Exhibit 10.6(c)
SECOND AMENDMENT TO CREDIT AGREEMENT
     THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the “Amendment”), dated as of
December 22, 2006, by and among P.H. GLATFELTER COMPANY, a Pennsylvania
corporation (the “Company”), on behalf of itself and each of the other Loan
Parties under the Credit Agreement (as hereinafter defined), the BANKS (as
defined under the Credit Agreement) parties hereto, PNC BANK, NATIONAL
ASSOCIATION, in its capacity as agent for the Banks (the “Agent”).
WITNESSETH:
     WHEREAS, the parties hereto are parties to that certain Credit Agreement,
dated as of April 3, 2006, as amended by that First Amendment thereto dated
April 25, 2006 (as so amended, the “Credit Agreement”);
     WHEREAS, the parties hereto desire to amend the Credit Agreement as
provided herein.
     NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows (Defined terms used herein unless
otherwise amended or defined herein shall have the meanings ascribed to them in
the Credit Agreement as amended by this Amendment.):
1. Amendment to Section 1.1 [Definitions] of the Credit Agreement.
     (A) Existing Definitions. The following definitions contained in
Section 1.1 of the Credit Agreement are hereby amended and restated to read as
follows:
          “Consolidated EBITDA shall mean as of the end of any fiscal quarter:
(i) EBITDA of the Company and its Subsidiaries for the immediately preceding
four fiscal quarters, plus (ii) the aggregate gain on sale of all timberland
properties (as determined in accordance with GAAP) (A) made within the eight
immediately preceding fiscal quarters and multiplied by one-half (1/2) if
Consolidated EBITDA is being calculated for any fiscal quarter through and
including the fiscal quarter ending June 30, 2008 and (B) made within the four
immediately preceding fiscal quarters if Consolidated EBITDA is being calculated
for any fiscal quarter ending after June 30, 2008, in each case net of any
losses on such sales, provided that the amount of the net gain on sale of
timberland properties included in the calculation of Consolidated EBITDA under
this clause (ii) may not exceed 30% of the EBITDA of the Company and its
Subsidiaries for the immediately preceding four fiscal quarters.”
          “Consolidated Total Debt shall mean all long and short term
Indebtedness (but excluding SunTrust Indebtedness described in Section 8.2.1(ix)
and Permitted Timber Installment Sale Indebtedness described in
Section 8.2.1(x)).”
          “EBITDA shall mean, for any period and any Person, net income
(excluding extraordinary gains and losses, gains and losses on sales of assets
and non-cash pension income) plus income tax expense, interest expense
(excluding Timber Installment Sale Interest Expense), depreciation, amortization
expense and any Permitted EBITDA Add Backs (if EBITDA is being computed for the
Company) of such Person.”

 

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          “Interest Period shall mean the period of time selected by the
Borrowers in connection with (and to apply to) any election permitted hereunder
by the Borrowers to have Revolving Credit Loans or Term Loans bear interest
under the Euro-Rate Option. Subject to the last sentence of this definition,
such period shall be (A) (i) one or two Months if Borrowers select the Euro-Rate
Option during the Syndications Period, and (ii) one, two, three or six Months if
the Borrowers select the Euro-Rate Option after the Syndications Period has
ended, and (B) one or two Months with respect to any Loans made in any Optional
Currency. Such Interest Period shall commence on the effective date of such
Interest Rate Option, which shall be (i) the Borrowing Date if the Borrowers are
requesting new Loans, or (ii) the date of renewal of or conversion to the
Euro-Rate Option if the Borrowers are renewing or converting to the Euro-Rate
Option applicable to outstanding Loans. Notwithstanding the second sentence
hereof: (A) any Interest Period which would otherwise end on a date which is not
a Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, and (B) the Borrowers shall
not select, convert to or renew an Interest Period for any portion of the Loans
that would end after the Expiration Date.”
     “Material Sale of Assets Excluding TISs shall mean: (i) any sales or other
dispositions of timberland of the Loan Parties (other than a Permitted Timber
Installment Sale) when the aggregate amount of such proceeds from such sales or
dispositions equals or exceeds $2,000,000 (the “Material Sale Threshold”) and
each time subsequent sales or dispositions are made after such time as the
Material Sale Threshold is reached, such subsequent sales or dispositions shall
constitute a “Material Sale of Assets Excluding TISs” when the aggregate amount
of proceeds from such subsequent sales or dispositions again equals or exceeds
the Material Sale Threshold, (ii) any sale or other disposition of any other
assets (other than timberland) of the Loan Parties sold pursuant to
Section 8.2.7(vi) if the proceeds of such sale or other disposition shall exceed
$2,000,000, or (iii) any sale or other disposition of any assets of the Loan
Parties sold pursuant to Section 8.2.7(vii).”
     (B) New Definitions. The following new definitions are hereby added to
Section 1.1 in alphabetical order:
     “Permitted Timber Installment Sale shall have the meaning assigned to such
term in Section 8.2.1(x).”
     “Permitted Timber Installment Sale Indebtedness shall have the meaning
assigned to such term in Section 8.2.1(x).”
     “Timber Installment Sale Interest Expense shall mean, for any period of the
Company and its Subsidiaries, interest expense arising pursuant to Permitted
Timber Installment Sale Indebtedness or SunTrust Indebtedness (as determined and
consolidated in accordance with GAAP).”
2. Amendment of Section 1.3 [Accounting Principles] of the Credit Agreement.
     Section 1.3 of the Credit Agreement is hereby amended and restated to read
as follows:
     “1.3 Accounting Principles.

