Exhibit 10.1

 

Execution Version

 

RECEIVABLES PURCHASE AGREEMENT

 

DATED AS OF SEPTEMBER 26, 2014

 

AMONG

 

KAPSTONE RECEIVABLES, LLC, AS THE SELLER,

 

KAPSTONE PAPER AND PACKAGING CORPORATION, AS THE SERVICER,

 

THE PURCHASERS FROM TIME TO TIME PARTY HERETO,

 

AND

 

WELLS FARGO BANK, N.A., AS ADMINISTRATIVE AGENT

 

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TABLE OF CONTENTS

 

 

PAGE

 

 

ARTICLE I. PURCHASE ARRANGEMENTS

1

 

 

Section 1.1.

Purchase Facility

1

Section 1.2.

Increases

2

Section 1.3.

Reductions

3

Section 1.4.

Payment Requirements

3

Section 1.5.

Deemed Collections

3

Section 1.6.

Yield

4

Section 1.7.

Suspension of LMIR

4

 

 

ARTICLE II. PAYMENTS AND COLLECTIONS

4

 

 

Section 2.1.

Collections during the Revolving Period

4

Section 2.2.

Collections After the Facility Termination Date

5

Section 2.3.

Order of Application of Collections on Settlement Dates

5

Section 2.4.

Payment Rescission

6

Section 2.5.

Clean-up Option

6

 

 

ARTICLE III. REPRESENTATIONS AND WARRANTIES

6

 

 

Section 3.1.

Representations and Warranties of Seller

6

Section 3.2.

Representations and Warranties of the Servicer

10

 

 

 

ARTICLE IV. CONDITIONS OF CLOSING AND PURCHASES

14

 

 

 

Section 4.1.

Conditions Precedent to Closing

14

Section 4.2.

Conditions Precedent to Initial Purchase

14

Section 4.3.

Conditions Precedent to All Purchases

14

 

 

ARTICLE V. COVENANTS

15

 

 

Section 5.1.

Affirmative Covenants of Seller Parties

15

Section 5.2.

Negative Covenants of Seller Parties

20

 

 

 

ARTICLE VI. ADMINISTRATION AND COLLECTION

22

 

 

Section 6.1.

Designation of the Servicer

22

Section 6.2.

Duties of the Servicer

23

Section 6.3.

Collection Accounts

25

Section 6.4.

Notices of Exclusive Control

25

Section 6.5.

Responsibilities under Contracts

25

Section 6.6.

Reports

26

Section 6.7.

Servicing Fees

26

 

 

 

ARTICLE VII. AMORTIZATION EVENTS

26

 

 

 

Section 7.1.

Amortization Events

26

Section 7.2.

Remedies

29

 

 

 

ARTICLE VIII. INDEMNIFICATION

30

 

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Section 8.1.

Indemnities by Seller

30

Section 8.2.

Indemnities by the Servicer

33

Section 8.3.

Increased Cost and Reduced Return

35

Section 8.4.

Other Costs and Expenses

36

Section 8.5.

Taxes

36

 

 

 

ARTICLE IX. THE ADMINISTRATIVE AGENT

39

 

 

 

Section 9.1.

Appointment

39

Section 9.2.

Delegation of Duties

39

Section 9.3.

Exculpatory Provisions

39

Section 9.4.

Reliance by the Administrative Agent and the Purchasers

40

Section 9.5.

Notice of Amortization Events

40

Section 9.6.

Non-Reliance on the Administrative Agent or Other Purchaser

40

Section 9.7.

Indemnification of the Administrative Agent

41

Section 9.8.

Administrative Agent in Its Individual Capacity

41

Section 9.9.

Successor Administrative Agent

42

Section 9.10.

UCC Filings

42

 

 

ARTICLE X. ASSIGNMENTS; PARTICIPATIONS

42

 

 

Section 10.1.

Assignments; Pledge to Federal Reserve

42

Section 10.2.

Participations

43

Section 10.3.

Replacement of a Purchaser

44

 

 

ARTICLE XI. GRANT OF SECURITY INTEREST

44

 

 

 

Section 11.1.

Grant of Security Interest

44

 

 

 

ARTICLE XII. MISCELLANEOUS

45

 

 

 

Section 12.1.

Waivers and Amendments

45

Section 12.2.

Notices

45

Section 12.3.

Ratable Payments

45

Section 12.4.

Intended Tax Characterization

46

Section 12.5.

Protection of Ownership and Security Interests

46

Section 12.6.

Confidentiality

46

Section 12.7.

CHOICE OF LAW

47

Section 12.8.

CONSENT TO JURISDICTION

48

Section 12.9.

WAIVER OF JURY TRIAL

48

Section 12.10.

Integration; Binding Effect; Survival of Terms

48

Section 12.11.

Counterparts; Severability; Section References

49

Section 12.12.

PATRIOT Act

49

 

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EXHIBITS AND SCHEDULES

 

Exhibit I

Definitions

Exhibit II-A

Form of Purchase Notice

Exhibit II-B

Form of Reduction Notice

Exhibit III

Seller’s Chief Executive Office, Principal Place of Business, Records Locations,
Federal Taxpayer ID Number and Organizational ID Number

Exhibit IV

Lock-Boxes; Collection Accounts and Collection Banks

Exhibit V

Legal Names; Trade Names; Assumed Names

Exhibit VI

Form of Assignment Agreement

Exhibit VII

Credit and Collection Policy

Exhibit VIII

Form of Monthly Report

Exhibit IX

Form of Performance Undertaking

Schedule 12.2

Addresses for Notices

Schedule A

Commitments

Schedule B

Closing Documents

 

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RECEIVABLES PURCHASE AGREEMENT

 

THIS RECEIVABLES PURCHASE AGREEMENT, dated as of September 26, 2014, is among:

 

(a)                                 KapStone Receivables, LLC, a Delaware
limited liability company (the “Seller”),

 

(b)                                 KapStone Paper and Packaging Corporation, a
Delaware corporation (“KapStone Paper”), as initial Servicer,

 

(c)                                  Wells Fargo Bank, N.A. (“Wells” or a
“Purchaser”),

 

(d)                                 PNC Bank, National Association (“PNC” or a
“Purchaser”), and

 

(e)                                  Wells Fargo Bank, N.A., in its capacity as
administrative agent for the Purchasers (in such capacity, together with its
successors and assigns in such capacity, the “Administrative Agent”).

 

Unless defined elsewhere herein, capitalized terms used in this Agreement shall
have the meanings assigned to such terms in Exhibit I hereto.

 

PRELIMINARY STATEMENTS

 

Seller desires to transfer and assign Receivable Interests to the Purchasers
from time to time.

 

On the terms and subject to the conditions set forth herein, each of the
Purchasers severally agrees to purchase its Percentage of each of the offered
Receivable Interests from time to time.

 

Wells Fargo Bank, N.A. has been requested and is willing to act as
Administrative Agent on behalf of the Purchasers in accordance with the terms
hereof.

 

ARTICLE I.

 

PURCHASE ARRANGEMENTS

 

Section 1.1.                             Purchase Facility.

 

(a)                                 On the terms and subject to the conditions
set forth in this Agreement, including, without limitation, the conditions set
forth in Article IV:

 

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(i) From time to time on or after the Effective Date and prior to the Facility
Termination Date, Seller may sell Receivable Interests to the Purchasers by
delivering to the Purchasers a written notice in the form set forth as
Exhibit II-A hereto (a “Purchase Notice”) in accordance with Section 1.2; and

 

(ii) Upon receipt of a Purchase Notice, each of the Purchasers, severally and
not jointly, agrees to purchase its Percentage of the Receivable Interest
described in such Purchase Notice on the applicable Purchase Date;

 

provided that (1) at no time may the aggregate Capital of any Purchaser at any
one time outstanding exceed the lesser of (x) the amount of such Purchaser’s
Commitment hereunder, and (y) such Purchaser’s Percentage of the Investment
Base, (2) in no event shall the Aggregate Capital outstanding hereunder exceed
the lesser of (x) the Facility Limit, and (y) the Investment Base, and (3) in no
event may the aggregate Receivable Interests exceed 100%.  Each Purchaser’s
several Commitment shall automatically terminate on the Facility Termination
Date.

 

(b)                                 Seller may, upon at least five (5) Business
Days’ irrevocable notice to the Purchasers, terminate in whole or permanently
reduce in part, ratably amongst the Purchasers in accordance with their
respective Percentages, the unused portion of the Facility Limit; provided that
each partial reduction of the Facility Limit shall be in an aggregate amount not
less than $1,000,000 per Purchaser (or a larger integral multiple of $100,000 in
excess thereof).

 

Section 1.2.                                 Increases.  If, on any Business Day
on or after the Effective Date and prior to the Facility Termination Date, there
is Investment Availability, Seller may request an Incremental Purchase in
accordance with this Section 1.2.  Seller shall provide the Purchasers with a
Purchase Notice by 3:00 p.m. (New York City time) on the Business Day prior to
the proposed Purchase Date of such Incremental Purchase.  The initial
Incremental Purchase shall be subject to Section 4.2 hereof, and all Purchases
(including the initial Incremental Purchase) shall be subject to Section 4.3
hereof.  Each Purchase Notice shall (a) be prepared based on the numbers set
forth in the most recent Monthly Report, (b) be irrevocable unless revoked on
the Business Day prior to the Purchase Date, and (c) specify the requested
Purchase Price (which shall be not less than $1,000,000 per Purchaser (or a
larger integral multiple of $100,000 in excess thereof) and the Purchase Date
(which shall be a Business Day).  On the date of each Incremental Purchase, upon
satisfaction of the applicable conditions precedent set forth in Article IV,
each Purchaser shall initiate a wire transfer to the Facility Account, in
immediately available funds, no later than 12:00 noon (New York City time), in
an amount equal to its Percentage of the Purchase Price of the Receivable
Interest then being purchased.

 

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Section 1.3.                                 Reductions.

 

(a)                                 Seller shall ensure that the Receivable
Interests at no time exceed 100% in the aggregate.  If the aggregate Receivable
Interests exceed 100% or the Aggregate Capital exceeds the lesser of the
Investment Base and the Facility Limit, within one (1) Business Day after the
earlier of (x) a Responsible Employee of the Seller having knowledge thereof, or
(y) the Administrative Agent or any Purchaser giving notice thereof to Seller,
Seller shall pay to each of the Purchasers its Percentage of an amount to be
applied to reduce the Aggregate Capital, such that after giving effect to such
payment, the aggregate of the Receivable Interests equals or is less than 100%
and the Aggregate Capital is less than or equal to the lesser of the Investment
Base or the Facility Limit.

 

(b)                                 If, on any Business Day, Seller desires to
make a voluntary reduction of the Aggregate Capital outstanding, Seller shall
provide the Purchasers with one (1) Business Day’s irrevocable prior written
notice in the form of Exhibit II-B hereto (a “Reduction Notice”) of a proposed
reduction of Aggregate Capital.  Such Reduction Notice shall (a) be prepared in
accordance with the most recent Monthly Report, and (b) designate (i) the
Business Day (the “Proposed Reduction Date”) upon which any such reduction of
Aggregate Capital shall occur, (ii) the amount of Aggregate Capital to be
reduced (the “Aggregate Reduction”), and (iii) each Purchaser’s Percentage of
such Aggregate Reduction which shall be not less than $1,000,000 per Purchaser. 
Seller shall pay to each Purchaser its Percentage of each Aggregate Reduction. 
Only one (1) Reduction Notice shall be outstanding at any time.

 

Section 1.4.                                 Payment Requirements.  Each Seller
Party shall initiate a wire transfer of amounts to be paid or deposited by it
pursuant to any provision of this Agreement no later than 2:00 p.m. (New York
City time) on the day when due in immediately available funds.  Amounts payable
to the Administrative Agent or Wells shall be paid to the Administrative Agent’s
Account.  Amounts payable to PNC shall be paid to the PNC Account; provided,
however, that from and after the Dominion Date, all amounts that would otherwise
be payable to the PNC Account shall instead first be paid to the Administrative
Agent’s Account for distribution to PNC.  All computations of Yield and per
annum Fees under the Transaction Documents shall be made on the basis of a year
consisting of three hundred sixty (360) days for the actual number of days
elapsed (or, in the case of Yield calculated by reference to the Alternate Base
Rate, three hundred sixty-five (365) days or, in the case of a leap year, three
hundred sixty-six (366) days).  If any amount hereunder shall be payable on a
day which is not a Business Day, such amount shall be payable on the next
succeeding Business Day.

 

Section 1.5.                                 Deemed Collections.  Upon the
occurrence of any Dilution, Seller shall be deemed to have received a Deemed
Collection in the amount specified in the definition of “Deemed Collection,” and
the Outstanding Balance of the Receivable(s) affected thereby shall be
immediately reduced by the amount of such Dilution.  If, after giving effect to
any Dilution (and the reduction of the Receivable(s) affected thereby) an
Investment Excess shall exist, Seller shall deliver to the Servicer immediately
available funds in an amount equal to the

 

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lesser of (a) the sum of all Deemed Collections deemed received by Seller in
respect of such Dilution and (b) the amount necessary to eliminate such
Investment Excess, and in each case, the Servicer shall remit the same in
accordance with Article II.

 

Section 1.6.                                 Yield.

 

(a)                                 The outstanding Capital of each investment
in the Receivable Interests shall accrue Yield for each day at a rate per annum
equal to LMIR (or, if LMIR is has been suspended pursuant to Section 1.7, at the
Alternate Base Rate).

 

(b)                                 Not later than the fifth (5th) Business Day
of each month, each Purchaser shall calculate the aggregate amount of Yield (if
any) payable to it for the Calculation Period then most recently ended
(including unpaid Yield, if any, due and payable on a prior Monthly Payment
Date) and shall notify Seller (and, from and after the Dominion Date, the
Administrative Agent) of such aggregate amount.

 

(c)                                  On each Monthly Payment Date after the
Effective Date, Seller shall pay to each Purchaser the aggregate amount of such
accrued and unpaid Yield.

 

Section 1.7.                                 Suspension of LMIR.  If any
Purchaser notifies Seller and the Administrative Agent that it has determined
that funding an investment in any Receivable Interest at LMIR would violate any
applicable law, rule, regulation, or directive of any Governmental Authority,
whether or not having the force of law, then the applicable Purchaser shall
suspend the availability of LMIR and require Seller to select the Alternate Base
Rate for such Purchaser’s portion of any Receivable Interest.

 

ARTICLE II.

 

PAYMENTS AND COLLECTIONS

 

Section 2.1.                                 Collections during the Revolving
Period.  During the Revolving Period, any Collections received by the Servicer
(or from and after the Dominion Date, by the Administrative Agent) shall be held
in trust for the payment of any accrued and unpaid Aggregate Unpaids or for a
Reinvestment as provided in this Section 2.1 (provided that Aggregate Capital
shall not be payable during the Revolving Period except to the extent provided
in Section 1.3 and Section 1.5, and Collections shall not be required to be
segregated prior to the Dominion Date but instead shall be permitted to be used
by the Servicer and its Affiliates in accordance with Section 6.2(d)).  On each
day during the Revolving Period that is not a Settlement Date, subject to the
last sentence of this Section 2.1 and to Section 4.3, Collections that are not
required to be segregated pursuant to Section 6.2(b) shall first be applied to
making additional Purchases of undivided interests in the Receivables and the
associated Related Security, such that after giving effect thereto, the
outstanding Aggregate Capital is equal to the Aggregate Capital outstanding
immediately prior to receipt of such Collections and the Receivable Interest
does not exceed 100% (each such Purchase, a “Reinvestment”).  Each

 

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Reinvestment will be made ratably amongst the Purchasers in accordance with
their respective Percentages.  On each Settlement Date, the Servicer shall
deliver to each of the Purchasers from its Percentage of all Collections
received (or deemed received) during the related Calculation Period (after
deducting therefrom its Servicing Fee), an amount equal to the aggregate of the
amounts due and owing to such Purchaser on such Settlement Date pursuant to
clauses first through fourth of Section 2.3 for application in accordance
therewith (the aggregate of all such amounts for all Purchasers, the “Required
Amounts”).  If on any Settlement Date during the Revolving Period there are
insufficient Collections to pay all Required Amounts that are then due and owing
under Section 2.3, the next available Collections shall be applied to such
payments in accordance with Section 2.3, and no Reinvestment shall be made
hereunder until such amounts payable have been paid in full.

 

Section 2.2.                                 Collections After the Facility
Termination Date.  On each day during the Liquidation Period, unless the
Dominion Date shall have occurred, all Collections shall be held in trust by the
Servicer, for the benefit of the Purchasers, in a Collection Account or other
segregated account, in each of the foregoing cases, which is subject to a first
priority perfected Security Interest in favor of the Administrative Agent.  On
each Settlement Date during the Liquidation Period, unless the Dominion Date
shall have occurred, the Servicer shall deliver to the Purchasers, all
Collections so held by the Servicer (after deducting its Servicing Fee
therefrom) for application pursuant to Section 2.3.

 

Section 2.3.                                 Order of Application of Collections
on Settlement Dates.  Upon receipt by the Purchasers (or, following the Dominion
Date, the Administrative Agent), on any Settlement Date of Collections, the
Purchasers or the Administrative Agent, as applicable, shall distribute them for
application in the following order of priority:

 

first, if such day is a Monthly Payment Date occurring after the Dominion Date,
to the Servicer in payment of its Servicing Fee to the extent not retained;

 

second, if such day is a Monthly Payment Date occurring after the Amortization
Date, to the Administrative Agent and the Purchasers, in payment of their
out-of-pocket expenses in connection with the enforcement or protection of their
rights in connection with this Agreement and the other Transaction Documents, to
the extent reimbursable under Section 8.4 and not otherwise paid by Seller;

 

third, if such day is a Monthly Payment Date, to the Purchasers, pro rata, in
payment of any accrued and unpaid Yield then due and owing on account of their
investments in the Receivable Interests, including any previously accrued Yield
that was not paid on the applicable prior Monthly Payment Date;

 

fourth, if such day is a Monthly Payment Date, to the Purchasers, pro rata, in
payment of any Fees accrued during the Calculation Period (or portion thereof)
then most recently ended, plus any previously accrued Fees not paid on a prior
Monthly Payment Date;

 

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fifth, if such day is a Capital Settlement Date, to the Purchasers, pro rata, in
reduction of their Capital, (i) during the Revolving Period, solely to the
extent such reduction is required under Section 1.3 or Section 1.5, and
(ii) during the Liquidation Period, until Aggregate Capital is reduced to $0;
and

 

sixth, (i) during the Revolving Period, to Seller, free and clear of any
interest of the Administrative Agent and the Purchasers or (ii) during or after
the Liquidation Period, if the Aggregate Unpaids have been reduced to zero, to
Seller, free and clear of any interest of the Administrative Agent and the
Purchasers.

 

Section 2.4.                                 Payment Rescission.  No payment of
any of the Aggregate Unpaids shall be considered paid or applied hereunder to
the extent that, at any time, all or any portion of such payment or application
is rescinded by application of law or judicial authority, or must otherwise be
returned or refunded for any reason.  Seller shall remain obligated for the
amount of any payment or application so rescinded, returned or refunded, and
shall promptly pay to each of the Purchasers, such Purchaser’s respective
Percentage thereof together with Yield thereon at the applicable Yield Rate from
the date of any such rescission, return or refunding.

 

Section 2.5.                                 Clean-up Option.  At any time while
the Aggregate Capital outstanding is less than 10% of the Facility Limit, the
Servicer shall have the right (after providing at least five (5) Business Days’
prior written notice to the Purchasers) to purchase all, but not less than all,
of the Receivable Interests.  The purchase price in respect thereof shall be an
amount equal to the Aggregate Unpaids through the date of such purchase, payable
in immediately available funds.  Such purchase shall be without representation,
warranty or recourse of any kind by, on the part of, or against the
Administrative Agent or any Purchaser except for a representation and warranty
that the conveyance to the Servicer is being made free and clear of any Adverse
Claim created by the Administrative Agent or such Purchaser.  On the date of
purchase of the Receivable Interests pursuant to this Section, the Commitments
of the Purchasers shall automatically terminate.

 

ARTICLE III.

 

REPRESENTATIONS AND WARRANTIES

 

Section 3.1.                                 Representations and Warranties of
Seller.  Seller hereby represents and warrants to the Administrative Agent and
the Purchasers as of the date hereof and as of each Purchase Date that:

 

(a)                                 Organization.  Seller is validly existing
and in good standing under the laws of its jurisdiction of organization; and
Seller is duly qualified to do business in each jurisdiction where, because of
the nature of its activities or properties, such qualification is required,
except for such jurisdictions where the failure to so qualify would not have a
Material Adverse Effect.

