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EXHIBIT 4.9
CONSENT AND AMENDMENT NO. 1 TO
LOAN AND SECURITY AGREEMENT
November 5, 1997
Pioneer Americas Acquisition Corp.
4300 NationsBank Center
700 Louisiana Street
Houston, Texas 77002
Attention: Chief Financial Officer
and Corporate Secretary
Ladies and Gentlemen:
Reference is made hereby to the certain Loan and Security
Agreement dated as of June 17, 1997 among Pioneer Americas Acquisition Corp.
("Borrower"), Bank of America National Trust and Savings Association, successor
by merger to Bank of America Illinois, as Agent (the "Agent") and a Lender and
the other Lenders party thereto (the "Loan Agreement"). Unless otherwise
defined herein, capitalized terms used herein shall have the meanings provided
to such terms in the Loan Agreement.
1. Background. Borrower has informed Agent and Lenders that
(a) Borrower's Subsidiary, PAI, has established three new Subsidiaries, PCI
Chemicals Canada Inc., a New Brunswick corporation ("PCI Canada"), PCI
Carolina, Inc., a Delaware corporation ("PCI Carolina") and Pioneer Licensing,
Inc., a Delaware corporation ("Licensing"); (b) PCI Canada and PCI Carolina
have agreed to acquire (the PCI Acquisition") certain of the assets, and assume
certain of the liabilities, of ICI Canada Inc. ("ICI Canada") and ICI Americas
Inc. ("ICI Americas"); (c) PAI has agreed to obtain a $83,000,000 term loan
(the "Term Loan") from DLJ Capital Funding, Inc., ("DLJ") and Salomon Brothers
Holding Company Inc. ("Salomon"); (d) PCI Canada has agreed to issue
$175,000,000 of senior secured notes (the "Senior Secured Notes"), the sale of
which will be underwritten by DLJ and Salomon; (e) PCI Canada and PCI Carolina
has each agreed to grant to the Collateral Agent for the lenders in respect of
the Term Loan and the Senior Secured Notes, a lien on its real estate,
equipment and certain general intangibles, and certain related property (the
"Collateral Grant"), to secure the obligations in respect of the Term Loan and
the Senior Secured Notes; (f) Borrower and each Subsidiary of Borrower has
agreed to guaranty the obligations in respect of the Term Loan and in respect
of the Senior Secured Notes; (g) PCI Canada and PCI Carolina has each agreed to
transfer its rights in respect of certain license agreements to Licensing; and
(h) Borrower and its Subsidiaries intend to consummate certain other
transactions in
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connection with the foregoing (all of the foregoing being collectively referred
to as the "Transactions"). Consummation of the Transactions would violate
various provisions of the Loan Agreement. Consequently, Borrower has requested
that Agent and Lenders consent to the consummation of the Transactions.
Borrower has also requested that Agent and Lenders agree to amend
the Loan Agreement in certain respects in order to (i) increase the Revolving
Credit Amount from $35,000,000 to $65,000,000; (ii) add PCI Canada as a
borrowing entity thereunder; (iii) provide for loans in Canadian Dollars; (iv)
add Kemwater North America, Inc. as a borrower thereunder; (v) accept
Borrower's designation of PCI Canada, PCI Carolina and Licensing as Designated
Subsidiaries thereunder; and (vi) extend the term thereof, amend the interest
rates and fees payable in connection therewith, amend the financial covenants
contained therein and otherwise revise and amend the Loan Agreement in various
respects. In connection with such requests, Agent and its affiliate,
BancAmerica Robertson Stephens ("BRS"), have issued a certain commitment letter
dated October 10, 1997 and accepted by Borrower on October 17, 1997 (the
"Commitment Letter"), which Commitment Letter describes the terms on which
Agent and Lenders have agreed to amend the Loan Agreement. A copy of the
Commitment Letter is attached hereto as Exhibit B.
Borrower and Agent have agreed that it will not be possible to
consummate the amendments described in the Commitment Letter prior to the
scheduled closing of the Transactions on November 5, 1997. Consequently,
Borrower has requested that Agent and Lenders (x) enter into an amendment to
the Loan Agreement that increases the Revolving Credit Amount thereunder to
$65,000,000, adds PCI Canada as a borrowing entity thereunder (subject to
satisfaction of certain conditions prior to Loans actually being made available
to PCI Canada), amends the interest charges and fees payable in connection with
the Loans and accepts the designation of PCI Canada, PCI Carolina and Licensing
as Designated Subsidiaries and (y) agree with Borrower that after consummation
of the Transactions, Agent and Lenders will negotiate with Borrower an Amended
and Restated Loan and Security Agreement (the "Amended Agreement") and related
agreements, instruments and documents, that collectively will effect the
financing terms described in the Commitment Letter.