 

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     Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
used in Sections 8.2.15, 8.2.16 and 8.2.17 (and all defined terms used in the
definition of any accounting term used in Sections 8.2.15, 8.2.16 and 8.2.17
shall have the meaning given to such terms (and defined terms) under GAAP as in
effect on the date hereof applied on a basis consistent with those used in
preparing the Annual Statements referred to in Section 6.1.8(i) . In the event
of any change after the date hereof in GAAP, and if such change would result in
the inability to determine compliance with the financial covenants set forth in
Sections 8.2.15, 8.2.16 and 8.2.17 based upon the Company’s regularly prepared
financial statements by reason of the preceding sentence, then the parties
hereto agree to endeavor, in good faith, to agree upon an amendment to this
Agreement that would adjust such financial covenants in a manner that would not
affect the substance thereof, but would allow compliance therewith to be
determined in accordance with the Company’s financial statements at that time;
provided, further, that for purposes of the calculation of the financial
covenants in Sections 8.2.15, 8.2.16 and 8.2.17, the adjustments to income and
expense of the Loan Parties (and any other adjustments) resulting from the
promulgation of Statement of Financial Accounting Standards (“SFAS”) No. 158
shall be disregarded.”
3. Amendment of Section 5.5.1.1 [Sale of Assets] of the Credit Agreement.
     Section 5.5.1.1 of the Credit Agreement is hereby amended and restated to
read as follows:
     “5.5.1.1 Sale of Assets.
     Within (a) five (5) Business Days of any Material Sale of Assets Excluding
TISs and (b) sixty (60) calendar days of any Permitted Timber Installment Sale,
the Borrowers shall make a mandatory prepayment of principal on the Term Loans
equal to the applicable percentage (as reflected on Schedule 5.5.1) of the
after-tax proceeds received or receivable (if not yet received) in connection
with such Material Sale of Assets Excluding TISs or such Permitted Timber
Installment Sale, as applicable (in each case as estimated in good faith by the
Borrower), together with accrued interest on such principal amount.”
4. Amendment of Section 8.2.1 [Indebtedness] of the Credit Agreement.
     Subsections (x) and (xiii) of Section 8.2.1 [Indebtedness] of the Credit
Agreement are hereby amended and restated to read as follows:
          “(x) Indebtedness (“Permitted Timber Installment Sale Indebtedness”)
which is (a) incurred in connection with an installment sale of timber (a
“Permitted Timber Installment Sale”), (b) structured similarly to the SunTrust
Indebtedness and used for similar purposes, and(c) upon terms and documentation
which has been reviewed and approved by the Agent; provided that the terms and
conditions contained in the agreements evidencing such Indebtedness shall not be
subsequently modified after the closing date thereof without the consent of the
Agent.”

 

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          “(xiii) Other unsecured Indebtedness in an amount not to exceed
$30,000,000 outstanding at any time.”
     The remainder of Section 8.2.1 [Indebtedness] remains unchanged hereby.
5. Amendment of Section 8.2.4 [Loans and Investments] of the Credit Agreement.
     A new subsection (ix) is hereby added to Section 8.2.4 [Loans and
Investments] of the Credit Agreement immediately after subsection (viii) thereof
to read as follows:
          “(ix) loans to (A) purchasers under a Permitted Timber Installment
Sale to finance the purchase price thereof and (B) Sustainable Conservation,
Inc. made prior to the Closing Date to finance the purchase of timberlands
pursuant to an installment sale of timberlands transaction, which occurred in
connection with the SunTrust Indebtedness.”
     The remainder of Section 8.2.4 [Loans and Investments] remains unchanged
hereby.
6. Amendment of Section 8.2.7 [Dispositions of Assets or Subsidiaries] of the
Credit Agreement.
     Subsection (iii) of Section 8.2.7 [Dispositions of Assets or Subsidiaries]
of the Credit Agreement is hereby amended and restated to read as follows:
     “(iii) any sale, transfer or lease of assets by (a) one Loan Party to
another Loan Party or (b) any Subsidiary of a Loan Party which is not itself a
Loan Party to a Loan Party or a Subsidiary of a Loan Party.”
     The remainder of Section 8.2.7 [Dispositions of Assets or Subsidiaries]
remains unchanged hereby.
7. Amendment of Section 8.2.17 [Minimum Interest Coverage Ratio] of the Credit
Agreement.
     Section 8.2.17 [Minimum Interest Coverage Ratio] of the Credit Agreement is
hereby amended and restated to read as follows:
     “8.2.17 Minimum Interest Coverage Ratio.
     The Borrowers shall not permit the ratio of Consolidated Adjusted EBITDA to
consolidated interest expense (excluding Timber Installment Sale Interest
Expense) of the Borrowers and their Subsidiaries, measured as of the end of each
fiscal quarter, for the four (4) fiscal quarters then ended, to be less than
3.50 to 1.00.”
8. Conditions to the Effectiveness of this Amendment.
     This Amendment shall be effective upon when (a) it has been signed and
delivered by the Company, the Required Banks and the Agent, (b) the Intercompany
Subordination Agreement substantially in the form of Exhibit A hereto has been
signed and delivered by each of the Loan