 

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(b)                                 Authorization; No Conflict.  Seller is duly
authorized to execute and deliver each Transaction Document to which it is a
party, Seller is duly authorized to transfer Receivable Interests hereunder and
Seller is duly authorized to perform its obligations under each Transaction
Document to which it is a party.  The execution, delivery and performance by
Seller of each Transaction Document to which it is a party, and the transfer of
the Receivable Interests by Seller hereunder, do not and will not (a) require
any consent or approval of any governmental agency or authority (other than any
consent or approval which has been obtained and is in full force and effect),
(b) conflict with (i) any provision of Law, (ii) the certificate of formation or
limited liability company agreement of Seller, or (iii) any agreement,
indenture, instrument or other document material to the business of Seller, or
any judgment, order or decree, which is binding upon Seller or any of its
properties or (c) require, or result in, the creation or imposition of any
Adverse Claim on any asset of Seller (other than Adverse Claims in favor of the
Administrative Agent and the Purchasers created pursuant to the Transaction
Documents).

 

(c)                                  Validity and Binding Nature.  Each of this
Agreement and each other Transaction Document to which Seller is a party is the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors’ rights generally and to general
principles of equity.  No transaction contemplated hereby requires compliance
with any bulk sales act or similar law.

 

(d)                                 Actions, Suits.  No litigation (including
derivative actions), arbitration proceeding or governmental investigation is
pending or, to the knowledge of a Responsible Employee of Seller, threatened in
writing against Seller as to which there is a reasonable possibility of an
adverse determination and that, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.

 

(e)                                  Accuracy of Information.  No written
information (including, without limitation, all Monthly Reports) heretofore
furnished by Seller to the Administrative Agent or any of the Purchasers for
purposes of or in connection with this Agreement or any transaction contemplated
hereby, when taken as a whole, contains, and no such written information
hereafter furnished by Seller to the Administrative Agent or any of the
Purchasers, when taken as a whole, will contain, any material misstatement of
fact or omit to state any material fact necessary to make such information
(taken as a whole) not materially misleading in light of the circumstances under
which made (it being recognized by the Administrative Agent and the Purchasers
that any projections and forecasts provided by Seller are based on good faith
estimates and assumptions believed by the Seller Parties to be reasonable as of
the date of the applicable projections or assumptions and that actual results
during the period or periods covered by any such projections and forecasts may
materially differ from projected or forecasted results).

 

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(f)                                   Regulation U.  Seller is not engaged
principally, or as one of its material activities, in the business of purchasing
or carrying Margin Stock or extending credit for the purpose of purchasing or
carrying Margin Stock.

 

(g)                                  Good Title.  Immediately prior to or
contemporaneously with each Purchase hereunder, Seller shall be the legal and
beneficial owner of all of the existing Receivables and Related Security with
respect thereto, free and clear of any Adverse Claim except as created by the
Transaction Documents and except for Permitted Liens.  There have been duly
filed all financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all appropriate jurisdictions
to perfect Seller’s Security Interest in each Receivable, its Collections and
the Related Security.

 

(h)                                 Perfection.

 

(i)                                     This Agreement is effective to, and
shall, upon each Purchase hereunder, transfer to the Administrative Agent for
the benefit of the or Purchasers (and the Administrative Agent, for the benefit
of the Purchasers, shall acquire from Seller) a valid undivided percentage
ownership interest in each Receivable existing as of the date of such Purchase
and in all other Collateral, free and clear of any Adverse Claim, except as
created by the Transactions Documents and except for Permitted Liens.

 

(ii)                                  Assuming the filing of the financing
statements approved by Seller on the date hereof (which will be filed by the
Administrative Agent or its representatives), this Agreement, together with the
filing of such financing statements, is effective to, and shall, upon each
Purchase hereunder, transfer to the Administrative Agent for the benefit of the
relevant Purchaser or Purchasers (and the Administrative Agent for the benefit
of such Purchaser or Purchasers shall acquire from Seller) a valid and perfected
first priority Security Interest in each Receivable existing as of the date of
such Purchase and in all other Collateral, free and clear of any Adverse Claim,
except as created by the Transactions Documents.  In accordance with the
preceding sentence, the Administrative Agent confirms that it or its
representatives have duly filed all financing statements or other similar
instruments or documents necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect the Administrative Agent’s (on behalf of
the Purchasers) Security Interest in the Collateral.

 

(i)                                     Places of Business and Locations of
Records.  Seller’s principal place of business, chief executive office and the
other locations (if any) where its Records are located are at the addresses
listed on Exhibit III or such other locations of which the Administrative Agent
and the Purchasers have been notified in accordance with Section 5.2(a) in
jurisdictions where all action required by Section 12.4(a) has been taken and
completed.  Seller’s Federal Employer Identification Number and Organizational
Identification Number are correctly set forth on Exhibit III.

 

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(j)                                    Collections.  The conditions and
requirements set forth in Section 5.1(j) and Section 6.2 have at all times been
satisfied and duly performed in all material respects.  Exhibit IV hereto (as
updated from time to time by written notice from the Servicer to the
Administrative Agent), sets forth (i) the names and addresses of all Collection
Banks, together with the account numbers of the Collection Accounts, and
(ii) the addresses of all Lock-Boxes, the numbers of all associated Collection
Accounts and the name and address of each Collection Bank.  Seller has not
granted any Person, other than the Servicer and the Administrative Agent) access
to or control of any Lock-Box or Collection Account, or the right to take
dominion and control of any such Lock-Box or Collection Account at a future time
or upon the occurrence of a future event.  To the extent that funds other than
Collections are deposited into any Collection Account, Seller or the Servicer
can promptly trace and identify which funds constitute Collections.

 

(k)                                 Material Adverse Effect.  Since the date of
Seller’s formation, no event has occurred that would have a material adverse
effect on (i) the financial condition or operations of Seller, (ii) the ability
of Seller to perform its obligations under the Transaction Documents to which it
is a party, (iii) the legality, validity or enforceability of this Agreement or
any other Transaction Document, (iv) the Administrative Agent’s or any
Purchaser’s interest in any substantial portion of the Receivables, the Related
Security or the Collections with respect thereto, or (v) the collectability of
any substantial portion of the Receivables.

 

(l)                                     Names.  Except as stated on Exhibit V as
amended from time to time upon written notice to the Administrative Agent
provided all necessary UCC financing statements and financing statement
amendments are delivered to the Administrative Agent in connection with such
amendments, in the past five (5) years, Seller has not used any legal names,
trade names or assumed names other than the name in which it has executed this
Agreement.

 

(m)                             Ownership of Seller.  KapStone Kraft owns
directly 100% of the issued and outstanding membership interests of Seller, free
and clear of any Adverse Claim (other than Adverse Claims granted in connection
with the Senior Credit Agreement.  Seller’s membership interests are validly
issued and there are no options, warrants or other rights to acquire membership
interests of Seller.

 

(n)                                 Not an Investment Company.  Seller is not
required to register as an “investment company” or a company “controlled” by an
“investment company” or a “subsidiary” of an “investment company,” within the
meaning of the Investment Company Act of 1940 or any successor statute.

 

(o)                                 Compliance with Law.  Seller has complied in
all material respects with all applicable laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject,
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.

 

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(p)                                 Compliance with Credit and Collection
Policy.  Seller has complied in all material respects with the Credit and
Collection Policy with regard to each Receivable and the related Contract.

 

(q)                                 Payments to Applicable Originators.  With
respect to each Receivable, Seller has given reasonably equivalent value to the
applicable Originator in consideration therefor and such transfer was not made
for or on account of an antecedent debt.  No transfer by any Originator of any
Receivable under the Sale Agreement is or may be voidable under any section of
the Bankruptcy Reform Act of 1978 (11 U.S.C. §§ 101 et seq.), as amended.

 

(r)                                    Enforceability of Contracts.  Each
Contract with respect to each Receivable is effective to create, and has
created, a valid and binding obligation of the related Obligor to pay the
Outstanding Balance of such Receivable created thereunder and any accrued
interest thereon, enforceable against such Obligor in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting creditors’ rights
generally and by general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).

 

(s)                                   Eligible Receivables.  Each Receivable
included in the Net Pool Balance on a Monthly Report as an Eligible Receivable
was an Eligible Receivable as of the last day of the period covered by such
Monthly Report, and the Outstanding Balance of each such Eligible Receivable as
of the last day of the Calculation Period covered by such Monthly Report was
accurately set forth on such Monthly Report.

 

(t)                                    [Reserved].

 

(u)                                 Financial Information.  All balance sheets,
all statements of income and of cash flow and all other financial information of
Seller (other than projections) furnished to the Administrative Agent or any of
the Purchasers and described in Section 5.1 have been or will be prepared in
accordance with GAAP and do or will present fairly in all material respects the
financial condition and results of operations of Seller, as at such dates and
for such periods in accordance with GAAP, subject, in the case of unaudited
financial statements, to changes resulting from normal year-end audit
adjustments and the absence of footnotes.

 

(v)                                 OFAC.  Seller is not, and, to the knowledge
of Seller, no director, manager, officer, employee, agent, affiliate or
representative thereof, is an individual or entity currently the subject of any
Sanctions, nor is Seller located, organized or resident in a country or
territory that is the subject of Sanctions.

 

Section 3.2.                                 Representations and Warranties of
the Servicer.  The Servicer hereby represents and warrants to the Administrative
Agent and the Purchasers as of the date hereof and as of each Purchase Date
that:

 

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(a)                                 Organization.  The Servicer is validly
existing and in good standing under the laws of Delaware; and the Servicer is
duly qualified to do business in each jurisdiction where, because of the nature
of its activities or properties, such qualification is required, except for such
jurisdictions where the failure to so qualify would not have a Material Adverse
Effect.

 

(b)                                 Authorization; No Conflict.  The Servicer is
duly authorized to execute and deliver each Transaction Document to which it is
a party and to perform its obligations thereunder.  The execution, delivery and
performance by the Servicer of each Transaction Document to which it is a party,
do not and will not (a) require any consent or approval of any Governmental
Authority (other than any consent or approval which has been obtained and is in
full force and effect), (b) conflict with (i) any provision of Law, (ii) the
charter, by-laws or other organizational documents of the Servicer or (iii) any
agreement, indenture, instrument or other document material to the business of
the Servicer, or any judgment, order or decree, which is binding upon the
Servicer or any of its properties or (c) require, or result in, the creation or
imposition of any Adverse Claim on any asset of the Servicer (other than Adverse
Claims in favor of the Administrative Agent and the Purchasers created pursuant
to the Transaction Documents).

 

(c)                                  Validity and Binding Nature.  Each of this
Agreement and each other Transaction Document to which the Servicer is a party
is the legal, valid and binding obligation of such Person, enforceable against
such Person in accordance with its terms, subject to bankruptcy, insolvency and
similar laws affecting the enforceability of creditors’ rights generally and to
general principles of equity.

 

(d)                                 Financial Condition.  The Servicer’s
financial statements filed with the SEC, present fairly in all material respects
the consolidated financial condition and results of operations of the Servicer
and its Subsidiaries, in each case, as at such dates and for such periods in
accordance with GAAP, subject, in the case of unaudited financing statements, to
changes resulting from normal year-end audit adjustments and the absence of
footnotes.

 

(e)                                  No Material Adverse Change.  Since
December 31, 2013, except as set forth in the Servicer’s reports on Forms 10-K,
10-Q and 8-K filed with the SEC at least two (2) Business Days prior to the
Closing Date, there has been no material adverse change in the financial
condition, operations, assets, business or properties of the Servicer and its
Subsidiaries taken as a whole.

 

(f)                                   Litigation and Contingent Liabilities. 
Except as set forth in the Servicer’s reports on Forms 10-K, 10-Q and 8-K filed
with the SEC at least two (2) Business Days prior to the Closing Date, no
litigation (including derivative actions), arbitration proceeding or
governmental investigation or proceeding is pending or, to the knowledge of a
Responsible Employee of the Servicer, threatened in writing against the Servicer
or its Subsidiaries as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected to
have a Material Adverse Effect.

 

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(g)                                  ERISA Compliance.

 

(i)                                     Except for any occurrences that are not
reasonably expected to result in a Material Adverse Effect, (a) each Pension
Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other federal or state laws, (B) each Pension Plan that is
intended to be a qualified plan under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service to the effect
that the form of such Pension Plan is qualified under Section 401(a) of the Code
and the trust related thereto has been determined by the Internal Revenue
Service to be exempt from federal income tax under Section 501(a) of the Code or
an application for such a letter is currently being processed by the Internal
Revenue Service or such Pension Plan is entitled to rely on an opinion letter
issued by the Internal Revenue Service with respect to the prototype plan on
which such Pension Plan is based and (C) to the knowledge of the Servicer,
nothing has occurred that would prevent, or cause the loss of, the tax-qualified
status of any Pension Plan.

 

(ii)                                  There are no pending or, to the knowledge
of the Servicer, threatened claims, actions or lawsuits, or actions by any
Governmental Authority, with respect to any Pension Plan that are reasonably
expected to have a Material Adverse Effect.  To the knowledge of the Servicer,
there has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Pension Plan that has resulted or is
reasonably expected to result in a Material Adverse Effect.

 

(iii)                               (i) Since December 31, 2013, no ERISA Event
has occurred, (ii) except for any failures that are not reasonably expected to
result in a Material Adverse Effect, since December 31, 2013 the Servicer and
each ERISA Affiliate has met all applicable requirements under the Pension
Funding Rules in respect of each Pension Plan; (iii) as of the most recent
valuation date for any Pension Plan, the funding target attainment percentage
(as defined in Section 430(d)(2) of the Code) is sixty percent (60%) or higher,
other than for any Pension Plan with respect to which the failure to attain such
percentage would not reasonably be expected to result in a Material Adverse
Effect; (iv) neither the Servicer nor any ERISA Affiliate has engaged in a
transaction that has resulted in liability under Section 4069 of ERISA which has
resulted in a Material Adverse Effect to the Servicer.

 

(h)                                 Investment Company Act.  The Servicer is not
required to be registered as an “investment company” or a company “controlled”
by an “investment company” or a “subsidiary” of an “investment company,” within
the meaning of the Investment Company Act of 1940.

 

(i)                                     Taxes.  The Servicer and each of its
Subsidiaries has timely filed all material Tax returns and reports required by
law to have been filed by it and has paid all Taxes and governmental charges due
and payable with respect to such return which, if unpaid, could become a Lien on
any of its property, except any such Taxes or charges which are being

 

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diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.

 

(j)                                    Information.  No Monthly Report or other
written information furnished by the Servicer to the Administrative Agent or any
Purchaser for purposes of or in connection with this Agreement and the
transactions contemplated hereby, when taken as a whole, contains any material
misstatement of fact or omits to state any material fact necessary to make such
information (taken as a whole) not materially misleading in light of the
circumstances under which made (it being recognized by the Administrative Agent
and the Purchasers that any projections and forecasts provided by the Servicer
are based on good faith estimates and assumptions believed by the Servicer to be
reasonable as of the date of the applicable projections or assumptions and that
actual results during the period or periods covered by any such projections and
forecasts may materially differ from projected or forecasted results).

 

(k)                                 OFAC.  Neither the Servicer, nor any of its
Subsidiaries, nor, to the knowledge of the Servicer, any director, officer,
employee, agent, affiliate or representative of the Servicer or any of its
Subsidiaries is an individual or entity currently the subject of any Sanctions,
nor is the Servicer or any of its Subsidiaries located, organized or resident in
a country or territory that is the subject of Sanctions.

 

(l)                                     Collections.  The conditions and
requirements set forth in Section 5.1(j) and Section 6.2 have at all times been
satisfied and duly performed in all material respects by Seller or the
Servicer.  Exhibit IV hereto (as updated from time to time by written notice
from the Servicer to the Administrative Agent), sets forth (i) the names and
addresses of all Collection Banks, together with the account numbers of the
Collection Accounts, and (ii) the addresses of all Lock-Boxes, the numbers of
all associated Collection Accounts and the name and address of each Collection
Bank.  Seller has not granted any Person, other than the Servicer and the
Administrative Agent, access to or control of any Lock-Box or Collection
Account, or the right to take dominion and control of any such Lock-Box or
Collection Account at a future time or upon the occurrence of a future event. 
To the extent that funds other than Collections of Receivables are deposited
into any Collection Account, the Servicer can promptly trace and identify which
funds constitute Collections of the Receivables.

 

(m)                             Ownership of KapStone Kraft.  The Servicer owns
directly 100% of the issued and outstanding Capital Stock of all classes of
KapStone Kraft.  KapStone Kraft’s Capital Stock is validly issued and there are
no options, warrants or other rights to acquire Capital Stock of KapStone Kraft.

 

(n)                                 Compliance with Credit and Collection
Policy.  The Servicer has complied in all material respects with the Credit and
Collection Policy with regard to each Receivable and the related Contract.

 

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ARTICLE IV.

 

CONDITIONS OF CLOSING AND PURCHASES

 

Section 4.1.                                 Conditions Precedent to Closing. 
The effectiveness of this Agreement is subject to the conditions precedent that
(a) the Administrative Agent shall have received on or before the date of such
Purchase those documents listed on Schedule B, and (b) the Administrative Agent
and the Purchasers (or, in the case of PNC, PNC Capital Markets LLC) shall have
received all Fees required to be paid on such date pursuant to the terms of the
Fee Letter.

 

Section 4.2.                                 Conditions Precedent to Initial
Purchase.  The initial Purchase under this Agreement may be made on or after the
Effective Date and is subject to the conditions precedent that (a) the
conditions in Section 4.1 have been satisfied, and (b) the Administrative Agent
and the Purchasers shall have received expenses required to be paid as of such
date pursuant to the terms of this Agreement for which Seller has received an
invoice as of the Effective Date.

 

Section 4.3.                                 Conditions Precedent to All
Purchases.  Each Incremental Purchase and each Reinvestment shall be subject to
the conditions precedent that (a) the Servicer shall have delivered to the
Purchasers on or prior to the date of such Purchase, in form satisfactory to the
Administrative Agent, all Monthly Reports as due on or before the applicable
Purchase Date under Section 6.6 within any applicable period of grace unless
waived in accordance with this Agreement, (b) the Facility Termination Date
shall not have occurred, and (c) on the applicable Purchase Date, the following
statements shall be true (and acceptance of the proceeds of such Purchase shall
be deemed a representation and warranty by Seller that such statements are then
true):

 

(i)                                     the representations and warranties set
forth in Article III are true and correct in all material respects on and as of
the Purchase Date of such Purchase as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall remain true and
correct in all material respects as of such earlier date;

 

(ii)                                  no event has occurred and is continuing,
or would result from such Purchase, that constitutes an Amortization Event or a
Potential Amortization Event; and

 

(iii)                               no Investment Excess exists or will result
from such Purchase.

 

It is expressly understood that each Reinvestment shall, unless otherwise
directed by the Administrative Agent (with the consent or at the direction of
the Purchasers), occur automatically on each day that the Servicer shall receive
any Collections without the requirement that any further action be taken on the
part of any Person and notwithstanding the failure of Seller to satisfy any of
the foregoing conditions precedent in respect of such Reinvestment.  The

 

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failure of Seller to satisfy any of the foregoing conditions precedent in
respect of any Reinvestment shall give rise to a right of the Administrative
Agent, which right may be exercised at any time on demand of the Administrative
Agent (with the consent or at the direction of the Purchasers), to rescind the
related Reinvestment and direct Seller to pay to the Administrative Agent for
the benefit of the Purchasers an amount equal to the Collections prior to the
Amortization Date that were applied to the affected Reinvestment.

 

ARTICLE V.

 

COVENANTS

 

Section 5.1.                                 Affirmative Covenants of Seller
Parties.  Until the date on which the Aggregate Unpaids have been paid in full
(other than contingent indemnification obligations to the extent no claim giving
rise thereto has been asserted) and the termination or expiration of all of the
Commitments:

 

(a)                                 Financial Reporting.  Each of the Seller
Parties will maintain for itself a system of accounting established and
administered in accordance with GAAP, and furnish or cause to be furnished to
the Administrative Agent (for prompt distribution to the Purchasers):

 

(i)                                     Annual Report.  Promptly when available
and in any event within 90 days after the close of each Fiscal Year, (A) in the
case of the Servicer, a consolidated balance sheet of the Performance Guarantor
and its Subsidiaries for such Fiscal Year, and the related statements of
earnings and cash flows for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all in reasonable
detail and prepared in accordance with GAAP, audited and accompanied by a report
and opinion of an independent registered public accounting firm of nationally
recognized standing, which report and opinion shall be prepared in accordance
with GAAP and shall not be subject to any “going concern” or like qualification
or exception or any qualification or exception as to the scope of such audit;
and (B) in the case of the Seller, unaudited financial statements of Seller for
such Fiscal Year.

