2000, as Pioneer suspended debt service due to insufficient cash flows. Results of Operations The following table sets forth certain operating data for the periods indicated (dollars in thousands and percentages of revenues):
YEAR ENDED DECEMBER 31, ----------------------------------------------------------- 2000 1999 1998 ----------------- ---------------- ---------------- Revenues........................ $ 341,481 100% $296,642 100% $384,688 100% Cost of sales................... 309,570 91 285,909 96 301,793 78 --------- --- -------- --- -------- --- Gross profit.................... 31,911 9 10,733 4 82,895 22 Selling, general and administrative expenses....... 43,424 13 49,580 17 50,162 13 Unusual charges................. -- -- -- -- 1,661 1 --------- --- -------- --- -------- --- Operating income (loss)......... (11,513) (4) (38,847) (13) 31,072 8 Interest expense, net........... (56,328) (16) (51,927) (18) (50,521) (13) Other income, net............... 3,309 1 14,176 5 1,755 1 --------- --- -------- --- -------- --- Loss before income taxes........ (64,532) (19) (76,598) (26) (17,694) (4) Income tax expense (benefit).... 41,031 12 (26,214) (9) (4,677) (1) --------- --- -------- --- -------- --- Net loss........................ $(105,563) (31)% $(50,384) (17)% $(13,017) (3)% ========= === ======== === ======== ===
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999 Revenues. Revenues increased by $44.8 million, or approximately 15%, to $341.5 million for the year ended December 31, 2000, as compared to 1999. Pioneer's average ECU sales price for the year ended December 31, 2000 was $327, an increase of approximately 35% from the average 1999 sales price of $242. Sales volumes during the twelve months ended December 31, 2000 were similar to those during 1999. The Kemwater sale resulted in a $13.6 million decrease in revenues from 1999 to 2000 due to the inclusion of only a partial year of operations in 2000. Cost of Sales. Cost of sales increased $23.7 million or approximately 8% in 2000, as compared to 1999. $10.9 million of this increase was due to the absence of the gain resulting from the modification of Pioneer's retiree health care benefits that occurred during the first quarter of 1999. The remaining increase in cost of sales was principally due to a $17.9 million increase in power costs, and a $7.9 million increase in purchase-for-resale costs for product purchased from third parties and resold to Pioneer customers, offset by a $14.8 million decrease due to the inclusion of only a partial year of operations of Kemwater. Gross Profit. Gross profit increased $21.2 million, resulting in a gross profit margin of 9% in 2000, compared to 4% in 1999, primarily as a result of the ECU pricing increase, partially offset by the cost of sales increase discussed above. 17 210 Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $6.2 million, or approximately 13%, for the year ended December 31, 2000. Decreases related to overhead expense reductions and the absence of asset impairments recorded in 1999 were partially offset by an increase of $1.6 million due to the absence of the modification of Pioneer's retiree health care benefits referred to above. Interest Expense, Net. Interest expense, net increased $4.4 million to $56.3 million in 2000, primarily as a result of interest incurred on higher revolving credit balances and higher variable interest rates in 2000 as compared to 1999. Although Pioneer suspended payments of interest under various debt agreements in December 2000, all amounts owing were expensed and included in accrued liabilities, or, in the case of the Revolving Facility, added to the outstanding balance, as at December 31, 2000. Other Income, Net. Other income, net decreased from $14.2 million for the year ended December 31, 1999 to $3.3 million for the year ended December 31, 2000. The 2000 amount was the result of a $3.3 million gain from the sale of certain excess property at the Henderson plant while 1999 included a $12 million gain on the sale of Pioneer's 15% partnership interest in Saguaro. Income Taxes. Pioneer is required to record a valuation allowance for deferred tax assets when management believes it is more likely than not that the asset will not be realized. In 2000, based on the uncertainty as to the effect of the Company's restructuring on the availability and use of the NOLs, and the level of historical taxable income and projections for future taxable income over the periods in which the NOLs are available for use, it was estimated that it is more likely than not that Pioneer will not realize the full benefit of the deferred tax assets relating to NOLs. Accordingly, Pioneer has recorded a valuation allowance of $67.8 million for the year ended December 31, 2000. Pioneer recorded deferred income tax assets in the years ended December 31, 1999 and 1998. In 1999 and 1998, no valuation allowance was recorded since management believed at that time that it was more likely than not that the benefit of the deferred tax asset would be realized based on the level of historical taxable income and projections for future taxable income over the periods in which the NOLs would be available for use. Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 Revenues. Revenues decreased by $88.0 million, or approximately 23%, to $296.6 million for the twelve months ended December 31, 1999, as compared to the same period in 1998. The decrease in revenues was primarily due to lower ECU prices. Pioneer's average ECU sales price for the year ended December 31, 1999 was $242, a decrease of approximately 28% from the average 1998 sales price of $336. The remaining revenue decrease was primarily due to the disposal of Pioneer's household bleach bottling business during the third quarter of 1998 and the disposal of the pool chemicals business in the fourth quarter of 1998. These businesses were considered non-strategic, and Pioneer retained long-term supply agreements with the purchasers. Cost of Sales. Cost of sales decreased $15.9 million or approximately 5% in 1999, as compared to 1998. $10.9 million of this decrease was due to the modification of Pioneer's retiree health care benefits. Benefits to current retirees under the plan were not impacted, but current employees will no longer receive benefits under this plan following retirement. The remaining decrease in cost of sales was principally as a result of disposed operations discussed above, offset by sales volume increases for chlorine and caustic soda in 1999 as compared to 1998. Gross Profit. Gross profit margin decreased to 4% in 1999 from 22% in 1998, primarily as a result of lower average ECU sales prices. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $0.6 million in 1999. This reduction was due to the modification of Pioneer's retiree health care benefits discussed above, the absence of incentive compensation accruals made in 1998 and various overhead expense 18 211 reductions, partially offset by increases in 1999 due to asset impairments included in depreciation and amortization. Interest Expense, Net. Interest expense, net increased $1.4 million to $51.9 million in 1999 as a result of decreased interest income due to lower average cash balances and interest expense incurred on revolving credit balances in 1999. Other Income. Other income in 1999 included a $12.0 million gain on the sale of Pioneer's 15% partnership interest in Saguaro. Recent Accounting Pronouncements Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The adoption of SFAS 133 effective January 1, 2001 did not have a significant impact on the financial position, results of operations, or cash flows of the Company. Risk Factors ABILITY TO CONTINUE AS A GOING CONCERN IS DEPENDENT UPON RESTRUCTURING Since December 2000, Pioneer has not been in compliance with certain covenants of its senior notes and term facilities. Pioneer stopped making payments of interest under the senior notes and principal under the term facilities in December 2000. Due to cross default provisions in the Revolving Facility agreement, the Revolving Facility is currently in default also. As Pioneer is not in compliance with the terms of these debt agreements, the debt outstanding under these debt agreements is classified as a current liability on Pioneer's December 31, 2000 Consolidated Balance Sheet. DISRUPTION OF OPERATIONS DUE TO RESTRUCTURING Pioneer's restructuring efforts could adversely affect its relationship with its customers, suppliers and employees. Employees generally are not party to employment contracts. Due to uncertainty about Pioneer's financial condition, it may be difficult to retain or attract high quality employees. If Pioneer's relationships with its customers, suppliers and employees are adversely affected, its operations could be materially affected. Weakened operating results could adversely affect Pioneer's ability to complete the restructuring. FINANCIAL UNCERTAINTY Until the financial restructuring is completed, there is significant uncertainty regarding Pioneer. Until the uncertainty is removed and the new capital structure is in place, the reported financial information discussed in this Annual Report on Form 10-K may not be indicative of operating results or financial condition. See Note 1 to the Consolidated Financial Statements included elsewhere herein. Forward Looking Statements Certain statements in this Form 10-K regarding future expectations of Pioneer's business and Pioneer's results of operations may be regarded as "forward looking statements" within the meaning of the Securities Litigation Reform Act. Such statements are subject to various risks, including Pioneer's high financial leverage, the outcome of financial restructuring efforts, the cyclical nature of the markets for many of the Pioneer's products and raw materials and other risks discussed in detail. Actual outcomes may vary materially. 19 212 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The table below provides information about Pioneer's market-sensitive financial instruments and constitutes a "forward-looking statement." Pioneer has certain long-term debt instruments that are subject to market risk. An increase in the market interest rates would increase Pioneer's interest expense and its cash requirements for interest payments. For example, an average increase of 0.25% in the variable interest rate would increase Pioneer's annual interest expense and payments by approximately $0.5 million. All items described are non-trading and are stated in thousands of United States dollars.
FAIR VALUE DECEMBER 31, EXPECTED DEBT MATURITY DATES 2001(D) 2002 2003 2004 2005 THEREAFTER TOTAL 2000 ---------------------------- -------- ---- ---- ---- ---- ---------- -------- ------------ U.S. $ denominated Average interest rates -- fixed(a)........ $387,127 $622 $671 $724 $782 $1,286 $391,212 $ 92,462 Average interest rates -- variable(b)..... 198,852 -- -- -- -- -- 198,852 198,852 Canadian $ denominated(c)................... 11,737 -- -- -- -- -- 11,737 11,737 -------- ---- ---- ---- ---- ------ -------- -------- Total debt.......................... $597,716 $622 $671 $724 $782 $1,286 $601,801 $303,051 ======== ==== ==== ==== ==== ====== ======== ========
--------------- (a) Debt instruments at fixed interest rates ranging from 8.0% to 9.25%, with the majority at 9.25% (b) Debt instruments at variable interest rates, including LIBOR and U.S. prime rate based loans (c) Revolving credit facility based on Canadian prime rate plus 1 1/4% (d) Certain amounts owed are reflected as current since they are in default. Pioneer, through PCI Canada, operates in Canada and is subject to foreign currency exchange rate risk. Due to the significance of PCI Canada's U.S. dollar-denominated long-term debt (and related accrued interest payable) and certain other U.S. dollar-denominated assets and liabilities, the entity's functional accounting currency is the U.S. dollar. Certain other items within PCI Canada's working capital are denominated in Canadian dollars. An average change of 1% in the currency exchange rate would change total assets by approximately $0.3 million. 20 213 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Index:
PAGE ---- Consolidated financial statements, Pioneer Companies, Inc. (1) and subsidiaries: Report of Management........................................ 22 Independent Auditors' Report................................ 23 Consolidated Balance Sheets as of December 31, 2000 and 1999...................................................... 24 Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998.......................... 25 Consolidated Statements of Stockholders' Equity (Deficiency in Assets) for the years ended December 31, 2000, 1999 and 1998...................................................... 26 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998.......................... 27 Notes to Consolidated Financial Statements.................. 28 (2).. Supplemental Schedule: Schedule II -- Valuation and Qualifying Accounts............ 54
All schedules, except the one listed above, have been omitted because they are either not applicable, not required or the information called for therein appears in the consolidated financial statements or notes thereto. 21 214 REPORT OF MANAGEMENT Management is responsible for the preparation and content of the financial statements and other information included in this annual report. The financial statements have been prepared in conformity with generally accepted accounting principles appropriate under the circumstances to reflect, in all material respects, the substance of events and transactions that should be included. The financial statements reflect management's judgments and estimates as to the effects of events and transactions that are accounted for or disclosed. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations, which raises substantial doubt about its ability to continue as a going concern without a financial restructuring. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management maintains accounting systems which are supported by internal accounting controls that provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. The concept of reasonable assurance is based on the recognition that the cost of a system of internal accounting controls should not exceed the benefits. An independent auditor performed an audit of Pioneer's financial statements for the purpose of determining that the statements are presented fairly in accordance with accounting principles generally accepted in the United States of America. The independent auditor is appointed by the Board of Directors and meets regularly with the Audit Committee of the Board. The Audit Committee of the Board of Directors is composed solely of outside directors. The Audit Committee meets periodically with Pioneer's senior officers and independent auditor to review the adequacy and reliability of Pioneer's accounting, financial reporting and internal controls. PHILIP J. ABLOVE Executive Vice President and Chief Financial Officer (Principal Financial Officer) PIERRE PRUD'HOMME Vice President, Controller (Principal Accounting Officer) April 11, 2001 22 215 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders of Pioneer Companies, Inc. We have audited the accompanying consolidated balance sheets of Pioneer Companies, Inc. and subsidiaries ("Pioneer") as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity (deficiency in assets), and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and financial statement schedule are the responsibility of Pioneer's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Pioneer as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. The accompanying consolidated financial statements have been prepared assuming that Pioneer will continue as a going concern. As discussed in Note 1, Pioneer is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. DELOITTE & TOUCHE LLP Houston, Texas April 11, 2001 23 216 PIONEER COMPANIES, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 31, --------------------- 2000 1999 --------- --------- ASSETS Current assets: Cash and cash equivalents................................. $ 5,935 $ 5,510 Accounts receivable, less allowance for doubtful accounts: 2000, $1,392; 1999, $2,750.............................. 49,571 50,185 Inventories............................................... 25,067 23,130 Prepaid expenses and other current assets................. 4,100 7,468 --------- --------- Total current assets............................... 84,673 86,293 Property, plant and equipment: Land...................................................... 10,622 10,622 Buildings and improvements................................ 61,334 63,949 Machinery and equipment................................... 348,695 338,851 Construction in progress.................................. 15,138 19,434 --------- --------- 435,789 432,856 Less accumulated depreciation............................... (135,405) (107,315) --------- --------- 300,384 325,541 Other assets, net of accumulated amortization: 2000, $12,004; 1999, $12,052.................................... 25,420 76,308 Excess cost over the fair value of net assets acquired, net of accumulated amortization: 2000, $39,945; 1999, $32,526................................................... 179,560 192,464 --------- --------- Total assets....................................... $ 590,037 $ 680,606 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS) Current liabilities: Accounts payable.......................................... $ 43,738 $ 30,443 Accrued liabilities....................................... 44,082 34,517 Current portion of long-term debt......................... 597,715 10,626 --------- --------- Total current liabilities.......................... 685,535 75,586 Long-term debt, less current portion........................ 4,086 594,723 Accrued pension and other employee benefits................. 14,984 15,091 Other long-term liabilities................................. 12,256 16,408 Commitments and contingencies............................... -- -- Redeemable preferred stock: $.01 par value, authorized 10,000 shares, 55 issued and outstanding.................. 5,500 5,500 Stockholders' equity (deficiency in assets): Common stock: Class A, $.01 par value, authorized 46,000 shares; issued and outstanding: 2000, 10,679; 1999, 10,656..... 106 106 Class B, $.01 par value, authorized 4,000 shares; issued and outstanding: 2000, 859; 1999, 859; convertible share-for-share into Class A shares.................... 9 9 Additional paid-in capital.................................. 55,193 55,176 Retained deficit............................................ (187,556) (81,993) Accumulated other comprehensive income...................... (76) -- --------- --------- Total stockholders' equity (deficiency in assets).......................................... (132,324) (26,702) --------- --------- Total liabilities and stockholders' equity (deficiency in assets)........................... $ 590,037 $ 680,606 ========= =========
See notes to consolidated financial statements. 24 217 PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, ------------------------------- 2000 1999 1998 --------- -------- -------- Revenues.................................................... $ 341,481 $296,642 $384,688 Cost of sales............................................... 309,570 285,909 301,793 --------- -------- -------- Gross profit................................................ 31,911 10,733 82,895 Selling, general and administrative expenses................ 43,424 49,580 50,162 Unusual charges............................................. -- -- 1,661 --------- -------- -------- Operating income (loss)..................................... (11,513) (38,847) 31,072 Interest expense, net....................................... (56,328) (51,927) (50,521) Other income, net........................................... 3,309 14,176 1,755 --------- -------- -------- Loss before income taxes.................................... (64,532) (76,598) (17,694) Income tax expense (benefit)................................ 41,031 (26,214) (4,677) --------- -------- -------- Net loss.................................................... $(105,563) $(50,384) $(13,017) ========= ======== ======== Loss per common share -- basic and diluted: Net loss.................................................. $ (9.15) $ (4.38) $ (1.14) ========= ======== ======== Weighted average number of shares outstanding: Basic and diluted......................................... 11,535 11,515 11,458
See notes to consolidated financial statements. 25 218 PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY IN ASSETS) (IN THOUSANDS)