 

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Parties and (c) the representations and warranties of the Loan Parties in
Section 6 hereof shall be true and correct.
9. Representations and Warranties.
     The Loan Parties hereby represent and warrant to the Agent and the Banks
that (a) the representations and warranties of the Loan Parties contained in the
Credit Agreement and the other Loan Documents are true and correct on and as of
the date hereof with the same force and effect as though made by the Loan
Parties on such date, except to the extent that any such representation or
warranty expressly relates solely to a previous date, and (b) the Loan Parties
are in compliance with all terms, conditions, provisions, and covenants
contained in the Credit Agreement and the other Loan Documents and there exists
no Event of Default or Potential Default and (c) all of the terms and
conditions, provisions and covenants in the Credit Agreement, the Loan Documents
and all other documents delivered to the Banks and the Agent in connection with
any of the foregoing documents and obligations secured thereby are in full force
and effect, are hereby ratified and confirmed and remain unaltered, except as
expressly modified by this Amendment. This Amendment has been duly executed by
an authorized officer of each Loan Party. The execution, delivery, and
performance of this Amendment have been duly authorized by all necessary
corporate action, require no governmental approval, and will neither contravene,
conflict with, nor result in the breach of any law, charter, articles, or
certificate of incorporation or organization, bylaws, operating agreement or
other agreement governing or binding upon any of the Loan Parties or any of
their property. Each Loan Party is in good standing in its jurisdiction of
organization.
10. Force and Effect.
     Each of the parties hereto reconfirms and ratifies the Credit Agreement and
all other documents executed in connection therewith, and confirms that all such
documents remain in full force and effect since the date of their execution,
except to the extent modified by this Amendment.
11. Governing Law.
     This Amendment shall be deemed to be a contract under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the internal laws of the Commonwealth
of Pennsylvania without regard to its conflict of laws principles.
12. Counterparts.
     This Amendment may be signed by telecopy or original in any number of
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
     IN WITNESS WHEREOF, the parties have executed this instrument under seal as
of the day and year first above written.
[SIGNATURE PAGES FOLLOW]

 

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[SIGNATURE PAGE 1 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              BORROWERS:
 
            P.H. GLATFELTER COMPANY
 
       
 
  By:   /s/ John P. Jacunski
 
       
 
  Name:   John P. Jacunski
 
  Title:   Senior Vice President and CFO
 
            PHG TEA LEAVES, INC.
 
       
 
  By:   /s/ George B. Amoss, Jr.
 
       
 
  Name:   George B. Amoss, Jr.
 
  Title:   President
 
            PAPIERFABRIK SCHOELLER & HOESCH GMBH & CO. KG
 
            By: S&H Verwaltungsgesellschaft mbH, its General Partner
 
       
 
  By:   /s/ John P. Jacunski
 
       
 
  Name:   John P. Jacunski
 
  Title:   Managing Director
 
            S&H VERWALTUNGESELLSCHAFT MBH
 
       
 
  By:   /s/ John P. Jacunski
 
       
 
  Name:   John P. Jacunski
 
  Title:   Managing Director
 
            GLATFELTER-UK, LTD
 
       
 
  By:   /s/ Jeffrey J. Norton
 
       
 
  Name:   Jeffrey J. Norton
 
  Title:   Secretary
 
            MOLLANVICK, INC.
 
       
 
  By:   /s/ George B. Amoss, Jr.
 
       
 
  Name:   George B. Amoss, Jr.
 
  Title:   President

 

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[SIGNATURE PAGE 2 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              GUARANTORS:
 
            THE GLATFELTER PULP WOOD COMPANY
 
       
 
  By:   /s/ George H. Glatfelter
 
       
 
  Name:   George H. Glatfelter
 
  Title:   Chairman and President
 
            GLT INTERNATIONAL FINANCE, LLC
 
       
 
  By:   /s/ George B. Amoss, Jr.
 