 

(ii)                                  Interim Reports.  In the case of the
Servicer, (i) promptly when available and in any event within 45 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year, consolidated
balance sheets of the Performance Guarantor and its Subsidiaries as of the end
of such Fiscal Quarter, together with consolidated statements of earnings and
cash flows for such Fiscal Quarter and for the period beginning with the first
day of such Fiscal Year and ending on the last day of such Fiscal Quarter,
together with a comparison with the corresponding period of the previous Fiscal
Year, certified by a Responsible Employee of the Performance Guarantor as fairly
presenting in all material respects the financial condition and results of
operations of the Performance Guarantor and its Subsidiaries in accordance with
GAAP, subject only to changes resulting from normal year-end audit adjustments
and subject to the absence of footnotes; and (ii) promptly upon request of the
Administrative Agent, consolidated balance sheets of the Performance Guarantor
and its Subsidiaries as of the end of

 

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the most recent month, together with consolidated statements of earnings and a
consolidated statement of cash flows for such month and for the period beginning
with the first day of such Fiscal Year and ending on the last day of such month,
together with a comparison with the corresponding period of the previous Fiscal
Year.

 

(iii)                               Reports to the SEC and to Shareholders.  In
the case of the Servicer, promptly upon the filing or sending thereof, copies of
all regular, periodic or special reports of any Seller Party or its Subsidiaries
filed with the SEC; copies of all registration statements of any Seller Party
filed with the SEC (other than on Form S-8); and copies of all proxy statements
or other communications made to security holders generally.

 

(iv)                              Other Information.  Promptly, from time to
time, such other information, documents, records or reports relating to the
Receivables or the financial condition, operations or business of such Seller
Party as the Administrative Agent or any Purchaser may from time to time
reasonably request in order to protect the interests of the Administrative Agent
and the Purchasers under or as contemplated by this Agreement.

 

Documents required to be delivered pursuant to Section 5.1(a) (to the extent any
such documents are included in materials otherwise filed with the SEC) may be
delivered electronically and if so delivered, shall be deemed to have been
delivered on the date on which (i) any Seller Party posts such documents, or
provides a link thereto on such Seller Party’s website on the Internet at the
website address listed on Schedule 12.2; or (ii) such documents are posted on
such Seller Party’s behalf on an Internet or intranet website, if any, to which
each Purchaser and the Administrative Agent have access (whether a commercial,
third-party website or whether sponsored by the Administrative Agent).

 

(b)                                 Notices.  Seller (or the Servicer on its
behalf) will notify the Purchasers in a writing signed by a Responsible Employee
of the occurrence of any of the following promptly upon learning of the
occurrence thereof, describing the same and, if applicable, the steps being
taken with respect thereto:

 

(i)                                     Amortization Events or Potential
Amortization Events.  The occurrence of any Amortization Event and any Potential
Amortization Event.

 

(ii)                                  Material Adverse Effect.  The occurrence
of any event or condition that has had a Material Adverse Effect;

 

(iii)                               Termination Date.  The occurrence of the
“Termination Date” under the Sale Agreement.

 

(iv)                              Change of Independent Director.  At least ten
(10) days prior to any proposed change of the Independent Director, notice of
such proposed change together with a certificate of Seller certifying that the
proposed replacement director satisfies the criteria set forth in the definition
of “Independent Director.”

 

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(c)                                  Compliance with Laws and Preservation of
Legal Existence.  Such Seller Party will comply, in all material respects, with
all applicable Laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect.  Such
Seller Party will preserve and maintain (i) its existence and good standing in
the jurisdiction of its organization, and (ii) its qualification to do business
and good standing in each jurisdiction where the nature of its business makes
such qualification necessary (other than such jurisdictions in which the failure
to be qualified or in good standing could not reasonably be expected to have a
Material Adverse Effect.

 

(d)                                 Audits.  Such Seller Party will, from time
to time during regular business hours as requested by the Administrative Agent
or any of the Purchasers upon not less than ten (10) days’ written notice and at
the sole cost of such Seller Party, permit the Administrative Agent (accompanied
by any Purchaser), or its respective agents or representatives (and shall cause
each Originator to permit the Administrative Agent (accompanied by any
Purchaser), or its respective agents or representatives):  (i) to examine and
make copies of and abstracts from all Records in the possession or under the
control of such Person relating to the Receivables and the Related Security,
including, without limitation, the related Contracts, and (ii) to visit the
offices and properties of such Person during reasonable business hours for the
purpose of examining such materials described in clause (i) above, and to
discuss matters relating to such Person’s financial condition or the Receivables
and the Related Security or any Person’s performance under any of the
Transaction Documents or any Person’s performance under the Contracts and, in
each case, with any of the officers or employees of Seller or the Servicer
having knowledge of such matters (each such visit, a “Review”); provided that,
so long as no Amortization Event has occurred and is continuing, only one Review
(which Review may apply to both the Seller and the Servicer) will be permitted
under this clause (d) in any Contract Year.

 

(e)                                  Keeping and Marking of Records and Books.

 

(i)                                     The Servicer will (and will cause each
Originator to) maintain and implement administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the originals thereof), and keep
and maintain all documents, books, records and other information reasonably
necessary or advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the immediate identification of each new
Receivable and all Collections of and adjustments to each existing Receivable). 
The Servicer will (and will cause each Originator to) give each of the
Purchasers notice of any material change in the administrative and operating
procedures related to collection procedures, cash application, credit approval,
credit memo approval and payment terms.

 

(ii)                                  The Servicer will (and will cause each
Originator to) (A) on or prior to the Effective Date, include a notation in its
master data processing records

 

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relating to the Receivables to indicate that the Receivables are “SOLD
RECEIVABLES” or mark or program its customer master table so that all reports
printed therefrom relating to the Receivables will contain “SOLD RECEIVABLES” in
the title of such report, and (B) solely if requested by the Administrative
Agent following the occurrence and during the continuation of an Amortization
Event, deliver to the Administrative Agent all Contracts (and will use best
efforts to deliver all multiple originals of any such Contract) relating to the
Receivables that are in the Servicer’s possession.

 

(f)                                   Compliance with Contracts and Credit and
Collection Policy.  The Servicer will (and will cause each Originator to) timely
and fully (i) perform and comply in all material respects with all provisions,
covenants and duties required to be observed by it under the Contracts related
to the Receivables, and (ii) comply in all material respects with the Credit and
Collection Policy in regard to each Receivable and the related Contract.

 

(g)                                  Performance and Enforcement of the Sale
Agreement and the Performance Undertaking.  Seller will perform, and will
require each of the Originators to perform, each of its obligations and
undertakings under and pursuant to the Sale Agreement.  Seller will purchase
Receivables under the Sale Agreement in strict compliance with the terms thereof
and will diligently enforce the rights and remedies accorded to it as the buyer
under the Sale Agreement.  Seller will take all actions to perfect and enforce
its rights and interests (and the rights and interests of the Administrative
Agent and the Purchasers as assignees of Seller) under the Sale Agreement and
the Performance Undertaking as the Administrative Agent may from time to time
reasonably request, including, without limitation, making claims to which it may
be entitled under any indemnity, reimbursement or similar provision contained in
the Sale Agreement.

 

(h)                                 Ownership.  Seller will (or, to the extent
required pursuant to the Sale Agreement, will require each Originator to) take
all necessary action to (i) vest legal and equitable title to the Receivables,
the Related Security and the Collections irrevocably in Seller, free and clear
of any Adverse Claims other than Adverse Claims in favor of the Administrative
Agent, for the benefit of the Purchasers, and (ii) establish and maintain, in
favor of the Administrative Agent, for the benefit of the Purchasers, a valid
and perfected first priority Security Interest in the Collateral to the full
extent contemplated herein, free and clear of any Adverse Claims other than
Adverse Claims in favor of the Administrative Agent for the benefit of the
Purchasers (including, without limitation, the filing of all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions) to perfect the
Administrative Agent’s (for the benefit of the Purchasers) Security Interest in
the Collateral and such other action to perfect, protect or more fully evidence
the Security Interest of the Administrative Agent for the benefit of the
Purchasers as the Administrative Agent or any Purchaser may reasonably request.

 

(i)                                     Separateness.  Seller acknowledges that
the Administrative Agent and the Purchasers are entering into the transactions
contemplated by this Agreement in reliance upon

 

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Seller’s identity as a legal entity that is separate from each of the
Originators and their respective other Affiliates (each, a “Related Entity”). 
Seller will:

 

(i)                                     maintain its books and records and bank
accounts separate from those of any other Related Entity;

 

(ii)                                  at all times hold itself out to the public
and all other Persons as a legal entity separate from its member and any other
Person;

 

(iii)                               have a board of directors separate from that
of its member and any other Person;

 

(iv)                              file its own tax returns, if any, as may be
required under applicable law, to the extent (1) not part of a consolidated
group filing a consolidated return or returns or (2) not treated as a division
for tax purposes of another taxpayer, and pay any taxes so required to be paid
under applicable law;

 

(v)                                 except as contemplated herein or in any
other Transaction Document, not commingle its assets with assets of any other
Person;

 

(vi)                              conduct its business in its own name and
strictly comply with all organizational formalities to maintain its separate
existence;

 

(vii)                           maintain separate financial statements;

 

(viii)                        pay its own liabilities only out of its own funds;

 

(ix)                              maintain an arm’s length relationship with
each other Related Entity;

 

(x)                                 pay the salaries of its own employees, if
any;

 

(xi)                              not hold out its credit or assets as being
available to satisfy the obligations of others;

 

(xii)                           allocate fairly and reasonably with other
Persons any overhead for shared office space;

 

(xiii)                        except as contemplated herein or in any other
Transaction Document, use separate stationery, invoices and checks;

 

(xiv)                       except as contemplated herein or in any other
Transaction Document, not pledge its assets for the benefit of any other Person;

 

(xv)                          correct any known misunderstanding regarding its
separate identity;

 

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(xvi)                       maintain adequate capital in light of its
contemplated business purpose, transactions and liabilities;

 

(xvii)                    cause its Board of Directors to keep minutes of any
meetings and actions and observe all other Delaware limited liability company
formalities;

 

(xviii)                 not acquire any securities of its member;

 

(xix)                       act solely in its own name and through its own
authorized managers, directors, members, officers and agents, except as
expressly permitted under the Transaction Documents; and

 

(xx)                          cause its directors, officers, agents and other
representatives to act at all times with respect to Seller consistently and in
furtherance of the foregoing and in the best interests of Seller.

 

(j)                                    Collections.  The Seller Parties shall,
or will cause the Originators to, direct all Obligors to make payments of the
Receivables (i) directly to a Lock-Box that clears through a Collection Account
which, at all times after October 10, 2014, is subject to a Control Agreement,
or (ii) directly to a Collection Account which, at all times after October 10,
2014, is subject to a Control Agreement.

 

(k)                                 Taxes.  Such Seller Party will file all
federal and all other material Tax returns and reports required by law to be
filed by it and will promptly pay all Taxes and governmental charges at any time
owing which, if unpaid, could become a Lien on any of its property, except any
such Taxes which are not yet delinquent or are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.  Seller will pay
when due any Taxes payable in connection with the Receivables, exclusive of
Excluded Taxes.

 

Section 5.2.                                 Negative Covenants of Seller
Parties.  Until the date on which the Aggregate Unpaids have been paid in full
(other than contingent indemnification obligations to the extent no claim giving
rise thereto has been asserted) and the termination or expiration of all of the
Commitments:

 

(a)                                 Name Change, Offices and Records.  Seller
will not change its name, identity or legal structure (within the meaning of
Section 9-507(c) of any applicable enactment of the UCC) or relocate its chief
executive office or any office where Records are kept unless it shall have: 
(i) given the Administrative Agent and the Purchasers at least thirty (30) days’
prior written notice thereof and (ii) delivered to the Administrative Agent all
financing statements, instruments and other documents reasonably requested by
the Administrative Agent in connection with such change or relocation.

 

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(b)                                 Change in Payment Instructions to Obligors. 
Except as may be required by the Administrative Agent pursuant to
Section 6.2(d) from and after the Dominion Date, such Seller Party will not
(i) add or terminate any bank as a Collection Bank, (ii) add or terminate any
Lock-Box or Collection Account, unless the Administrative Agent shall have
received:  (A) at least ten (10) days before the proposed effective date
therefor, written notice of such addition, termination or change, together with
an updated version of each of Exhibit III to the Sale Agreement and Exhibit IV
to this Agreement, (B) with respect to the addition of a Collection Account, an
executed Control Agreement (or an executed amendment to an existing Control
Agreement) with respect to the new Collection Account prior to depositing any
Collections therein, and (C) concurrently with or promptly after termination of
any Collection Account, an executed amendment to the applicable Control
Agreement reflecting the terminated Collection Account’s deletion.  In addition,
except as may be required by the Administrative Agent pursuant to
Section 6.2(d) from and after the Dominion Date, such Seller Party will not make
any change in the instructions to any Obligor as to where payments on the
Receivables should be made; provided, however, that the Servicer may make
changes in instructions to Obligors regarding payments if such new instructions
require such Obligor to make payments to another existing Collection Account
that is subject to a Control Agreement.

 

(c)                                  Modifications to Contracts and Credit and
Collection Policy.  The Servicer will not make any change to the Credit and
Collection Policy that could reasonably be expected to adversely impact the
Receivables in any material respect without the prior written consent of the
Administrative Agent (which consent will not be unreasonably withheld or delayed
but which, may be conditioned upon changes in one or more ratios, reserves or
Concentration Limits contained in this Agreement to the extent they are impacted
by such change).  Except as provided in Section 6.2(d), no Seller Party will, or
will permit any Originator to, extend, amend or otherwise modify the payment
terms of any Receivable or any Contract related to such Receivable in any
material respect other than in accordance with the Credit and Collection Policy.

 

(d)                                 Sales, Liens.  Other than the Receivable
Interests and the ownership and Security Interests contemplated by the
Transaction Documents, Seller will not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to, or
create or suffer to exist any Adverse Claim upon (including, without limitation,
the filing of any financing statement) or with respect to, any Receivable,
Related Security or Collections, or upon or with respect to any Contract under
which any Receivable arises, or any Lock-Box or Collection Account, or assign
any right to receive income with respect thereto (other than, in each case, the
creation of the interests therein in favor of the Administrative Agent for the
benefit of the Purchasers provided for herein), and Seller will defend the
right, title and interest of the Administrative Agent and the Purchasers in, to
and under any of the foregoing property, against all claims of third parties
claiming through or under Seller or any Originator.

 

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(e)                                  Termination of Sale Agreement.  Except as
otherwise permitted under Section 7.1(k), Seller will not terminate the Sale
Agreement or send any termination notice to any Originator in respect thereof,
without the prior written consent of each of the Purchasers.

 

(f)                                   Restricted Junior Payments.  After the
occurrence and during the continuance of any Amortization Event, Seller will not
make any Restricted Junior Payment while any Aggregate Unpaids remain
outstanding.

 

(g)                                  Seller Debt.  Except as contemplated by the
Transaction Documents, Seller will not incur or permit to exist any Debt or
liability on account of deposits except:  (i) the Aggregate Unpaids, (ii) the
Subordinated Loans, and (iii) other current accounts payable arising in the
ordinary course of business and not overdue, unless such overdue accounts
payable are disputed and being contested in good faith.

 

(h)                                 Sanctions.  Seller will not, directly or
indirectly, use the proceeds of any Purchase, or lend, contribute or otherwise
provide such proceeds to any Affiliate, joint venture partner or other
individual or entity, to fund activities of or business with any individual or
entity in a Designated Jurisdiction that, at the time of funding, is the subject
of Sanctions, or in any other manner that will result in a violation by any
individual or entity participating in the transaction, whether as the
Administrative Agent, a Purchaser or otherwise, of Sanctions.

 

ARTICLE VI.

 

ADMINISTRATION AND COLLECTION

 

Section 6.1.                                 Designation of the Servicer.

 

(a)                                 The servicing, administration and collection
of the Receivables shall be conducted by such Person (the “Servicer”) so
designated from time to time in accordance with this Section 6.1.  KapStone
Paper is hereby designated as, and hereby agrees to perform the duties and
obligations of, the Servicer pursuant to the terms of this Agreement.  At any
time after the occurrence and during the continuance of an Amortization Event
resulting from an action or inaction of, or circumstance existing with respect
to, the Servicer (each, a “Servicer Termination Event”), the Administrative
Agent and the Purchasers may at any time, upon written notice to the current
Servicer and the Seller, designate as the Servicer any Person to succeed
KapStone Paper or any successor Servicer.

 

(b)                                 KapStone Paper may delegate to the
Originators, as sub-servicers of the Servicer (each such Originator, a
“Sub-Servicer”), certain of its duties and responsibilities as the Servicer
hereunder in respect of the Receivables originated by such Originators.  Without
the prior written consent of the Purchasers, the Servicer shall not be permitted
to delegate any of its duties or responsibilities as the Servicer to any Person
other than (i) the Originators, and (ii) with respect to certain Charged-Off
Receivables, outside collection agencies in accordance with its customary
practices.  None of the Sub-Servicers shall be permitted to further delegate to
any

 

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other Person any of the duties or responsibilities of the Servicer delegated to
it by KapStone Paper.  If at any time following the occurrence of a Servicer
Termination Event, the Purchasers shall designate as the Servicer any Person
other than KapStone Paper, all duties and responsibilities theretofore delegated
by KapStone Paper to any of the Sub-Servicers shall automatically be terminated.

 

(c)                                  Notwithstanding the foregoing subsection
(b), (i) the Servicer shall be and remain primarily liable to the Administrative
Agent and the Purchasers for the full and prompt performance of all duties and
responsibilities of the Servicer hereunder in accordance with the terms hereof
and (ii) the Administrative Agent and the Purchasers shall be entitled to deal
exclusively with the Servicer in matters relating to the discharge by the
Servicer of its duties and responsibilities hereunder.  The Administrative Agent
and the Purchasers shall not be required to give notice, demand or other
communication to any Person other than the Servicer in order for communication
to the Servicer and the Sub-Servicers or other delegate with respect thereto to
be accomplished.  The Servicer, at all times that it is the Servicer, shall be
responsible for providing any Sub-Servicer or other delegate of the Servicer
with any notice given to the Servicer under this Agreement.

 

Section 6.2.                                 Duties of the Servicer.

 

(a)                                 The Servicer shall take or cause to be taken
all such actions as may be necessary or advisable to collect each Receivable
from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy.

 

(b)                                 The Servicer shall direct all Obligors to
make payments of the Receivables (i) directly to a Lock Box that clears through
a Collection Account which, at all times after October 10, 2014, is subject to a
Control Agreement; or (ii) directly to a Collection Account which, at all times
after October 10, 2014, is subject to a Control Agreement.  If, notwithstanding
the foregoing, any Obligor makes payment to any Seller Party or Originator, the
Seller or the Servicer, as the case may be, agrees to remit, or to cause the
applicable Originator to remit, any Collections (including any security deposits
applied to the Outstanding Balance of any Receivable) that it receives on
Receivables directly to a Collection Account that, at all times after
October 10, 2014, is subject to a Control Agreement within one (1) Business Day
after receipt thereof, and further agrees that all such Collections shall be
deemed to be received in trust for the Administrative Agent and the Purchasers;
provided that prior to the Dominion Date, the Seller or the Servicer may retain
such Collections until required to be turned over to the Administrative Agent or
the Purchasers on the next Settlement Date.

 

(c)                                  [Reserved].

 

(d)                                 The Servicer (and from and after the
Dominion Date, the Administrative Agent) shall administer the Collections in
accordance with the procedures described herein and

 

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in Article II.  Subject to the last sentence of this Section 6.2(d), the
Servicer (and from and after the Dominion Date, the Administrative Agent) shall
hold in trust for the account of Seller and each Purchaser their respective
shares of the Collections in accordance with Article II.  From and after the
Dominion Date, to the extent any Collections come into the possession of the
Servicer, the Servicer shall, upon the request of the Administrative Agent,
segregate, in a manner acceptable to the Administrative Agent, all such
Collections from the general funds of the Servicer or Seller prior to the
remittance thereof in accordance with Article II to the extent of any accrued
and unpaid Aggregate Unpaids, and the requirement to continue such segregation
shall continue until the Amortization Event giving rise to the Dominion Date is
waived in the sole discretion of the Purchasers.  Subject to Section 2.2, at all
times while the Servicer is required to segregate Collections pursuant to the
preceding sentence, the Servicer shall segregate and deposit with a bank
designated by the Administrative Agent such allocable share of Collections of
Receivables set aside for the Purchasers on the first Business Day following
receipt by the Servicer of such Collections, duly endorsed or with duly executed
instruments of transfer.  Notwithstanding anything in this Agreement to the
contrary, for so long as the Administrative Agent is not permitted to and has
not requested the segregation of Collections in accordance with this
Section 6.2(d) and KapStone Paper or one of its Affiliates is the Servicer, the
Servicer may process Collections as a part of a central cash management system
maintained by KapStone Paper and its Affiliates, which system shall include
written records (which may be electronic) of all debits and credits attributable
to Seller and its Receivables and all other participants in such system and,
prior to the Dominion Date, such funds may be commingled with other funds of
KapStone Paper and its Affiliates.