COMMON STOCK ISSUED AND OUTSTANDING --------------------------------- CLASS A CLASS B ADDITIONAL OTHER --------------- --------------- PAID-IN RETAINED COMPREHENSIVE SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT LOSS TOTAL ------ ------ ------ ------ ---------- --------- ------------- --------- Balance at January 1, 1998............... 9,227 $ 92 750 $8 $54,713 $ (18,592) $ -- $ 36,221 Net loss............................... -- -- -- -- -- (13,017) -- (13,017) Stock issued........................... 49 -- -- -- 347 -- -- 347 Stock options exercised................ 2 -- -- -- 2 -- -- 2 Stock dividend issued.................. 649 7 53 -- (7) -- -- -- Balance at December 31, 1998............. 9,927 99 803 8 55,055 (31,609) -- 23,553 ------ ---- --- -- ------- --------- ---- --------- Net loss............................... -- -- -- -- -- (50,384) -- (50,384) Stock issued........................... 32 -- -- -- 129 -- -- 129 Stock dividend issued.................. 697 7 56 1 (8) -- -- -- ------ ---- --- -- ------- --------- ---- --------- Balance at December 31, 1999............. 10,656 106 859 9 55,176 (81,993) -- (26,702) Comprehensive loss: Net loss............................... -- -- -- -- -- (105,563) -- -- Other comprehensive loss, net of taxes: Additional minimum pension liability.......................... -- -- -- -- -- -- (76) -- Comprehensive loss................. -- -- -- -- -- -- -- (105,639) Stock issued........................... 23 -- -- -- 17 -- -- 17 ------ ---- --- -- ------- --------- ---- --------- Balance at December 31, 2000............. 10,679 $106 859 $9 $55,193 $(187,556) $(76) $(132,324) ====== ==== === == ======= ========= ==== =========
See notes to consolidated financial statements. 26 219 PIONEER COMPANIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------- 2000 1999 1998 --------- -------- -------- Operating activities: Net loss.................................................. $(105,563) $(50,384) $(13,017) Adjustments to reconcile net loss to net cash flows from operating activities: Reduction in post-retirement medical expense........... -- (12,530) -- Depreciation and amortization.......................... 50,242 54,713 50,316 Deferred tax expense (benefit)......................... 41,348 (26,181) (4,677) Unusual charges........................................ -- -- 1,661 Gain (loss) on disposal of assets...................... (2,257) (10,922) 1,845 Foreign exchange gain (loss)........................... 636 (1,025) 78 Net effect of changes in operating assets and liabilities.......................................... 28,731 (6,020) 3,131 --------- -------- -------- Net cash flows from operating activities.......... 13,137 (52,349) 39,337 --------- -------- -------- Investing activities: Capital expenditures...................................... (18,697) (28,318) (34,759) Proceeds from disposal of assets.......................... 2,878 13,159 335 --------- -------- -------- Net cash flows from investing activities.......... (15,819) (15,159) (34,424) --------- -------- -------- Financing activities: Net proceeds under revolving credit arrangements.......... 6,418 21,163 -- Repayments on long-term debt.............................. (1,950) (2,666) (2,611) Debt issuance and related costs........................... -- (968) -- Other..................................................... 18 129 347 --------- -------- -------- Net cash flows from financing activities.......... 4,486 17,658 (2,264) --------- -------- -------- Effect of exchange rate changes on cash..................... (1,379) 1,538 (714) --------- -------- -------- Net increase (decrease) in cash............................. 425 (48,312) 1,935 Cash at beginning of period................................. 5,510 53,822 51,887 --------- -------- -------- Cash at end of period....................................... $ 5,935 $ 5,510 $ 53,822 ========= ======== ========
See notes to consolidated financial statements. 27 220 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION Organization The consolidated financial statements include the accounts of Pioneer Companies, Inc. (the "Company") and its subsidiaries (collectively, "Pioneer"), including Pioneer Corporation of America ("PCA"), Pioneer Americas, Inc. ("PAI") and PCI Chemicals Canada Inc. ("PCI Canada"). All significant intercompany balances and transactions have been eliminated in consolidation. In August 2000 Pioneer completed the disposal of substantially all of the assets of two former operating subsidiaries, Kemwater North America Company ("KNA") and KWT, Inc. ("KWT," and together with KNA, "Kemwater"). Kemwater had revenues of $8.7 million, $22.4 million and $35.3 million in 2000, 1999 and 1998, respectively. Pioneer operates in one industry segment, that being the production, marketing and selling of chlor-alkali and related products. Pioneer operates in one geographic area, North America. Dollar amounts, other than per share amounts, in tabulations in the notes to the consolidated financial statements are stated in thousands of dollars unless otherwise indicated. The accompanying consolidated financial statements have been prepared on the going concern basis of accounting, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Pioneer has experienced net losses each of the four years in the period ended December 31, 2000. In December 2000, Pioneer delayed making payments on various debt obligations due to insufficient liquidity. As a result, at December 31, 2000 Pioneer was not in compliance with the terms of certain of its debt agreements and the maturity of the debt could be accelerated. Accordingly, $597.7 million of debt outstanding under various agreements is classified as a current liability on Pioneer's consolidated balance sheet. Pioneer is developing a comprehensive financial restructuring program for which it will solicit the consent of its lenders at the earliest practical time. The consolidated financial statements do not include any adjustments that may result from the resolution of these uncertainties. Pioneer has held discussions with an informal committee of holders of its outstanding senior notes and term facilities and their advisers, and representatives of its revolving credit lender about a financial restructuring program. Negotiations and discussions with the lenders regarding a restructuring agreement have recently begun. If a consensual agreement cannot be reached, the proposed restructuring may occur under the supervision of a United States Bankruptcy Court. While Pioneer believes that the discussions to-date have been productive, there can be no assurance that an agreement on the proposed restructuring can be timely completed. Accounting principles generally accepted in the United States of America ("GAAP") require that the amounts owed to Pioneer's creditors as of December 31, 2000 not be adjusted to reflect any proposed restructuring as Pioneer continues to be bound by the provisions of the original credit agreements. If a restructuring agreement is reached and implemented, the restructuring of debt could give rise to a gain that will be reported as income in 2001 at the time of plan implementation, in accordance with GAAP. The amount of such gain, if any, cannot be determined until the restructuring plan is finalized. Pioneer's ability to meet its ongoing liquidity requirements is dependent upon the successful completion of the financial restructuring described above, its ability to generate sufficient cash flow to meet its obligations on a timely basis and its ability to obtain other financing as may be required. While Pioneer believes it may be able to complete a consensual restructuring during 2001, there can be no assurance that it will be successful in doing so. Pioneer is reviewing with its financial and legal advisors the financial alternatives available to Pioneer, including without limitation the debt restructuring proposal described above and/or the filing of a petition under Chapter 11 of the United States Bankruptcy Code. 28 221 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents All highly liquid investments with a maturity of three months or less when purchased are considered to be cash equivalents. Inventories Inventories are valued at the lower of cost or market. Finished goods and work-in-process costs are recorded under the average cost method, which includes appropriate elements of material, labor and manufacturing overhead costs, while the first-in, first-out method is utilized for raw materials, supplies and parts. Pioneer enters into agreements with other companies to exchange chemical inventories in order to minimize working capital requirements and to facilitate distribution logistics. Balances related to quantities due to or payable by Pioneer are included in inventory. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Disposals are removed at carrying cost less accumulated depreciation with any resulting gain or loss reflected in operations. Depreciation is computed primarily under the straight-line method over the estimated remaining useful lives of the assets. Asset lives range from 5 to 15 years with a predominant life of 10 years, which include buildings and improvements with an average life of 15 years and machinery and equipment with an average life of 9 years. Other Assets Other assets include amounts for deferred financing costs, which are being amortized on a straight-line basis over the term of the related debt. Amortization of such costs using the interest method would not result in material differences in the amounts amortized during the periods presented. Amortization expense for other assets for the years ended December 31, 2000, 1999, and 1998 was approximately $4.8 million, $7.7 million, and $4.4 million, respectively. Excess Cost Over The Fair Value of Net Assets Acquired Excess cost over the fair value of net assets acquired ("goodwill") of approximately $219.5 million is amortized on a straight-line basis over 25 years. The carrying value of goodwill is reviewed annually, and if this review indicates that such excess cost will not be recoverable, as determined based on the estimated future undiscounted cash flows of the entity acquired over the remaining amortization period, Pioneer's carrying value of goodwill will be reduced by the estimated deficit of discounted cash flows compared to the fair value of the related entity. Amortization expense for excess cost over the fair value of net assets acquired was approximately $9.0 million, $9.3 million and $9.2 million for the years ended December 31, 2000, 1999, and 1998, respectively. Environmental Expenditures Remediation costs are accrued based on estimates of known environmental remediation exposure. Such accruals are based upon management's best estimate of the ultimate cost. Ongoing environmental compliance costs, including maintenance and monitoring costs, are charged to operations as incurred. 29 222 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Revenue Recognition Pioneer generates revenues through sales in the open market and long-term supply contracts. Revenue is recognized when the products are shipped and collection is reasonably assured. Pioneer classifies amounts billed to customers for shipping and handling as revenues, with the related shipping and handling costs included in cost of goods sold. Research and Development Expenditures Research and development expenditures are expensed as incurred. Such costs totaled $1.4 million in 2000, $1.5 million in 1999, and $1.4 million in 1998. Per Share Information Per share information for all periods presented reflects 7% stock dividends on the Class A and Class B Common Stock issued in December 1999 and December 1998. Preferred Stock Each share of preferred stock is convertible at the option of the shareholder into 9.8 shares of the Company's Class A Common Stock (which reflects adjustment for stock dividends subsequent to the issuance of the preferred stock). In addition, the stock may be redeemed at varying premiums either at the Company's option or upon the occurrence of certain designated events. Because of the preferred stock's mandatory redemption characteristics, the stock is excluded from stockholders' equity. Foreign Currency Translation Following SFAS No. 52, "Foreign Currency Translation," the functional accounting currency for Canadian operations is the U.S. dollar; accordingly, gains and losses resulting from balance sheet translations are included in the consolidated statement of operations. Reclassifications Certain amounts have been reclassified in prior years to conform to the current year presentation. All reclassifications have been applied consistently for the periods presented. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates and judgments made in preparing these financial statements, which include assumptions made concerning the amounts owed to creditors and realizable values of assets. Management has reviewed Pioneer's long-lived assets and intangibles such as goodwill, to assess whether the events and changes in circumstances described in Note 1 indicate that the carrying amount of the asset may not be recoverable. In making these estimates, management has utilized the assessments, calculations, and determinations made in preparing analyses utilized in discussions with creditors, including estimates of overall enterprise value. 3. DIVESTITURES In March 2000 Pioneer sold its coagulant business at Antioch, California, and recorded a $0.9 million loss on the sale. On August 21, 2000, Pioneer sold its remaining coagulant business and transferred to the buyer fixed assets, including plants in Spokane, Washington, and Savannah, Georgia, certain technology-related assets 30 223 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and liabilities associated with the Spokane operations, and all assets and liabilities of the Savannah operations, including $1.9 million of cash and notes payable of $8.0 million. Pioneer received cash of $0.9 million as payment for Spokane. This transaction did not have a material impact on Pioneer's financial statements. 4. CASH FLOW INFORMATION The net effect of changes in operating assets and liabilities are as follows:
YEAR ENDED DECEMBER 31, ---------------------------- 2000 1999 1998 ------- ------- -------- Accounts receivable.................................... $ 844 $(2,800) $ 21,418 Inventories............................................ (2,019) 3,487 (3,139) Prepaid expenses....................................... 1,054 826 (1,590) Other assets........................................... 5,145 (1,333) (4,202) Accounts payable....................................... 16,188 (2,709) (14,604) Accrued liabilities.................................... 12,934 189 1,707 Other long-term liabilities............................ (4,406) (5,229) 52 Accrued pension and other employee benefits............ (1,009) 1,549 3,489 ------- ------- -------- Net change in operating accounts....................... $28,731 $(6,020) $ 3,131 ======= ======= ========
Following is supplemental cash flow information:
YEAR ENDED DECEMBER 31, --------------------------- 2000 1999 1998 ------- ------- ------- Cash payments for: Interest.............................................. $46,613 $52,652 $50,651 Income taxes.......................................... $ 11 $ 126 $ 159
5. INVENTORIES Inventories consisted of the following at December 31:
2000 1999 ------- ------- Raw materials, supplies and parts........................... $14,329 $16,822 Finished goods and work-in-process.......................... 9,391 5,350 Inventories under exchange agreements....................... 1,347 958 ------- ------- $25,067 $23,130 ======= =======
6. INVESTMENTS IN BASIC MANAGEMENT, INC. AND THE LANDWELL COMPANY, L.P. Prior to June 2000 the Company, through its subsidiary PAI, was the record owner of approximately 32% of the common stock of Basic Management, Inc. ("BMI"), which owns and maintains the water and power distribution network within a Henderson, Nevada industrial complex. BMI is the general partner of and has a 50% interest in The LandWell Company, L.P. ("LandWell"), which is a large landowner in Henderson and Clark County, Nevada. Prior to June 2000 PAI also owned an approximate 21% limited partnership interest in LandWell. The remainder of the common stock of BMI and the partnership interests in LandWell is owned by other companies with facilities located in the same industrial complex. Pioneer's interests in BMI and LandWell, together with certain other California and Louisiana real estate interests, constituted assets that were held for the economic benefit of the previous owners of PAI. Dividends and distributions received by Pioneer on account of such interests were deposited in a separate cash account 31 224 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (the "Contingent Payment Account"), the balance of which was to be applied in satisfaction of certain obligations of such previous owners under environmental indemnity obligations in favor of Pioneer, provided that any amounts not so applied prior to April 20, 2015 were to be remitted to such persons. Pioneer's investment in BMI, LandWell and the California and Nevada real estate interests, following the equity method, was $18.0 million at December 31, 1999, and the balance in the Contingent Payment Account was $6.7 million on that date. Within Pioneer's balance sheet as of December 31, 1999, those assets were offset by liabilities of the same amount because the right of setoff existed, as Pioneer and the previous owners owed determinable amounts, Pioneer had the right to set off the amount owed by the previous owners, Pioneer intended to set off the amount and the setoff was enforceable by law. Effective in June 2000 Pioneer and the previous owners effected an agreement pursuant to which Pioneer agreed to transfer to the previous owners the record title to the interests in BMI, LandWell and the California and Louisiana real estate interests, as well as $800,000 of the cash balance in the Contingent Payment Account. The remaining $5.3 million balance in the Contingent Payment Account, which was determined as an amount adequate to pay for future environmental remediation costs that would be subject to the indemnity obligations of the previous owners, was retained by Pioneer, in exchange for the release of the indemnity obligations. This transaction resulted in a gain of $1.8 million. 7. OTHER ASSETS Other assets consist of the following at December 31:
2000 1999 ------- ------- Debt financing assets and organizational cost assets, net of accumulated amortization of $7,598 in 2000 and $5,311 in 1999...................................................... $14,646 $18,150 Deferred tax asset, net of valuation allowance.............. 2,833 39,821 Patents, trademarks and other intangibles, net of accumulated amortization of $4,406 in 2000 and $6,741 in 1999...................................................... 3,607 8,518 Indemnification of environmental reserve.................... 2,367 7,777 Other....................................................... 1,967 2,042 ------- ------- Other assets, net................................. $25,420 $76,308 ======= =======
8. ACCRUED LIABILITIES Accrued liabilities consist of the following at December 31:
2000 1999 ------- ------- Payroll, benefits and pension............................... $ 6,234 $ 6,300 Interest and bank fees...................................... 16,760 6,671 Other accrued liabilities................................... 21,088 21,546 ------- ------- Accrued liabilities............................... $44,082 $34,517 ======= =======
9. EMPLOYEE BENEFITS Pension Plans Pioneer sponsors various non-contributory, defined benefit plans covering substantially all union and non-union employees of PAI and PCI Canada. Pension plan benefits are based primarily on participants' compensation and years of credited service. Annual pension costs and liabilities for Pioneer under its defined benefit plans are determined by actuaries using various methods and assumptions. Pioneer has agreed to contribute such amounts as are necessary to provide assets sufficient to meet the benefits to be paid to its 32 225 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) employees. Pioneer's present intent is to make annual contributions, which are actuarially computed, in amounts not more than the maximum nor less than the minimum allowable under the Internal Revenue Code. Plan assets at December 31, 2000 and 1999 consist primarily of fixed income investments and equity investments. Information concerning the pension obligation, plan assets, amounts recognized in Pioneer's financial statements and underlying actuarial assumptions is stated below.