       
 
  Name:   George B. Amoss, Jr.
 
  Title:   Treasurer
 
            GLENN-WOLFE, INC
 
       
 
  By:   /s/ George B. Amoss, Jr.
 
       
 
  Name:   George B. Amoss, Jr.
 
  Title:   President
 
            GLATFELTER HOLDINGS, LLC
 
       
 
  By:   /s/ Thomas V. Bosley
 
       
 
  Name:   Thomas V. Bosley
 
  Title:   Vice President and General Manager
 
      Of Glatfelter Pulp Wood Company
 
      Member of Glatfelter Holdings, LLC
 
            GLATFELTER HOLDINGS II, LLC
 
       
 
  By:   /s/ Thomas V. Bosley
 
       
 
  Name:   Thomas V. Bosley
 
  Title:   Vice President and General Manager
 
      Of Glatfelter Pulp Wood Company
 
      Member of Glatfelter Holdings II, LLC

 

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[SIGNATURE PAGE 3 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              BANKS AND AGENT:
 
            PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
 
       
 
  By:   /s/ Frank A. Pugliese
 
       
 
  Name:   Frank A. Pugliese
 
  Title:   Senior Vice President

 

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[SIGNATURE PAGE 4 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              CREDIT SUISSE, CAYMAN ISLANDS BRANCH
 
       
 
  By:   /s/ David Dodd
 
       
 
  Name:   David Dodd
 
  Title:   Vice President
 
       
 
  By:   /s/ James Neira
 
       
 
  Name:   James Neira
 
  Title:   Associate

 

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[SIGNATURE PAGE 5 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              LASALLE BANK NATIONAL ASSOCIATION
 
       
 
  By:   /s/ Philip R. Medsger
 
       
 
  Name:   Philip R. Medsger
 
  Title:   First Vice President

 

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[SIGNATURE PAGE 6 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              MANUFACTURERS AND TRADERS TRUST COMPANY
 
       
 
  By:   /s/ Tracey E. Sawyer-Calhoun
 
       
 
  Name:   Tracey E. Sawyer-Calhoun
 
  Title:   Vice President

 

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[SIGNATURE PAGE 7 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              SUNTRUST BANK
 
       
 
  By:   /s/ William C. Washburn, Jr.
 
       
 
  Name:   William C. Washburn, Jr.
 
  Title:   Vice President

 

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[SIGNATURE PAGE 8 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              BANK OF AMERICA, N.A.
 
       
 
  By:   /s/ Charles R. Dickerson
 
       
 
  Name:   Charles R. Dickerson
 
  Title:   Managing Director

 

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[SIGNATURE PAGE 9 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              HSBC BANK USA
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       

 

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[SIGNATURE PAGE 10 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              CITIBANK, N.A.
 
       
 
  By:   /s/ Christopher D. Pannacciulli
 
       
 
  Name:   Christopher D. Pannacciulli
 
  Title:   Vice President

 

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[SIGNATURE PAGE 11 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              CITIBANK, N.A., CANADIAN BRANCH
 
       
 
  By:   /s/ Niyousha Zarinpour
 
       
 
  Name:   Niyousha Zarinpour
 
  Title:   Authorized Signer

 

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[SIGNATURE PAGE 12 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              CITIZENS BANK OF PENNSYLVANIA
 
       
 
  By:   /s/ Michael J. Gillig
 
       
 
  Name:   Michael J. Gillig
 
  Title:   Vice President

 

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[SIGNATURE PAGE 13 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES
 
       
 
  By:   /s/ Subash R. Viswanathan
 
       
 
  Name:   Subash R. Viswanathan
 
  Title:   Senior Vice President
 
       
 
  By:   /s/ Barbara Peters
 
       
 
  Name:   Barbara Peters
 
  Title:   Assistant Vice President

 

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[SIGNATURE PAGE 14 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              COMERICA BANK
 
       
 
  By:   /s/ Richard C. Hampson
 
       
 
  Name:   Richard C. Hampson
 
  Title:   Vice President

 

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[SIGNATURE PAGE 15 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              FIFTH THIRD BANK
 
       
 
  By:   /s/ Jim Janovsky
 
       
 
  Name:   Jim Janovsky
 
  Title:   Vice President

 

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[SIGNATURE PAGE 16 OF 16 TO
SECOND AMENDMENT TO CREDIT AGREEMENT]

              COBANK, ACB
 
       
 
  By:   /s/ Pat Schulz
 
       
 
  Name:   Pat Schulz
 
  Title:   Assistant Corporate Secretary

 