 

(e)                                  The Servicer may, in accordance with the
Credit and Collection Policy, extend the maturity of any Receivable or adjust
the Outstanding Balance of any Receivable as the Servicer determines to be
appropriate to maximize Collections thereof; provided, however, that such
extension or adjustment shall not alter the status of such Receivable as a
Delinquent Receivable, Defaulted Receivable or Charged-Off Receivable or limit
the rights of the Administrative Agent or the Purchasers under this Agreement. 
Notwithstanding anything to the contrary contained herein, following the
occurrence and during continuation of an Amortization Event, the Administrative
Agent shall have the absolute and unlimited right to direct the Servicer to
commence or settle any legal action with respect to any Defaulted Receivable or
to foreclose upon or repossess any Related Security to the extent not in
contravention of the related Contracts or applicable Law.

 

(f)                                   The Servicer shall hold in trust for
Seller and the Administrative Agent and each Purchaser all Records in its
possession that (i) evidence or relate to the Receivables, the related Contracts
and Related Security or (ii) are otherwise necessary or desirable to collect the
Receivables and shall, following the occurrence and during the continuance of an
Amortization Event, as soon as practicable upon demand of the Administrative
Agent, deliver or make available to the Administrative Agent all such Records,
at a place selected by the Administrative Agent.  The Servicer shall, one
(1) Business Day following receipt thereof, turn over (A) to Seller any cash
Collections or other cash proceeds in accordance with Article II and (B) to the

 

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applicable Person any cash collections or other cash proceeds received with
respect to Debt not constituting Receivables.  The Servicer shall, from time to
time at the request of the Administrative Agent or any Purchaser, furnish to the
Purchasers (not later than two (2) Business Days after any such request) a
calculation of the amounts set aside for the Purchasers pursuant to Article II.

 

(g)                                  If any payment by an Obligor in respect of
any indebtedness owed by it to an Originator or Seller has not been applied to
the applicable Invoice within 30 days after its receipt, such payment shall, as
between such Originator or Seller and the Administrative Agent and the
Purchasers, except as otherwise specified by such Obligor or otherwise required
by Contract or law and unless otherwise instructed by the Administrative Agent,
be applied as a Collection of any Receivable of such Obligor (starting with the
oldest such Receivable) to the extent of any amounts then due and payable
thereunder before being applied to any other receivable or other obligation of
such Obligor.

 

Section 6.3.                                 Collection Accounts.  Subject to
the terms of the applicable Control Agreement, at all times after October 10,
2014, the Seller shall either (a) grant to the Administrative Agent for the
benefit of the Purchasers “control” (within the meaning of the UCC) over each
Collection Account and each Collection Account from time to time identified by
the Administrative Agent or (b) obtain such “control” over each Collection
Account and assign its “control” rights to the Administrative Agent for the
benefit of the Purchasers.

 

Section 6.4.                                 Notices of Exclusive Control.  The
Administrative Agent is authorized to date and to deliver to the Collection
Banks the Notices of Exclusive Control at any time after the occurrence and
during the continuance of an Amortization Event.  Subject to the terms of the
applicable Control Agreement, the applicable Originator or Seller has
transferred to the Administrative Agent, for the benefit of the Purchasers,
exclusive “control” over each Collection Account identified on Exhibit IV
hereto; provided, however, that the Seller Parties shall retain the right to
direct dispositions of funds from the Collection Accounts prior to the Dominion
Date.  Each of the Seller Parties hereby authorizes the Administrative Agent,
and agrees that the Administrative Agent shall be entitled (a) at any time after
delivery of the Notices of Exclusive Control, to endorse the applicable Seller
Party’s (or the applicable Originator’s) name on checks and other instruments
representing Collections, (b) at any time after an Amortization Event hereunder
has occurred and is continuing, to enforce the Receivables, the related
Contracts and the Related Security, and (c) at any time after an Amortization
Event hereunder has occurred and is continuing, to take such action as shall be
necessary or desirable to cause all cash, checks and other instruments
constituting Collections of Receivables to come into the possession of the
Administrative Agent rather than the Seller Parties or the Originators.

 

Section 6.5.                                 Responsibilities under Contracts. 
Anything herein to the contrary notwithstanding, the exercise by the
Administrative Agent and the Purchasers of their rights hereunder shall not
release the Servicer, any Originator or Seller from any of their duties or
obligations with respect to any Receivables or under the related Contracts.  The
Purchasers shall

 

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have no obligation or liability with respect to any Receivables or related
Contracts, nor shall any of them be obligated to perform the obligations of
Seller or any Originator.

 

Section 6.6.                                 Reports.

 

(a)                                 On each Monthly Reporting Date (and on such
other dates as any Purchaser may reasonably request upon reasonable advance
notice; provided that the Purchasers will not request more than one additional
report in any Calculation Period), the Servicer shall prepare and deliver not
later than 11:00 a.m. (New York City time) to the Purchasers, (i) a Monthly
Report for the calendar month (or portion thereof) then most recently ended in
the form of Exhibit VIII hereto (appropriately completed and executed), and
(ii) an electronic file of the data contained therein.

 

(b)                                 At such times as any Purchaser shall
reasonably request, the Servicer shall prepare and deliver not later than
11:00 a.m. (New York City time) five (5) Business Days after such request a
listing by Obligor of all Receivables together with an aging of such
Receivables.

 

Section 6.7.                                 Servicing Fees.  In consideration
of KapStone Paper’s agreement to act as the Servicer hereunder, so long as
KapStone Paper shall continue to perform as the Servicer hereunder, KapStone
Paper shall be paid a fee (the “Servicing Fee”) on each Monthly Payment Date, in
arrears for the immediately preceding Calculation Period, equal to 1.0% per
annum of the aggregate Outstanding Balance of all Receivables as of the first
day of such period.  The Servicer shall retain the payment of the Servicing Fee
from Collections held on behalf of the Seller pursuant to Section 2.1.  At any
time while the Servicer is not an Affiliate of Seller, the Servicing Fee shall
be computed at such rate per annum as the Administrative Agent, Seller and the
substitute the Servicer may mutually agree.

 

ARTICLE VII.

 

AMORTIZATION EVENTS

 

Section 7.1.                                 Amortization Events.  The
occurrence of any one or more of the following events shall constitute an
“Amortization Event”:

 

(a)                                 (i) Seller shall fail to make any payment of
Capital required to be paid by it under this Agreement or the Fee Letter; or
(ii) Seller or the Servicer shall fail to make any payment or deposit of any
other amount required to be paid or deposited by it to the Administrative Agent
or any of the Purchasers or Indemnified Parties under this Agreement or the Fee
Letter and such failure under this clause (ii) continues for three
(3) consecutive days after the date when the same was required to be made.

 

(b)                                 Any Seller Party shall fail to perform or
observe any covenant contained in any provision of Section 5.2 or Section 6.6
and such failure continues for two (2) consecutive Business Days after the date
when the same is required to be performed.

 

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(c)                                  Any Seller Party shall fail to perform or
observe any other covenant, agreement or other obligation hereunder (other than
as referred to in another paragraph of this Section 7.1) or any other
Transaction Document to which it is a party and such failure shall continue for
thirty (30) days following the earlier to occur of (i) notice from the
Administrative Agent or any of the Purchasers of such non-performance or
non-observance, or (ii) the date on which a Responsible Employee of such Seller
Party has knowledge of such non-performance or non-observance.

 

(d)                                 Any representation, warranty, certification
or statement made by any Seller Party in this Agreement, any other Transaction
Document or in any other document required to be delivered pursuant hereto or
thereto shall prove to have been incorrect when made or deemed made in any
material respect; provided that to the extent such false or misleading
representation occurs under any of Section 3.1(i), Section 3.1(g),
Section 3.1(h), Section 3.1(p), Section 3.1(q) or Section 3.1(s), no
Amortization Event shall occur under this Section 7.1(d) if a Deemed Collection
is applied to reduction of the Outstanding Balance of the affected
Receivable(s) as provided in Section 1.5.

 

(e)                                  [Reserved]

 

(f)                                   (i) Seller shall fail to pay any principal
of or premium or interest on any of its Debt (other than Debt under this
Agreement) in an amount in excess of $15,324, individually or in the aggregate
which is outstanding when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or permit the acceleration of, the maturity of such
Debt; or any such Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to repay, redeem, purchase or defease such
Debt shall be required to be made, in each case prior to the stated maturity
thereof; or

 

(ii) (A) Except for Contingent Liabilities arising with respect to
indemnification obligations of any Seller Party or its Subsidiaries (other than
Seller) being contested in good faith by appropriate proceedings and for which
such Seller Party or such Subsidiary maintains adequate reserves, any default
shall occur under the terms applicable to any Debt of any Seller Party or any of
its Subsidiaries (other than Seller) in an aggregate amount (for all such Debt
so affected and including undrawn committed or available amounts and amounts
owing to all creditors under any combined or syndicated credit arrangement)
exceeding $20,000,000 and such default shall (1) consist of the failure to pay
such Debt when due, whether by acceleration or otherwise, or (2) accelerate the
maturity of such Debt or cause the holder or holders thereof, or any trustee or
agent for such holder or holders to cause, such Debt to become

 

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due and payable (or require any Seller Party or any of its Subsidiaries (other
than Seller) to purchase or redeem such Debt or post cash collateral in respect
thereof) prior to its expressed maturity or (B) there occurs under any Swap
Contract (as defined in the Senior Credit Agreement) an Early Termination Date
(as defined in such Swap Contract) resulting from (A) any event of default under
such Swap Contract as to which the Performance Guarantor or any Subsidiary is
the Defaulting Party (as defined in such Swap Contract) or (C) any Termination
Event (as defined in such Swap Contract) under such Swap Contract as to which
the Performance Guarantor or any Subsidiary is an Affected Party (as defined in
such Swap Contract) and, in either event, the termination value or other amount
owed by the Performance Guarantor or such Subsidiary (other than Seller) as a
result thereof is greater than $20,000,000.

 

(g)                                  An Event of Bankruptcy shall occur with
respect to any Seller Party or any Originator.

 

(h)                                 As at the end of any calendar month:

 

(i)                                     the average of the Delinquency Ratios
for the three months then most recently ended shall exceed 5.00%;

 

(ii)                                  the average of the Default Ratios for the
three months then most recently ended shall exceed 2.75%; or

 

(iii)                               the average of the Dilution Ratios for the
three months then most recently ended shall exceed 5.00%.

 

(i)                                     A Change of Control shall occur.

 

(j)                                    (i) One or more judgments or orders for
the payment of money (not paid or fully covered by insurance as to which the
relevant insurance company has acknowledged coverage) in an amount in excess of
$15,324, individually or in the aggregate, shall be entered against Seller or
(ii) one or more judgments or orders for the payment of money (not paid or fully
covered by insurance as to which the relevant insurance company has acknowledged
coverage) aggregating in excess of $20,000,000 shall be rendered against any or
all of the Performance Guarantor, the Servicer or any Originator and, in each of
the foregoing cases described in clauses (i) and (ii) either (A) enforcement
proceedings shall have been commenced by any creditor upon any such judgments or
orders or (B) there shall be any period of thirty (30) consecutive days during
which a stay of enforcement of any such judgments or orders, by reason of a
pending appeal, bond or otherwise, shall not be in effect.

 

(k)                                 (i) An ERISA Event occurs which has resulted
or would reasonably be expected to result in liability of any Seller Party under
Title IV of ERISA or to the Pension Plan, Multiemployer Plan (as defined in the
Senior Credit Agreement) or the PBGC in an aggregate amount in excess of
$20,000,000, or (ii) the Servicer or any ERISA Affiliate fails to pay when due,
after the expiration of any applicable grace period, any installment payment
with respect to

 

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its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan
in an aggregate amount in excess of $20,000,000.

 

(l)                                     Either (i) the “Termination Date” under
and as defined in the Sale Agreement shall occur or (ii) any Originator shall
for any reason cease to transfer, or cease to have the legal capacity to
transfer, or otherwise be incapable of transferring Receivables to Seller under
the Sale Agreement, provided, however, that upon 30 days’ prior written notice,
an Originator may cease to sell or contribute Receivables to Seller (and
otherwise cease to be a party) under the Sale Agreement without causing an
Amortization Event under this Agreement if such Originator has consolidated or
merged with or into (or otherwise sold all or substantially all of its assets
to) an Originator.

 

(m)                             The Performance Undertaking shall cease to be
effective or to be the legally valid, binding and enforceable obligation of
Performance Guarantor, or Performance Guarantor shall contest in any proceeding
in any court or any mediation or arbitral proceeding such effectiveness,
validity, binding nature or enforceability of its obligations thereunder.

 

(n)                                 This Agreement shall terminate in whole or
in part (except in accordance with its terms), or shall cease to be effective or
to be the legally valid, binding and enforceable obligation of Seller, or any
other Seller Party shall directly or indirectly contest in any manner such
effectiveness, validity, binding nature or enforceability, or the Administrative
Agent for the benefit of the Purchasers shall cease to have a valid and
perfected first priority Security Interest under the applicable laws of the
United States of America or any applicable state or territory thereof, in any
material part of the Receivables, the Related Security or Collections with
respect thereto, or, at any time after October 10, 2014, each of the Collection
Accounts.

 

(o)                                 The Internal Revenue Service shall file
notice of a lien with respect to an amount in excess of $1,000,000 pursuant to
Section 6323 of the Code with regard to any of the Receivables or Related
Security and such lien shall not have been released or fully-secured with cash
pledged to Seller (and collaterally assigned to the Administrative Agent for the
benefit of the Purchasers pursuant to this Agreement) within thirty (30) days.

 

(p)                                 The PBGC shall file notice of a lien with
respect to an amount in excess of $1,000,000 pursuant to Section 4068 of ERISA
with respect to any of the Receivables or Related Security and such Lien shall
not have been released or fully-secured with cash pledged to the Seller (and
collaterally assigned to the Administrative Agent for the benefit of the
Purchasers pursuant to this Agreement) within thirty (30) days.

 

Section 7.2.                                 Remedies.  Upon the occurrence and
during the continuation of an Amortization Event, the Administrative Agent may,
and upon the direction of any Purchaser, shall, take any of the following
actions:  (i) upon notice to the Seller Parties, declare the Amortization Date
to have occurred, whereupon Purchases shall cease and the Amortization Date
shall forthwith occur, without demand, protest or further notice of any kind,
all of which are

 

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hereby expressly waived by each Seller Party; provided, however, that upon the
occurrence of an Amortization Event described in Section 7.1(g), the
Amortization Date shall automatically occur, without demand, protest or any
notice of any kind, all of which are hereby expressly waived by each Seller
Party, (ii) deliver the Notices of Exclusive Control, and (iii) if any Aggregate
Unpaids remain outstanding thirty (30) days after the occurrence of the
Amortization Date, unless a Seller Party has already done so, notify Obligors of
the Administrative Agent’s and Purchasers’ interest in the Receivables.  The
aforementioned rights and remedies shall be without limitation, and shall be in
addition to all other rights and remedies of the Administrative Agent and the
Purchasers otherwise available under any other provision of this Agreement, by
operation of law, at equity or otherwise, all of which are hereby expressly
preserved, including, without limitation, all rights and remedies provided under
the UCC, all of which rights shall be cumulative.  For the avoidance of doubt,
the occurrence of the Amortization Date shall result in the termination of
Purchases under this Agreement, and, although it may change the handling and
application of Collections pursuant to Article II, shall not accelerate or
permit the Administrative Agent or any Purchaser to accelerate, the due date for
any amount payable under any Receivable or under the Transaction Documents.

 

ARTICLE VIII.

 

INDEMNIFICATION

 

Section 8.1.                                 Indemnities by Seller.  (a) Without
limiting any other rights that the Administrative Agent or any of the Purchasers
may have hereunder or under applicable Law, Seller hereby agrees to indemnify
(and pay upon demand to) the Administrative Agent, the Purchasers and their
respective successors, assigns, officers, directors, agents and employees (each
of the foregoing, an “Indemnified Party”) from and against any and all damages,
losses, claims, Taxes, liabilities, costs, reasonable expenses and for all other
amounts payable, including reasonable fees and disbursements of external counsel
in suits by parties to the Transaction Documents against one another and by
third parties (all of the foregoing being collectively referred to as
“Indemnified Amounts”) awarded against or incurred by any of them arising out of
or as a result of this Agreement or the acquisition, either directly or
indirectly, by the Administrative Agent or any Purchaser of an interest in the
Receivables excluding, however, in all of the foregoing instances:

 

(A)                               Indemnified Amounts to the extent a final
judgment of a court of competent jurisdiction holds that such Indemnified
Amounts resulted from gross negligence,  willful misconduct or fraud on the part
of the Indemnified Party seeking indemnification;

 

(B)                               Indemnified Amounts to the extent the same
includes losses in respect of Receivables that are uncollectible solely on
account of the insolvency, bankruptcy or lack of creditworthiness of the related
Obligor; or

 

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(C)                               Taxes (which shall be governed by Sections 8.3
and 8.5);

 

provided, however, that nothing contained in this sentence shall limit the
liability of Seller or limit the recourse of the Administrative Agent or the
Purchasers to Seller for amounts otherwise specifically provided to be paid by
Seller under the terms of the Transaction Documents.  Without limiting the
generality of the foregoing indemnification, Seller shall indemnify the
Indemnified Parties for Indemnified Amounts (including, without limitation,
losses in respect of uncollectible Receivables, regardless of whether
reimbursement therefor would constitute recourse to Seller) relating to or
resulting from:

 

(i)                                     any representation or warranty made by
any Seller Party or any Originator (or any officers of any such Person) under or
in connection with this Agreement, any other Transaction Document or any other
information or report required to be delivered by any such Person pursuant
hereto or thereto, which shall have been false or incorrect in any material
respect when made or deemed made;

 

(ii)                                  the failure by any Seller Party or any
Originator to comply with any applicable law, rule or regulation with respect to
any Receivable or Contract related thereto, or the nonconformity of any
Receivable or Contract included therein with any such applicable law, rule or
regulation or any failure of any Originator to keep or perform any of its
obligations, express or implied, with respect to any Contract;

 

(iii)                               any failure of any Seller Party or any
Originator to perform its duties, covenants or other obligations in accordance
with the provisions of any Transaction Document to which it is a party;

 

(iv)                              any environmental liability, products
liability, personal injury or damage suit, or other similar claim arising out of
or in connection with merchandise, insurance or services that are the subject of
any Contract or any Receivable;

 

(v)                                 any dispute, claim, offset or defense (other
than discharge in bankruptcy of the Obligor) of the Obligor to the payment of
any Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its terms),
or any other claim resulting from the sale of the merchandise or service related
to such Receivable or the furnishing or failure to furnish such merchandise or
services;

 

(vi)                              the commingling of Collections of Receivables
at any time with other funds;

 

(vii)                           any investigation, litigation or proceeding
related to or arising from this Agreement or any other Transaction Document, the
transactions contemplated hereby, the use of the proceeds of any Purchase, the
ownership of the Receivable

 

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Interests or any other investigation, litigation or proceeding relating to any
Seller Party or any Originator in which any Indemnified Party becomes involved
as a result of any of the transactions contemplated hereby;

 

(viii)                        any inability to litigate any claim against any
Obligor in respect of any Receivable as a result of such Obligor being immune
from civil and commercial law and suit on the grounds of sovereignty or
otherwise from any legal action, suit or proceeding;

 

(ix)                              any Amortization Event described in
Section 7.1(g);

 

(x)                                 any failure of Seller to acquire and
maintain legal and equitable title to, and ownership of any Receivable and the
Related Security and Collections with respect thereto from any Originator, free
and clear of any Adverse Claim (other than as created hereunder); or any failure
of Seller to give reasonably equivalent value to the applicable Originator under
the Sale Agreement in consideration of the transfer by it of any Receivable, or
any attempt by any Person to void such transfer under statutory provisions or
common law or equitable action;

 

(xi)                              any failure to vest and maintain vested in the
Administrative Agent (for the benefit of the Purchasers) a valid and perfected
ownership interest (to the extent of the Receivable Interests) or a first
priority perfected Security Interest in the Collateral, free and clear of any
Adverse Claim (except as created by the Transaction Documents);

 

(xii)                           the failure to have filed, or any delay in
filing, financing statements or other similar instruments or documents under the
UCC of any applicable jurisdiction or other applicable laws with respect to any
Collateral, whether on the date hereof or at any subsequent time, except to the
extent such failure or delay is caused by the Administrative Agent;

 

(xiii)                        any action or omission by any Seller Party which
reduces or impairs the rights of the Administrative Agent or the Purchasers with
respect to any Collateral or the value of any Collateral (other than at the
direction of the Administrative Agent or any Purchaser and except as
contemplated by the Transaction Documents);

 

(xiv)                       any attempt by any Person to void any Purchase or
the Security Interest in the Collateral granted hereunder, whether under
statutory provision, common law or equitable action;  and

 

(xv)                          the failure of any Receivable included in the
calculation of the Investment Base as an Eligible Receivable to be an Eligible
Receivable at the time so included.