2000 1999 ------- ------- Change in benefit obligation: Projected benefit obligation, beginning of year........... $56,966 $55,011 Service cost.............................................. 2,766 3,042 Interest cost............................................. 4,187 3,850 Actuarial gains........................................... (270) (3,573) Benefits paid............................................. (1,491) (1,379) Plan amendments........................................... 928 15 ------- ------- Projected benefit obligation, end of year................. $63,086 $56,966 ======= ======= Change in plan assets: Market value of assets, beginning of year................. $49,591 $42,643 Actual return on plan assets.............................. 2,465 5,755 Employer contributions.................................... 3,412 2,600 Benefits paid............................................. (1,518) (1,407) ------- ------- Market value of assets, end of year....................... $53,950 $49,591 ======= ======= Development of net amount recognized: Funded status............................................. $(9,157) $(7,375) Actuarial gain............................................ (428) (1,829) Unrecognized prior service cost........................... 1,467 666 ------- ------- Net amount recognized..................................... $(8,118) $(8,538) ======= ======= Amounts recognized in the Consolidated Balance Sheets: Accrued pension cost...................................... $(8,194) $(8,538) Accumulated other comprehensive income.................... 76 -- ------- ------- Net amount recognized..................................... $(8,118) $(8,538) ======= =======
2000 1999 1998 ------- ------- ------- Components of net periodic benefit cost: Service cost.............................................. $ 2,766 $ 3,042 $ 2,278 Interest cost............................................. 4,187 3,850 3,232 Expected return on plan assets............................ (4,109) (3,311) (3,020) Amortization of prior service cost........................ 126 127 49 ------- ------- ------- Net period benefit cost................................... $ 2,970 $ 3,708 $ 2,539 ======= ======= ======= Weighted-average assumptions as of December 31: Discount rate............................................. 7.5% 7.4% 6.8% Expected return on plan assets............................ 8.0% 8.0% 8.0% Rate of compensation increase............................. 4.4% 4.0% 4.0%
33 226 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Defined Contribution Plans Pioneer offers defined contribution plans under which employees may generally contribute from 1% to 15% of their compensation. Pioneer also contributes funds to the plans in the amount of 50% of employee contributions up to 4% to 6% of employee compensation, depending on the plan. Aggregate expense of Pioneer with respect to such plans was $1.2 million, $1.5 million, and $0.7 million in 2000, 1999, and 1998, respectively. Post-Retirement Benefits Other Than Pensions Effective January 1, 1999, Pioneer modified its retiree health care benefits plan. Employees retiring on or after January 1, 1999 will not receive company-paid retiree medical benefits. Eligible employees who retired prior to January 1, 1999 will continue to receive certain company-paid health care benefits. Pioneer provides certain life insurance benefits for qualifying retired employees who reached normal retirement age while working for Pioneer. Information concerning the plan obligation, the funded status, amounts recognized in Pioneer's financial statements and underlying actuarial assumptions is stated below.
2000 1999 ------- ------- Change in benefit obligation: Accumulated post-retirement benefit obligation, beginning of year................................................ $ 6,151 $28,396 Service cost.............................................. 122 99 Interest cost............................................. 579 499 Actuarial gain............................................ (39) (1,644) Benefits paid............................................. (260) (325) Plan curtailment.......................................... -- (20,874) ------- ------- Accumulated post-retirement benefit obligation, end of year................................................... $ 6,553 $ 6,151 ======= ======= Funded status............................................. $(6,553) $(6,151) Unrecognized net loss..................................... 68 146 ------- ------- Accrued benefit cost...................................... $(6,485) $(6,005) ======= =======
2000 1999 1998 ---- ---- ------ Components of net periodic benefit cost: Service cost.............................................. $122 $ 99 $ 535 Interest cost............................................. 579 499 776 Amortization of net loss.................................. 37 4 283 ---- ---- ------ Net period benefit cost................................... $738 $602 $1,594 ==== ==== ====== Weighted-average assumptions as of December 31: Discount rate............................................. 7.6% 8.0% 6.8%
34 227 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The weighted-average annual assumed health care trend rate is assumed to be 9% for 2000. The rate is assumed to decrease gradually to 4.5% in 2013 and remain level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care trend rates would have the following effects:
1-PERCENTAGE 1-PERCENTAGE POINT INCREASE POINT DECREASE -------------- -------------- Effect on total of service and interest cost components... $ 119 $ (101) Effect on post-retirement benefit obligation.............. 1,291 (1,134)
Stock Based Compensation Pioneer has two stock option plans which provide for the issuance of options to key employees. The plans authorized the issuance of options to purchase up to a total of 2.3 million shares of common stock, with vesting periods of up to three years and maximum option terms of ten years. As of December 31, 2000, options to purchase approximately 0.8 million shares were available for issuance. In addition, options for the purchase of 0.3 million shares have been issued outside the scope of the stock option plans. The following table summarizes the transactions with respect to the stock options for the three year period ended December 31, 2000:
WEIGHTED AVERAGE NUMBER OF EXERCISE PRICE EXERCISE PRICE OPTIONS SHARES PER SHARE PER SHARE EXERCISABLE --------- -------------- ---------------- ----------- Outstanding at January 1, 1998... 1,338 $4.07-$11.12 $4.79 -- 1998: Granted........................ 179 $4.89-$7.86 $7.35 Exercised...................... (47) $4.95-$4.95 $4.95 Forfeited...................... (1) $4.95-$4.95 $4.95 ----- Outstanding at December 31, 1998........................... 1,469 $4.08-$11.12 $5.10 338 1999: Granted........................ 176 $4.09-$6.53 $4.79 Exercised...................... -- -- -- Forfeited...................... (101) $4.69-$4.95 $4.90 ----- Outstanding at December 31, 1999........................... 1,544 $4.08-$11.12 $5.08 520 2000: Granted........................ 102 $5.45 $5.45 Exercised...................... (3) $4.95 $4.95 Forfeited...................... (204) $4.09-7.86 $5.01 ----- Outstanding at December 31, 2000........................... 1,439 $4.08-$11.12 $5.11 773
35 228 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes information about stock options outstanding at December 31, 2000:
OPTIONS OUTSTANDING ------------------------------------- OPTIONS EXERCISABLE WEIGHTED- ----------------------- AVERAGE WEIGHTED EXERCISABLE WEIGHTED AS OF REMAINING AVERAGE AS OF AVERAGE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE RANGE OF EXERCISE PRICES 2000 LIFE PRICE 2000 PRICE ------------------------ ------------ ----------- -------- ------------ -------- $4.00-$5.00........................... 1,075 5.5 years $ 4.44 723 $ 4.53 $5.01-$6.00........................... 152 8.4 years $ 5.51 26 $ 5.57 $6.01-$7.00........................... 31 8.0 years $ 6.53 6 $ 6.53 $7.01-$8.00........................... 141 7.4 years $ 7.86 -- $ -- $11.00-$12.00......................... 40 4.3 years $11.11 18 $11.12 ----- ------ --- Total....................... 1,439 6.0 years $ 5.11 773 $ 4.73 ===== ====== ===
All stock options are granted at fair market value of the common stock at the grant date. The fair value of the stock options granted during 2000, 1999, and 1998, was $0.4 million, $0.6 million, and $0.8 million, respectively. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for the grants: risk free interest rate of 5.2% in 2000, 4.5% in 1999, and 4.5% in 1998; expected dividend yield of 0.0%; expected life of six years. Expected volatility was 95% in 2000, 95% in 1999, and 95% in 1998. Pioneer accounts for the stock option plans in accordance with Accounting Principles Board Opinion No. 25, under which no compensation expense has been recognized for stock option awards. Had compensation expense for the plans been determined consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," Pioneer's pro forma net income and earnings per share for the three years ended December 31, 2000 would have been as indicated below:
2000 1999 1998 --------- -------- -------- Net loss: As reported....................................... $(105,563) $(50,384) $(13,017) Pro forma......................................... (105,935) (50,796) (13,591) Loss per share -- basic and diluted As reported..... $ (9.15) $ (4.38) $ (1.14) Pro forma......................................... (9.18) (4.41) (1.19)
36 229 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. LONG-TERM DEBT Long-term debt consisted of the following at December 31:
2000 1999 --------- -------- Revolving credit facility; variable interest rates based on U.S. prime rate plus 1/2% and Canadian prime rate plus 1 1/4%.................................................... $ 27,581 $ 21,163 9 1/4% Senior Secured Notes, due June 15, 2007.............. 200,000 200,000 9 1/4% Senior Secured Notes, due October 15, 2007........... 175,000 175,000 June 1997 term facility, due in quarterly installments of $250 with the balance due 2006; variable interest rate based on LIBOR or base rate............................... 96,750 97,500 November 1997 term facility, due in quarterly installments of $250 with the balance due 2006; variable interest rate based on LIBOR or base rate............................... 80,000 80,750 Promissory note, interest at 8% per annum and payable quarterly, due April 20, 2005............................. 11,463 11,463 Promissory note to Kemira Kemi AB, principal payments due in four equal installments on March 31, 2000, 2001 and 2002 and December 31, 2002, with a variable interest rate based on LIBOR plus 1.2%........................................ -- 8,016 Other notes, maturing in various years through 2014, with various installments, at various interest rates........... 11,007 11,457 --------- -------- Total............................................. 601,801 605,349 Current maturities of long-term debt........................ (597,715) (10,626) --------- -------- Long-term debt, less current maturities........... $ 4,086 $594,723 ========= ========
Contractual long-term debt maturities (which include $0.5 million in 2001 of principal payments due in 2000 on the term loans that were not made) are as follows: $10.5 million in 2001; $32.5 million in 2002; $5.0 million in 2003; $5.0 million in 2004; $5.0 million in 2005; and $543.8 million thereafter. As part of the acquisition of the Tacoma plant in June 1997, Pioneer issued and sold $200 million of 9 1/4% Senior Secured Notes due June 15, 2007. Interest is payable semi-annually on June 15 and December 15. Effective December 15, 2000, Pioneer suspended payments of interest on the notes which, after a 30 day grace period, created a default under the indenture. Accordingly, the amount of the notes outstanding has been classified as a current liability at December 31, 2000. As part of the acquisition of the Tacoma plant in June 1997, Pioneer also entered into a nine and one-half year $100 million term facility, due in quarterly installments of $250,000 with the balance due in 2006. Pioneer did not make a principal payment that was due on December 28, 2000, which created an event of default under the terms of the facility. Accordingly, the default interest rate is in effect and the amount outstanding under the facility has been classified as a current liability at December 31, 2000. As part of the acquisition of the PCI Canada assets in November 1997, Pioneer issued and sold $175 million of 9 1/4% Senior Secured Notes due October 15, 2007. Interest is payable semi-annually on April 15 and October 15. When Pioneer defaulted on the $200 million 9 1/4 % Senior Secured Notes due June 15, 2007, it constituted an event of default under the indenture for the $175 million 9 1/4% Senior Secured Notes due October 15, 2007. Accordingly, the amount of the notes outstanding has been classified as a current liability at December 31, 2000. As part of the acquisition of the PCI Canada assets in November 1997, Pioneer also entered into a nine and one-quarter year $83 million term facility, due in quarterly installments of $250,000 with the balance due 37 230 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) in 2006. Pioneer did not make a principal payment that was due on December 28, 2000, which created an event of default under the terms of the facility. Accordingly, the default interest rate is in effect and the amount of outstanding under the facility has been classified as a current liability at December 31, 2000. In September 1999, PCA entered into a $50.0 million three-year revolving credit facility with Congress Financial Corporation (Southwest) (the "Revolving Facility") that replaced an existing $50.0 million revolving facility (the "Bank Credit Facility"). The Revolving Facility provides for revolving loans in an aggregate amount up to $50.0 million, subject to borrowing base limitations related to the level of accounts receivable and inventory, which, together with certain other collateral, secure borrowings under the facility. The total borrowing base at December 31, 2000 of $45.8 million was subject to a reserve of $5.0 million until the ratio of EBITDA to fixed charges, as defined in the Revolving Facility, exceeds 1.15:1 for a period of two consecutive quarters. As of December 31, 2000, there were letters of credit outstanding of $3.5 million and loans outstanding of $27.6 million. Based on the cross default provisions contained in the Revolving Facility agreement, the facility is currently in default, may be subject to the default rate of interest and is classified as a current liability at December 31, 2000. The Senior Secured Notes due June 15, 2007, and the Senior Secured Notes due October 15, 2007, are senior obligations of Pioneer, ranking pari passu with all existing and future senior indebtedness of Pioneer. These notes and both term facilities are fully and unconditionally guaranteed on a joint and several basis by all of PCA's direct and indirect wholly-owned subsidiaries and are secured by first mortgage liens on certain manufacturing facilities. Following is a summary of selected financial information as of December 31, 2000 and 1999 for the direct and indirect subsidiaries which, as of December 31, 2000, were not guarantors of the senior notes and term facilities.