Agent and Lenders have agreed to all of the foregoing on the
terms described herein.
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2. Consent. Agent and Lenders hereby consent to the
consummation of the Transactions and agree that notwithstanding anything to the
contrary contained in the Loan Agreement, the consummation of the Transactions
shall not constitute an Event of Default or an Unmatured Event of Default,
provided that:
a. the Acquisition is consummated pursuant to the
terms of the certain Asset Purchase Agreement dated as of September 22,
1997, as amended October 31, 1997, among PCI Canada, PCI Carolina,
Parent, ICI Canada, ICI Americas and Imperial Chemical Industries PLC
and related agreements, instruments and documents in the forms presented
to Agent and its counsel prior to the date hereof;
b. the Term Loan is consummated pursuant to the terms
of a Term Loan Agreement dated as of October 30, 1997 and related
agreements 31, 1997, instruments and documents in the forms presented to
Agent and its counsel prior to the date hereof;
c. the Senior Secured Notes are issued pursuant to the
terms of a Senior Note Indenture and a Purchase Agreement, each dated as
of October 30, 1997 and related agreements, instruments and documents in
the forms presented to Agent and its counsel prior to the date hereof;
d. the Collateral Grant is consummated pursuant to the
terms of various agreements, instruments and documents in substantially
the forms presented to Agent and its counsel prior to the date hereof;
and
e. the other Transactions are consummated pursuant to
the terms of various agreements, instruments and documents in
substantially the forms presented to Agent and its counsel prior to the
date hereof.
This Consent and Amendment No. 1 to Loan and Security Agreement
(the "Amendment") shall constitute a consent only to the matters specifically
described herein and shall not constitute a consent to any other departure from
the terms of the Loan Agreement or any Related Agreement or a waiver of any
existing or future Event of Default or Unmatured Event of Default under any of
the foregoing, whether or not now known to Agent or any Lender.
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3. Amendments. The Loan Agreement is hereby amended as
follows:
a. The term "Revolving Credit Amount" contained in the
Loan Agreement is hereby amended to increase the amount thereof to
$65,000,000.
b. PCI Canada is hereby added as a borrowing entity
under the Loan Agreement. However, the term "Borrower" shall be deemed
to continue to refer only to PAAC until such time as the Amended
Agreement is effective. Notwithstanding PCI Canada's designation as a
borrowing entity, PCI Canada shall not be entitled to request Loans or
Letters of Credit under the Loan Agreement, nor shall Agent or any
Lender have any obligation to make Loans to, or issue Letters of Credit
on the application of, PCI Canada, in any case until the Amended
Agreement is effective.
c. The definition of the term "Applicable Margin"
contained in the Loan Agreement is hereby amended and restated in its
entirety, as follows:
"'Applicable Margin' means, at any time, a percentage
determined with reference to Borrower's Interest Coverage Ratio
for the twelve month period ending on the last day of Borrower's
most recent fiscal quarter, as set forth below for the applicable
interest rate or fee:
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Applicable Margin Applicable
for LIBOR Rate Margin for Applicable
Interest Coverage and Letter Floating Rate Margin for
Coverage Ratio of Credit Commissions Loans Non-Use Fee
-------------- --------------------- ----- -----------
Greater than or equal to 1.75% 0.75% 0.35%
3.5:1.0
Less than 3.5:1.0 and 2.00% 1.00% 0.40%
greater than or equal to
3.0:1.0
Less than 3.0:1.0 and 2.25% 1.25% 0.45%
greater than or equal to
2.5:1.0
Less than 2.5:1.0 2.50% 1.50% 0.50%
The Interest Coverage Ratio for any fiscal quarter shall be
determined pursuant to Borrower's monthly financial statements
for the last month in such quarter delivered pursuant to Section
5.1.1(b) or, with respect to the last fiscal quarter in any
Fiscal Year, Borrower's annual audited financial statements for
such Fiscal Year delivered pursuant to Section 5.1.1(a). Changes
in the Applicable Margin shall become prospectively effective 5
days after receipt by Agent of the applicable financial
statements, accompanied by a calculation of the Interest Coverage
Ratio. The Applicable Margin for the period from November 5,
1997 until 5 days after receipt by Agent of Borrower's financial
statements for December 31, 1997 shall be set at the level that
would be applicable if the Interest Coverage Ratio were less than
2.5:1.0."
d. The definition of the term "Floating Rate"
contained in the Loan Agreement is hereby amended and restated in its
entirety, as follows:
"'Floating Rate' means, at any time, the Reference Rate
plus the Applicable Margin."
