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EXHIBIT 10
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIRST AMENDMENT TO Credit Agreement (this "Agreement"), dated as
of August 6, 2001, is by and among P. H. GLATFELTER COMPANY, a Pennsylvania
corporation (the "Company"), various Subsidiaries of the Company party hereto
(the "Subsidiary Borrowers" and, together with the Company, the "Borrowers"),
the financial institutions party to the Credit Agreement (as defined below), in
their capacities as lenders (collectively, the "Lenders," and each individually,
a "Lender"), and Bankers Trust Company, as agent (the "Agent") for the Lenders.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrowers, the Lenders and the Agent are parties to that
certain Credit Agreement dated as of December 22, 1997 (as heretofore and
hereafter amended, restated, supplemented or otherwise modified and in effect
from time to time, the "Credit Agreement"), pursuant to which the Lenders have
provided to the Borrowers credit facilities and other financial accommodations;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Defined Terms. Terms capitalized herein and not otherwise defined
herein are used with the meanings ascribed to such terms in the Credit
Agreement.
2. Amendments to Credit Agreement. The Credit Agreement is, as of the
Effective Date (as defined below), hereby amended as follows:
(a) Section 1.1 of the Credit Agreement is amended by
inserting a new sentence at the end of the definition of "Consolidated Net
Income" and "Consolidated Net Loss" appearing in such Section as follows:
"Notwithstanding anything to the contrary, there shall also be
excluded from the calculation of Consolidated Net Income the loss of
$50,000,000 recorded in the Fiscal Quarter ended June 30, 2001 and a
loss of up to $15,000,000 to be recorded in the Fiscal Quarter ended
September 30, 2001, in each case resulting from the write-down of the
book value of the assets used in the Ecusta Division of the Company."
(b) Schedule 6.16 to the Credit Agreement is hereby amended by
deleting such schedule in its entirety and replacing such schedule with Schedule
6.16 attached hereto.
3. Representations and Warranties. In order to induce the Agent and the
Lenders to enter into this Agreement, each Borrower hereby represents and
warrants to the Agent and the Lenders, in each case after giving effect to this
Agreement, as follows:
(a) Each Borrower has the right, power and capacity and has
been duly authorized and empowered by all requisite corporate or limited
liability company and shareholder or member action to enter into, execute,
deliver and perform this Agreement and all agreements, documents and instruments
executed and delivered pursuant to this Agreement.
(b) This Agreement constitutes each Borrower's legal, valid
and binding obligation, enforceable against it, except as enforcement thereof
may be subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and general
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principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law or otherwise).
(c) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects at and as of the Effective Date as though made on and as of the
Effective Date (except to the extent specifically made with regard to a
particular date, in which case such representation and warranty is true and
correct in all material respects as of such earlier date).
(d) Each Borrower's execution, delivery and performance of
this Agreement do not and will not violate its Articles or Certificate of
Incorporation or By-laws, any law, rule, regulation, order, writ, judgment,
decree or award applicable to it or any contractual provision to which it is a
party or to which it or any of its property is subject.
(e) No authorization or approval or other action by, and no
notice to or filing or registration with, any governmental authority or
regulatory body (other than those which have been obtained and are in force and
effect) is required in connection with the execution, delivery and performance
by the Borrowers or any other Credit Party of this Agreement and all agreements,
documents and instruments executed and delivered pursuant to this Agreement.
(f) No Event of Default or Unmatured Event of Default exists
under the Credit Agreement or would exist after giving effect to this Agreement.
4. Conditions to Effectiveness of Waiver. This Agreement shall become
effective on the date (the "Effective Date") each of the following conditions
precedent is satisfied:
(a) Execution and Delivery. The Borrowers, the Agent and the
Required Lenders shall have executed and delivered this Agreement, the Company
shall have executed and delivered an Officers Certificate in the form of Exhibit
A attached hereto and the Company and the Subsidiary Guarantors shall have
executed and delivered a Reaffirmation of Guarantee in the form of Exhibit B
attached hereto.
(b) No Defaults. After giving effect to this Agreement, no
Event of Default or Unmatured Event of Default under the Credit Agreement shall
have occurred and be continuing.
(c) Representations and Warranties. After giving effect to
this Agreement, the representations and warranties of the Borrowers and the
other Credit Parties contained in this Agreement, the Credit Agreement and the
other Loan Documents shall be true and correct in all material respects as of
the Effective Date, with the same effect as though made on such date, except to
the extent that any such representation or warranty relates to an earlier date,
in which case such representation or warranty shall be true and correct in all
material respects as of such earlier date.