2000 1999 ------- ------- Balance sheet data: Current assets............................................ $ 272 $ 1,148 Non-current assets........................................ -- 7,628 Current liabilities....................................... -- 13,224 Non-current liabilities................................... 2,337 9,959 Operating statement data: Revenues.................................................. 6,329 12,330 Gross margin.............................................. 1,116 602 Net income (loss)......................................... 17,016 (2,596)
The Company is a holding company with no operating assets or operations. Financial statements of the Company's direct and indirect wholly-owned subsidiaries are not separately included herein because Pioneer's management does not believe this information would be material to investors or lenders. The senior notes are redeemable at a premium at Pioneer's option starting in 2002. Upon change of control, as defined in the agreement, Pioneer is required to offer to purchase all the senior notes for 101% of the principal due. Pioneer may prepay the June 1997 term facility and the November 1997 term facility without penalty or premium. Pioneer's long-term debt agreements contain various restrictions which, among other things, limit the ability of Pioneer to incur additional indebtedness and to acquire or dispose of assets or operations. PCA is restricted in paying dividends to the Company and providing cash to the unrestricted subsidiaries, as defined, to the sum of $5.0 million plus 50% of the cumulative consolidated net income of PCA since June 1997. As of December 31, 2000, no additional distributions were allowable under the debt covenants. PCA's ability to incur additional new indebtedness is restricted by a covenant requiring an interest coverage ratio of at 38 231 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) least 2.0 to 1.0 for the prior four fiscal quarters. As of December 31, 2000, PCA did not meet this requirement and accordingly, additional new indebtedness, other than borrowing available under the Revolving Facility, is not allowed. 11. FINANCIAL INSTRUMENTS Concentration of Credit Risk Pioneer manufactures and sells its products to companies in diverse industries. Pioneer performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Pioneer's sales are primarily to customers throughout the United States and in eastern Canada. Credit losses relating to these customers have historically been immaterial. Pioneer maintains cash deposits with major banks, which may exceed federally insured limits. Pioneer periodically assesses the financial condition of the institutions and believes that any risk of loss is minimal. Investments It is the policy of Pioneer to invest its excess cash in securities whose value is not subject to market fluctuations such as master notes of issuers rated at the time of such investment at least "A-2" or the equivalent thereof by S&P or at least "P-2" or the equivalent thereof by Moody's or any bank or financial institution party to the Revolving Facility. Fair Value of Financial Instruments In preparing disclosures about the fair value of financial instruments, Pioneer has assumed that the carrying amount approximates fair value for cash and cash equivalents, receivables, short-term borrowings, accounts payable and certain accrued expenses because of the short maturities of those instruments. The fair values of debt instruments are estimated based upon quoted market values (if applicable), or based on debt with similar terms and remaining maturities. Considerable judgment is required in developing these estimates and, accordingly, no assurance can be given that the estimated values presented herein are indicative of the amounts that would be realized in a free market exchange. Pioneer held no derivative financial instruments as of December 31, 2000 and 1999. At December 31, 2000, the fair market value of all of Pioneer's financial instruments approximated the book value with the exceptions of the 9 1/4% Senior Notes due June 15, 2007 and the 9 1/4% Senior Notes due October 15, 2007, which had a book value of $200.0 million and $175.0 million, respectively and a fair value, based upon quoted market prices, of $36.0 million and $40.3 million, respectively. 39 232 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 12. GEOGRAPHIC INFORMATION Financial information relating to Pioneer by geographical area is as follows. Revenues are attributed to countries based on delivery point.
2000 1999 1998 -------- -------- -------- REVENUES United States........................................ $249,377 $207,754 $291,460 Canada............................................... 90,387 84,274 87,614 Other................................................ 1,717 4,614 5,614 -------- -------- -------- Consolidated......................................... $341,481 $296,642 $384,688 ======== ======== ======== LONG-LIVED ASSETS United States........................................ $356,357 $345,573 $399,219 Canada............................................... 146,174 186,514 175,655
No individual customer constituted 10% or more of the total revenues in 1998, 1999 or 2000. 13. UNUSUAL CHARGES During 1998, Pioneer disposed of its pool chemicals business. This disposal included the sale of certain packaging and transportation equipment for bottled bleach and hydrochloric acid. Pioneer recognized a $1.8 million loss from the disposal of assets plus an unusual charge of approximately $1.0 million related to closing Pioneer's facility at City of Industry, California. Unusual charges in 1998 also include approximately $0.7 million related to the consolidation and downsizing of certain administrative functions. Substantially all accrued unusual charges were expended by December 31, 1998. 14. INTEREST EXPENSE, NET Interest expense, net consisted of the following for the indicated periods:
YEAR ENDED DECEMBER 31, --------------------------- 2000 1999 1998 ------- ------- ------- Interest expense........................................ $56,702 $52,969 $52,006 Interest income......................................... (374) (1,042) (1,485) ------- ------- ------- Interest expense, net................................... $56,328 $51,927 $50,521 ======= ======= =======
Capitalized interest was $0.3 million in 1999. No interest was capitalized in 2000 or in 1998. 15. COMMITMENTS AND CONTINGENCIES Letters of Credit At December 31, 2000, Pioneer had letters of credit and performance bonds outstanding of approximately $3.5 million and $1.8 million, respectively. These letters of credit and performance bonds were issued for the benefit of customers under sales agreements securing delivery of products sold and state environmental agencies as required for manufacturers in the state. The letters of credit expire at various dates in 2001. No amounts were drawn on the letters of credit at December 31, 2000. 40 233 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Purchase Commitments Pioneer has various purchase commitments related to its operations. Pioneer has committed to purchase salt used in its production processes under contracts which continue through the year 2004 with rates similar to prevailing market rates. Pioneer also has various commitments related to the purchase of electricity, which continue through the year 2008 at rates similar to prevailing market rates. Required purchase quantities of commitments in excess of one year at December 31, 2000 are as follows:
SALT-TONS ELECTRICITY-MWH --------- --------------- 2001........................................................ 1,414 333,540 2002........................................................ 612 395,940 2003........................................................ 447 395,940 2004........................................................ 67 395,940 2005........................................................ -- 395,940 Thereafter.................................................. -- 1,111,840 ----- --------- Total commitment quantities....................... 2,540 3,029,140 ===== =========
During the years ended December 31, 2000, 1999, and 1998, all required purchase quantities under the above commitments were consumed during normal operations. Operating Leases Pioneer leases certain manufacturing and distribution facilities, computer equipment, and administrative offices under non-cancelable leases. Minimum future rental payments on such leases with terms in excess of one year in effect at December 31, 2000 are as follows: 2001...................................................... $12,905 2002...................................................... 8,992 2003...................................................... 6,379 2004...................................................... 3,985 2005...................................................... 1,708 Thereafter................................................ 967 ------- Total minimum obligations....................... $34,936 =======
Lease expense charged to operations for the years ended December 31, 2000, 1999, and 1998 was approximately $20.2 million, $17.7 million, and $19.2 million, respectively. Litigation Pioneer is party to various legal proceedings and potential claims arising in the ordinary course of its businesses. In the opinion of management, Pioneer has adequate legal defenses and/or insurance coverage with respect to these matters and management does not believe that they will materially affect Pioneer's financial position or results of operations. 16. INCOME TAXES For financial reporting purposes, deferred income taxes are determined utilizing an asset and liability approach. This method gives consideration to the future tax consequences associated with differences between the financial accounting basis and tax basis of the assets and liabilities, and the ultimate realization of any deferred tax asset resulting from such differences. Pioneer considers all foreign earnings as being permanently invested in that country. 41 234 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Components of income (loss) before income taxes and income taxes are as follows:
2000 1999 1998 -------- -------- -------- Income (loss) before income taxes: U.S. .............................................. $(57,932) $(55,924) $(27,267) Foreign............................................ (6,600) (20,674) 9,573 -------- -------- -------- Total...................................... $(64,532) $(76,598) $(17,694) ======== ======== ======== Deferred income tax provision (benefit): U.S. .............................................. $ 42,353 $(18,010) $ (8,562) Foreign............................................ (2,686) (6,973) 4,375 State.............................................. 1,364 (1,231) (490) -------- -------- -------- Total deferred............................. 41,031 (26,214) (4,677) -------- -------- -------- Total income tax........................... $ 41,031 $(26,214) $ (4,677) ======== ======== ========
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax liabilities and assets are as follows at December 31:
2000 1999 -------- -------- Deferred tax liabilities: Property, plant and equipment............................. $(33,092) $(32,987) -------- -------- Total deferred tax liabilities.................... (33,092) (32,987) -------- -------- Deferred tax assets: Post employment benefits.................................. 5,532 3,972 Environmental reserve..................................... 3,178 4,656 Equity in partnership..................................... 4,082 4,082 Tax credit carryovers..................................... 3,037 1,956 Other deferred assets..................................... 711 890 Net operating loss carryforward........................... 89,017 61,070 -------- -------- Total deferred tax assets......................... 105,557 76,626 Valuation allowance for deferred tax assets................. (67,835) -- -------- -------- Net deferred tax assets................................ 37,722 76,626 -------- -------- Net deferred taxes..................................... $ 4,630 $ 43,639 ======== ========
The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense (benefit) for the periods presented is as follows:
2000 1999 1998 ------------------ ------------------ ----------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT -------- ------- -------- ------- ------- ------- Tax at U.S. statutory rates... $(22,586) (35)% $(26,809) (35)% $(6,193) (35)% State and foreign income taxes, net of federal tax benefit..................... (6,068) (9) (1,186) (1) (142) (1) Amortization of non-deductible Goodwill.................... 1,850 3 1,781 2 1,658 9 Valuation allowance........... 67,835 105 -- -- -- -- -------- --- -------- --- ------- --- $ 41,031 64% $(26,214) (34)% $(4,677) (27)% ======== === ======== === ======= ===
42 235 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2000, Pioneer had available U.S. net operating loss carryforward ("NOL") of approximately $224 million which expires in 2009 through 2020 and $20 million of foreign NOL expiring in 2004 through 2008. The NOLs are available for offset against future taxable income generated during the carryforward period. In assessing the value of the deferred tax assets, management considers whether it is more likely than not that all of the deferred tax assets will be realized. Projected future income tax planning strategies and the expected reversal of deferred tax liabilities are considered in making this assessment. In 2000, based on the uncertainties as to the effect of the financial restructuring on the NOLs and the level of historical taxable income and projections for future taxable income over the periods in which the NOLs are available for use, it was estimated that it is more likely than not that Pioneer will not realize the full benefits of deferred tax assets. Accordingly, a valuation allowance of $67.8 million has been recorded as of December 31, 2000. 17. OTHER LONG-TERM LIABILITIES -- ENVIRONMENTAL Pioneer's operations are subject to extensive environmental laws and regulations related to protection of the environment, including those applicable to waste management, discharge of materials into the air and water, clean-up liability from historical waste disposal practices, and employee health and safety. At several of Pioneer's facilities, investigations or remediation is underway and at some of these locations regulatory agencies are considering whether additional actions are necessary to protect or remediate surface or groundwater resources. Pioneer could be required to incur additional costs to construct and operate remediation systems in the future. In addition, at several of its facilities Pioneer is in the process of replacing or closing ponds for the collection of wastewater. Pioneer plans to spend approximately $1.5 million during the next three years on improvements to discontinue the use of three chlor-alkali waste water disposal ponds at the Henderson plant, replacing them with systems to recycle wastewater. Pioneer believes that it is in substantial compliance with existing government regulations. Pioneer's Henderson plant is located within what is known as the "Basic Complex." Soil and groundwater contamination have been identified within and adjoining the Basic Complex, including land owned by Pioneer. A groundwater treatment system was installed at the facility in 1983 and, pursuant to a Consent Agreement with the Nevada Division of Environmental Protection, studies are being conducted to further evaluate soil and groundwater contamination at the facility and other properties within the Basic Complex and to determine whether additional remediation will be necessary with respect to Pioneer's property. In connection with the October 1988 acquisition of the chlor-alkali business by PCA's predecessor (the "Predecessor Company"), ICI Delaware Holdings, Inc. and ICI Americas, Inc. (such companies or their successors, the "ZENECA Companies") agreed to indemnify the Predecessor Company for certain environmental liabilities (the "ZENECA Indemnity"), including liabilities associated with operations at Pioneer's plant located in Henderson, Nevada (the "Henderson Plant"). In general, the ZENECA Companies agreed to indemnify the Predecessor Company for environmental costs which arise from or relate to pre-acquisition actions which involved disposal, discharge, or release of materials resulting from non-chlor-alkali manufacturing operations at the Henderson Plant and at other properties within the same industrial complex. Payments under the indemnity cannot exceed approximately $65 million. Due to the change in ownership resulting from the acquisition of the Predecessor Company by PCA (the "Pioneer Acquisition"), the ZENECA Indemnity terminated on April 20, 1999. The ZENECA Indemnity continues to cover those claims as to which proper notice was given to the ZENECA Companies and certain other conditions had been satisfied. Management believes that proper notice was provided to the ZENECA Companies with respect to outstanding claims under the ZENECA Indemnity, but the amount of such claims has not yet been determined given the ongoing nature of the environmental work at Henderson. Pioneer believes that the ZENECA Companies will continue to honor their obligations under the ZENECA Indemnity for claims properly presented by Pioneer. It is possible, however, that disputes could arise between 43 236 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the parties and that Pioneer would have to subject its claims for clean-up expenses, which could be substantial, to the contractually established arbitration process. In the opinion of management, any environmental liability in excess of the amount indemnified and accrued on the consolidated balance sheet would not have a material adverse affect on the consolidated financial statements. In the agreement relating to the Pioneer Acquisition, the sellers agreed to indemnify Pioneer for certain environmental liabilities that result from certain discharges of hazardous materials, or violations of environmental laws, arising prior to April 20, 1995 (the "Closing Date") from or relating to the PCA plant sites or arising before or after the Closing Date with respect to certain environmental liabilities relating to assets held by Pioneer for the benefit of the sellers (the "Sellers' Indemnity"). Amounts payable pursuant to the Sellers' Indemnity were generally payable as follows: (i) out of certain reserves established on the Predecessor Company's balance sheet at December 31, 1994; (ii) either by offset against the amounts payable under the notes issued to the sellers or from deposit account balances held by Pioneer (see Note 6); and (iii) in certain circumstances and subject to specified limitations, out of the personal assets of the sellers. Pioneer was required to reimburse the sellers for amounts paid under the Sellers' Indemnity with amounts recovered under the ZENECA Indemnity or from other third parties. In 1999 disputes arose between the Company and the Sellers as to the proper scope of the indemnity. During June 2000, the Company and the sellers effected an agreement pursuant to which the Company, in exchange for cash and other consideration, relieved the sellers from their environmental indemnity obligations and agreed to transfer to the Sellers the record title to the Contingent Payment Properties and the $800,000 remaining cash balance in the Contingent Payment Account that was determined to be in excess of anticipated environmental liability. The cash balance in the Contingent Payment Account at the time of this transaction was $6.1 million. This cash balance was not previously reflected on the Company's balance sheet since a right of setoff existed. This transaction resulted in a gain of $1.8 million. Remediation costs are accrued based on estimates of known environmental remediation exposure. Such accruals are based upon management's best estimate of the ultimate cost and are recorded even if significant uncertainties exist over the ultimate cost of the remediation. Ongoing environmental compliance cost, including