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e. The first sentence of the definition of the term
"Reference Rate" contained in the Loan Agreement is hereby amended and
restated in its entirety, as follows:
"'Reference Rate' means, at any time, the higher of (a)
the rate of interest than most recently announced by Bank of
America National Trust and Savings Association at Chicago,
Illinois as its reference rate and (b) the then applicable
Federal Funds Rate plus one-half of one percent (0.50%)."
f. Section 2.2(b) of the Loan Agreement is hereby
amended to provide that the Letter of Credit commissions payable
thereunder at any time that the Default Rate is not being charged, shall
be equal to the Applicable Margin.
g. Section 5.29 of the Loan Agreement is hereby
amended to provide that the merger of Borrower and PAI must be completed
on or before October 31, 1998.
h. The Loan Agreement is hereby amended to provide
that Borrower will pay to Agent, for its own account, an annual agency
fee equal to $15,000 per annum, payable on the date hereof, on October
10, 1998 and on each anniversary of October 10, 1998 until termination.
i. The Loan Agreement is hereby amended to provide
that on the date hereof, Borrower will pay BRS, for its own account, any
unpaid portion of the $275,000 arrangement fee described in the
Commitment Letter.
j. The Loan Agreement is hereby amended to provide
that interest on the Floating Rate Loans shall be payable in arrears on
the last day of each quarter, commencing on December 31, 1997 and at
maturity and that interest on LIBOR Rate Loans shall be payable in
arrears on the last day of each quarter, commencing on December 31,
1997, on the last day of each Interest Rate Period applicable thereto,
and at maturity.
k. PCI Canada, PCI Carolina and Licensing are hereby
deemed to be "Designated Subsidiaries" under the Loan Agreement.
Notwithstanding such designation, (i) no Accounts Receivable of any of
such Persons shall be deemed to be Eligible Accounts Receivable; (ii) no
Inventory of any such Person shall be deemed to be Eligible Inventory;
and (iii) Borrower shall not be entitled to make
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loans or advances to any such Person, in each case until each such
Person has complied with the terms of Sections 5.19 and 5.20 of the Loan
Agreement and until the Amended Agreement has become effective.
l. This Amendment shall have the effect of amending
the Loan Agreement, Supplement A and the Related Agreements as
appropriate to express the agreements contained herein. In all other
respects, the Loan Agreement, Supplement A and the Related Agreements
shall remain in full force and effect in accordance with their
respective terms.
4. Agreement. Agent and Lenders hereby agree with Borrower
that after consummation of the Transactions and prior to December 31, 1997,
Agent and Lenders will negotiate with Borrower an Amended Agreement and related
agreements, instruments and documents, that collectively will effect the
financing terms described in the Commitment Letter, subject to all of the
conditions set forth therein.
5. Conditions to Effectiveness. This Amendment shall be
effective upon execution hereof by Agent and Lenders and acceptance hereof by
Borrower and each other Obligor, together with (a) each other item listed in
Section IX of the Closing Checklist attached hereto as Exhibit C, all in form
and substance satisfactory to Agent, (b) the balance of the $275,000
arrangement fee due to BRS in connection with the
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issuance of the Commitment Letter and the $15,000 initial annual agency fee due
to Agent in connection with the issuance of the Commitment Letter (each of
which fees may be paid by debit to the Loan Account) and (c) evidence
satisfactory to Agent that each of the other Transactions will be consummated
contemporaneously with, and in accordance with the terms of, this Amendment.
Very truly yours,
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Agent and as a Lender
By /s/ David A. Johanson
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Its Vice President
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Acknowledged and agreed to as of
this 5th day of November, 1997
PIONEER AMERICAS ACQUISITION CORP.
By /s/ Philip J. Ablove
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Its Vice President
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PCI CHEMICALS CANADA, INC.
By /s/ Philip J. Ablove
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Its Vice President
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Acknowledgment and Acceptance of Guarantors
Each of the undersigned is a party to the Master Corporate
Guaranty dated June 17, 1997 in favor of Bank of America National Trust and
Savings Association, as Agent for itself and Lenders (the "Guaranty"), pursuant
to which each of the undersigned has guaranteed the Liabilities of Borrower
under the Loan Agreement. Each of the undersigned hereby acknowledges receipt
of the foregoing Consent and Amendment No. 1 to Loan and Security Agreement,
accepts and agrees to be bound by the term thereof, ratifies and confirms all
of its obligations under the Guaranty, and agrees that the Guaranty shall
continue in full force and effect as to it, notwithstanding such amendment.
Acknowledged and Agreed to
this 5th day of November,
1997.
EACH OF THE SUBSIDIARIES SET
FORTH ON EXHIBIT A ATTACHED
HERETO
By /s/ Philip J. Ablove
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Vice President of each
such Subsidiary
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EXHIBIT A
Subsidiaries
Pioneer Americas, Inc.
Pioneer Chlor Alkali Company, Inc.
Imperial West Chemical Co.
All-Pure Chemical Co.
All-Pure Chemical Northwest, Inc.
Black Mountain Power Company