Promptly upon satisfaction of the foregoing conditions
precedent, the Agent will notify the Company as to the Effective Date.
5. Miscellaneous. The parties hereto hereby further agree as follows:
(a) Costs, Expenses and Taxes. The Borrowers hereby agree to
pay all reasonable fees, costs and expenses of the Agent incurred in connection
with the negotiation, preparation and execution of this Agreement and the
transactions contemplated hereby, including, without limitation, the reasonable
fees and expenses of Winston & Strawn, counsel to the Agent.
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(b) Counterparts. This Agreement may be executed in one or
more counterparts, each of which, when executed and delivered, shall be deemed
to be an original and all of which counterparts, taken together, shall
constitute but one and the same document with the same force and effect as if
the signatures of all of the parties were on a single counterpart, and it shall
not be necessary in making proof of this Agreement to produce more than one (1)
such counterpart.
(c) Headings. Headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(d) Integration. This Agreement and the Credit Agreement
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof.
(e) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF
THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS PRINCIPLES).
(f) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the Borrowers, the Agent and the
Lenders and their respective successors and assigns. Except as expressly set
forth to the contrary herein, this Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the Borrowers, the Agent
and the Lenders and their respective successors and permitted assigns.
(g) Amendment; Waiver. The parties hereto agree and
acknowledge that nothing contained in this Agreement in any manner or respect
limits or terminates any of the provisions of the Credit Agreement or any of the
other Loan Documents other than as expressly set forth herein and further agree
and acknowledge that the Credit Agreement (as amended hereby) and each of the
other Loan Documents remain and continue in full force and effect and are hereby
ratified and confirmed. Except to the extent expressly set forth herein, the
execution, delivery and effectiveness of this Agreement shall not operate as a
Agreement of any rights, power or remedy of the Lenders or the Agent under the
Credit Agreement or any other Loan Document, nor constitute a Agreement of any
provision of the Credit Agreement or any other Loan Document. No delay on the
part of any Lender or the Agent in exercising any of their respective rights,
remedies, powers and privileges under the Credit Agreement or any of the Loan
Documents or partial or single exercise thereof, shall constitute a Agreement
thereof. On and after the Effective Date each reference in the Credit Agreement
to "this Agreement," "hereunder," "hereof," "herein" or words of like import,
and each reference to the Credit Agreement in the Loan Documents and all other
documents delivered in connection with the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended hereby. The Borrowers acknowledge
and agree that this Agreement constitutes a "Loan Document" for purposes of the
Credit Agreement, including, without limitation, Section 10.1 of the Credit
Agreement. None of the terms and conditions of this Agreement may be changed,
waived, modified or varied in any manner, whatsoever, except in accordance with
Section 12.1 of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
[signature page follows]
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P. H. GLATFELTER COMPANY PHG TEA LEAVES, INC.
/s/ C. Matthew Smith /s/ C. Matthew Smith
--------------------------------- --------------------
C. Matthew Smith C. Matthew Smith
Chief Financial Officer President
PHG VERWALTUNGSGESELLSCHAFT mbH (formerly named S&H VERWALTUNGSGESELLSCHAFT mbH (formerly named
RABOISEN 209, VERMOGENSVER- RABOISEN 210, VERMOGENSVER-
WALTUNGSGESELLSCHAFT mbH) WALTUNGSGESELLSCHAFT mbH)
/s/ C. Matthew Smith /s/ Gerhard Federer
--------------------------------- -------------------
C. Matthew Smith Gerhard Federer
Managing Director Managing Director
BANKERS TRUST COMPANY, ALLFIRST BANK
individually and as Agent
/s/ Kellie M. Matthews
/s/ Robert R. Telesca ----------------------
--------------------------------- Kellie M. Matthews
Robert R. Telesca Senior Vice President
Vice President
DEUTSCHE BANK AG, DEUTSCHE BANK AG,
New York Branch a/o Cayman Island Branch New York Branch a/o Cayman Island Branch
/s/ Hans-Josef Thiele /s/ Christian Dauwitz
-------------------- ---------------------
Hans-Josef Thiele Christian Dauwitz
Director Vice President
PNC BANK, NATIONAL ASSOCIATION FIRST UNION NATIONAL BANK
/s/ Eric G. Erickson /s/ Andrew Phelps
--------------------------------- -----------------
Eric G. Erickson Andrew Phelps
Vice President Vice President
WACHOVIA BANK MELLON BANK, N.A.