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EXHIBIT A
FORM OF
INTERCOMPANY SUBORDINATION AGREEMENT
     THIS INTERCOMPANY SUBORDINATION AGREEMENT is dated as of 12/2/2006 and is
made by and among the entities listed on the signature page hereto and each
Person who hereafter becomes a Borrower or a Guarantor under the Credit
Agreement (defined below) (subsequently joining this agreement) (each being
individually referred to herein as a “Company” and collectively as the
“Companies”).
WITNESSETH THAT:
     WHEREAS, each capitalized term used herein shall, unless otherwise defined
herein, have the meaning specified in that certain Credit Agreement dated as of
even date herewith (as it may be hereafter amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”) by and among P.H.
GLATFELTER COMPANY, a Pennsylvania corporation (the “Glatfelter”) and certain of
its subsidiaries identified on the signature pages hereto (each a “Borrower” and
collectively, the “Borrowers”), the Guarantors now or hereafter party thereto,
the Banks now or hereafter party thereto (the “Banks”) and PNC BANK, NATIONAL
ASSOCIATION, as agent (the “Agent”) for the Banks, PNC CAPITAL MARKETS LLC and
CREDIT SUISSE SECURITIES (USA) LLC, as joint arrangers and bookrunners, and
CREDIT SUISSE SECURITIES (USA) LLC, as syndication agent (the “Syndication
Agent”); and
     WHEREAS, pursuant to the Credit Agreement and the other Loan Documents
referred to and defined in the Credit Agreement, the Banks intend to make Loans
to the Borrowers; and
     WHEREAS, the Companies are or may become indebted to each other (the
Indebtedness of each of the Companies to any other Company, now existing or
hereafter incurred (whether created directly or acquired by assignment or
otherwise), and interest and premiums, if any, thereon and other amounts payable
in respect thereof are hereinafter collectively referred to as the “Intercompany
Indebtedness”); and
     WHEREAS, the obligations of the Banks to maintain the Commitments and make
Loans to the Borrowers from time to time are subject to the condition, among
others, that the Companies subordinate the Intercompany Indebtedness to the
Obligations of the Borrowers or any other Company to the Agent or the Banks
pursuant to the Credit Agreement, the other Loan Documents or any Bank-Provided
Interest Rate Hedge (collectively, the “Senior Debt”) in the manner set forth
herein.
     NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
covenant and agree as follows:
     1. Intercompany Indebtedness Subordinated to Senior Debt. The recitals set
forth above are hereby incorporated by reference. All Intercompany Indebtedness
shall be subordinate

 

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and subject in right of payment to the prior indefeasible payment in full of all
Senior Debt pursuant to the provisions contained herein.
     2. Payment Over of Proceeds Upon Dissolution, Etc. Upon any distribution of
assets of any Company in the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to any such Company or to
its creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of any such Company, whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy (other than a liquidation,
dissolution or winding up which (i) is permitted under the Credit Agreement
(ii) which is made when no Event of Default exists under the Credit Agreement),
or (c) any assignment for the benefit of creditors or any marshalling of assets
and liabilities of any such Company (a Company distributing assets as set forth
herein being referred to in such capacity as a “Distributing Company”), then and
in any such event, the Agent shall be entitled to receive, for the benefit of
the Agent and the Banks as their respective interests may appear, indefeasible
payment in full of all amounts due or to become due (whether or not an Event of
Default has occurred under the terms of the Loan Documents or the Senior Debt
has been declared due and payable prior to the date on which it would otherwise
have become due and payable) on or in respect of any and all Senior Debt before
the holder of any Intercompany Indebtedness owed by the Distributing Company is
entitled to receive any payment on account of the principal of or interest on
such Intercompany Indebtedness, and to that end, the Agent shall be entitled to
receive, for application to the payment of the Senior Debt, any payment or
distribution of any kind or character, whether in cash, property or securities,
which may be payable or deliverable in respect of the Intercompany Indebtedness
owed by the Distributing Company in any such case, proceeding, dissolution,
liquidation or other winding up event.
     3. No Commencement of Any Proceeding. Each Company agrees that, so long as
the Senior Debt shall remain unpaid, it will not commence, or join with any
creditor other than the Banks and the Agent in commencing, any proceeding
referred to in the first paragraph of Section 2 against any other Company which
owes it any Intercompany Indebtedness.
     4. Prior Payment of Senior Debt Upon Acceleration of Intercompany
Indebtedness. If any portion of the Intercompany Indebtedness owed by any
Company becomes or is declared due and payable before its stated maturity, then
and in such event the Agent and the Banks shall be entitled to receive
indefeasible payment in full of all amounts due and to become due on or in
respect of the Senior Debt (whether or not an Event of Default has occurred
under the terms of the Loan Documents or the Senior Debt has been declared due
and payable prior to the date on which it would otherwise have become due and
payable) before the holder of any such Intercompany Indebtedness is entitled to
receive any payment thereon.
     5. No Payment When Senior Debt in Default. If any Event of Default shall
have occurred and be continuing, or such an Event of Default or Potential
Default would result from or exist after giving effect to a payment with respect
to any portion of the Intercompany Indebtedness, unless the Required Banks shall
have consented to or waived the same, so long as any of the Senior Debt shall
remain outstanding, no payment shall be made by any Company