 

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(b)                                 After receipt by an Indemnified Party of
notice of any investigative, administrative or judicial proceeding
(collectively, a “Proceeding”) involving such Indemnified Party, such
Indemnified Party shall, if a claim in respect thereof is to be made against
Seller hereunder, promptly notify Seller in writing, and in reasonable detail,
of such Proceeding.  Upon receipt of notice from an Indemnified Party seeking
indemnification hereunder with respect to any such Proceeding, Seller shall be
entitled to assume the defense of any such Proceeding with counsel reasonably
satisfactory to the Administrative Agent.  Upon Seller’s assumption of the
defense of any such Proceeding, the Indemnified Party shall have the right to
participate in such Proceeding and to retain its own counsel but Seller shall
not be liable for any legal expenses of other counsel subsequently incurred by
such Indemnified Party in connection with the defense thereof unless (x) Seller
agrees in writing to pay such fees and expenses, (y) Seller fails to employ
counsel reasonably satisfactory to the Administrative Agent in a timely manner,
or (z) the Indemnified Party shall have been advised by counsel that there are
actual or potential conflicting interests between Seller, on the one hand, and
the Indemnified Party, on the other hand, including situations in which there
are one or more legal defenses available to the Indemnified Party that are
different from or additional to those available to Seller; provided, however,
that Seller shall not in any event be responsible hereunder for the fees and
expenses of more than one counsel (plus local counsel, where necessary) for all
Indemnified Parties in connection with any Proceeding. Seller shall have the
sole authority to settle any claim for monetary damages and, if Seller chooses
not to assume the defense of any such Proceeding, no Indemnified Party will
consent to a settlement of, or the entry of any judgment arising from, any
Proceeding without Seller’s prior written consent, which shall not be
unreasonably withheld or delayed.

 

Section 8.2.                                 Indemnities by the Servicer. 
(a) Without limiting any other rights that the Administrative Agent or any
Purchaser may have hereunder or under applicable law, the Servicer hereby agrees
to indemnify (and pay upon demand to) each Indemnified Party from and against
any and all damages, losses, claims, Taxes, liabilities, costs, reasonable
expenses and for all other amounts payable, including reasonable fees and
disbursements of external counsel (all of the foregoing being collectively
referred to as “Servicer Indemnified Amounts”) awarded against or incurred by
any of them arising out of or as a result of the Servicer’s failure to duly and
punctually perform its obligations under this Agreement excluding, however, in
all of the foregoing instances:

 

(A) Servicer Indemnified Amounts to the extent a final judgment of a court of
competent jurisdiction holds that such Servicer Indemnified Amounts resulted
from gross negligence, willful misconduct or fraud on the part of an Indemnified
Party; and

 

(B) Servicer Indemnified Amounts to the extent the same includes losses in
respect of Receivables that are uncollectible on account of the insolvency,
bankruptcy or lack of creditworthiness or financial inability or unwillingness
to pay (other than a dispute giving rise to a Dilution) of the related Obligor;

 

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provided, however, that nothing contained in this sentence shall limit the
liability of the Servicer or limit the recourse of the Purchasers to the
Servicer for Collections received by the Servicer and required to be remitted by
it under the terms of this Agreement.  Without limiting the generality of the
foregoing indemnification, the Servicer shall indemnify the Indemnified Parties
for Servicer Indemnified Amounts (including, without limitation, losses in
respect of uncollectible Receivables, regardless of whether reimbursement
therefor would constitute recourse to the Servicer) relating to or resulting
from:

 

(i)                                     any representation or warranty made by
the Servicer (or any officers of the Servicer) under or in connection with this
Agreement, any other Transaction Document or any other information or report
delivered by any such Person pursuant hereto or thereto, which shall have been
false or incorrect in any material respect when made or deemed made;

 

(ii)                                  the failure by the Servicer to comply with
any applicable law, rule or regulation with respect to the collection of any
Receivable or Related Security;

 

(iii)                               any failure of the Servicer to perform its
duties, covenants or other obligations in accordance with the provisions of this
Agreement or any other Transaction Document;

 

(iv)                              the commingling by the Servicer of Collections
of Receivables or funds or other assets arising therefrom at any time with other
funds;

 

(v)                                 any investigation, litigation or proceeding
relating to the Servicer in which any Indemnified Party becomes involved as a
result of any of the transactions contemplated hereby;

 

(vi)                              any Amortization Event of the described in
Section 7.1(g) with respect to the Servicer; and

 

(vii)                           any action or omission by the Servicer relating
to its obligations hereunder which reduces or impairs the rights of the
Administrative Agent or the Purchasers with respect to any Receivable or the
value of any such Receivable (other than at the direction of the Administrative
Agent or any Purchaser and except as contemplated by the Transaction Documents).

 

(b)                                 After receipt by an Indemnified Party of
notice of any Proceedings involving such Indemnified Party, such Indemnified
Party shall, if a claim in respect thereof is to be made against Servicer
hereunder, promptly notify the Servicer in writing, and in reasonable detail, of
such Proceeding.  Upon receipt of notice from an Indemnified Party seeking
indemnification hereunder with respect to any such Proceeding, the Servicer
shall be entitled to assume the defense of any such Proceeding with counsel
reasonably satisfactory to the Administrative Agent.  Upon the Servicer’s
assumption of the defense of any such Proceeding, the Indemnified

 

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Party shall have the right to participate in such Proceeding and to retain its
own counsel but the Servicer shall not be liable for any legal expenses of other
counsel subsequently incurred by such Indemnified Party in connection with the
defense thereof unless (x) the Servicer agrees in writing to pay such fees and
expenses, (y) the Servicer fails to employ counsel reasonably satisfactory to
the Administrative Agent in a timely manner, or (z) the Indemnified Party shall
have been advised by counsel that there are actual or potential conflicting
interests between the Servicer, on the one hand, and the Indemnified Party, on
the other hand, including situations in which there are one or more legal
defenses available to the Indemnified Party that are different from or
additional to those available to the Servicer; provided, however, that the
Servicer shall not in any event be responsible hereunder for the fees and
expenses of more than one counsel (plus local counsel, where necessary) for all
Indemnified Parties in connection with any Proceeding.  The Servicer shall have
the sole authority to settle any claim for monetary damages and, if the Servicer
chooses not to assume the defense of any such Proceeding, no Indemnified Party
will consent to a settlement of, or the entry of any judgment arising from, any
Proceeding without the Servicer’s prior written consent, which shall not be
unreasonably withheld or delayed.

 

Section 8.3.                                 Increased Cost and Reduced Return. 
If after the Closing Date, the Administrative Agent or any Purchaser shall be
charged any fee, expense or increased cost on account of the adoption after the
date hereof of any applicable law, rule or regulation (including any applicable
law, rule or regulation regarding capital adequacy and any accounting
principles) or any change after the date hereof in any applicable Law, rule or
regulation, or any change after the date hereof in the interpretation or
administration of any applicable law, rule or regulation by the Financial
Accounting Standards Board or any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency (a “Regulatory
Change”):  (a) that subjects the Administrative Agent or any Purchaser to any
Taxes — other than Indemnified Taxes and Excluded Taxes — on its interest in the
Receivable Interests or its Commitment or other obligations, or its deposits,
reserves, other liabilities or capital attributable thereto, (b) that imposes,
modifies or deems applicable any reserve, assessment, insurance or other
insurance-related charge, special deposit or similar requirement against assets
of, deposits with or for the account of the Administrative Agent or a Purchaser,
or credit extended or any commitments to extend credit by the Administrative
Agent or any Purchaser pursuant to this Agreement or any other Transaction
Document, or (c) that imposes any other condition the result of which is to
increase the cost to the Administrative Agent or any Purchaser of performing its
obligations under the Transaction Documents, or to reduce the rate of return on
the Administrative Agent’s or any Purchaser’s capital as a consequence of its
obligations under the Transaction Documents, or to reduce the amount of any sum
received or receivable by the Administrative Agent or any Purchaser under any
Transaction Document or to require any payment calculated by reference to the
amount of interests in Receivable Interests, then, upon demand by the
Administrative Agent or such Purchaser, Seller shall pay to the Administrative
Agent or such Purchaser such amounts charged to such Person amounts to otherwise
compensate such Person for such increased cost or such reduction; provided that
notwithstanding anything herein to the contrary, (x) the Dodd-Frank

 

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Wall Street Reform and Consumer Protection Act adopted on July 21, 2010 and all
requests, rules, guidelines or directives thereunder and (y) all requests,
rules, guidelines or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a “Regulatory
Change”,(1) regardless of the date enacted, adopted or issued.  For the
avoidance of doubt, payments under this Section 8.3 in respect of increased
Taxes shall be without duplication of any Taxes payable pursuant to Section 8.5.

 

Section 8.4.                                 Other Costs and Expenses.  Seller
shall pay (a) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and the Purchasers (including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent), in connection with
the preparation, negotiation, execution, delivery and administration of this
Agreement and the other Transaction Documents or any amendments, modifications
or waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), and (b) all out-of-pocket
expenses incurred by the Administrative Agent or any Purchaser (including the
fees, charges and disbursements of one primary outside counsel to the
Administrative Agent and the Purchasers taken as a whole, and, if necessary, one
local counsel in each relevant jurisdiction and special counsel and, in the
event of any actual or potential conflict of interest, one additional counsel
for each Purchaser subject to such conflict), in connection with the enforcement
or protection of its rights in connection with this Agreement and the other
Transaction Documents, including its rights under this Section.

 

Section 8.5.                                       Taxes.

 

(a)                                 Any and all payments by or on account of any
obligation of Seller under any Transaction Document shall be made without
deduction or withholding for any Taxes, except as required by applicable law. 
If any applicable law (as determined in the good faith discretion of the Seller)
requires the deduction or withholding of any Tax from any such payment by the
Seller, then the Seller shall be entitled to make such deduction or withholding
and shall timely pay the full amount deducted or withheld to the relevant
Governmental Authority in accordance with applicable law and, if such Tax is an
Indemnified Tax, then the sum payable by the Seller shall be increased as
necessary so that after such deduction or withholding has been made (including
such deductions and withholdings applicable to additional sums payable under
this Section 8.5) the applicable Indemnified Party receives an amount equal to
the sum it would have received had no such deduction or withholding been made.

 

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(1)  If Senior Credit Agreement changes to address this point, we will conform
this Agreement to the Senior Credit Agreement.

 

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(b)                                 Seller shall timely pay to the relevant
Governmental Authority in accordance with applicable law, or at the written
request of the applicable Indemnified Party timely reimburse it for the payment
of, any Other Taxes.

 

(c)                                  Seller shall indemnify each Indemnified
Party, on the first Settlement Date which is at least 45 days after demand
therefor, for the full amount of any Indemnified Taxes (including Indemnified
Taxes imposed or asserted on or attributable to amounts payable under this
Section 8.5) payable or paid by such Indemnified Party and any reasonable
out-of-pocket expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority.  Each Indemnified Party will promptly notify
the Seller of any event of which it has knowledge, which will entitle such
Indemnified Party to compensation pursuant to this Section 8.5; provided,
however, that failure of any Indemnified Party to demand indemnification for any
Taxes shall not constitute a waiver of such right to indemnification, except
that the Seller shall not be required to indemnify an Indemnified Party for
Taxes under this Section 8.5 unless such Indemnified Party notifies the Seller
of such claim no later than 45 days after such Indemnified Party has knowledge
of such Taxes being imposed or arising.  Any notice claiming indemnification
under this Section 8.5 shall set forth in reasonable detail the additional
amount or amounts to be paid to it hereunder and shall be conclusive in the
absence of manifest error.

 

(d)                                 Each Indemnified Party agrees that it will
use reasonable efforts to reduce or eliminate any claim for indemnity pursuant
to this Section 8.5, including, subject to applicable law, a change in the
funding office of such Indemnified Party; provided, however, that nothing
contained herein shall obligate any Indemnified Party to take any action that
imposes on such Indemnified Party any material additional costs or imposes
material legal or regulatory burdens, nor which, in such Indemnified Party’s
reasonable opinion, would have a material adverse effect on its business,
operations or financial condition.

 

(e)                                  If any Indemnified Party receives a refund
of any Taxes as to which it has been indemnified pursuant to this Section 8.5
(including by the payment of additional amounts pursuant to this Section 8.5),
it shall pay to the Seller an amount equal to such refund (but only to the
extent of indemnity payments made under this Section with respect to the Taxes
giving rise to such refund), net of all reasonable out-of-pocket expenses
(including Taxes) of such Indemnified Party and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund).  The Seller, upon the request of such Indemnified Party, shall repay to
such Indemnified Party the amount paid over pursuant to this clause (e) (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such Indemnified Party is required to repay such
refund to such Governmental Authority.  Notwithstanding anything to the contrary
in this clause (e), in no event will the

 

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Indemnified Party be required to pay any amount to the Seller pursuant to this
clause (e) the payment of which would place the Indemnified Party in a less
favorable net after-Tax position than the Indemnified Party would have been in
if the Tax subject to indemnification and giving rise to such refund had not
been deducted, withheld or otherwise imposed and the indemnification payments or
additional amounts with respect to such Tax had never been paid.  This paragraph
shall not be construed to require any Indemnified Party to make available its
Tax returns (or any other information relating to its Taxes that it deems
confidential) to the Seller or any other Person.

 

(f)                                   Each Purchaser shall deliver to the Seller
and Servicer, on or prior to the date on which such Purchaser becomes a
Purchaser under this Agreement and as otherwise prescribed by applicable law or
reasonably requested by the Seller, such valid, properly completed and duly
executed forms, certificates and documentation (including, as
applicable, Internal Revenue Service Form W-8ECI, W-8BEN-E, W-8IMY or W-9 or
successor form of the foregoing), along with any applicable attachments
(including, in case of a Person claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, a certificate reasonably
satisfactory to the Seller to the effect that such Person is not a “bank” within
the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of
Seller or KapStone Paper within the meaning of Section 881(c)(3)(B) of the Code,
or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the
Code), prescribed by applicable law or reasonably requested by the Seller, the
Servicer, the Administrative Agent or any Administrator as will permit such
payments to be made without or at a reduced rate of withholding.  Each Purchaser
agrees that if any form or certification it previously delivered expires or
becomes obsolete or inaccurate in any respect, it shall update such form or
certification or promptly notify the Seller, Servicer and Administrative Agent,
in writing of its legal inability to do so.  Each Purchaser shall replace or
update such forms when necessary to maintain any applicable exemption and as
requested by the Administrative Agent, the Administrators or the Seller, as
applicable.  Each Purchaser agrees to hold the Administrative Agent, the
Administrators, the Servicer and the Seller harmless from any Withholding Taxes
relating to payments by the Seller to such Purchaser or such indemnitee arising
from such Purchaser’s failure to comply with this Section 8.5(f).

 

(g)                                  If a payment made to the Administrative
Agent or any Purchaser hereunder would be subject to U.S. federal withholding
Tax imposed by FATCA if such payee were to fail to comply with the applicable
reporting requirements of FATCA (including those contained in Section 1471(b) or
1472(b) of the Internal Revenue Code, as applicable), such payee shall deliver
to the Seller at the time or times prescribed by law and at such time or times
reasonably requested by the Seller, such documentation prescribed by applicable
law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue
Code) and such additional documentation reasonably requested by the Seller as
may be necessary for the Seller to comply with its obligations under FATCA and
to determine that such payee has complied with such payee’s obligations under

 

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FATCA or to determine the amount to deduct and withhold from such payment. 
Solely for purposes of this clause (g), the term “FATCA” shall include any
amendments made to FATCA after the date of this Agreement.

 

ARTICLE IX.

 

THE ADMINISTRATIVE AGENT

 

Section 9.1.                                 Appointment.

 

(a)                                 Each Purchaser hereby irrevocably designates
and appoints Wells Fargo Bank, N.A., as Administrative Agent hereunder, and
authorizes the Administrative Agent to take such action on its behalf under the
provisions of the Transaction Documents and to exercise such powers and perform
such duties as are expressly delegated to the Administrative Agent by the terms
of the Transaction Documents, together with such other powers as are reasonably
incidental thereto.  Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the
Administrative Agent shall be read into this Agreement or otherwise exist
against the Administrative Agent.

 

(b)                                 The provisions of this Article IX are solely
for the benefit of the Administrative Agent and the Purchasers, and the Seller
Parties shall not have any rights as a third-party beneficiary or otherwise
under any of the provisions of this Article IX (other than as provided in
Section 9.9), except that this Article IX shall not affect any obligations which
the Administrative Agent or any Purchaser may have to any of the Seller Parties
under the other provisions of this Agreement.

 

(c)                                  In performing its functions and duties
hereunder, the Administrative Agent shall act solely as the Administrative Agent
of the Purchasers and does not assume nor shall be deemed to have assumed any
obligation or relationship of trust or agency with or for any of the Seller
Parties or any of their respective successors and assigns.

 

Section 9.2.                                 Delegation of Duties.  The
Administrative Agent may execute any of its duties under the applicable
Transaction Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties. 
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.

 

Section 9.3.                                 Exculpatory Provisions.  Neither
the Administrative Agent nor any of its directors, officers, agents or employees
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or them or any Person described in Section 9.2 under or in connection with the
Transaction Documents (except for its, their or such Person’s own gross
negligence, fraud or willful misconduct), or (ii) responsible in any manner to
any of the Purchasers or other

 

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agents for any recitals, statements, representations or warranties made by
Seller contained in any Transaction Document or in any certificate, report,
statement or other document referred to or provided for in, or received under or
in connection with, any Transaction Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other document furnished in connection herewith, or for any failure of
either of Seller Parties to perform its respective obligations hereunder, or for
the satisfaction of any condition specified in Article IV, except receipt of
items required to be delivered to the Administrative Agent.  The Administrative
Agent shall not be under any obligation to any Purchaser to ascertain or to
inquire as to the observance or performance of any of the agreements or
covenants contained in, or conditions of, any Transaction Document, or to
inspect the properties, books or records of Seller Parties.  This Section 9.3 is
intended solely to govern the relationship between the Administrative Agent, on
the one hand, and the Purchasers, on the other.

 

Section 9.4.                                 Reliance by the Administrative
Agent and the Purchasers.

 

(a)                                 Each of the Administrative Agent and the
Purchasers shall in all cases be entitled to rely, and shall be fully protected
in relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, facsimile, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to Seller Parties), independent accountants and other
experts selected by the Administrative Agent or such Purchaser.  The
Administrative Agent shall in all cases be fully justified in failing or
refusing to take any action under this Agreement or any other document furnished
in connection herewith unless it shall first receive such advice or concurrence
of all of the Purchasers.

 

(b)                                 Any action taken by the Administrative Agent
in accordance with Section 9.4(a) shall be binding upon all Purchasers.

 

Section 9.5.                                 Notice of Amortization Events.  The
Administrative Agent and the Purchasers shall not be deemed to have knowledge or
notice of the occurrence of any Amortization Event or Potential Amortization
Event unless it has received notice from another party referring to this
Agreement, stating that an Amortization Event or Potential Amortization Event
has occurred hereunder and describing such Amortization Event or Potential
Amortization Event.  In the event that the Administrative Agent or one of the
Purchasers receives such a notice, it shall promptly give notice thereof to the
other Purchasers.  The Administrative Agent shall take such action with respect
to such Amortization Event or Potential Amortization Event as shall be directed
by either of the Purchasers.

 

Section 9.6.                                 Non-Reliance on the Administrative
Agent or Other Purchaser.  Each of the Purchasers expressly acknowledges that
the Administrative Agent, the other Purchaser, and the respective officers,
directors, employees, agents, attorneys-in-fact or affiliates of any of the
foregoing has made no representations or warranties to it and that no act by the

 

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Administrative Agent or the other Purchaser hereafter taken, including, without
limitation, any review of the affairs of Seller Parties, shall be deemed to
constitute any representation or warranty by the Administrative Agent or such
other Purchaser.  Each of the Purchasers also represents and warrants to the
Administrative Agent and the other Purchaser that it has, independently and
without reliance upon any such Person (or any of their Affiliates) and based on
such documents and information as it has deemed appropriate, made its own
appraisal of, and investigation into, the business, operations, property,
prospects, financial and other conditions and creditworthiness of Seller Parties
and made its own decision to enter into this Agreement.  Each of the Purchasers
also represents that it will, independently and without reliance upon any of the
Administrative Agent or the other Purchaser, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, prospects, financial and other
condition and creditworthiness of Seller Parties.  The Administrative Agent, the
Purchasers and the respective Affiliates of the foregoing, shall have no duty or
responsibility to provide any party to this Agreement with any credit or other
information concerning the business, operations, property, prospects, financial
and other condition or creditworthiness of Seller Parties which may come into
the possession of such Person or any of its respective officers, directors,
managers, employees, agents, attorneys-in-fact or affiliates.