/s/ Anne L. Sayles /s/ Michael J. Gillig
--------------------------------- ---------------------
Anne L. Sayles Michael J. Gillig
Senior Vice President Vice President
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EXHIBIT A
CERTIFICATE OF OFFICER
----------------------
I, the undersigned, Chief Financial Officer of P. H. GLATFELTER
COMPANY, a Pennsylvania corporation (the "Company"), in accordance with Section
4(a) of that certain First Amendment to Credit Agreement dated as of August 6,
2001 (the "Agreement") among the Company, the Subsidiary Borrowers party
thereto, Bankers Trust Company, as Agent, and the financial institutions party
to the Credit Agreement (as defined in the Agreement), do hereby certify on
behalf of the Borrowers the following:
1. The representations and warranties set forth in Section 3 of
the Agreement are true and correct in all material respects as
of the date hereof except to the extent such representations
and warranties are expressly made as of a specified date in
which event such representations and warranties were true and
correct in all material respects as of such specified date;
2. No Event of Default or Unmatured Event of Default has occurred
and is continuing after giving effect to the Agreement; and
3. The conditions of Section 4 of the Agreement have been fully
satisfied.
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings set forth in the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered on
behalf of the Borrowers this Certificate of Officer on this 6th day of August,
2001.
P. H. GLATFELTER COMPANY
By: /s/ C. Matthew Smith
----------------------------------
C. Matthew Smith
Chief Financial Officer
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EXHIBIT B
REAFFIRMATION OF GUARANTEE
--------------------------
Each of the undersigned acknowledges receipt of a copy of the First
Amendment to Credit Agreement (the "Agreement"; capitalized terms used herein
shall, unless otherwise defined herein, have the meanings provided in the
Agreement) dated as of August 6, 2001, by and among P. H. Glatfelter Company, a
Pennsylvania corporation (the "Company"), the Subsidiary Borrowers party
thereto, Bankers Trust Company, as agent, and the financial institutions party
to the Credit Agreement (as defined in the Agreement) as Lenders, consents to
such Agreement and each of the transactions referenced in the Agreement and
hereby reaffirms its obligations under the Company's guaranty set forth in
Article XIII of the Credit Agreement or the Subsidiary Guaranty, as applicable.
Dated as of August 6, 2001.
PHG TEA LEAVES, INC.
/s/ C. Matthew Smith
------------------------------------
C. Matthew Smith
President
THE GLATFELTER PULP WOOD COMPANY
/s/ Markus R. Mueller
------------------------------------
Markus R. Mueller
Secretary
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Schedule 6.16
Environmental Matters
---------------------
The Company is subject to loss contingencies resulting from regulation by
various federal, state, local and foreign governmental authorities with respect
to the environmental impact of air and water emissions and noise from its mills,
as well as the disposal of solid waste generated by its operations. To comply
with environmental laws and regulations, the Company has incurred substantial
capital and operating expenditures in past years. The Company anticipates that
environmental regulation of its operations will continue to become more
burdensome and that capital and operating expenditures will continue, and
perhaps increase, in the future. In addition, the Company may incur obligations
to remove or mitigate any adverse effects on the environment resulting from its
operations, including the restoration of natural resources, and liability for
personal injury and damage to property, including natural resources. Because
environmental regulations are not consistent worldwide, the Company's ability to
compete in the world marketplace may be adversely affected by capital and
operating expenditures required for environmental compliance.
Subject to permit approval, the Company has undertaken an initiative under the
Voluntary Advanced Technical Incentive Program of the United States
Environmental Protection Agency ("EPA") to comply with the new "Cluster Rule"
regulations. This initiative, the Company's "New Century Project," will require
capital expenditures currently estimated at approximately $30,000,000 to be
incurred before April 2004. The Company expects such expenditures to begin
during the first quarter of 2002.
On September 7, 2000, the Pennsylvania Department of Environmental Protection
("DEP") issued to the Company a renewed wastewater discharge permit for the
Spring Grove mill with an effective date of October 1, 2000. The renewed permit
calls for reductions in the mill's discharge of color that the Company believes
cannot be achieved at this time without a curtailment of operations. On
September 7, 2000, DEP also issued to the Company an administrative order
calling for achievement of the limitations in the permit on a schedule extending
until 2007. Both the permit and the order contemplate adoption of an alternative
limitation on color which would be less stringent. The Company expects to be
able to meet the alternative limitation without a curtailment of operations
under the schedule set forth in the order. Under the schedule set forth in the
permit, however, the Company would not have been able to meet the alternative
limitation without a curtailment of operations. The Company has appealed the
permit and the order to the Pennsylvania Environmental Hearing Board. After an
evidentiary hearing, the Board granted a stay of the permit limitation during
the pendency of the appeal. The Board did not grant a stay of the alternative
limitation because it is not yet in effect, and will not come into effect until
a change in the Pennsylvania Water Quality Standard for color is approved; in
this case, "approval" includes an approval by EPA. The Pennsylvania Public
Interest Research Group and several other parties (collectively "Penn PIRG")
have appealed the alternative limitation and have also intervened in the
Company's appeal of the permit. The Company has reached a conditional settlement
of these administrative matters subject to the settlement of the Penn PIRG
litigation described below. If that litigation is settled on the terms currently
agreed to, the Company expects to receive a revised permit calling for
achievement of the less stringent alternative limitation for color by April
2004.