- 2 -

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owing such Intercompany Indebtedness on account of principal or interest on any
portion of the Intercompany Indebtedness.
     6. Payment Permitted if No Default. Nothing contained in this Agreement
shall prevent any of the Companies, at any time except during the pendency of
any of the conditions described in Sections 2, 4 and 5, from making payments at
any time of principal of or interest on any portion of the Intercompany
Indebtedness, or the retention thereof by any of the Companies of any money
deposited with them for the payment of or on account of the principal of or
interest on the Intercompany Indebtedness.
     7. Receipt of Prohibited Payments. If, notwithstanding the foregoing
provisions of Sections 2, 4, 5 and 6, a Company which is owed Intercompany
Indebtedness by a Distributing Company shall have received any payment or
distribution of assets from the Distributing Company of any kind or character,
whether in cash, property or securities, then and in such event such payment or
distribution shall be held in trust for the benefit of the Agent and the Banks
as their respective interests may appear, shall be segregated from other funds
and property held by such Company, and shall be forthwith paid over to the Agent
in the same form as so received (with any necessary endorsement) to be applied
(in the case of cash) to or held as collateral (in the case of noncash property
or securities) for the payment or prepayment of the Senior Debt in accordance
with the terms of the Credit Agreement.
     8. Rights of Subrogation. Each Company agrees that no payment or
distribution to the Agent or the Banks pursuant to the provisions of this
Agreement shall entitle it to exercise any rights of subrogation in respect
thereof until the Senior Debt shall have been indefeasibly paid in full and the
Commitments shall have terminated and the Letters of Credit have expired.
     9. Records Evidencing Intercompany Indebtedness. Each Company will mark its
books of account in such a manner as shall be effective to give proper notice of
the effect of this Agreement.
     10. Agreement Solely to Define Relative Rights. The purpose of this
Agreement is solely to define the relative rights of the Companies, on the one
hand, and the Agent and the Banks, on the other hand. Nothing contained in this
Agreement is intended to or shall impair, as between any of the Companies and
their creditors other than the Agent and the Banks, the obligation of the
Companies to each other to pay the principal of and interest on the Intercompany
Indebtedness as and when the same shall become due and payable in accordance
with its terms, or is intended to or shall affect the relative rights among the
Companies and their creditors other than the Agent and the Banks, nor shall
anything herein prevent any of the Companies from exercising all remedies
otherwise permitted by applicable Law upon default under any agreement pursuant
to which the Intercompany Indebtedness is created, subject to the rights, if
any, under this Agreement of the Agent and the Banks to receive cash, property
or securities otherwise payable or deliverable with respect to the Intercompany
Indebtedness.
     11. No Implied Waivers of Subordination. No right of the Agent or any Bank
to enforce subordination, as herein provided, shall at any time in any way be
prejudiced or impaired

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by any act or failure to act on the part of any Company or by any act or failure
to act by the Agent or any Bank, or by any non-compliance by any Company with
the terms, provisions and covenants of any agreement pursuant to which the
Intercompany Indebtedness is created, regardless of any knowledge thereof with
which the Agent or any Bank may have or be otherwise charged. Each Company by
its acceptance hereof shall agree that, so long as there is Senior Debt
outstanding or Commitments in effect under the Credit Agreement, such Company
shall not agree to sell, assign, pledge, encumber or otherwise dispose of, or
agree to compromise, the obligations of the other Companies with respect to
their Intercompany Indebtedness, other than by means of payment of such
Intercompany Indebtedness according to its terms, without the prior written
consent of the Agent.
     Without in any way limiting the generality of the foregoing paragraph, the
Agent or any of the Banks may, at any time and from time to time, without the
consent of or notice to the Companies, without incurring responsibility to the
Companies and without impairing or releasing the subordination provided in this
Agreement or the obligations hereunder of the Companies to the Agent and the
Banks, do any one or more of the following: (i) change the manner, place or
terms of payment, or extend the time of payment, renew or alter the Senior Debt
or otherwise amend or supplement the Senior Debt or the Loan Documents;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing the Senior Debt; (iii) release any person liable
in any manner for the payment or collection of the Senior Debt; and
(iv) exercise or refrain from exercising any rights against any of the Companies
and any other person.
     12. Additional Subsidiaries. The Companies covenant and agree that they
shall cause Material Subsidiaries created or acquired after the date of this
Agreement, and any other Material Subsidiaries required to join this Agreement
pursuant to Section 8.2.9 [Subsidiaries] or otherwise under the Credit
Agreement, to execute either a Guarantor Joinder in substantially the form of
Exhibit 1.1(G)(1) to the Credit Agreement or a Borrower Joinder in substantially
the form of Exhibit 1.1(B) to the Credit Agreement, whereby such Material
Subsidiary joins this Agreement and subordinates all Indebtedness owed to any
such Material Subsidiary by any of the Companies or other Material Subsidiaries
hereafter created or acquired to the Senior Debt.
     13. Continuing Force and Effect. This Agreement shall continue in force for
so long as any portion of the Senior Debt remains unpaid and any Commitments or
Letters of Credit under the Credit Agreement remain outstanding, it being
contemplated that this Agreement be of a continuing nature.
     14. Modification, Amendments or Waivers. Any and all agreements amending or
changing any provision of this Agreement or the rights of the Agent or the Banks
hereunder, and any and all waivers or consents to Events of Default or other
departures from the due performance of the Companies hereunder, shall be made
only by written agreement, waiver or consent signed by the Agent, acting on
behalf of all the Banks, with the written consent of the Required Banks, any
such agreement, waiver or consent made with such written consent being effective
to bind all the Banks.