 

Section 9.7.                                 Indemnification of the
Administrative Agent.  The Purchasers severally agree to indemnify the
Administrative Agent and its officers, directors, employees, representatives and
agents (to the extent not reimbursed by Seller Parties and without limiting the
obligation of Seller Parties to do so), ratably in accordance with their
respective Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for the Administrative Agent or
such Person in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not the Administrative Agent acts
in its capacity as Administrative Agent, or such Person shall be designated a
party thereto) that may at any time be imposed on, incurred by or asserted
against the Administrative Agent or such Person as a result of, or arising out
of, or in any way related to or by reason of, any of the transactions
contemplated hereunder or the execution, delivery or performance of this
Agreement or any other document furnished in connection herewith (but excluding
any such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
gross negligence, fraud or willful misconduct of the Administrative Agent or
such Person, as the case may be, as finally determined by a court of competent
jurisdiction).

 

Section 9.8.                                 Administrative Agent in Its
Individual Capacity.  The Administrative Agent in its individual capacity and
the affiliates thereof may make loans to, accept deposits from and generally
engage in any kind of business with Seller Parties and their Affiliates as
though the Administrative Agent were not the Administrative Agent hereunder. 
With respect to its Receivable Interests, if any, the Administrative Agent shall
have the same

 

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rights and powers under this Agreement as any Purchaser and may exercise the
same as though it were not one of the Administrative Agent, and the terms
“Purchaser” and “Purchasers” shall include the Administrative Agent in its
individual capacity.

 

Section 9.9.                                 Successor Administrative Agent. 
The Administrative Agent, upon thirty (30) days’ notice to Seller Parties and
the Purchasers, may voluntarily resign and may be removed at any time, with or
without cause, by the Purchasers.  If the Purchaser acting as Administrative
Agent shall voluntarily resign or be removed as Administrative Agent under this
Agreement, then the other Purchaser shall succeed to the rights, powers and
duties of the Administrative Agent and the term “Administrative Agent” shall
mean such successor Administrative Agent, effective upon its appointment, and
the former Administrative Agent’s rights, powers and duties as Administrative
Agent shall be terminated, without any other or further act or deed on the part
of such former Administrative Agent or any of the parties to this Agreement. 
Upon resignation or replacement of any Administrative Agent in accordance with
this Section 9.9, the retiring Administrative Agent shall execute or authorize
the filing of such UCC-3 assignments and amendments, and assignments and
amendments of the Transaction Documents, as may be necessary to give effect to
its replacement by a successor Administrative Agent.  After any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
provisions of Article VIII and this Article IX shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.

 

Section 9.10.                          UCC Filings.  Each of the Purchasers
hereby expressly recognizes and agrees that the Administrative Agent may be
designated as the secured party of record on the various UCC filings required to
be made under this Agreement and the party entitled to amend, release and
terminate the UCC filings under the Sale Agreement in order to perfect their
respective interests in the Receivables, Collections and Related Security, that
such designation shall be for administrative convenience only in creating a
record or nominee holder to take certain actions hereunder on behalf of the
Purchasers and that such listing will not affect in any way the status of the
Purchasers as the true parties in interest with respect to the Receivable
Interests.  In addition, such listing shall impose no duties on the
Administrative Agent other than those expressly and specifically undertaken in
accordance with this Article IX.

 

ARTICLE X.

 

ASSIGNMENTS; PARTICIPATIONS

 

Section 10.1.                          Assignments; Pledge to Federal Reserve.

 

(a)                                 With the prior written consent of the
Administrative Agent (which consent will not be unreasonably withheld or
delayed), each of the Purchasers may assign to one or more Eligible Assignees
(each, an “Assignee Purchaser”) all or any part of its rights and obligations
under this Agreement pursuant to an assignment agreement, substantially in the
form set forth in Exhibit VI hereto (an “Assignment Agreement”) executed by such
Assignee Purchaser and such

 

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selling Purchaser, it being understood and agreed that prior to the occurrence
of an Amortization Event, each “Lender” under the Senior Credit Agreement shall
be given a reasonable period of time to exercise the option to become Assignee
Purchaser under this Agreement before any other Eligible Assignee is offered
such option.  So long as no Amortization Event shall have occurred and be
continuing, the consent of Seller (which consent shall not be unreasonably
withheld or delayed) shall be required prior to the effectiveness of any
assignment under this Section 10.1(a) other than to an existing Purchaser.  Upon
delivery of the executed Assignment Agreement to the Administrative Agent, such
selling Purchaser shall be released from its obligations hereunder to the extent
of such assignment.  Thereafter, the Assignee Purchaser shall for all purposes
be a Purchaser party to this Agreement and shall have all the rights and
obligations of a Purchaser under this Agreement to the same extent as if it were
an original party hereto and thereto, and no further consent or action by
Seller, the Purchasers or the Administrative Agent shall be required.  If, after
giving effect to any assignment hereunder, there are three or more Purchasers,
Seller, such Purchasers and the Administrative Agent shall amend this Agreement
to provide for receipt of notices and other communications and administration of
payments by the Administrative Agent on behalf of the Purchasers.  Neither
Seller nor the Servicer shall have the right to assign its rights or obligations
under this Agreement.  No Purchaser may assign all or any part of its rights or
obligations under this Agreement other than as permitted by this Section 10.1.

 

(b)                                 The Administrative Agent, acting solely for
this purpose as an agent of Seller, shall maintain at one of its offices a copy
of each Assignment Agreement delivered to it and a register for the recordation
of the names and addresses of the Purchasers, and the Commitments of, and
Capital (and Yield Rate) of the Receivables Interest owing to, each Purchaser
pursuant to the terms hereof from time to time (the “Register”).  The entries in
the Register shall be conclusive absent manifest error, and Seller, the
Administrative Agent and each other Purchaser shall treat each Person whose name
is recorded in the Register pursuant to the terms hereof as a Purchaser
hereunder for all purposes of this Agreement.  The Register shall be available
for inspection by Seller and any Purchaser at any reasonable time and from time
to time upon reasonable prior notice.

 

(c)                                  Notwithstanding any other provision of this
Agreement to the contrary, any Purchaser may at any time pledge or grant a
Security Interest in all or any portion of its rights (including, without
limitation, rights to payment of principal and interest) under this Agreement to
secure obligations of such Purchaser to a Federal Reserve Bank located in the
United States of America, without notice to or consent of any other party
hereto; provided that no such pledge or grant of a Security Interest shall
release such Purchaser from any of its obligations hereunder or substitute any
such pledgee or grantee for such Purchaser as a party hereto.

 

Section 10.2.                          Participations.  Any Purchaser may, in
the ordinary course of its business at any time sell to one or more Persons
(each a “Participant”) participating interests in its Commitment and its
Receivable Interests.  Notwithstanding any such sale by a Purchaser of a
participating interest to a Participant, such Purchaser’s rights and obligations
under this

 

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Agreement shall remain unchanged, such Purchaser shall remain solely responsible
for the performance of its obligations hereunder, and each of the parties hereto
shall continue to deal solely and directly with such Purchaser in connection
with such Purchaser’s rights and obligations under this Agreement.  Each
Purchaser agrees that any agreement between such Purchaser and any such
Participant in respect of such participating interest shall not restrict such
Purchaser’s right to agree to any amendment, supplement, waiver or modification
to the Transaction Documents without such Participant’s consent.

 

Section 10.3.                          Replacement of a Purchaser.  If Seller
becomes obligated to pay additional amounts to any Purchaser pursuant to
Section 8.3 or Section 8.5, or any Purchaser gives notice of the occurrence of
any circumstances described in Section 1.7, then Seller may within 90 days
thereafter designate another bank or financial institution meeting the
requirements of an Eligible Assignee (or otherwise reasonably acceptable to the
Administrative Agent) (such other institution being called a “Replacement
Purchaser”) to purchase the Receivable Interests of such Purchaser and such
Purchaser’s rights hereunder, without recourse to or warranty by, or expense to,
such Purchaser, for a purchase price equal to the outstanding Capital and Yield
payable to such Purchaser plus any accrued but unpaid fees owed to such
Purchaser and any other amounts payable to such Purchaser under this Agreement,
and to assume all the obligations of such Purchaser hereunder, all in compliance
with Section 10.1.  Upon such purchase and assumption (pursuant to an Assignment
Agreement), such Purchaser shall no longer be a party hereto or have any rights
hereunder (other than rights with respect to indemnities and similar rights
applicable to such Purchaser prior to the date of such purchase and assumption)
and shall be relieved from all obligations to Seller hereunder, and the
Replacement Purchaser shall succeed to the rights and obligations of such
Purchaser hereunder.

 

ARTICLE XI.

 

GRANT OF SECURITY INTEREST

 

Section 11.1.                          Grant of Security Interest.  In addition
to the interests which the Purchasers may from time to time acquire pursuant
hereto, Seller hereby grants to the Administrative Agent for the ratable benefit
of the Purchasers and the Indemnified Parties, a continuing Security Interest in
all of Seller’s right, title and interest in, to and under all Receivables now
existing or hereafter arising, all Related Security, all Collections and other
rights and payments relating to such Receivables and Related Security, in each
case, whether now existing or hereafter arising, and all proceeds of any of the
foregoing (collectively, the “Collateral”), to secure the prompt and complete
payment of the Aggregate Unpaids and the performance of all of Seller’s
obligations under the Transaction Documents.  The Administrative Agent is hereby
authorized to file a financing statement naming Seller as the debtor and/or
Seller and describing the collateral covered thereby as “all assets and the
proceeds thereof, whether now existing or hereafter arising.”  The
Administrative Agent, for the benefit of the Purchasers and the Indemnified
Parties, shall have, in addition to the rights and remedies that it may have

 

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under this Agreement, all other rights and remedies provided to a secured
creditor under the UCC and other applicable law, which rights and remedies shall
be cumulative

 

ARTICLE XII.

 

MISCELLANEOUS

 

Section 12.1.                          Waivers and Amendments.

 

(a)                                 No failure or delay on the part of the
Administrative Agent or any of the Purchasers in exercising any power, right or
remedy under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or remedy preclude any other
further exercise thereof or the exercise of any other power, right or remedy. 
The rights and remedies herein provided shall be cumulative and nonexclusive of
any rights or remedies provided by law.  Any waiver of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given.

 

(b)                                 No provision of this Agreement may be
amended, supplemented, modified or waived except in writing in accordance with
the provisions of this Section 12.1(b).  This Agreement and the provisions
hereof may only be amended, supplemented, modified or waived in a writing signed
by the Seller, the Servicer, the Administrative Agent and the Purchasers.

 

Section 12.2.                          Notices.  Except as provided in this
Section 12.2, all communications and notices provided for hereunder shall be in
writing (including email, bank wire, facsimile or electronic transmission or
similar writing) and shall be given to the other parties hereto at their
respective addresses or facsimile numbers set forth on Schedule 12.2 hereto or
at such other address or facsimile number as such Person may hereafter specify
in writing for the purpose of notice to each of the other parties hereto.  Each
such notice or other communication shall be effective (a) if given by facsimile
or email, upon the receipt thereof, (b) if given by mail, three (3) Business
Days after the time such communication is deposited in the mail with first class
postage prepaid or (c) if given by any other means, when received at the address
specified in this Section 12.2

 

Section 12.3.                          Ratable Payments.  If any Purchaser,
whether by setoff or otherwise, has payment made to it with respect to any
portion of the Aggregate Unpaids owing to such Purchaser (other than payments
received pursuant to Section 8.3 or 8.4) in a greater proportion than that
received by any other Purchaser entitled to receive a ratable share of such
Aggregate Unpaids, such Purchaser agrees, promptly upon demand, to purchase for
cash without recourse or warranty a portion of such Aggregate Unpaids held by
the other Purchasers so that after such purchase each Purchaser will hold its
ratable proportion of such Aggregate Unpaids; provided that if all or any
portion of such excess amount is thereafter recovered from such Purchaser, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.

 

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Section 12.4.                          Intended Tax Characterization.  The
parties hereto intend and agree that, for the purposes of all Taxes, the
transactions contemplated hereby shall be treated as loans by the Purchasers to
the Seller that are secured by the Receivables, all Related Security and all
Collections with respect thereto (the “Intended Tax Characterization”).  The
parties hereto agree to report and otherwise to act for the purposes of all
Taxes in a manner consistent with the Intended Tax Characterization.  Under the
Intended Tax Characterization, (i) each purchase of a Receivables Interest shall
be treated as a loan; (ii) Collections transferred to the Purchasers in
reduction of their Capital in respect of a Receivables Interest shall be treated
as repayment of loan principal; and (iii) Yield in respect of a Receivables
Interest shall be treated as interest.

 

Section 12.5.                          Protection of Ownership and Security
Interests.

 

(a)                                 Seller agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and documents, and
take all actions, that may be reasonably necessary or desirable, or that the
Administrative Agent may reasonably request, to perfect, protect or more fully
evidence the Purchasers’ ownership of the Receivable Interests or the
Administrative Agent’s Security Interest (on behalf of the Purchasers) in the
Collateral, or to enable the Administrative Agent or the Purchasers to exercise
and enforce their rights and remedies hereunder.  At any time after the
occurrence of an Amortization Event, the Administrative Agent may direct Seller
or the Servicer to notify the Obligors of Receivables, at Seller’s expense, of
the ownership or Security Interests of the Administrative Agent (on behalf of
the Purchasers) under this Agreement, and if such notification is not made
within thirty (30) days after the Administrative Agent has so directed Seller
and the Servicer, the Administrative Agent may make such notification.  Seller
or the Servicer (as applicable) shall, at the Administrative Agent’s or any
Purchaser’s request, withhold the identity of the Administrative Agent or such
Purchaser in any such notification.

 

(b)                                 If any Seller Party fails to perform any of
its obligations hereunder, the Administrative Agent or any Purchaser may (but
shall not be required to) perform, or cause performance of, such obligations,
and the Administrative Agent’s or such Purchaser’s costs and expenses incurred
in connection therewith shall be payable by Seller as provided in Section 8.4.

 

Section 12.6.                          Confidentiality.

 

(a)                                 Each of the Seller Parties shall maintain
and shall cause each of its directors, officers and employees to maintain the
confidentiality of the Fee Letter, except that such Seller Party and its
directors, officers and employees may disclose such information (i) to its
external accountants, attorneys, investors, potential investors and credit
enhancers and the agents or advisors of such Persons, and (ii) as required by
any applicable Law or regulation or by any court, regulatory body or agency
having jurisdiction over such Seller Party.

 

(b)                                 Each of the Administrative Agent and the
Purchasers agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be

 

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disclosed (i) to its Affiliates and to its and its Affiliates’ respective
partners, directors, officers, employees, agents, trustees, advisors and
representatives (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (ii) to the extent requested
by any regulatory authority purporting to have jurisdiction over it (including
any self-regulatory authority, such as the National Association of Insurance
Commissioners), (iii) to the extent required by applicable laws or regulations
or by any subpoena or similar legal process, (iv) to any other party hereto,
(v) in connection with the exercise of any remedies hereunder or under any other
Transaction Document or any action or proceeding relating to this Agreement or
any other Transaction Document or the enforcement of rights hereunder or
thereunder, (vi) subject to an agreement containing provisions substantially the
same as those of this Section, to (A) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (B) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Seller and its
obligations, (vii) with the consent of the Seller or (viii) to the extent such
Information (A) becomes publicly available other than as a result of a breach of
this Section or (B) becomes available to the Administrative Agent, any Purchaser
or any of their respective Affiliates on a nonconfidential basis from a source
other than Seller.

 

For purposes of this Section, “Information” means all information received from
any Seller Party or any Subsidiary thereof relating to any Seller Party or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to the Administrative Agent or any Purchaser on a
nonconfidential basis prior to disclosure by any Seller Party or any Subsidiary
thereof, provided that, in the case of information received from a Seller Party
or any such Subsidiary after the date hereof, such information is clearly
identified at the time of delivery as confidential.  Any Person required to
maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

(c)                                  Each of the Administrative Agent and the
Purchasers acknowledges that (i) the Information may include material non-public
information concerning KapStone Paper or a Subsidiary, as the case may be,
(ii) it has developed compliance procedures regarding the use of material
non-public information and (iii) it will handle such material non-public
information in accordance with applicable Law, including United States Federal
and state securities Laws.

 

Section 12.7.                          CHOICE OF LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF OTHER THAN
SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW WHICH SHALL
APPLY HERETO) EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE ADMINISTRATIVE
AGENT’S SECURITY INTEREST IN THE COLLATERAL OR REMEDIES HEREUNDER IN

 

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RESPECT THEREOF ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE
OF NEW YORK.

 

Section 12.8.                          CONSENT TO JURISDICTION.  EACH OF THE
PARTIES HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, NEW
YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT, AND EACH OF
THE PARTIES HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE
AGENT OR THE PURCHASERS TO BRING PROCEEDINGS AGAINST ANY SELLER PARTY IN THE
COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY
AGAINST THE ADMINISTRATIVE AGENT OR THE PURCHASERS OR ANY AFFILIATE THEREOF
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH SELLER
PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN THE BOROUGH
OF MANHATTAN, NEW YORK.

 

Section 12.9.                          WAIVER OF JURY TRIAL.  EACH PARTY HERETO
HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT
EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER.

 

Section 12.10.                   Integration; Binding Effect; Survival of Terms.

 

(a)                                 This Agreement and each other Transaction
Document contain the final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof superseding all prior oral or written understandings.

 

(b)                                 This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns (including any trustee in bankruptcy).  This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms and shall remain in full force and effect until
terminated in

 

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accordance with its terms; provided, however, that the rights and remedies with
respect to (i) any breach of any representation and warranty made by any Seller
Party pursuant to Article V, (ii) the indemnification and payment provisions of
Article VIII, and Sections 12.5 through and including 12.8 shall be continuing
and shall survive any termination of this Agreement.

 

Section 12.11.                   Counterparts; Severability;
Section References.  This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same Agreement.  To the fullest
extent permitted by applicable law, delivery of an executed counterpart of a
signature page of this Agreement by telefacsimile or electronic image scan
transmission (such as a “pdf” file) will be effective to the same extent as
delivery of a manually executed original counterpart of this Agreement. Any
provisions of this Agreement which are prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.  Unless otherwise expressly indicated, all references herein
to “Article,” “Section,” “Schedule” or “Exhibit” shall mean articles and
sections of, and schedules and exhibits to, this Agreement.

 

Section 12.12.                   PATRIOT Act.  Each Purchaser that is subject to
the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)), as amended (the “Act”) hereby notifies Seller and
the Servicer that pursuant to the requirements of the Act, it is required to
obtain, verify and record information that identifies the Seller Parties, the
Originators and their respective Subsidiaries, which information includes the
name and address of the Seller Parties, the Originators and their respective
Subsidiaries and other information that will allow such Purchasers to identify
such parties in accordance with the Act.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date hereof.

 

 

KAPSTONE RECEIVABLES, LLC, AS SELLER

 

 

 

 

 

By:

/s/ Andrea K. Tarbox

 

Name:

Andrea K. Tarbox

 

Title:

Treasurer

 

 

 

 

 

KAPSTONE PAPER AND PACKAGING CORPORATION, AS THE SERVICER

 

 

 

 

By:

/s/ Andrea K. Tarbox

 

Name:

Andrea K. Tarbox

 

Title:

Vice President and Chief Financial Officer

 

 

--------------------------------------------------------------------------------

 

WELLS FARGO BANK, N.A.,

 

AS ADMINISTRATIVE AGENT AND A PURCHASER

 

 

 

 

 

By:

/s/ Michael J. Landry

 

Name:

Michael J. Landry

 

Title:

Vice President

 

 

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PNC BANK, NATIONAL ASSOCIATION,

 

AS A PURCHASER

 

 

 

 

 

By:

/s/ Mark S. Falcione

 

Name:

Mark S. Falcione

 

Title:

Executive Vice President

 

 

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EXHIBIT I

 

DEFINITIONS

 

Capitalized terms used and not otherwise defined in this Agreement, are used
with the meanings attributed thereto in the Sale Agreement.

 

Except as otherwise specified in this Agreement, all references in this
Agreement (i) to any Person (other than the Seller) shall be deemed to include
such Person’s successors and assigns, and (ii) to any law, agreement, statute or
contract specifically defined or referred to in this Agreement shall be deemed
references to such law, agreement, statute or contract as the same may be
supplemented, amended, waived, consolidated, replaced or modified from time to
time, but only to the extent permitted by, and effected in accordance with, the
terms thereof.  The words “herein,” “hereof” and “hereunder” and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any provision of this Agreement, and references to “Article,”
“Section,” “paragraph,” “Exhibit,” “Schedule” and “Appendix” are references to
this Agreement unless otherwise specified.  Whenever the context so requires,
words importing any gender include the other gender.  Any of the defined terms
may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference; the singular includes the plural and the
plural includes the singular.  The word “or” shall not be exclusive.