In June 1999, Penn PIRG brought a citizen suit under the Federal Clean Water Act
and Pennsylvania Clean Streams Law seeking a reduction in the Spring Grove
mill's discharge of color, civil penalties and reimbursement for costs of
litigation. On February 7, 2001, the United States District Court granted
partial summary judgment on liability to plaintiffs as to certain claims and
granted summary judgment to the Company on others. The Company moved for
reconsideration, and the
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case was stayed pending settlement discussions. The parties have reached a
conditional settlement of this case. Under the terms of the settlement, to which
the Pennsylvania DEP will become a party, the Company agrees to achieve the less
stringent alternative limitation for color by April 2004. In addition, the
Company will create a permanent endowment for certain environmental and
recreational improvement projects in the Codorus Creek watershed, and the
Company will pay Penn PIRG certain amounts that it incurred in litigation
expenses related to this lawsuit. The total cost to the Company under this
settlement is $2,500,000. A federal consent decree that sets forth some of the
terms of this integrated settlement is in the process of execution by the
parties. The consent decree must be submitted to the United States Department of
Justice for review and then to the Court for review and entry. As the result of
those reviews, the terms of the settlement may change, or the consent decree may
not be entered by the Court.
In 1999, EPA and DEP issued to the Company separate Notices of Violation
("NOVs") alleging violations of the federal and state air pollution control
laws, primarily for purportedly failing to obtain appropriate preconstruction
air quality permits in conjunction with certain modifications to the Company's
Spring Grove mill. EPA announced that the Company was one of seven pulp and
paper mill operators to have received contemporaneously an NOV alleging this
kind of violation. EPA and DEP alleged that the Company's modifications produced
(1) significant net emissions increases in certain air pollutants which should
have been covered by appropriate permits imposing new emissions limitations, and
(2) certain other violations.
For all but one of the modifications cited by EPA, the Company applied for and
obtained from DEP the preconstruction permits which the Company concluded were
required by applicable law. EPA reviewed those applications before the permits
were issued. DEP's NOV pertained only to the modification for which the Company
did not receive a preconstruction permit. The Company conducted an evaluation at
the time of this modification, and determined that the preconstruction permit
cited by EPA and DEP was not required. The Company has been informed that EPA
and DEP will seek substantial emissions reductions, as well as civil penalties,
to which the Company believes it has meritorious defenses. Nevertheless, the
Company is unable to predict the ultimate outcome of these matters or the costs
involved.
The Company faces several related threatened claims arising out of the presence
of polychlorinated biphenyls ("PCBs") in sediments in the Fox River below Lake
Winnebago and in Green Bay, downstream of the Company's Neenah mill. As
described below, various sovereigns have formally notified seven potentially
responsible parties ("PRPs"), of which the Company is one, that they are
potentially responsible for investigation, cleanup and natural resource damages
arising from this contamination under the federal Comprehensive Environmental
Response, Compensation and Liability Act and other laws.
The Wisconsin Department of Natural Resources ("DNR") notified the Company and
other PRPs informally in 1990 that it wished to pursue cleanup of certain
sediments in the Fox River under state law. DNR subsequently asserted claims
under federal law as well for cleanup and for natural resource damages. Since
1998, DNR has been performing a remedial investigation and feasibility study
("RI/FS") of the Fox River and Green Bay under contract to the EPA. In February
1999, DNR issued a draft RI/FS report estimating the costs of potential remedies
for the Fox River at between $0 and $721,000,000, but did not select a preferred
remedy. The Company does not believe that the no action remedy will be selected.