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     15. Expenses. The Companies unconditionally and jointly and severally agree
upon demand to pay to the Agent and the Banks the amount of any and all
out-of-pocket costs, expenses and disbursements, including fees and expenses of
counsel (including the allocated costs of staff counsel) for which reimbursement
is customarily obtained, which the Agent or any of the Banks may incur in
connection with (a) the administration of this Agreement, (b) the exercise or
enforcement of any of the rights of the Agent or the Banks hereunder, or (c) the
failure by the Companies to perform or observe any of the provisions hereof.
     16. Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
     17. Governing Law. This Agreement shall be a contract under the internal
laws of the Commonwealth of Pennsylvania and for all purposes shall be construed
in accordance with the internal laws of the Commonwealth of Pennsylvania without
giving effect to its principles of conflict of laws.
     18. Successors and Assigns. This Agreement shall inure to the benefit of
the Agent and the Banks and their respective successors and assigns, and the
obligations of the Companies shall be binding upon their respective successors
and permitted assigns, provided, that no company may assign or transfer its
rights or obligations hereunder or any interest herein and any such purported
assignment or transfer shall be null and void. The duties and obligations of the
Companies may not be delegated or transferred by the Companies without the
written consent of the Required Banks and any such delegation or transfer
without such consent shall be null and void. Except to the extent otherwise
required by the context of this Agreement, the word “Banks” when used herein
shall include, without limitation, any holder of a Note or an assignment of
rights therein originally issued to a Bank under the Credit Agreement, and each
such holder of a Note or assignment shall have the benefits of this Agreement to
the same extent as if such holder had originally been a Bank under the Credit
Agreement.
     19. Joint and Several Obligations. Each of the obligations of each and
every Company under this Agreement is joint and several. The Agent and the
Banks, or any of them, may, in their sole discretion, elect to enforce this
Agreement against any Company without any duty or responsibility to pursue any
other Company and such an election by the Agent and the Banks, or any of them,
shall not be a defense to any action the Agent and the Banks, or any of them,
may elect to take against any Company. Each of the Banks and Agent hereby
reserve all right against each Company.
     20. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when executed and delivered, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.

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     21. Attornevs-in-Fact. Each of the Companies hereby authorizes and empowers
the Agent, at its election and in the name of either itself, for the benefit of
the Agent and the Banks as their respective interests may appear, or in the name
of each such Company as is owed Intercompany Indebtedness, to execute and file
proofs and documents and take any other action the Agent may deem advisable to
completely protect the Agent’s and the Banks’ interests in the Intercompany
Indebtedness and their right of enforcement thereof and to that end each of the
Companies hereby irrevocably makes, constitutes and appoints the Agent, its
officers, employees and agents, or any of them, with full power of substitution,
as the true and lawful attorney-in-fact and agent of such Company, and with full
power for such Company, and in the name, place and stead of such Company for the
purpose of carrying out the provisions of this Agreement, and taking any action
and executing, delivering, filing and recording any instruments which the Agent
may deem necessary or advisable to accomplish the purposes hereof, which power
of attorney, being given for security, is coupled with an interest and is
irrevocable. Each Company hereby ratifies and confirms, and agrees to ratify and
confirm, all action taken by the Agent, its officers, employees or agents
pursuant to the foregoing power of attorney.
     22. Application of Payments. In the event any payments are received by the
Agent under the terms of this Agreement for application to the Senior Debt at
any time when the Senior Debt has not been declared due and payable and prior to
the date on which it would otherwise become due and payable, such payment shall
constitute a voluntary prepayment of the Senior Debt for all purposes under the
Credit Agreement.
     23. Remedies. In the event of a breach by any of the Companies in the
performance of any of the terms of this Agreement, the Agent, on behalf of the
Banks, may demand specific performance of this Agreement and seek injunctive
relief and may exercise any other remedy available at law or in equity, it being
recognized that the remedies of the Agent on behalf of the Banks at law may not
fully compensate the Agent on behalf of the Banks for the damages they may
suffer in the event of a breach hereof.
     24. Consent to Jurisdiction: Waiver of Jury Trial. Each of the Companies
hereby irrevocably consents to the non-exclusive jurisdiction of the Court of
Common Pleas of Allegheny County, Pennsylvania and the United States District
Court for the Western District of Pennsylvania, waives personal service of any
and all process upon it and consents that all such service of process be made by
certified or registered mail directed to the Companies at the addresses set
forth or referred to in Section 26 hereof and service so made shall be deemed to
be completed upon actual receipt thereof. Each of the Companies waives any
objection to jurisdiction and venue of any action instituted against it as
provided herein and agrees not to assert any defense based on lack of
jurisdiction or venue, AND EACH OF THE COMPANIES WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT TO THE FULL EXTENT PERMITTED
BY LAW.
     Each Company hereby appoints a process agent, P.H. Glatfelter Company, as
its agent to receive on behalf of such party and its respective property,
service of copies of the summons and complaint and any other process which may
be served in any action or proceeding. Such service may be made by mailing or
delivering a copy of such process to any of the Companies in care of