 

All accounting terms not otherwise defined in this Agreement shall have the
meanings assigned them in conformity with GAAP.  All terms used in Article 9 of
the UCC and not specifically defined in this Agreement shall be defined herein
and in the Transaction Documents as such terms are defined in the UCC as in
effect in the State of New York.  Each reference to this Agreement, any other
Transaction Document, or any other agreement shall be a reference to such
agreement together with all exhibits, schedules, attachments and appendices
thereto, in each case as amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms thereof and hereof.  References
to “writing” include facsimile, printing, typing, lithography and other means of
reproducing words in a tangible visible form including computer-generated
information accessible in tangible visible form.  References to “written”
include faxed, printed, typed, lithographed and other means of reproducing words
or symbols in a tangible visible form consistent with the preceding sentence. 
The words “including,” “includes” and “include” shall be deemed to be followed
by the words “without limitation”.

 

Unless otherwise expressly provided herein, any period of time ending on a day
which is not a Business Day shall end on the next succeeding Business Day. 
Unless otherwise stated in this Agreement, in the computation of a period of
time from a specified date to a later specified date, the word “from” means
“from and including” and the words “to” and “until” each means “to but
excluding.”

 

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In addition, as used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):

 

“Act” has the meaning specified in Section 3.1(y).

 

“Adjusted Dilution Ratio” means, at any time, the rolling average of the
Dilution Ratio for the 12 Calculation Periods then most recently ended.

 

“Adverse Claim” means any lien, Security Interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), charge against or interest in property, or other priority or
preferential arrangement of any kind or nature whatsoever.

 

“Administrative Agent” has the meaning set forth in the preamble to this
Agreement.

 

“Administrative Agent’s Account” means Wells’ account no. 37235547964502222, at
Wells Fargo Bank, N.A., 420 Montgomery Street, San Francisco, CA, ABA
No. 121-000-248, Reference:  KapStone Receivables, LLC, or any other account or
accounts as the Administrative Agent may indicate in writing to Seller and the
Servicer from time to time.

 

“Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified.  For purposes of this
definition, “Control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise. 
“Controlling” and “Controlled” have meanings correlative thereto.

 

“Aggregate Capital” means, on any date of determination, the aggregate amount of
Capital of all Receivable Interests outstanding on such date.

 

“Aggregate Commitment” means, on any date of determination, the aggregate of all
Purchasers’ Commitments.

 

“Aggregate Reduction” has the meaning specified in Section 1.3.

 

“Aggregate Unpaids” means, at any time, the sum of the Aggregate Capital and all
Required Amounts.

 

“Agreement” means this Receivables Purchase Agreement, as it may be amended,
restated, supplemented or otherwise modified and in effect from time to time.

 

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“Alternate Base Rate” means, for any day, a rate per annum equal to the sum of
(a) the higher as of such day of (i) the Prime Rate, or (ii) one-half of one
percent (0.50%) above the Federal Funds Rate, plus (b) in each of the foregoing
cases, the Applicable Margin.  For purposes of determining the Alternate Base
Rate for any day, changes in the Prime Rate or the Federal Funds Rate shall be
effective on the date of each such change.

 

“Amortization Date” means the earliest to occur of (a) the Business Day
immediately prior to the occurrence of an Amortization Event set forth in
Section 7.1(g), (b) the Business Day specified in a written notice from the
Administrative Agent at the direction of each Purchaser following the occurrence
and during continuation of any other Amortization Event, and (c) the date which
is five (5) Business Days after the Administrative Agent’s receipt of written
notice from Seller that it wishes to terminate the facility evidenced by this
Agreement.

 

“Amortization Event” has the meaning specified in Section 7.1.

 

“Applicable Margin” has the meaning set forth in the Fee Letter.

 

“Assignee Purchaser” has the meaning set forth in Section 10.1.

 

“Assignment Agreement” has the meaning set forth in Section 10.1.

 

“Business Day” means any day on which banks are not authorized or required to
close in New York, New York, Atlanta, Georgia, Pittsburgh, Pennsylvania, or in
any location where a Collection Account is maintained.

 

“Calculation Period” means a calendar month.

 

“Canadian Receivable” means a Receivable the Obligor of which is invoiced at an
address in Canada or any province or territory thereof.

 

“Capital” of any Receivable Interest means, at any time, (A) the Purchase Price
of such Receivable Interest minus (B) the sum of the aggregate amount of
Collections and other payments received by the Administrative Agent which in
each case are applied to reduce such Capital in accordance with the terms and
conditions of this Agreement; provided that such Capital shall be restored in
the amount of any Collections or other payments so received and applied if at
any time the distribution of such Collections or payments are rescinded,
returned or refunded for any reason.

 

“Capital Settlement Date” means the first Monthly Payment Date after any Monthly
Report revealing an Investment Excess is delivered and each Business Day during
the Liquidation Period designated by the Administrative Agent as a “Capital
Settlement Date.”

 

“Capital Stock” means, with respect to any Person, all shares, interests,
participations or other equivalents (however designated, whether voting or
non-voting) of such

 

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Person’s capital, whether now outstanding or issued or acquired after the
Closing Date, including common shares, preferred shares, membership interests in
a limited liability company, limited or general partnership interests in a
partnership, interests in a trust, interests in other unincorporated
organizations, warrants, options or other rights for the purchase or acquisition
from such Person of shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for the purchase or
acquisition from such Person of such shares (or such other interests) or any
other equivalent of such ownership interest.

 

“Change of Control” means:

 

(a)                                 Any “person” or “group” (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding any employee benefit plan of such person or its subsidiaries, and any
person or entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 35% of the Capital Stock of the Performance Guarantor
entitled to vote for members of the board of directors or equivalent governing
body of the Performance Guarantor on a fully diluted basis; provided that the
acquisition by any one or more Exempt Persons (as defined below) (acting singly
or in concert) of the “beneficial ownership” of 35% or more of the Capital Stock
of the Performance Guarantor entitled to vote for members of the board of
directors or equivalent governing body of the Performance Guarantor on a fully
diluted basis shall not be a Change of Control;

 

(b)                                 A majority of the members of the Board of
Directors of Performance Guarantor shall cease to be Continuing Members (as
defined below); or

 

(c)                                  The Performance Guarantor shall cease to
own and control, directly or indirectly, 100% of each class of the outstanding
Capital Stock of any Originator or Seller; provided that any Originator may
merge or consolidate into or with an Originator and such merger or consolidation
shall not constitute a Change of Control.

 

For purposes of the foregoing, (x) “Continuing Member” means a member of the
Board of Directors of the Performance Guarantor who either (i) was a member of
the Performance Guarantor’s Board of Directors on the day before the Closing
Date and has been such continuously thereafter or (ii) became a member of such
Board of Directors on or after the Closing Date and whose election or nomination
for election by the stockholders of the Performance Guarantor was approved by a
vote of the majority of the Continuing Members then members of the Performance
Guarantor’s Board of Directors and (y) “Exempt Person” means each member of the
class consisting of:  (i) Roger Stone, (ii) Matthew Kaplan and (iii) so long as

 

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voting control is retained by such Person, any spouse, lineal descendant, parent
or sibling of such Person, or any trust or similar estate planning entity
controlled by such Person or whose beneficiaries or owners are solely comprised
of such Person’s spouse, lineal descendant, parent or sibling.

 

“Charged-Off Receivable” means a Receivable: (a) as to which the Servicer has
received notice or a Responsible Employee is otherwise aware that the Obligor
thereof has taken any action, or suffered any event to occur, of the type
described in the definition of “Event of Bankruptcy” (as if references to Seller
Party therein refer to such Obligor); (b) which, consistent with the Credit and
Collection Policy, would be written off the Servicer’s books as uncollectible;
or (c) which has been identified by the Servicer as uncollectible.

 

“Closing Date” means September 26, 2014.

 

“Code” means the Internal Revenue Code of 1986, and the rules and regulations
thereunder, each as amended or modified from time to time.

 

“Collateral” has the meaning specified in Section 11.1.

 

“Collection Account” means each concentration account, depositary account,
lock-box clearing account or similar account in which any Collections are
collected or deposited and which is listed on Exhibit IV hereto.

 

“Collection Bank” means, at any time, any bank at which a Collection Account or
Lock-Box is maintained.

 

“Collections” means, with respect to any Receivable, all cash collections and
other cash proceeds in respect of such Receivable, including, without
limitation, all yield, Finance Charges or other related amounts accruing in
respect thereof and all cash proceeds of Related Security with respect to such
Receivable.

 

“Commitment” means, for each Purchaser, the commitment of such Purchaser to make
investments in Receivable Interests from Seller from time to time, in an amount
not to exceed (a) in the aggregate, the amount set forth opposite such
Purchaser’s name on Schedule A to this Agreement, as such amount may be modified
in accordance with the terms hereof and (b) with respect to any individual
Purchase hereunder, such Purchaser’s Percentage of the Purchase Price therefor.

 

“Concentration Limit” means, at any time, in relation to the aggregate
Outstanding Balance of Receivables owed by any single Obligor (other than an
Other Foreign Obligor) and its Affiliates (if any), the applicable concentration
limit shall be determined as follows for such other Obligors who have short term
unsecured debt ratings currently assigned to them by S&P and Moody’s (or in the
absence thereof, the equivalent long term unsecured senior debt ratings), the
applicable concentration limit shall be determined according to the following

 

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table:

 

S&P Rating

 

Moody’s Rating

 

Allowable % of
Eligible Receivables

 

A-1+

 

P-1

 

12.00

%

A-1

 

P-1

 

10.00

%

A-2

 

P-2

 

8.00

%

A-3

 

P-3

 

4.00

%

Below A-3 or Not Rated by either S&P or Moody’s

 

Below P-3 or Not Rated by either S&P or Moody’s

 

4.00

%

 

; provided, however, that (i) if any Obligor has a split rating, the applicable
rating will be the lower of the two, (ii) if any Obligor is a Non-Rated Obligor,
the applicable Concentration Limit shall be the one set forth in the last line
of the table above, and (iii) upon Seller’s request from time to time, the
Purchasers, in their sole discretion, may agree to a higher percentage of
Eligible Receivables for a particular Obligor and its Affiliates (each such
higher percentage, a “Special Concentration Limit”), it being understood that
any Special Concentration Limit may be cancelled by any Purchaser upon not less
than five (5) Business Days’ written notice to Seller and the Administrative
Agent.

 

“Contingent Liability” has the meaning specified in the Senior Credit Agreement.

 

“Contract” means, with respect to any Receivable, any and all instruments,
agreements, Invoices or other writings pursuant to which such Receivable arises
or which evidences such Receivable.

 

“Contract Year” means (i) the period beginning on the Closing Date and ending on
the day prior to such date in the succeeding year, and (ii) thereafter, each
period beginning on an anniversary of the Closing Date and ending on the day
prior to such anniversary in the next succeeding calendar year.

 

“Contractual Dilution” means, for any Receivable, any early payment discounts or
volume purchase rebates set forth in the applicable Invoice or Contract.

 

“Control Agreement” means an agreement, in form reasonably acceptable to the
Administrative Agent, in which a Collection Bank agrees to take instructions
from the Administrative Agent, either directly or as assignee of Seller, with
respect to the disposition of funds in a Collection Account without further
consent of any applicable Seller Party or any Originator; provided, however,
that any such agreement shall allow a Seller Party or an Originator to give
instructions with respect to such Collection Account prior to delivery of a
Notice of Exclusive Control.

 

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“Credit and Collection Policy” means the Originators’ credit and collection
policies and practices relating to Contracts and Receivables existing on the
date hereof and summarized in Exhibit VII hereto, as modified from time to time
in accordance with this Agreement.

 

“Cut-Off Date” means for any Monthly Report or monthly computation, the last day
of the most recent Calculation Period.

 

“Days Sales Outstanding” means, as of any day, an amount equal to the product of
(a) 91, multiplied by (b) the amount obtained by dividing (i) the aggregate
Outstanding Balance of all Receivables as of the most recent Cut-Off Date, by
(ii) the aggregate amount of Receivables created during the three
(3) Calculation Periods including and immediately preceding such Cut-Off Date.

 

“Debt” has the meaning specified in the Senior Credit Agreement.

 

“Deemed Collections” means the aggregate of all amounts Seller shall have been
deemed to have received as a Collection of a Receivable.  Seller shall be deemed
to have received a Collection of a Receivable if any Dilution occurs with
respect to such Receivable.  The amount of the Collection which Seller shall be
deemed to have received shall equal, in the case of clauses (a)-(d) of the
definition of “Dilution,” the amount by which the Outstanding Balance of such
Receivable was reduced as a result thereof and, in the case of clause (e) of the
definition of “Dilution,” the Outstanding Balance of such Receivable.

 

“Default Horizon Ratio” means, as of any Cut-Off Date, the ratio (expressed as a
decimal)(2) computed by dividing (i) the aggregate sales generated by the
Originators during the last six (6) months ending on such Cut-Off Date, by
(ii) the Net Pool Balance as of such Cut-off Date.

 

“Default Ratio” means, as of any Cut-Off Date, the ratio (expressed as a
percentage) computed by dividing (a) the total amount of Receivables which
became Defaulted Receivables during the month that includes such Cut-Off Date,
by (b) the aggregate sales generated by the Originators during the month
occurring six (6) months prior to the month ending on such Cut-Off Date.

 

“Defaulted Receivable” means a Receivable:  (a) as to which the Obligor thereof
has suffered an event of bankruptcy; (b) which, consistent with the Originators’
credit and collection policies, should be written off as uncollectible; or
(c) as to which any payment, or part thereof, remains unpaid for sixty-one (61)
days or more from the original due date.

 

--------------------------------------------------------------------------------

(2) We believe that decimal is correct here.

 

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“Delinquency Ratio” means, at any time, a percentage equal to (a) the aggregate
outstanding principal balance of all Receivables that were Delinquent
Receivables at such time divided by (b) the aggregate outstanding principal
balance of all Receivables at such time.

 

“Delinquent Receivable” means a Receivable as to which any payment, or part
thereof, remains unpaid for thirty-one (31) days or more from the original due
date.

 

“Designated Jurisdiction” means any country or territory to the extent that such
country or territory itself is the subject of any Sanction.

 

“Dilution” means the amount of any reduction or cancellation of the Outstanding
Balance of a Receivable due to (a) any defective or rejected goods or services,
any cash discount or any other adjustment by any Originator or any Affiliate
thereof (other than as a result of any Collections), or as a result of any
governmental or regulatory action, (b) any setoff in respect of any claim by the
Obligor thereof (whether such claim arises out of the same or a related or an
unrelated transaction), (c) any warranty claim, rebate or refund, (d) any
misstatement of the amount thereof, or (e) any misrepresentation with respect to
such Receivable under any of Section 3.1(g), Section 3.1(h), Section 3.1(p),
Section 3.1(r) or Section 3.1(s); provided, however, that “Dilution” shall not
include a credit memo where offset by a rebill or correction on the same day
when the original due date is not extended and such re-bill or correction can be
captured and reported.

 

“Dilution Horizon Ratio” means, as of any Cut-off Date, a ratio (expressed as a
decimal), computed by dividing (a) the sum of (i) the aggregate sales generated
by the Originators during the one (1) month ending on such Cut-Off Date, plus
(ii) 50% of the aggregate sales generated by the Originators during the month
ending one month prior to such Cut-Off Date, by (b) the Net Pool Balance as of
such Cut-Off Date.

 

“Dilution Ratio” means, as of any Cut-Off Date, a ratio (expressed as a
percentage), computed by dividing (a) the total amount of decreases in
outstanding principal balances due to Dilution (other than Contractual Dilution)
during the month ending on such Cut-Off Date, by (b) the aggregate sales
generated by the Originators during the Calculation Period ending two (2) months
prior to such Cut-Off Date.

 

“Dilution Reserve” means, for any month, the product (expressed as a percentage)
of:  (a) the sum of (i) 2.0 times the Adjusted Dilution Ratio as of the
immediately preceding Cut-Off Date, plus (ii) the Dilution Volatility Component
as of the immediately preceding Cut-Off Date, times (b) the Dilution Horizon
Ratio as of the immediately preceding Cut-Off Date.

 

“Dilution Volatility Component” means, at any time, the product (expressed as a
percentage) of (i) the difference between (a) the highest three-month rolling
average Dilution Ratio over the 12-month period then most recently ended and
(b) the Adjusted Dilution Ratio, and (ii) a fraction, the numerator of which is
equal to the amount calculated in (i)(a) of this

 

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definition and the denominator of which is equal to the amount calculated in
(i)(b) of this definition.

 

“Dominion Date” means the date on which the Administrative Agent delivers to any
Collection Bank(s) a Notice of Exclusive Control pursuant to Section 6.4.

 

“Effective Date” means September 29, 2014.

 

“Eligible Assignee” means any bank or other financial institution having a
combined capital and surplus of at least $250,000,000.

 

“Eligible Receivable” means a Receivable:

 

(a)                                 the Obligor of which (i) is not is an
individual or entity currently the subject of any Sanctions, nor invoiced at an
address in a country or territory that is the subject of Sanctions, (ii) is not
an Affiliate of any Originator or the Performance Guarantor, and (iii) is not a
government or a governmental subdivision or agency (unless the Assignment of
Claims Act of 1940, as amended, and any applicable state assignment of claims
act, has been complied with),

 

(b)                                 which is not (i) a Delinquent Receivable,
(ii) a Defaulted Receivable, or (iii) owing from an Obligor as to which more
than 50% of the aggregate Outstanding Balance of all Receivables owing from such
Obligor are Defaulted Receivables,

 

(c)                                  which is due within 270 days of the
original invoice date therefor,

 

(d)                                 which is an “account” or a “payment
intangible” as defined in section 9-102 of the UCC of all applicable
jurisdictions,

 

(e)                                  which is denominated and payable only in
United States dollars to a Lock-Box or Collection Account located in the United
States,

 

(f)                                   which arises under a Contract, invoice or
other written contractual obligation which, together with such Receivable, is in
full force and effect and constitutes the legal, valid and binding obligation of
the related Obligor enforceable against such Obligor in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors’ rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law),

 

(g)                                  which arises under a Contract, invoice or
other written contractual obligation that contains an obligation to pay a
specified sum of money, contingent only upon the sale of goods or the provision
of services by the applicable Originator,

 

(h)                                 which, together with the Contract related
thereto, does not contravene in

 

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any material respect any Law, rule or regulation applicable thereto (including,
without limitation, usury laws, the Federal Truth in Lending Act, and Regulation
Z, Regulation D and Regulation B of the Federal Reserve Board, and applicable
judgments, decrees, injunctions, writs, orders, or line of action of any court,
arbitrator or other administrative, judicial, or quasi-judicial tribunal or
agency of competent jurisdiction) and with respect to which no part of the
Contract related thereto is in violation of any such law, rule or regulation,

 

(i)                                     which satisfies in all material respects
all applicable requirements of the Credit and Collection Policy,

 

(j)                                    which was generated in the ordinary
course of the applicable Originator’s business,

 

(k)                                 which arises solely from the sale of goods
or the provision of services to the related Obligor by the applicable
Originator, and not by any other Person that is not an Originator (in whole or
in part),

 

(l)                                     which is not subject to (A) any right of
rescission or set-off, or (B) any currently asserted counterclaim or other
defense (including defenses arising out of violation of usury laws) or any other
Adverse Claim of the applicable Obligor against the applicable Originator (i.e.,
the Obligor with the right, claim or defense has such right claim or defense
directly against the Originator rather than against an Affiliate of such
Originator), and the Obligor thereon holds no right as against the applicable
Originator to cause such Originator to repurchase the goods or merchandise the
sale of which gave rise to such Receivable (except with respect to sale
discounts effected pursuant to the Contract, or defective goods returned in
accordance with the terms of the Contract); provided, however, that (1) if such
rescission, set-off, counterclaim, defense or repurchase right affects only a
portion of the Outstanding Balance of such Receivable, then such Receivable may
be deemed an Eligible Receivable to the extent of the portion of such
Outstanding Balance which is not so affected (i.e., the amount of the
outstanding claim or the amount the Obligor is entitled to set-off against the
applicable Originator based on the amount which such Originator owes the
applicable Obligor) would be netted against the applicable Receivable, but the
excess of the Receivable over such outstanding claim or set-off would be
included as an Eligible Receivable) and (2) Receivables of any Obligor which has
any accounts payable from the applicable Originator (thus giving rise to a
potential offset against such Obligor’s Receivables) may be treated as Eligible
Receivable to the extent that such Obligor has agreed pursuant to a written
agreement in form and substance satisfactory to the Administrative Agent, that
such Receivable shall not be subject to such offset,

 

(m)                             as to which the applicable Originator has
satisfied and fully performed all obligations on its part with respect to such
Receivable required to be fulfilled by it, and no further action is required to
be performed by any Person with respect thereto other than payment thereon by
the applicable Obligor,

 

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(n)                                 as to which all right, title and interest to
and in which has been validly transferred by the applicable Originator directly
or indirectly to Seller pursuant to the Sale Agreement, and Seller has good and
marketable title thereto free and clear of any Adverse Claim (other than Adverse
Claims in favor of the Administrative Agent created pursuant to the Transaction
Documents), and

 

(o)                                 is required to be paid to a Lock-Box or
Collection Account that is subject to a Control Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or modified from time to time.