maintenance and monitoring costs, are charged to operations as incurred. The liabilities are based upon all available facts, existing technology, past experience and cost-sharing arrangements, including the viability of other parties. Charges made against income for recurring environmental matters, included in "cost of sales" on the statements of operations, totaled approximately $2.7 million, $2.8 million and $3.4 million for the years ended December 31, 2000, 1999, and 1998, respectively. Capital expenditures for environmental-related matters at existing facilities approximated $1.8 million, $1.2 million and $2.5 million for the years ended December 31, 2000, 1999, and 1998, respectively. Future environmental-related capital expenditures will depend upon regulatory requirements, as well as timing related to obtaining necessary permits and approvals. Estimates of future environmental restoration and remediation costs are inherently imprecise due to currently unknown factors such as the magnitude of possible contamination, the timing and extent of such restoration and remediation, the extent to which such costs are recoverable from third parties, and the extent to which environmental laws and regulations may change in the future. The Predecessor Company established a reserve at the time of its acquisition of the Henderson, Nevada and St. Gabriel, Louisiana facilities with respect to potential remediation costs relating to matters not covered by the ZENECA Indemnity, consisting primarily of remediation costs that may be incurred by Pioneer for chlor-alkali-related remediation of the Henderson and St. Gabriel facilities. The recorded accrual included certain amounts related to anticipated closure and post-closure actions that may be required in the event that operation of the present chlor-alkali plants ceases. Such accrual, in the amount of $5.9 million, is recorded in Pioneer's consolidated balance sheets at December 31, 2000. However, complete analysis and study has not been completed, and therefore, additional charges may be recorded in the event a decision for closure is made. 44 237 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 1994, the Predecessor Company recorded an additional $3.2 million environmental reserve related to pre-closing actions at sites that are the responsibility of the ZENECA Companies. In June 2000, based on the results of a third party environmental analysis, the $3.2 million environmental reserve and offsetting receivable discussed below were adjusted to the discounted future cash flows for estimated environmental remediation, which was $2 million. Reserves of $2 million and $3.2 million were recorded in Pioneer's consolidated balance sheets at December 31, 2000 and 1999, respectively. Other assets include an account receivable of the same amount from the ZENECA Companies. Pioneer believes it will be reimbursed by the ZENECA Companies for substantially all of such costs that are incurred at the Henderson Plant and other properties within the same industrial complex. Additionally, certain other environmental matters exist which have been assumed directly by the ZENECA Companies. No assurance can be given that actual costs will not exceed accrued amounts. The imposition of more stringent standards or requirements under environmental laws or regulations, new developments or changes respecting site cleanup costs, or a determination that Pioneer is potentially responsible for the release of hazardous substances at other sites could result in expenditures in excess of amounts currently estimated by Pioneer to be required for such matters. Further, there can be no assurance that additional environmental matters will not arise in the future. 18. RELATED PARTY TRANSACTIONS On December 28, 1999, Pioneer sold its 15% partnership interest in Saguaro Power Company ("Saguaro"), which owns a cogeneration plant located in Henderson, Nevada. Pioneer's interest in Saguaro was accounted for using the cost method of accounting. Prior to this sale, Pioneer sold certain products and services to and purchased steam from Saguaro at market prices. Transactions with Saguaro prior to the sale were as follows:
1999 1998 ------ ------ Sales to Saguaro............................................ $ 874 $ 778 Purchases from Saguaro...................................... 1,585 1,284 Partnership cash distribution from Saguaro (included in other income, net)........................................ 1,020 975
Accounts receivable from and accounts payable to Saguaro were not significant to Pioneer's consolidated balance sheet. Pioneer is a party to an agreement with BMI for the delivery of Pioneer's water to the Henderson production facility. The agreement provides for the delivery of a minimum of eight million gallons of water per day. The agreement expires on December 31, 2014, unless terminated earlier in accordance with the provisions of the agreement. In addition, BMI owns the power facilities which transmit electricity to the Henderson facility. For the year ended December 31, 2000, 1999, and 1998, for its services BMI charged operating expenses to Pioneer of approximately $1.5 million, $1.6 million, and $1.3 million, respectively. During 1999, Pioneer entered into arrangements with an affiliate of Strategic Distribution, Inc. ("Strategic") pursuant to which Strategic's affiliate provides procurement, handling and data management of maintenance, repair and operating supplies at Pioneer's facilities in Henderson, Nevada and St. Gabriel, Louisiana. William R. Berkley, Chairman of the Board of Pioneer, owns approximately twenty-three percent of Strategic's common stock, and serves as chairman of the board of directors of the company. Andrew R. Bursky, a Pioneer director, is a director of Strategic, and Jack Nusbaum, a Pioneer director, is also a director of Strategic. The Strategic affiliate was paid $4.0 million and $2.5 million for the years ended December 31, 2000 and 1999, respectively, for services rendered to Pioneer under the agreement. 45 238 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 19. LOSS PER SHARE Per share information for all periods presented reflects 7% stock dividends on the Class A and Class B Common Stock issued in 1999 and 1998. Computational amounts for loss per share are as follows:
2000 1999 1998 --------- -------- -------- Net loss............................................ $(105,563) $(50,384) $(13,017) ========= ======== ======== Basic and Diluted Earnings Per Share: Weighted average number of common shares outstanding.................................... 11,535 11,515 11,458 ========= ======== ======== Loss per share.................................... $ (9.15) $ (4.38) $ (1.14) ========= ======== ========
20. RECENT ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The adoption of SFAS 133 effective January 1, 2001 did not have a significant impact on the financial position, results of operations, or cash flows of the Company. 21. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- Year ended December 31, 2000 Revenues................................. $ 84,304 $ 89,157 $ 87,363 $ 80,657 Operating income (loss).................. (807) 807 (6,243) (5,270) Loss before income taxes................. (14,171) (8,692) (21,203) (20,466) Net loss................................. (9,586) (5,875) (13,358) (76,744) Per share data(1) -- Basic and diluted net loss............ $ (0.83) $ (0.51) $ (1.16) $ (6.65) ======== ======== ======== ======== Year ended December 31, 1999 Revenues................................. $ 70,949 $ 69,030 $ 74,872 $ 81,791 Operating income (loss).................. 4,768 (14,622) (12,599) (16,394) Loss before income taxes................. (8,553) (27,247) (23,201) (17,597) Net loss................................. (6,033) (18,348) (14,567) (11,436) Per share data(1) -- Basic and diluted net loss............ $ (0.52) $ (1.59) $ (1.26) $ (0.99) ======== ======== ======== ========
--------------- No cash dividends were declared or paid by the Company in 2000, 1999, or 1998. (1) Per share information for all periods presented reflects 7% stock dividends on the Class A and Class B Common Stock in December 1999. 46 239 PIONEER COMPANIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 22. SUBSEQUENT EVENT In March 2001, Pioneer announced a fifty percent curtailment in the capacity of the Tacoma plant due to an inability to obtain sufficient power at reasonable prices. The primary cost related to the Tacoma curtailment is severance expense, which management expects to be approximately $1.9 million. Management has reviewed Tacoma's long-lived assets and goodwill to assess whether the assets are impaired in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Based on the results of this analysis, management believes that the Tacoma long-lived assets and goodwill are not impaired. 47 240 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Pursuant to General Instruction G of Form 10-K, the information called for by Item 10 of Part III of Form 10-K is incorporated by reference to the information set forth in Pioneer's definitive proxy statement relating to the 2001 Annual Meeting of Stockholders of Pioneer (the "2001 Proxy Statement") to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in response to Items 401 and 405 of Regulation S-K under the Securities Act of 1933, as amended, and the Exchange Act ("Regulation S-K"), or if the 2001 Proxy Statement is not so filed within 120 days after December 31, 2000, such information will be included in an amendment to this report filed not later than the end of such period. Reference is also made to the information appearing in Item 4.a of Part I of this report under the caption "Executive Officers of the Registrant." ITEM 11. EXECUTIVE COMPENSATION. Pursuant to General Instruction G of Form 10-K, the information called for by Item 11 of Part III of Form 10-K is incorporated by reference to the information set forth in the 2001 Proxy Statement in response to Item 402 of Regulation S-K, or if the 2001 Proxy Statement is not so filed within 120 days after December 31, 2000, such information will be included in an amendment to this report filed not later than the end of such period. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Pursuant to General Instruction G of Form 10-K, the information called for by Item 12 of Part III of Form 10-K is incorporated by reference to the information set forth in the 2001 Proxy Statement in response to Item 403 of Regulation S-K, or if the 2001 Proxy Statement is not so filed within 120 days after December 31, 2000, such information will be included in an amendment to this report filed not later than the end of such period. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Pursuant to General Instruction G of Form 10-K, the information called for by Item 13 of Part III of Form 10-K is incorporated by reference to the information set forth in the 2001 Proxy Statement in response to Item 404 of Regulation S-K, or if the 2001 Proxy Statement is not so filed within 120 days after December 31, 2000, such information will be included in an amendment to this report filed not later than the end of such period. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) List of Documents Filed. (1) The financial statements filed as part of this report are listed in the Index to Financial Statements under Item 8 on page 20 hereof. (2) Additional financial information and schedules included pursuant to the requirements of Form 10-K are listed in the Index to Financial Statements under Item 8 on page 20 hereof. 48 241 (3) Exhibits The exhibits indicated by an asterisk (*) are incorporated by reference. The exhibits indicated by a plus sign (+) each constitute a management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to the requirements of Item 14(c) of Form 10-K.
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 2.1* -- Stock Purchase Agreement, dated as of March 24, 1995, by and among the Company, PCA and the Sellers parties thereto (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K filed on May 5, 1995) 2.2* -- Asset Purchase Agreement, dated as of May 14, 1997, by and between OCC Tacoma, Inc. and the Company (incorporated by reference to Exhibit 2 to Pioneer's Current Report on Form 8-K filed on July 1, 1997) 2.3(a)* -- Asset Purchase Agreement, dated as of September 22, 1997, between PCI Chemicals Canada Inc. ("PCICC"), PCI Carolina, Inc. and the Company and ICI Canada Inc., ICI Americas, Inc. and Imperial Chemical Industries plc (incorporated by reference to Exhibit 2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997) 2.3(b)* -- First Amendment to Asset Purchase Agreement, dated as of October 31, 1997, between PCICC, PCI Carolina, Inc. and the Company and ICI Canada Inc., ICI Americas, Inc. and Imperial Chemical Industries plc (incorporated by reference to Exhibit 2 to Pioneer's Current Report on Form 8-K filed on November 17, 1997) 3.1(a)* -- Third Restated Certificate of Incorporation of the Company filed with Secretary of State of Delaware on May 21, 1993 (incorporated by Reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993) 3.1(b)* -- First Amendment to Third Restated Certificate of Incorporation of the Company filed with Secretary of State of Delaware on April 20, 1995 (incorporated by reference to Exhibit 3.1(b) to Pioneer's Annual Report on Form 10-K for the year ended December 31, 1995) 3.1(c)* -- Second Amendment to Third Restated Certificate of Incorporation of the Company filed with Secretary of State of Delaware on April 27, 1995 (incorporated by reference to Exhibit 3.1(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1995) 3.2* -- By-laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998) 4.1* -- Certificate of Designations of Series A Preferred Stock of the Company (incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K filed on July 1, 1997) 4.2* -- Indenture, dated as of June 17, 1997, by and among PCA, the Subsidiary Guarantors defined therein and United States Trust Company of New York, as Trustee, relating to $200,000,000 principal amount of 9 1/4% Series A Senior Notes due 2007, including form of Note and Guarantees (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K filed on July 1, 1997) 4.3(a)* -- Deed of Trust, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PAI (Tacoma, Washington) (incorporated by reference to Exhibit 4.2(a) to PCA's Registration Statement on Form S-4, as amended (file no. 333-30683))
49 242
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.3(b)* -- Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PAI (St. Gabriel, Louisiana) (incorporated by reference to Exhibit 4.2(b) to PCA's Registration Statement on Form S-4, as amended (file no. 333-30683)) 4.3(c)* -- Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by PAI (Henderson, Nevada) (incorporated by reference to Exhibit 4.2(c) to PCA's Registration Statement on Form S-4, as amended (file no. 333-30683)) 4.4(a)* -- Term Loan Agreement, dated as of June 17, 1997, among PAI, various financial institutions as Lenders, DLJ Capital Funding, inc., as the Syndication Agent, Salomon Brothers Holding Company Inc, as the Agent (the "PAI Term Loan Agreement") (incorporated by reference to Exhibit 4.3(a) to PCA's Registration Statement on Form S-4, as amended (file no. 333-30683)) 4.4(b)* -- Subsidiary Guaranty, dated June 17, 1997, executed by each of the Subsidiaries party thereto, as guarantor, respectively, in favor of the Lenders, guaranteeing the obligations of one another under the PCA Term Loan Agreement (incorporated by reference to Exhibit 4.3(b) to PCA's Registration Statement on Form S-4, as amended (file No. 333-30683)) 4.5* -- Security Agreement, dated as of June 17, 1997, among PAI and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.4 to PCA's Registration Statement on Form S-4, as amended (file no. 333-30683)) 4.6* -- Stock Pledge Agreement, dated as of June 17, 1997, among PCA and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5 to PAI's Registration Statement on Form S-4, as amended (file no. 333-30683)) 4.7* -- Intercreditor and Collateral Agency Agreement, dated as of June 17, and Collateral Agent, Bank of America Illinois, as Agent, PCA and PAI (incorporated by reference to Exhibit 4.7 to PCA's Registration Statement on Form S-4, as amended (file no. 333-30683)) 4.8* -- Indenture, dated as of October 30, 1997, by and among PCICC, the 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 (incorporated by reference to Exhibit 4.1 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.9* -- Deed of Hypothec, dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.2 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.10* -- Affiliate Security Agreement, dated as of October 30, 1997, among PCICC, Pioneer Licensing, Inc. and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.3 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.11* -- Borrower (Canadian) Security Agreement, dated as of October 30, 1997, between PCICC and United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.4 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221))
50 243
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.12(a)* -- Demand Debenture (Ontario), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.12(b)* -- Demand Debenture (Quebec), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.12(c)* -- Demand Debenture (New Brunswick), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.5(c) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.13(a)* -- Demand Pledge Agreement (Ontario), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.13(b)* -- Demand Pledge Agreement (Quebec), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.13(c)* -- Demand Pledge Agreement (New Brunswick), dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.6(c) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.14* -- Subsidiary Security Agreement, dated as of October 30, 1997, by PCICC in favor of United States Trust Company of New York, as Collateral Agent (incorporated by reference to Exhibit 4.7 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.15(a)* -- Term Loan Agreement, dated as of October 30, 1997, among PCA, PAI, various financial institutions, as Lenders, DLJ Capital Funding, Inc., 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 (incorporated by reference to Exhibit 4.8(a) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 4.15(b)* -- Affiliate Guaranty, dated as of October 30, 1997, by and among PCICC, the Guarantors identified therein and the Initial Purchasers identified therein (incorporated by reference to Exhibit 4.8(b) to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221))
51 244
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.16* -- Amended and Restated Loan and Security Agreement by and among Congress Financial Corporation (Southwest) as U.S. Lender, Congress Financial Corporation (Canada) as Canadian Lender, and Congress Financial Corporation (Southwest) as Agent for Lenders and Pioneer Chlor Alkali Company, Inc., All-Pure Chemical Co., Kemwater North America Company, PCI Chemicals Canada Inc./PCI Chimie Canada Inc., PCI Carolina, Inc. and T.C. Products, Inc., as Borrowers and Pioneer Americas, Inc., Imperial West Chemical Co., Black Mountain Power Company, T.C. Holdings, Inc., Pioneer Licensing, Inc. and Pioneer (East), Inc., as Guarantors dated as of September 24, 1999 (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999) 10.1* -- Contingent Payment Agreement, dated as of April 20, 1995, by and among the Company, PCA and the Sellers party thereto (incorporated by Reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 5, 1995) 10.2* -- Tax Sharing Agreement, dated as of April 20, 1995, by and among the Company, PCA and the Subsidiary Guarantors (incorporated by reference to Exhibit 10.3 to PCA's Registration Statement on Form S-4, as amended (file No. 33-98828)) 10.3*+ -- Pioneer Companies, Inc. 1995 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to PCA's Registration Statement on Form S-4, as amended (file No. 33-98828)) 10.4*+ -- Non-Qualified Stock Option Agreement, dated January 4, 1997, between Pioneer and Michael J. Ferris (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996) 10.5*+ -- Non-Qualified Stock Option Agreement, dated May 15, 1997, between the Company and Andrew M. Bursky (incorporated by reference to Exhibit 10.11 to PCICC's Registration Statement on Form S-4, as amended (file no. 333-41221)) 21 -- Subsidiaries of the Company 23.1 -- Independent Auditors' Consent