The largest components of the costs of certain of the remedial alternatives are
attributable to large-scale sediment removal by dredging. There is no assurance
that the cost estimates in the draft RI/FS will not differ significantly from
actual costs. Under ordinary procedures, the final RI/FS report will be issued
along with a proposed remedial action plan ("PRAP"). EPA will consider comments
on the PRAP and then will select a remedy for the site. EPA and DNR had stated
publicly that the final RI/FS would be issued in 2000. The expected date of
issuance was subsequently delayed to the spring of 2001 and has now been further
delayed until September 2001.
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Based on current information and advice from its environmental consultants, the
Company continues to believe that an aggressive effort, as included in certain
remedial alternatives in the draft RI/FS, to remove PCB-contaminated sediment,
much of which is buried under cleaner material or is otherwise unlikely to move
and which is abating naturally, would be environmentally detrimental and,
therefore, inappropriate.
In January 1997, DNR, the Wisconsin Department of Justice ("WDOJ"), and the
seven PRPs entered into an agreement to conduct a cooperative natural resource
damages assessment ("NRDA"). The State of Wisconsin has notified the Company
that it intends to terminate the agreement effective August 15, 2001. While that
NRDA has not been completed, based upon work conducted to date, DNR and WDOJ
have proposed to enter into a settlement with another PRP of its share of the
natural resource damages liability. The proposed settlement does not state
explicitly the total amount of natural resource damages, but it calls for such
other PRP to spend $7,000,000 on resource restoration projects.
The United States Fish and Wildlife Service ("FWS"), the National Oceanic and
Atmospheric Administration ("NOAA"), four Indian tribes and the Michigan
Attorney General claim to be trustees for natural resources injured by the PCBs
in the Fox River and Green Bay. In June 1994, FWS notified the Company and other
PRPs that it considered them potentially responsible for natural resource
damages. The federal, tribal and Michigan agencies claiming to be trustees have
proceeded with the preparation of an NRDA separate from the work performed by
DNR. While the final report of assessment will be delayed until after selection
of a remedy for the site, on October 25, 2000, the federal trustees released a
restoration and compensation determination plan ("RCDP") that estimates natural
resource damages for the site at between $176,000,000 and $333,000,000.
The Company is seeking settlement with the Wisconsin agencies and with EPA for
all of its liabilities for response actions and natural resource damages
associated with the site. The Company believes that the federal, tribal and
Michigan natural resource damages claims are without merit, and that the federal
NRDA is technically and procedurally flawed. The Company further maintains that
its share of any liability as among the seven identified PRPs is much less than
one-seventh and that additional responsible parties exist other than the seven
identified by the governments.
The Company currently is unable to predict the ultimate costs to the Company
related to this matter, because the Company cannot predict which remedy will be
selected for the site or the ultimate amount of natural resource damages nor can
the Company predict its share of these costs or damages.
The Company continues to believe it is likely that this matter will result in
litigation; however, the Company believes it will be able to persuade a court
that removal of a substantial amount of PCB-contaminated sediments is not an
appropriate remedy. There can be no assurance, however, that the Company will be
successful in arguing that removal of PCB-contaminated sediments is
inappropriate or that it would prevail in any resulting litigation.
The amount and timing of future expenditures for environmental compliance,
cleanup, remediation and personal injury, natural resource damage and property
damage liability, including but not limited to those related to the lower Fox
River and the Bay of Green Bay, cannot be ascertained with any certainty due to,
among other things, the unknown extent and nature of any contamination, the
extent and timing of any technological advances for pollution control, the
remedial actions which may be required and the number and financial resources of
any other PRPs. The Company continues to evaluate its exposure and the level of
its reserves, including, but not limited to, its share of the costs and damages
(if any) associated with the lower Fox River and the Bay of Green Bay. The
Company believes that it is insured against certain losses related to the lower
Fox River,
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depending on the nature and amount thereof. Coverage, which is currently being
investigated under reservation of rights by various insurance companies, is
dependent upon the identity of the plaintiff, the procedural posture of the
claims asserted and how such claims are characterized. The Company does not know
when the insurers' investigation as to coverage will be completed.
The Company's current assessment, after consultation with legal counsel, is that
ultimately it should be able to resolve these environmental matters without a
long-term, material adverse impact on the Company. In the meantime, however,
these matters could, at any particular time or for any particular period, have a
material adverse effect on the Company's consolidated financial condition,
liquidity or results of operations or result in a default under the Company's
loan covenants. Moreover, there can be no assurance that the Company's reserves
will be adequate to provide for future obligations related to these matters,
that the Company's share of costs and/or damages for these matters will not
exceed its available resources or that such obligations will not have a
long-term, material adverse effect on the Company's consolidated financial
condition, liquidity or results of operations.
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