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the Process Agent at the Process Agent’s address, and each of the Companies
hereby authorizes and directs the Process Agent to receive such service on its
behalf. Each Company agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions (or an
political subdivision thereof) by suit on the judgment or in any other manner
provided by law. Each Company further agrees that it shall, for so long as any
Commitment, Letter of Credit or any obligation of any Loan Party to the Bank
remains outstanding, continue to retain Process Agent for the purposes set forth
in this Section 24. The Process Agent hereby accepts the appointment of Process
Agent by the Companies and agrees to act as Process Agent on behalf of the
Companies. The Process Agent has an address of, on the date hereof, 96 South
George Street, Suite 500, York, PA 17401 United States.
     25. EXCEPT AS PROHIBITED BY LAW, EACH COMPANY, THE AGENT AND THE BANKS
HEREBY WAIVE TRIAL BY A JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULLEST EXTENT PERMITTED BY LAW.
     26. Notices. All notices, statements, requests and demands and other
communications given to or made upon the Companies, the Agent or the Banks in
accordance with the provisions of this Agreement shall be given or made as
provided in Section 11.6 [Notices] of the Credit Agreement.
     27. Rules of Construction. The rules of construction set forth in
Section 1.2 [Construction] of the Credit Agreement shall apply to this
Agreement.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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[SIGNATURE PAGE 1 OF 2 TO
INTERCOMPANY SUBORDINATION AGREEMENT]

            BORROWERS:

P. H. GLATFELTER COMPANY
      By:   /s/ John P. Jacunski         Name:   John P. Jacunski       
Title:   Senior Vice President and CFO     

            PHG TEA LEAVES, INC.
      By:   /s/ Donald R. Gross       Name:   Donald R. Gross       Title:  
Treasurer     

            PAPIERFABRIK SCHOELLER & HOESCH
GMBH & CO. KG
By: S&H Verwaltungsgesellschaft mbH, its General Partner
      By:   /s/ John P. Jacunski         Name:   John P. Jacunski       
Title:   Managing Director     

            S&H VERWALTUNGESELLSCHAFT MBH
      By:   /s/ John P. Jacunski         Name:   John P. Jacunski       
Title:   Managing Director     

            GLATFELTER-UK, LTD
      By:   /s/ Jeffrey J. Norton         Name:   Jeffrey J. Norton       
Title:   Secretary     

            MOLLANVICK, INC.
      By:   /s/ Donald R. Gross       Name:   Donald R. Gross       Title:  
Treasurer   

 

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[SIGNATURE PAGE 2 OF 2 TO
INTERCOMPANY SUBORDINATION AGREEMENT]

            GUARANTORS:

THE GLATFELTER PULP WOOD COMPANY
      By:   /s/ George H. Glatfelter         Name:   George H. Glatfelter       
Title:   Chairman and President     

            GLT INTERNATIONAL FINANCE, LLC
      By:   /s/ John P. Jacunski         Name:   John P. Jacunski       
Title:   Manager     

            GLENN-WOLFE, INC
      By:   /s/ Donald R. Gross       Name:   Donald R. Gross       Title:  
Treasurer     

            GLATFELTER HOLDINGS, LLC
      By:   /s/ Thomas V. Bosley         Name:   Thomas V. Bosley        
Title:   Vice President and General Manager
Of Glatfelter Pulp Wood Company
Member of Glatfelter Holdings, LLC     

            GLATFELTER HOLDINGS II, LLC
      By:   /s/ Thomas V. Bosley         Name:   Thomas V. Bosley        
Title:   Vice President and General Manager
Of Glatfelter Pulp Wood Company
Member of Glatfelter Holdings II, LLC