(b) Reports on Form 8-K. On December 19, 2000, the Company filed a report on Form 8-K. Under Item 5 of the report ("Other Events"), the Company reported that it had issued a press release announcing that Pioneer Corporation of America, a wholly-owned subsidiary of the Company, was delaying the payment of interest due on December 15, 2000, on outstanding 9 1/4% Senior Secured Notes due June 2007. The press release also disclosed that the Company had entered into discussions with an institutional investor with respect to a three-year credit facility of up to $35 million subject to specified conditions. It was stated that if the new financing was consummated within thirty days, Pioneer would be able to pay the delayed interest payment within the grace period allowed by the Notes, and that necessary consents would be sought from the holders of the Company's senior indebtedness. Further, the Company disclosed that if the financing was not arranged or if the necessary consents were not obtained, the Company would seek a restructuring of the senior indebtedness. In a subsequent Form 8-K filed on January 8, 2001, the Company reported that a subsequent press release had been issued, announcing that principal payments due on additional indebtedness had not been paid, that the discussions with respect to a new credit facility had been terminated, and that the Company was developing a more comprehensive financial restructuring program. 52 245 (c) Financial Statement Schedule. Filed herewith as a financial statement schedule is Schedule II with respect to Valuation and Qualifying Accounts for Pioneer. All other schedules have been omitted because they are not applicable, not required or the required information is included in the financial statements or notes thereto. 53 246 SCHEDULE II PIONEER COMPANIES, 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 ----------- ---------- ---------- --------- ---------- ---------- Year Ended December 31, 2000: Allowance for doubtful accounts.... $2,750 $93 -- $(1,451)(A)(B) $1,392 Year Ended December 31, 1999: Allowance for doubtful accounts.... 3,122 405 -- (777)(A) 2,750 Year Ended December 31, 1998: Allowance for doubtful accounts.... 3,602 205 -- (685)(A) 3,122
--------------- (A) Uncollectible accounts written off, net of recoveries. (B) Includes reversal of $1,158 of KNA allowance in connection with the sale of that business. 54 247 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. By: /s/ MICHAEL J. FERRIS ---------------------------------- Michael J. Ferris President and Chief Executive Officer April 11, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ MICHAEL J. FERRIS President and Chief Executive April 11, 2001 ----------------------------------------------------- Officer and Director (Michael J. Ferris) /s/ PHILIP J. ABLOVE Executive Vice President and April 11, 2001 ----------------------------------------------------- Chief Financial Officer and (Philip J. Ablove) Director (Principal Financial Officer) /s/ PIERRE PRUD'HOMME Vice President, Controller April 11, 2001 ----------------------------------------------------- (Principal Accounting (Pierre Prud'homme) Officer) /s/ WILLIAM R. BERKLEY Chairman of the Board April 11, 2001 ----------------------------------------------------- (William R. Berkley) /s/ ANDREW M. BURSKY Director April 11, 2001 ----------------------------------------------------- (Andrew M. Bursky) /s/ DONALD J. DONAHUE Director April 11, 2001 ----------------------------------------------------- (Donald J. Donahue) /s/ RICHARD C. KELLOGG, JR. Director April 11, 2001 ----------------------------------------------------- (Richard C. Kellogg, Jr.) /s/ JOHN R. KENNEDY Director April 11, 2001 ----------------------------------------------------- (John R. Kennedy) /s/ JACK H. NUSBAUM Director April 11, 2001 ----------------------------------------------------- (Jack H. Nusbaum)
55 248 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-K/A AMENDMENT NO. 2 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-9859 PIONEER COMPANIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 06-1215192 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 700 LOUISIANA STREET, SUITE 4300 HOUSTON, TEXAS (713) 570-3200 77002 (Address of principal executive offices) (Zip Code) ---------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: CLASS A COMMON STOCK, $.01 PAR VALUE (Title of Class)
On March 30, 2001, there were outstanding 10,678,893 shares of the Company's Class A Common Stock, $.01 par value. The aggregate market value of the Company's voting stock held by non-affiliates of the Company is $2,476,584 based on the closing price for the Class A Common Stock in consolidated trading on March 30, 2001. INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ] INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN CONFIRMED BY A COURT. YES [X] NO [ ] ================================================================================ 249 Pioneer Companies, Inc. (the "Company") hereby amends its annual report on Form 10-K for the year ended December 31, 2000, to include the following disclosure. As filed, the annual report did not include certain information called for by Items 10, 11, 12 and 13 of Part III of Form 10-K, in reliance on General Instruction G of Form 10-K. It has now been determined that the Company's definitive proxy statement with respect to the Company's 2001 annual meeting of stockholders will not be filed with the Commission within 120 days after the end of the year covered by the annual report, such that incorporation by reference of information that will otherwise be provided in the definitive proxy statement is not available. That information is set forth herein. ITEM 10. DIRECTORS OF THE REGISTRANT. Following is certain information with respect to the members of the Company's Board of Directors: William R. Berkley -- Mr. Berkley has been the Company's Chairman of the Board and a member of the Board of Directors since 1987. He also serves as chairman of the board of several other companies that he controls or founded. These include W.R. Berkley Corporation, a property and casualty insurance company, Strategic Distribution, Inc., a distributor of maintenance, repair and operations products to industry, Associated Community Bancorp, Inc., a bank holding company, and Interlaken Capital, Inc., a private investment and consulting firm. Mr. Berkley is 55 years of age, and his term of office as a director expires at the annual meeting of stockholders to be held in 2003. Philip J. Ablove -- Mr. Ablove has been the Company's Executive Vice President and Chief Financial Officer since November 1999. He was the Company's Vice President and Chief Financial Officer from March 1996 to November 1999. He was a consultant and officer and director specializing in financially distressed companies from 1983 to 1996, and in a consulting role he served as Acting Chief Financial Officer of the Company from October 1995 to March 1966. Mr. Ablove is 60 years of age, and his term of office as a director expires at the annual meeting of stockholders to be held in 2002. Andrew M. Bursky -- Mr. Bursky has been a Managing Director of Pegasus Investors, L.P., a private investment firm, since June 1999. From May 1980 to May 1999, he was a Managing Director of Interlaken Capital, Inc., a private investment and consulting firm. He also serves as a director of Strategic Distribution, Inc. Mr. Bursky is 44 years of age, and his term of office as a director expires at the annual meeting of stockholders to be held in 2002. Donald J. Donahue -- Mr. Donahue has been a private investor since February 1996, and he has served as the Company's Vice Chairman of the Board of Directors since May 1996. He served as Chairman of the Board of Magma Copper Company from 1987 to 1996 and as chairman of Nacolah Holding Co., a life and health insurance company, from 1990 to 1993. Mr. Donahue is 76 years of age, and his term of office as a director expires at the annual meeting of stockholders to be held in 2001. Michael J. Ferris -- Mr. Ferris has been the Company's President and Chief Executive Officer since January 1997. Prior to joining the Company, he was employed by Vulcan Materials Company from March 1974 to January 1997, and he served as an Executive Vice President of Vulcan from 1996 to 1997. Vulcan is engaged in the production of industrial materials and commodities with significant positions in two industries, construction aggregates and chemicals. He is also a director of ChemFirst, Inc. Mr. Ferris is 56 years of age, and his term of office as a director expires at the annual meeting of stockholders to be held in 2003. John R. Kennedy -- Mr. Kennedy retired as President and Chief Executive Officer of Federal Paper Board Company, Inc. in 1996, after serving that company since 1975. He also serves as a director of International Paper Company, Chase Brass Industries, Inc., Modis Professional Services, Inc., and Holnam Inc. Mr. Kennedy is 70 years of age, and his term of office as a director expires at the annual meeting of stockholders to be held in 2002. 250 Richard C. Kellogg, Jr. -- Mr. Kellogg has been a private investor since January 1997. He served as the Company's President from April 1995 to January 1997. He was a co-founder of Pioneer Americas, Inc. and served as chairman of the board and as a director of that company from its formation in 1988 until its acquisition by the Company in 1995. Mr. Kellogg is 49 years of age, and his term of office as a director expires at the annual meeting of stockholders to be held in 2001. Jack H. Nusbaum -- Mr. Nusbaum is Chairman of the New York law firm of Willkie Farr & Gallagher, where he has been a partner for more than twenty-five years. He is also a director of W.R. Berkley Corporation, Strategic Distribution, Inc., Prime Hospitality Corp., The Topps Company, Inc. and Neuberger Berman, Inc. Mr. Nusbaum is 60 years of age, and his term of office as a director expires at the annual meeting of stockholders to be held in 2001. ITEM 11. EXECUTIVE COMPENSATION. The following table provides information with respect to the compensation of the Company's President and Chief Executive Officer and the four other most highly paid executive officers. Where appropriate, share data reflects the two seven percent stock dividends paid to holders of record during the last three years.
LONG TERM COMPENSATION ANNUAL COMPENSATION OTHER ANNUAL AWARDS ALL OTHER ------------- COMPEN- NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1)($) OPTIONS(2)(#) SATION($)(3) Michael J. Ferris, 2000 400,010 -0- -0- 25,000 4,750 President and Chief 1999 400,010 -0- -0- 26,750 4,800 Executive Officer 1998 387,506 78,581 -0- 28,622 4,200 Norman E. Thogersen, 2000 244,540 -0- 7,796 17,500 -0- Executive Vice President 1999 217,645 -0- 8,970 10,700 -0- and Chief Operating 1998 187,594 78,790 13,200 13,738 -0- Officer(4) Philip J. Ablove, 2000 225,009 -0- -0- 12,500 6,563 Executive Vice President 1999 225,005 -0- -0- 8,025 4,800 and Chief Financial Officer 1998 225,003 36,873 -0- 9,159 4,125 Kent R. Stephenson, 2000 174,307 -0- -0- 5,000 5,229 Vice President, General 1999 168,004 -0- -0- 4,280 4,800 Counsel and Secretary 1998 164,753 20,039 -0- 4,579 4,800 Pierre Prud'homme, 2000 82,069 -0- 4,747 3,000 -0- Vice President and 1999 80,191 -0- 5,178 2,140 -0- Controller(5) 1998 75,264 18,884 5,377 2,289 -0-
(1) The amounts for Mr. Thogersen relate to the personal use of a company car and premiums related to a company-paid life insurance policy, and the amounts for Mr. Prud'homme relate to the personal use of a company car. (footnotes continued on following page) 251 (2) Expressed in terms of the numbers of shares of the Company's Class A Common Stock underlying options granted during the year. Option grants in 1999 and 2000 were under the Company's 1998 Stock Plan. The option grants in 1998 were under the Company's 1995 Stock Incentive Plan. (3) Represents amounts contributed to match a portion of the employee's contributions under a 401(k) plan. (4) Mr. Thogersen resigned effective February 22, 2001. (5) Mr. Prud'homme was elected Vice President and Controller of the Company on November 17, 2000. From November 2, 1999, to November 17, 2000, he served as Vice President, Business Planning and Development, of the Company, and prior thereto he served as Vice President and Controller of the Company's Canadian subsidiary. Upon his resignation as Executive Vice President and Chief Operating Officer of the Company, Mr. Thogersen entered into a severance agreement with the Company that provides for his continuing employment for a two-year period. During the period Mr. Thogersen is continuing to receive annual compensation of C$350,000 (approximately US$233,415 at current exchange rates), and he continues to participate in benefit programs provided by the Company's Canadian subsidiary. The Company has established a severance program for all employees, and an executive severance program that applies to the individuals named in the above compensation table in the event of a termination of employment for reasons other than for cause. Under the latter program, following a termination for other than cause Mr. Ferris and Mr. Ablove would each receive two years' severance pay and Messrs. Stephenson and Prud'homme would each receive one year's severance pay. Defined benefit retirement coverage is provided to U.S.-based executive officers under the Pension Plan established by Pioneer Americas, Inc. At the normal retirement age of 65, participants under the plan receive benefits based on their credited service and their covered compensation for the average of their highest five complete consecutive plan years out of their last ten complete consecutive plan years. Covered compensation under the plan includes base pay and annual performance and incentive programs, but excludes all other items of compensation. In addition, a nonqualified, unfunded plan, the Restoration Retirement Plan, provides benefits for key salaried employees. The plan provides benefits in an amount equal to the amount that would be paid under the pension plan but for the maximum compensation limit (currently $170,000) under the Internal Revenue Code. Each of the executives named in the Summary Compensation Table, with the exception of Mr. Thogersen, participates in the Restoration Retirement Plan. The following table sets forth benefits payable under the Pension Plan and the Restoration Retirement Plan, computed as a straight life annuity beginning at age 65. Benefits are not subject to any deduction for social security since the basic benefit formula incorporates the average social security breakpoint in calculating the benefit. Pension Plan Table
Years of Service (1) ------------------------------------------------------------------------ Remuneration 15 20 25 30 35 ------------ -------- -------- -------- -------- -------- $125,000................. $ 26,809 $ 35,745 $ 44,681 $ 53,618 $ 62,554 150,000................. 32,434 43,245 54,056 64,868 75,679 175,000................. 38,059 50,745 63,431 76,118 88,804 200,000................. 43,684 58,245 72,806 87,368 101,929 225,000................. 49,309 65,745 82,181 98,618 115,054 250,000................. 54,939 73,245 91,556 109,868 128,179 300,000................. 66,184 88,245 110,306 132,368 154,429 400,000................. 88,684 118,245 147,806 177,368 206,929 450,000................. 99,934 133,245 166,556 199,868 233,179 500,000................. 111,184 49,245 185,306 222,368 259,429
---------- (1) The estimated years of credited service for each of the named executive officers of Pioneer as of December 31, 2000, were: Mr. Ferris -- 4 years; Mr. Ablove -- 4 years; Mr. Stephenson -- 7 years; and Mr. Prud'homme -- 22 years. 252 Under the Internal Revenue Code the amount of employer contributions under the 401(k) Savings Plan are also limited if an individual's annual compensation is in excess of $170,000. Under the Restoration Retirement Plan unfunded benefits are provided to each of the executives named in the Summary Compensation Table, with the exception of Mr. Thogersen, in an amount equal to three percent of pay in excess of the salary limitation amount. Defined benefit retirement coverage will be provided to Mr. Thogersen under the pension plan maintained by the Company's Canadian subsidiary. At the expiration of the severance agreement between the Company and Mr. Thogersen, he will be eligible to receive annual benefits of C$173,000 per year (approximately US$115,374 at current exchange rates), based on what will have been 32 years of credited service at that time. While Revenue Canada regulations limit pension benefits, the amount of the pension benefits to be provided to Mr. Thogersen that exceeds the limits will be provided under an unfunded, excess pension plan. Option Grants in 2000 -- The following table provides information with respect to grants of stock options during 2000 to the named executive officers:
POTENTIAL REALIZABLE PERCENT VALUE AT ASSUMED NUMBER OF OF TOTAL ANNUAL RATES OF STOCK SHARES OPTIONS PRICE APPRECIATION FOR UNDERLYING GRANTED TO OPTION TERM OPTIONS EMPLOYEES -------------------------- NAME GRANTED (#) IN 2000 5%($) 10%($) ----- ------------ ---------- ------- -------- Michael J. Ferris 25,000 19.7 222,059 353,592 Norman E. Thogersen 17,500 13.8 155,441 247,514 Philip J. Ablove 12,500 9.8 111,030 176,796 Kent R. Stephenson 5,000 3.9 44,412 70,718 Pierre Prud'homme 3,000 2.4 26,647 42,431
All of the options were granted under the Company's 1998 Stock Plan, with exercise prices equal to the fair market value of the Common Stock on the date of grant. All of the options have an exercise price of $5.453 per share, are exercisable in full on or after March 23, 2003, and expire if not exercised prior to March 23, 2010. The amounts indicated as potential realizable values reflect assumed rates of appreciation in market value from the date of grant until the end of the option term, at the rates set by the Securities and Exchange Commission, and therefore are not intended to forecast possible future appreciation, if any, in the Company's stock price. The Company did not use an alternative formula for a grant date valuation, as it is not aware of any formula that will determine with reasonable accuracy a present value based on future unknown or volatile factors. Aggregated Year-End Option Amounts -- The following table shows with respect to the named executive officers the number of shares covered by both exercisable and non-exercisable stock options as of December 31, 2000, with respect to options to purchase Class A Common Stock of Pioneer. The closing price of the Class A Common Stock on December 29, 2000, the last trading day of the Company's fiscal year, was $0.688 per share, and none of the options that are outstanding were "in-the-money" (that is, the exercise prices for all shares that may be purchased upon the exercise of options exceeded the year-end market price). None of the named executive officers exercised any stock options during the year. 253
NUMBER OF SHARES UNDERLYING UNEXERCISED OPTIONS AT DECEMBER 31, 2000 (#) ----------------------------------- NAME EXERCISABLE UNEXERCISABLE ---- ----------- ------------- Michael J. Ferris 334,395 230,643 Norman E. Thogersen 8,990 63,572 Philip J. Ablove 65,536 29,684 Kent R. Stephenson 25,357 13,859 Pierre Prud'homme -0- 7,429
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table shows, as of April 17, 2001, certain information regarding the shares of common stock and preferred stock owned by each person or entity who is known by the Company to be the beneficial owner of more than five percent of any class of stock. Except as noted, each person or entity has sole voting and investment power over the shares shown in the table.
SHARES NAME AND ADDRESS OF BENEFICIALLY PERCENT TITLE OF CLASS BENEFICIAL OWNER OWNED OF CLASS -------------- ------------------- ------------ --------- Class A William R. Berkley(1) 6,375,335 59.7 Common Stock 165 Mason Street Greenwich, CT 06830 Richard C. Kellogg, Jr.(2) 630,916 5.9 2716 University Boulevard Houston, Texas 77005 Frans G.J. Speets(3) 630,916 5.9 Class B Chemical Bank(4) 858,830 100.0 Common Stock Special Loan Group 270 Park Avenue, 48th Floor New York, NY 10017 Preferred Stock OCC Tacoma, Inc. 55,000 100.0 5005 LBJ Freeway Dallas, Texas 75380-9050
---------- (1) Includes 3,723,850 shares held by Interlaken Investment Partners, L.P. Mr. Berkley is the sole owner of a company that indirectly controls Interlaken, and so he may be deemed to be the beneficial owner of the shares held by Interlaken. Mr. Berkley's holdings (including the shares owned by Interlaken) represent 52.8% of the voting power of the Company's outstanding capital stock. (2) Mr. Kellogg's holdings (including the shares that can be obtained through the exercise of options) represent 5.2% of the voting power of Pioneer's outstanding capital stock. (3) Mr. Speets' holdings (including the shares that can be obtained through the exercise of options) represent 5.2% of the voting power of Pioneer's outstanding capital stock. (4) Information obtained from a Schedule 13G, dated July 21, 1992, filed with the Securities and Exchange Commission by Chemical Bank. The filing reported that Chemical Bank had acquired 858,830 shares of Class B Common Stock (as adjusted for the one-for-four reverse stock split on (footnotes continued on following page) 254 April 27, 1995, and the four seven-percent stock dividends paid to stockholders since that date), of which it was the beneficial owner with sole voting and dispositive power. The holdings of Chemical Bank represent 7.1% of the voting power of the outstanding capital stock. (5) The holdings of OCC Tacoma, Inc. represent 4.5% of the voting power of the outstanding capital stock. The following table shows, as of April 17, 2001, information regarding beneficial ownership of Pioneer's common stock by each of Pioneer's directors, each of Pioneer's executive officers named in Item 11 above, and all of Pioneer's directors and executive officers as a group. Included within beneficial ownership are shares that an individual has the right to acquire within 60 days of April 17, 2001 through the exercise of stock options. Percentages of common stock are based on the shares outstanding as of April 17, 2001, together with the shares that would be issued if the options are exercised.
SHARES NAME OF BENEFICIALLY PERCENT TITLE OF CLASS BENEFICIAL OWNER OWNED OF CLASS(1) -------------- ---------------- ------------ ----------- Class A William R. Berkley 6,375,335 56.6 Common Stock Michael J. Ferris 518,554(2) 4.6 Philip J. Ablove 88,394(3) * Andrew M. Bursky 310,026(4) 2.8 Donald J. Donahue 260,238(5) 2.3 Richard C. Kellogg, Jr. 630,916 5.6 John H. Kennedy 8,134 * Jack H. Nusbaum 27,573 * Norman E. Thogersen 23,728(6) * Kent R. Stephenson 33,212(7) * Pierre Prud'homme 2,289(8) * All directors and executive officers as a group (11 persons) 8,275,996 73.5
---------- (1) Percentages of less than one percent are indicated by an asterisk (*). (2) Includes currently-exercisable options for the purchase of 334,395 shares. (3) Includes currently-exercisable options for the purchase of 74,695 shares. (4) Includes currently-exercisable options for the purchase of 122,493 shares. (5) Includes 98,308 shares held by the Donahue Family Partnership, which Mr. Donahue serves as the general partner. (6) Includes currently-exercisable options for the purchase of 22,728 shares. (7) Includes currently-exercisable options for the purchase of 29,936 shares. (8) Includes currently-exercisable options for the purchase of 2,289 shares. Pioneer does not know of any current arrangements, including any pledge by any persons of Pioneer securities that may result in a change of control of Pioneer in the future. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During 1999, a subsidiary of the Company entered into arrangements with an affiliate of Strategic Distribution, Inc. pursuant to which the affiliate provides procurement, handling and data management for maintenance, repair and operating supplies at the subsidiary's facilities in Henderson, Nevada and St. Gabriel, Louisiana. William R. Berkley, the Chairman of the Board of the Company and the direct or indirect owner of approximately 59.7% of the Company's Class A Common Stock, owns approximately twenty-three percent of Strategic Distribution's common stock, and serves as the chairman of the board of directors of the company. Andrew R. Bursky and Jack H. Nusbaum, directors of the Company, are also directors of Strategic Distribution. Since January 1, 2000, the Strategic Distribution affiliate has been paid a total of approximately $942,000 for services rendered to the Company's subsidiary under the agreements. 255 In accordance with the 1995 agreement relating to the acquisition of Pioneer Americas, Inc. by the Company, certain assets not necessary for the Company's chlor-alkali business were held for the benefit of the former owners of Pioneer Americas, Inc. Those assets included certain excess real property in St. Gabriel, Louisiana and Mojave, California, and a 32% equity interest in Basic Management, Inc. and, directly or indirectly, 37.22% of the partnership interest in The LandWell Company, L.P. Any proceeds from the assets were held in a separate contingent payment account for the benefit of the former owners, subject to offset against any claims by Pioneer Americas, Inc. under environmental warranties provided to Pioneer Americas, Inc. by the former owners. Included among the former owners are Richard C. Kellogg, Jr., a director of the Company and the beneficial owner of 5.9% of the Company's Class A Common Stock, and Frans G. J. Speets, who is the beneficial owner of 5.9% of the Company's Class A Common Stock. Messrs. Kellogg and Speets had interests in the contingent payment account of 39.4% and 29.4%, respectively. During 1999 a dispute arose between the former owners and the Company regarding the extent of the environmental indemnity and whether Pioneer Americas, Inc. had provided proper notice of claims under the indemnity. During June 2000 the Company and the former owners reached agreement to settle the dispute and to terminate the relationship that gave rise to it. The former owners were released from their environmental indemnity obligations, and the record title to the assets held by Pioneer Americas, Inc. for their benefit and $800,000 of the cash balance in the contingent payment account were transferred by Pioneer Americas, Inc. to a new entity formed by it, and all of the equity interests in that entity were transferred to the former owners. The remaining balance in the contingent payment account, $5.3 million, was retained by Pioneer Americas, Inc. That amount represented outstanding indemnity claims as well as the present value of anticipated environmental liabilities subject to the indemnity obligations, as determined by a third-party environmental analysis. The settlement and the resulting adjustment to the remediation reserve established by Pioneer Americas, Inc. led to a pre-tax gain of $1.8 million for the Company during the second quarter of 2000. In connection with the 1995 acquisition agreement, Messrs. Kellogg and Speets each also hold promissory notes payable by the Company in the principal amounts of $4,512,330 and $3,366,062, respectively. In connection with the settlement of the dispute with the former owners, the notes were revised to provide for a single maturity date of April 20, 2005. Previously the notes were payable in five equal annual installments beginning on April 1, 2001. Since January 1, 2000, the Company has paid Messrs. Kellogg and Speets interest on the notes in the amounts of approximately $364,000 and $271,000, respectively. The notes are currently in default, since the Company did not make the payments of interest that were due on January 1 and April 1 of this year. Pioneer Americas, Inc. is party to an agreement with Basic Management, Inc. for the delivery of water to the production facility in Henderson, Nevada. The agreement provides for the delivery of a minimum of eight million gallons of water per day. The agreement expires on December 31, 2014, unless terminated earlier under certain circumstances. Basic Management also charges Pioneer Americas, Inc. and other companies in the Henderson industrial complex for power distribution services and for real property management services. Since January 1, 2000, Pioneer Americas, Inc. has paid Basic Management approximately $2.2 million for providing such services. At March 31, 2001, the amount owed to Basic Management was approximately $286,000. An entity in which Messrs. Kellogg and Speets have respective 39.4% and 29.4% equity ownership interests owns 32% of the equity interest of Basic Management. Mr. Kellogg also serves as chairman of the board of directors of Basic Management. On April 20, 1995, the Company entered into a five-year employment agreement with Mr. Kellogg pursuant to which he served as President of the Company. Mr. Kellogg resigned as the Company's President on January 4, 1997. He continued to perform services for the Company, and pursuant to the terms of the agreement the Company continued to pay Mr. Kellogg an annual salary of $300,000 until the termination of the agreement on April 20, 2000. In connection with the 1995 acquisition agreement the Company also entered into an employment agreement with Mr. Speets, pursuant to which the Company paid Mr. Speets an annual salary of $190,000 through April 30, 2000. 256 Jack H. Nusbaum, a director of the Company, is Chairman of the law firm of Willkie Farr & Gallagher, which has provided legal services to the Company from time to time. Each transaction involving officers or directors of the Company, its controlling persons or affiliates was authorized at the time of the transaction or subsequently ratified by a majority of the Company's disinterested directors. It is the Company's practice not to enter into any transactions with affiliated parties unless a majority of the disinterested and independent directors determines that the terms of such transactions are at least as favorable to the Company as those available in similar transactions made with non-affiliated parties. 257 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. By: /s/ MICHAEL J. FERRIS --------------------------------- Michael J. Ferris President and Chief Executive Officer April 30, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title DATE ---- /s/ MICHAEL J. FERRIS President and Chief Executive April 30, 2001 ------------------------------------ Officer and Director (Michael J. Ferris) /s/ PHILIP J. ABLOVE Executive Vice President and April 30, 2001 ------------------------------------ Chief Financial Officer and (Philip J. Ablove) Director (Principal Financial Officer) /s/ PIERRE PRUD'HOMME Vice President, Controller April 30, 2001 ------------------------------------ (Principal Accounting Officer) (Pierre Prud'homme) /s/ WILLIAM R. BERKLEY Chairman of the Board April 30, 2001 ------------------------------------ (William R. Berkley) /s/ ANDREW M. BURSKY Director April 30, 2001 ------------------------------------ (Andrew M. Bursky) /s/ DONALD J. DONAHUE Director April 30, 2001 ------------------------------------ (Donald J. Donahue) /s/ RICHARD C. KELLOGG, JR. Director April 30, 2001 ------------------------------------ (Richard C. Kellogg, Jr.) /s/ JOHN R. KENNEDY Director April 30, 2001 ----------------------------------- (John R. Kennedy) /s/ JACK H. NUSBAUM Director April 30, 2001 ----------------------------------- (Jack H. Nusbaum)
258 EXHIBIT D TO DISCLOSURE STATEMENT Projected Financial Information 259 PIONEER COMPANIES, INC. PROJECTED CONSOLIDATED INCOME STATEMENT AS OF DECEMBER 31 (UNAUDITED) (Dollars in Thousands)
JANUARY 1- OCTOBER 1- SEPTEMBER 30, DECEMBER 31, 2001 2001 2001 2002 2003 2004 -------------- -------------- ------------- ------------- ------------- ------------ NET SALES $302,821 $ 93,028 $395,849 $375,338 $469,306 $444,046 Freight (43,079) (13,230) (56,308) (58,650) (61,580) (61,070) --------- ------- -------- -------- -------- -------- NET REVENUE 259,742 79,798 339,540 316,688 407,725 382,976 COGS (193,405) (61,211) (254,617) (250,268) (255,645) (255,922) --------- ------- -------- -------- -------- -------- GROSS PROFIT 66,337 18,587 84,924 66,420 152,080 127,054 SG&A (27,490) (6,939) (34,429) (26,737) (26,737) (26,737) --------- ------- -------- -------- -------- -------- EBITDA 38,847 11,648 50,495 39,683 125,343 100,317 Depreciation (23,348) (7,416) (30,764) (31,016) (32,216) (33,316) Amortization (10,012) (734) (10,746) (2,936) (2,936) (2,936) Interest Expense (31,159) (5,526) (36,685) (22,343) (20,912) (17,722) Interest Income, net of expense 854 22 876 200 200 200 Restructuring Expenses (18,853) 0 (18,853) 0 0 0 --------- ------- -------- -------- -------- -------- INCOME FROM CONT. OPERATIONS (43,671) (2,007) (45,678) (16,412) 69,480 46,544 Provision for Income Taxes (2,175) 0 (2,175) 0 (27,792) (18,617) NET INCOME ($45,846) ($2,007) ($47,853) ($16,412) $41,688 $ 27,926 ========= ======= ======== ======== ======== ========
260 PIONEER COMPANIES, INC. PROJECTED CONSOLIDATED CAPITALIZATION TABLE AS OF DECEMBER 31, (UNAUDITED) (Dollars in Thousands)
SEPTEMBER 30, 2001 2001 2002 2003 2004 ------------- ---------- ----------- ----------- ----------- CASH $ 8,759 $ 8,759 $ 10,000 $ 10,000 $ 10,000 SHORT-TERM DEBT Congress Secured Revolver 35,000 36,384 41,797 3,165 767 LONG-TERM DEBT Senior Secured Debt 5,945 5,753 4,986 4,219 3,452 New Tranche A Term Notes 50,000 50,000 50,000 50,000 11,707 New Tranche B Notes 150,000 150,000 150,000 150,000 150,000 -------- -------- -------- -------- -------- Total Long-term Debt 205,945 205,753 204,986 204,219 165,159 Total Debt 240,945 242,138 246,783 207,384 165,926 ======== ======== ======== ======== ======== SHAREHOLDER'S EQUITY Common shares 134,055 134,055 134,055 134,055 134,055 Retained earnings (deficit) 0 (2,007) (18,419) 23,269 51,195 -------- -------- -------- -------- -------- Total Shareholder's Equity 134,055 132,048 115,635 157,324 185,250 TOTAL CAPITALIZAITON $375,000 $374,185 $362,419 $364,708 $351,176 ======== ======== ======== ======== ========
261 PIONEER COMPANIES, INC. PROJECTED CONSOLIDATED BALANCE SHEET (UNAUDITED) (Dollars in Thousands)
PRO FORMA SEPTEMBER 30, SEPTEMBER 30, 2001 ADJUSTMENTS 2001 ------------- ------------- -------------- ASSETS CASH AND CASH EQUIVALENTS $8,759 $0 $8,759 Accounts Receivable (net) 54,738 0 54,738 Inventory 21,002 0 21,002 Deferred Taxes 42 (42) 0 Prepaid Expenses 681 0 681 -------- --------- --------- TOTAL CURRENT ASSETS $85,223 ($42) $85,181 Gross PP&E 448,045 0 448,045 Accumulated Depreciation (160,053) 0 (160,053) -------- --------- --------- NET PP&E $287,992 $0 $287,992 Goodwill (net) 173,425 (100,031) 73,394 Other Assets 23,490 0 23,490 -------- --------- --------- TOTAL ASSETS $570,129 ($100,073) $470,057 ======== ========= ========= LIABILITIES & SHAREHOLDER'S EQUITY Accounts Payable $32,843 $0 $32,843 Accrued Liabilities 70,888 (37,875) 33,014 Other Current Liabilities 0 0 0 -------- --------- --------- TOTAL CURRENT LIABILITIES $103,731 ($37,875) $65,857 Revolver 35,000 0 35,000 Senior Secured Debt 5,945 0 5,945 Senior Notes 551,750 (551,750) 0 New Tranche A Term Notes 0 50,000 50,000 New Tranche B Notes 0 150,000 150,000 Other Unsecured Notes 16,000 (16,000) 0 -------- --------- --------- TOTAL LONG-TERM DEBT $608,695 ($367,750) $240,945 Returnable Deposits 4,793 0 4,793 Accr. Pension/Emp. Benefits 15,797 0 15,797 Other Non Current Liabilities 8,610 0 8,610 Preferred Stock 5,500 (5,500) 0 Common Stock 115 133,940 134,055 Paid-in Capital, net of treasury stock 55,193 (55,193) 0 Retained Earnings (232,305) 232,305 0 -------- --------- --------- TOTAL EQUITY (171,497) 305,552 134,055 TOTAL LIABILITIES & S/H'S EQUITY $570,129 ($100,073) $470,057 ======== ========= =========
--------- (1) Pre-petition accrued interest. 262 PIONEER COMPANIES, INC. PROJECTED CONSOLIDATED INCOME STATEMENT AS OF DECEMBER 31, (UNAUDITED) (Dollars in Thousands)
JANUARY 1- OCTOBER 1- SEPTEMBER 30, DECEMBER 31, 2001 2001 2001 2002 2003 2004 -------------- ------------- ----------- ----------- ----------- ---------- NET INCOME ($45,846) ($2,007) ($47,853) ($16,412) $41,688 $27,926 Depreciation & amortization 33,360 8,150 41,511 33,952 35,152 36,252 Net change in working capital accts. 17,131 (1,086) 16,045 9,056 (7,441) 2,280 Other adjustments 3,506 0 3,506 0 0 0 -------- ------- -------- -------- -------- -------- CASH FROM OPERATIONS $8,151 $5,057 $13,208 $26,595 $69,399 $66,458 Net Capital Expenditures (12,258) (6,250) (18,508) (30,000) (30,000) (25,000) Other 37 0 37 0 0 0 -------- ------- -------- -------- -------- -------- CASH FROM BY INVESTING ACT'S ($12,221) ($6,250) ($18,471) ($30,000) ($30,000) ($25,000) CASH AVAILABLE FOR DEBT SERVICE (4,070) (1,193) (5,263) (3,405) 39,399 41,458 Mandatory Debt Repayments 0 0 0 0 0 0 Revolver Draw/(Repayments) 7,419 1,384 8,803 5,413 (38,632) (2,398) Cash Sweep 0 0 0 0 0 (38,293) Other (525) (192) (717) (767) (767) (767) -------- ------- -------- -------- -------- -------- CASH FROM BY FINANCING ACT'S $6,894 $1,193 $8,087 $4,646 ($39,399) ($41,458) Net Inc./(Dec.) in Cash Balance 2,824 0 2,824 1,241 0 0 Plus: Cash at Beginning of Period 5,935 8,759 5,935 8,759 10,000 10,000 -------- ------- -------- -------- -------- -------- CASH AT END OF PERIOD $8,759 $8,759 $8,759 $10,000 $10,000 $10,000 ======== ======= ======== ======== ======== ========
263 PIONEER COMPANIES, INC. PROJECTED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, (UNAUDITED) (Dollars in Thousands)
2001 2002 2003 2004 ------------ ------------ ----------- ----------- ASSETS CASH AND CASH EQUIVALENTS $8,759 $10,000 $10,000 $10,000 Accounts Receivable (net) 54,979 46,917 58,663 55,506 Inventory 21,992 19,288 22,813 21,586 Deferred Taxes 0 0 0 0 Prepaid Expenses 681 681 681 681 -------- -------- -------- -------- TOTAL CURRENT ASSETS $86,411 $76,886 $92,158 $87,772 Gross PP&E 454,295 484,295 514,295 539,295 Accumulated Depreciation (167,470) (198,486) (230,702) (264,017) -------- -------- -------- -------- NET PP&E $286,825 $285,809 $283,594 $275,278 Goodwill (net) 72,661 69,725 66,789 63,853 Other Assets 23,490 23,490 23,490 23,490 -------- -------- -------- -------- TOTAL ASSETS $469,386 $455,910 $466,030 $450,393 ======== ======== ======== ======== LIABILITIES & SHAREHOLDER'S EQUITY Accounts Payable $32,987 $31,278 $39,109 $37,004 Accrued Liabilities 33,014 33,014 33,014 33,014 Other Current Liabilities 0 0 0 0 -------- -------- -------- -------- TOTAL CURRENT LIABILITIES $66,001 $64,292 $72,122 $70,017 Revolver 36,384 41,797 3,165 767 Senior Secured Debt 5,753 4,986 4,219 3,452 New Tranche A Term Notes 50,000 50,000 50,000 11,707 New Tranche B Notes 150,000 150,000 150,000 150,000 -------- -------- -------- -------- TOTAL LONG-TERM DEBT $242,138 $246,783 $207,384 $165,926 Returnable Deposits 4,793 4,793 4,793 4,793 Accr. Pension/Emp. Benefits 15,797 15,797 15,797 15,797 Other Non Current Liabilities 8,610 8,610 8,610 8,610 Common Stock 134,055 134,055 134,055 134,055 Paid-in Capital, net of treasury stock 0 0 0 0 Retained Earnings (2,007) (18,419) 23,269 51,195 -------- -------- -------- -------- TOTAL EQUITY 132,048 115,635 157,324 185,250 TOTAL LIABILITIES & S/H'S EQUITY $469,386 $455,910 $466,030 $450,393 ======== ======== ======== ========
264 EXHIBIT E TO DISCLOSURE STATEMENT Liquidation Analysis 265 Pioneer Companies, Inc. Initial Liquidation Analysis Assets value in US $ as of June 30th, 2001
ASSETS $ AMOUNT RECOVERY % RECOVERY AMOUNT Cash & Cash Equivalent $ 5,057,614 100% 5,057,614 Accounts Receivables $ 58,473,360 80% 46,778,688 (including Allowance for bad Debts) Inventory Raw Materials $ 3,784,949 50% 1,892,475 Finished Goods $ 7,039,566 90% 6,335,609 Prepaid Expenses and Others $ 722,890 10% 72,289 ------------ ------------ TOTAL CURRENT ASSETS $ 75,078,379 80% 60,136,675 Fixed Assets Land $ 10,621,726 50% 5,310,863 Buildings & Impr. Gross book value $ 61,337,544 25% 15,334,386 Buildings & Impr. Acc. Depreciation $ 32,576,463 25% -8,144,116 Mach. and Equip. Gross book value $349,990,857 10% 34,999,086 Mach. and Equip. Acc. Depreciation $120,060,965 10% -12,006,097 CIP Work in Progress $ 19,844,393 0% 0 Stores items (Reclass. from Inventory) $ 10,177,873 50% 5,088,937 ------------ ------------ NET P, P & E $299,334,965 14% 40,583,059 Other Assets PLI Patents $ 699,410 0% 0 Non Compete Agreement $ 842,107 0% 0 Capitalized Financing Costs $ 13,290,267 0% 0 Deferred tax Assets $ 76,355,457 0% 0 Deferred tax Assets - valuation $ 73,848,273 0% 0 Env. Remed Receivables $ 2,366,726 0% 0 Capitalized Plant Improvements $ 835,426 0% 0 Notes receivables Kemiron $ 1,957,999 80% 1,566,399 Others $ 990,056 10% 99,006 ------------ ------------ TOTAL OTHER ASSETS $ 23,489,175 7% 1,566,399 Excess Cost over Acquisition $175,177,314 0% 0 ------------ ------------ Total Excess Costs $175,177,314 0% 0 ------------------------------------------------------------------------------------------------------- TOTAL ASSETS $573,079,833 0% 102,286,133 ------------------------------------------------------------------------------------------------------- Cash generated During liquidation Period 14,000,000 Cash Available for Satisfaction of Claims 116,286,133 Less: Administrative Expenses including Professional Fees -4,000,000 Priority Tax Claims -1,000,000 Secured Claims Secured Term loans, and Bonds Claims -596,761,693 Congress Revolver -31,870,476 Environmental Liability -8,125,854 Accrued Pension and OPEBS 0 ------------------------------------------------------------------------------------------------------- AVAILABLE FOR UNSECURED CLAIMS -525,471,890 -------------------------------------------------------------------------------------------------------
Note 1: The estimation of the liquidation proceeds from PP&E is based upon a review of the results of similar situations such as LaRoche, Holtrachem and ATO-FINA as well as management views of what likely proceeds would be during the liquidation period given the current economic climate, and the state of the Chlor-Alkali Industry. Note 2: This assumes a 5 month liquidation period and is management's estimation of cash generated during this period from operations, and takes in to account those expenses associated with the forced liquidation of the assets but not any costs attendant to closing the business such as severance/retention. EX-99.T3F 26 h90985ex99-t3f.txt CROSS REFERENCE SHEET TO INDENTURE 1 Exhibit T3F Cross reference sheet showing the location in the Indenture of the provisions inserted therein pursuant to Section 310 through 318(a), inclusive, of the 1939 Act.
Trust Indenture Indenture Act Section Section ----------- ------- Section 310(a)(1) ........... 608 (a)(2) ............... 608 (a)(3) ............... N.A. (a)(4) ............... N.A. (a)(5) ............... 607 (b) .................. 607, 609 (c) .................. N.A. Section 311(a) .............. 612 (b) .................. 612 (c) .................. N.A. Section 312(a) .............. 701, 702 (b) .................. 117, 702 (c) .................. 117, 702 Section 313(a) .............. 703 (b)(1) ............... 703 (b)(2) ............... 703 (c) .................. 703 (d) .................. 703 Section 314(a) .............. 704, 1003 [(b) ................. N.A.] (c)(1) ............... 103 (c)(2) ............... 103 (c)(3) ............... N.A. (d) .................. 103, 1503, 1504, 1507 (e) .................. 103 (f) .................. N.A. Section 315(a) .............. 602, 613, 903 (b) ................. 601, 602, 903 (c) ................. 602, 903 (d) ................. 602, 903 (e) .................. 511 Section 316(a)(last sentence) 101 ("Outstanding") (a)(1)(A) ................... 502, 505 (a)(1)(B) ............ 504 (a)(2) ............... N.A. (b) .................. 507
2 (c) .................. 105 Section 317(a)(1) ........... 508 (a)(2) ............... 509 (b) .................. 1018 Section 318(a) .............. 310
N.A. means not applicable.________________________________ 2 EX-25.1 27 h90985ex25-1.txt FORM T-1 - WELLS FARGO MINNESOTA, NAT. ASSOCIATION 1 EXHIBIT 25.1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ----------------------------- [ ] CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2) ----- WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) A U.S. NATIONAL BANKING ASSOCIATION 41-1592157 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national Identification No.) bank) SIXTH STREET AND MARQUETTE AVENUE Minneapolis, Minnesota 55479 (Address of principal executive offices) (Zip code) Stanley S. Stroup, General Counsel WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 (612) 667-1234 (Agent for Service) ----------------------------- PIONEER COMPANIES, INC. (Exact name of obligor as specified in its charter) DELAWARE 06-1215192 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 700 LOUISIANA, SUITE 4300 HOUSTON, TEXAS 77002 (Address of principal executive offices) (Zip code) ----------------------------- 10% SENIOR SECURED GUARANTEED NOTES DUE 2008 (Title of the indenture securities) ================================================================================ 2 Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Treasury Department Washington, D.C. Federal Deposit Insurance Corporation Washington, D.C. The Board of Governors of the Federal Reserve System Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. Item 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee. No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13. Item 15. Foreign Trustee. Not applicable. Item 16. List of Exhibits. List below all exhibits filed as a part of this Statement of Eligibility. Wells Fargo Bank incorporates by reference into this Form T-1 the exhibits attached hereto. Exhibit 1. a. A copy of the Articles of Association of the trustee now in effect.** Exhibit 2. a. A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.* b. A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of The Northwestern National Bank of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the surviving entity being titled Northwestern National Bank and Trust Company of Minneapolis.* c. A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.* 3 d. A copy of the letter dated May 12, 1983 from the Regional Counsel, Comptroller of the Currency, acknowledging receipt of notice of name change effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest Bank Minneapolis, National Association.* e. A copy of the letter dated January 4, 1988 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis, National Association with various other banks under the title of "Norwest Bank Minnesota, National Association."* f. A copy of the letter dated July 10, 2000 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation effective July 8, 2000 of Norwest Bank Minnesota, National Association with various other banks under the title of "Wells Fargo Bank Minnesota, National Association."*** Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust powers issued January 2, 1934, by the Federal Reserve Board.* Exhibit 4. Copy of By-laws of the trustee as now in effect.** Exhibit 5. Not applicable. Exhibit 6. The consent of the trustee required by Section 321(b) of the Act. Exhibit 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority.**** Exhibit 8. Not applicable. Exhibit 9. Not applicable. * Incorporated by reference to exhibit number 25 filed with registration statement number 33-66026. ** Incorporated by reference to the exhibit of the same number to the trustee's Form T-1 filed as exhibit 99.T3G to the Form T-3 dated July 13, 2000 of GB Property Funding Corp. file number 022-22473. *** Incorporated by reference to exhibit number 2f to the trustee's Form T-1 filed as exhibit 25.1 to the Current Report Form 8-K dated September 8, 2000 of NRG Energy Inc. file number 001-15891. **** Incorporated by reference to exhibit 25.1 to the Current Report Form T-3 dated September 10, 2001 of Loewen Group International Inc. file number 022-22557. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 28th day of September 2001. WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Jane Y. Schweiger --------------------- Jane Y. Schweiger Assistant Vice President 5 EXHIBIT 6 September 28, 2001 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Very truly yours, WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION /s/ Jane Y. Schweiger --------------------- Jane Y. Schweiger Assistant Vice President