 

“ERISA Affiliate” has the meaning specified in the Senior Credit Agreement.

 

“ERISA Event” has the meaning specified in the Senior Credit Agreement.

 

“Event of Bankruptcy” means, with respect to any Person, that such Person
becomes insolvent or generally fails to pay, or admits in writing its inability
or refusal to pay, debts as they become due; or such Person applies for,
consents to, or acquiesces in the appointment of a trustee, receiver or other
custodian for such Person or any property thereof, or makes a general assignment
for the benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for such
Person or for a substantial part of the property of any thereof and, unless such
Person is the Seller, is not discharged within 60 days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is
commenced in respect of such Person, and if such case or proceeding is not
commenced by such Person, it is consented to or acquiesced in by such Person,
or, unless such Person is the Seller, remains for 60 days undismissed; such
Person takes any action to authorize, or in furtherance of, any of the
foregoing.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
any Recipient or required to be withheld or deducted from a payment to any
Recipient:  (a) Taxes imposed on or measured by net income (however
denominated), franchise Taxes, and branch profits Taxes, in each case,
(i) imposed as a result of such Recipient being organized under the laws of, or
having its principal office located in, the jurisdiction imposing such Tax (or
any political subdivision thereof) or (ii) that are Other Connection Taxes,
(b) in the case of a Purchaser, U.S. Federal withholding Taxes imposed on
amounts payable to or for the account of such Purchaser with respect to an
applicable interest in a Receivable Interest or Commitment pursuant to a law in
effect on the date on which (i) such Purchaser acquires such interest in the
Receivable Interest or Commitment, or (ii) such Purchaser changes its funding
office, except in each case to the extent amounts with respect to such Taxes
were payable either to such Purchaser’s assignor immediately before such
Purchaser became a party hereto or to such Purchaser immediately before its
changed its funding office, (c) Taxes attributable to any

 

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Purchaser’s failure to comply with Section 8.5(f) or 8.5(g), and (d) any U.S.
federal withholding Taxes imposed under FATCA.

 

“Extended Term Receivable” means any Receivable that is due within 91-270 days
of the original invoice date therefor.

 

“Facility Account” means account no. 8670306540 at Bank of America, N.A., 135 S.
LaSalle St., Chicago, IL 60603, ABA # 026009593, Account Name:  KapStone
Receivables, LLC, or such other account as may be designated by Seller in
writing from time to time.

 

“Facility Limit” means $175,000,000, as such amount may be amended from time to
time in accordance with this Agreement.

 

“Facility Termination Date” means the earlier of (i) September 28, 2015, and
(ii) the Amortization Date.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantially comparable
and not materially more onerous to comply with) any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code or any intergovernmental agreement
entered into by the United States in connection with the implementation of such
Sections of the Code.

 

“Federal Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as amended and any successor statute thereto.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded
upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Wells Fargo
Bank, National Association on such day on such transactions as determined by the
Administrative Agent.

 

“Fee Letter” means that certain Fee Letter dated September 26, 2014 by and among
Seller, the Administrative Agent and the Purchasers, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

 

“Fees” means, collectively, any fees payable pursuant to the Fee Letter.

 

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“Finance Charges” means, with respect to a Contract, any finance, interest, late
payment charges or similar charges owing by an Obligor pursuant to such
Contract.

 

“Fiscal Year” means the fiscal year of KapStone Paper and its Subsidiaries,
which period shall be the 12-month period ending on December 31 of each year. 
References to a Fiscal Year with a number corresponding to any calendar year
(e.g., “Fiscal Year 2014”) refer to the Fiscal Year ending on December 31 of
such calendar year.

 

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank)
and any group or body charged with setting financial accounting or regulatory
capital rules or standards (including, without limitation, the Financial
Accounting Standards Board, the Bank for International Settlements or the Basel
Committee on Banking Supervision or any successor or similar authority to any of
the foregoing).

 

“Incremental Purchase” means a purchase of a Receivable Interest that increases
the total outstanding Aggregate Capital hereunder.

 

“Indemnified Taxes” means Taxes, other than Excluded Taxes, imposed on or with
respect to any payment made by or on account of any obligation of Seller under
any Transaction Document.

 

“Independent Director” means a director of the Seller who shall be a natural
person who (a) shall not have been at the time of such person’s appointment or
at any time during the preceding five (5) years and shall not be as long as such
person is a director of the Seller:  (i) a director, officer, employee, partner,
shareholder, member, manager or Affiliate of any of the following Persons
(collectively, the “KapStone Group”):  the Performance Guarantor, the Servicer,
any Originator, or any of their respective Affiliates (other than the Seller or
another special purpose entity which is an Affiliate of the Performance
Guarantor), (ii) a supplier to any of the KapStone Group or the Seller,
(iii) the beneficial owner (at the time of such individual’s appointment as an
Independent Director or at any time thereafter while serving as an Independent
Director) of any of the outstanding membership or other equity interests of the
Seller or any of the KapStone Group having general voting rights, (iv) a Person
controlling or

 

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under common control with any director, officer, employee, partner, shareholder,
member, manager, Affiliate or supplier of any of the KapStone Group or the
Seller, or (v) a member of the immediate family of any director, officer,
employee, partner, shareholder, member, manager, Affiliate or supplier of any of
the KapStone Group or the Seller; (b) has not less than three (3) years of
experience in serving as an independent director or independent manager for
special purpose vehicles engaged in securitization and/or structured financing
transactions; and (c) is employed by Global Securitization Services, LLC, Lord
Securities Corporation, AMACAR Group LLC, CT Corporation, Corporation Service
Company, such other Person that provides independent director or independent
manager services for special purpose vehicles engaged in securitization and/or
structured financing transactions in the ordinary course of its business, and
their respective successors. For purposes of this definition, the term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of voting securities or general partnership or managing member
interests, by contract or otherwise.

 

“Investment Availability” means, on any Business Day, that the Aggregate Capital
outstanding hereunder is less than the lesser of (i) the Facility Limit and
(ii) the difference between the Investment Base as of such day.

 

“Investment Base” means, on any date of determination, the difference between
the Net Pool Balance and the Required Reserve.

 

“Investment Excess” means, on any Business Day, that (a) the Aggregate Capital
outstanding hereunder exceeds the lesser of (i) the Facility Limit and (ii) the
Investment Base, or (b) the aggregate of the Receivable Interests exceeds 100%.

 

“Invoice” has the meaning specified in the Sale Agreement

 

“KapStone Kraft” means KapStone Kraft Paper Corporation, a Delaware corporation.

 

“KapStone Paper” has the meaning specified in the preamble to this Agreement.

 

“LIBOR Market Index Rate” means, for any day, the one-month Eurodollar Rate for
U.S. dollar deposits as reported on the Reuters Screen LIBOR01 Page or any other
page that may replace such page from time to time for the purpose of displaying
offered rates of leading banks for London interbank deposits in United States
dollars, as of 11:00 a.m. (London time) on such date, or if such day is not a
Business Day, then the immediately preceding Business Day (or if not so
reported, then as determined by the Administrative Agent from another recognized
source for interbank quotation), in each case, changing when and as such rate
changes.

 

“Liquidation Period” means the period beginning on the Facility Termination Date
and ending on the date thereafter when all Aggregate Unpaids have been paid in
full and all Commitments have been terminated.

 

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“LMIR” means, on any date of determination, a rate per annum equal to the sum of
(a) the LIBOR Market Index Rate plus (b) the Applicable Margin.

 

“Lock-Box” means each locked postal box with respect to which a bank who has
executed a Control Agreement has been granted exclusive access for the purpose
of retrieving and processing payments made on the Receivables and which is
listed on Exhibit IV.

 

“Loss Reserve” means, for any Calculation Period, the product (expressed as a
percentage) of (a) 2.0, times (b) the highest three-month rolling average
Default Ratio during the 12 Calculation Periods ending on the immediately
preceding Cut-Off Date, times (c) the Default Horizon Ratio as of the
immediately preceding Cut-Off Date.

 

“Material Adverse Effect” means a material adverse effect on (a) the financial
condition or operations of (i) Seller, or (ii) Performance Guarantor and its
Subsidiaries, taken as a whole, (b) the ability of any Seller Party to perform
its obligations under the Transaction Documents to which it is a party, (c) the
legality, validity or enforceability of this Agreement or any other Transaction
Document, (d) the Administrative Agent’s or any Purchaser’s interest in any
substantial portion of the Receivables, the Related Security or the Collections
with respect thereto, or (e) the collectability of any substantial portion of
the Receivables.

 

“Monthly Payment Date” means the 17th day of each month after the Effective Date
(or, if any such day is not a Business Day, the next succeeding Business Day
thereafter).

 

“Monthly Report” means a report in substantially the form of Exhibit VIII hereto
(appropriately completed), furnished by the Servicer to the Administrative Agent
and the Purchasers pursuant to Section 6.6.

 

“Monthly Reporting Date” means the 15th day of each month after the Effective
Date (or, if any such day is not a Business Day, the next succeeding Business
Day thereafter).

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Net Pool Balance” means, at any time, the aggregate Outstanding Balance of all
Eligible Receivables at such time minus (i) the aggregate amount by which the
Outstanding Balance of all Eligible Receivables of each Obligor and its
Affiliates exceeds the Concentration Limit or Special Concentration Limit for
such Obligor, (ii) the aggregate amount by which the aggregate Outstanding
Balance of all Extended Term Receivables included as Eligible Receivables
exceeds ten percent (10.00%) of the aggregate Outstanding Balance of all
Eligible Receivables, (iv) the aggregate amount by which the aggregate
Outstanding Balance of all Canadian Receivables included as Eligible Receivables
exceeds ten percent (10.00%) of the aggregate Outstanding Balance of all
Eligible Receivables, (v) the aggregate amount by which the Outstanding Balance
of all Eligible Receivables of all Other Foreign Obligors in a particular
country exceeds two and one-half percent (2.50%) of the aggregate Outstanding
Balance of all Eligible Receivables, (vi) the aggregate amount by which the
aggregate Outstanding Balance of

 

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all Other Foreign Receivables included as Eligible Receivables exceeds six and
one-half percent (6.50%) of the aggregate Outstanding Balance of all Eligible
Receivables, (vii) the Reserve for Cash Discounts, and (viii) the Reserve for
Customer Rebates.

 

“Non-Rated Obligor” means any Obligor rated below A-3 or P-3 by S&P or Moody’s,
respectively, or which is not rated by either S&P or Moody’s.

 

“Notice of Exclusive Control” means, with respect to a Control Agreement, a
notice given by the Administrative Agent to the related Collection Bank in
substantially the form prescribed by or attached to such Control Agreement
pursuant to which the Administrative Agent exercises its exclusive right to
direct the disposition of funds on deposit in the applicable Collection
Account(s) in accordance with such Control Agreement.

 

“Obligor” means a Person obligated to make payments pursuant to a Contract.

 

“Organizational Document” means, relative to any Person, its certificate or
articles of incorporation or formation, its by-laws, its partnership agreement,
its memorandum and articles of association, its limited liability company
agreement and/or operating agreement, share designations or similar organization
documents and all shareholder agreements, voting trusts and similar arrangements
applicable to any of its authorized Capital Stock.

 

“Originator” has the meaning specified in the Sale Agreement.

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Tax (other than connections arising solely from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a Security
Interest under, engaged in any other transaction pursuant to or enforced any
Transaction Document, or sold or assigned an interest in any Receivable Interest
or Transaction Document).

 

“Other Foreign Obligor” means an Obligor which is invoiced at an address in any
country other than the United States of America, Canada or any state, province
or territory of the foregoing.

 

“Other Foreign Receivable” means a Receivable the Obligor of which is an Other
Foreign Obligor.

 

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Transaction Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment.

 

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“Outstanding Balance” of any Receivable at any time means the then outstanding
principal balance thereof.

 

“Participant” has the meaning set forth in Section 10.2.

 

“PBGC” means the Pension Benefit Guaranty Corporation and any Person succeeding
to any or all of its functions under ERISA.

 

“Pension Plan” has the meaning specified in the Senior Credit Agreement.

 

“Percentage” means, as to any Purchaser, the ratio (expressed as a percentage)
of its Commitment to the Aggregate Commitment.

 

“Performance Guarantor” means KapStone Paper and its successors and permitted
assigns.

 

“Performance Undertaking” means the Performance Undertaking, dated as of
September 26, 2014, by the Performance Guarantor in favor of Seller.

 

“Permitted Lien” means with respect to any Person or its assets, liens for taxes
or other governmental charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate proceedings and,
in each case, for which such Person maintains adequate reserves.

 

“Person” means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.

 

“PNC” has the meaning specified in the preamble to this Agreement.

 

“Potential Amortization Event” means an event which, with the passage of any
applicable cure period or the giving of notice, or both, would constitute an
Amortization Event.

 

“Purchase” means an Incremental Purchase or a Reinvestment.

 

“Purchase Date” means the Business Day on which a Purchase occurs.

 

“Purchase Price” means, with respect to any Incremental Purchase of a Receivable
Interest, the amount paid to Seller for such Receivable Interest which shall not
exceed the least of (i) the amount requested by Seller in the applicable
Purchase Notice, (ii) the unused Portion of the Facility Limit on the applicable
Purchase Date, and (ii) the excess, if any, of the Net Pool Balance (less the
Required Reserve) as of the last day of the most recent Monthly Report over the
outstanding Aggregate Capital determined as of the applicable Purchase Date,
taking into account the proposed Incremental Purchase.

 

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“Purchase Notice” has the meaning set forth in Section 1.1(a).

 

“Purchaser” has the meaning set forth in the preamble to this Agreement and
shall include such Person’s respective successors and permitted assigns.

 

“Purchase” means an Incremental Purchase or a Reinvestment.

 

“Receivable Interest” means, at any time, an undivided percentage interest
(computed as set forth below) associated with a designated amount of Capital,
selected pursuant to the terms and conditions hereof in (i) each Receivable
arising prior to the time of the most recent computation or recomputation of
such undivided interest, (ii) all Related Security with respect to each such
Receivable, and (iii) all Collections with respect to, and other proceeds of,
each such Receivable.  Each such undivided percentage interest shall equal:

 

 

  C

 

 

NPB-RR

 

 

where:

 

C                                      
=                                         the Capital of such Receivable
Interest.

 

NPB                       =                                         the Net Pool
Balance.

 

RR                              =                                         the
Required Reserve.

 

Such undivided percentage interest shall be initially computed on its date of
purchase.  Thereafter, until the Facility Termination Date, each Receivable
Interest shall be automatically recomputed (or deemed to be recomputed) on each
day prior to the Facility Termination Date.  The variable percentage represented
by any Receivable Interest is computed (or deemed recomputed) as of the close of
the Business Day immediately preceding the Facility Termination Date and shall
equal 100% in the aggregate for all Receivable Interests at all times
thereafter.

 

“Recipient” means the Administrative Agent or any Purchaser.

 

“Records” means, with respect to any Receivable, all Contracts and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards, data processing software and
related property and rights) relating to such Receivable, any Related Security
therefor and the related Obligor.

 

“Reduction Notice” has the meaning set forth in Section 1.3.

 

“Reinvestment” has the meaning set forth in Section 2.1.

 

“Related Security” means, with respect to any Receivable:

 

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(i) all right, title and interest (if any) in the goods, the sale of which gave
rise to such Receivable, and any and all insurance contracts with respect
thereto,

 

(ii) all other Security Interests or liens and property subject thereto from
time to time, if any, purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise, together with
all financing statements and security agreements describing any collateral
securing such Receivable,

 

(iii) all guaranties, letters of credit, insurance and other supporting
obligations, agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable whether pursuant to the
Contract related to such Receivable or otherwise,

 

(iv) all service contracts and other contracts and agreements associated with
such Receivable,

 

(v) all Records related to such Receivable,

 

(vi) all of the applicable Originator’s right, title and interest in each
Lock-Box, each Collection Account and each Collection Account, and

 

(vii) all proceeds of any of the foregoing.

 

When used in this Agreement, the term “Related Security” shall also include all
right, title and interest of Seller in, to and under the Sale Agreement and the
Performance Undertaking, and the proceeds of the foregoing.  Notwithstanding
anything to the contrary contained herein, in no event shall the Seller or any
Originator be required to name the Administrative Agent or any Purchaser as
additional insured or beneficiary on any insurance policy or letter of credit.

 

“Required Amounts” has the meaning set forth in Section 2.1.

 

“Required Reserve” means, on any day during a month, the product of (a) the
greater of (i) the sum of the Required Reserve Factor Floor, the Yield Reserve
and the Servicing Reserve, and (ii) the sum of the Loss Reserve, the Yield
Reserve, the Dilution Reserve and the Servicing Reserve, times (b) the Net Pool
Balance as of the Cut-Off Date immediately preceding such month.

 

“Required Reserve Factor Floor” means, for any month, the sum (expressed as a
percentage) of (a) 16.00% (or such higher percentage as may be specified by the
Purchasers in connection with granting a Special Concentration Limit), plus
(b) the product of the Adjusted Dilution Ratio and the Dilution Horizon Ratio,
in each case, as of the immediately preceding Cut-Off Date.

 

“Reserve for Cash Discounts” means, for any Calculation Period, the aggregate

 

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amount accrued and unapplied as of the last day of such Calculation Period by
the Originators for early payment discounts to be granted to customers.

 

“Reserve for Customer Rebates” means, for any Calculation Period, the aggregate
amount accrued and unapplied as of the last day of such Calculation Period by
the Originators for volume purchase rebates to be paid to customers.

 

“Responsible Employee” means, in respect of any Seller Party, the chief
executive officer, president, chief operating officer, chief financial officer,
treasurer, director of risk or controller of a Seller Party and any other
officer or employee of such Seller Party, as applicable, so designated by any of
the foregoing officers or employees in a notice to the Administrative Agent. 
Any document delivered hereunder that is signed by a Responsible Employee of a
Seller Party shall be conclusively presumed to have been authorized by all
necessary corporate, partnership and/or other action on the part of such Seller
Party, as applicable, and such Responsible Employee shall be conclusively
presumed to have acted on behalf of such Seller Party, as applicable.

 

“Restricted Junior Payment” means (i) any dividend or other distribution, direct
or indirect, on account of any membership interest of any class of Seller now or
hereafter outstanding, except a dividend payable solely in membership interests
of Seller of that class or any junior class, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of Seller now or hereafter outstanding, (iii) any
payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to the Subordinated Loans, (iv) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire any membership interest of Seller now or
hereafter outstanding, and (v) any payment of management fees by Seller (except
for reasonable management fees to an Originator or its Affiliates in
reimbursement of actual management services performed).

 

“Review” shall have the meaning specified in Section 5.1(d) of this Agreement.

 

“Revolving Period” means the period from and after the Effective Date to but
excluding the Facility Termination Date.

 

“Sale Agreement” means that certain Receivables Sale Agreement, dated as of
September 26, 2014, by and between the Originators, as sellers, and the Seller,
as buyer, as the same may be amended, restated or otherwise modified from time
to time in accordance with the terms hereof.

 

“S&P” means Standard & Poor’s, a Standard & Poor’s Business Services LLC
business.

 

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“SEC” means the Securities and Exchange Commission (or any successor thereto).

 

“Security Interest” has the meaning provided in Section 1-201(37) (or any
successor section) of the UCC.

 

“Seller” has the meaning set forth in the preamble to this Agreement.

 

“Seller Parties” means (a) Seller, (b) at any time while KapStone Paper and
Packaging Corporation or one of its Subsidiaries is acting as Servicer,
Servicer, and (c) at any time while KapStone Paper and Packaging Corporation or
one of its Subsidiaries is acting as Performance Guarantor, the Performance
Guarantor.

 

“Senior Credit Agreement” means that certain Amended and Restated Credit
Agreement, dated as of July 18, 2013 among KapStone Kraft, as borrower, KapStone
Paper and certain subsidiaries of KapStone Kraft, as guarantors, the lenders
from time to time party thereto, and Bank of America, N.A., as administrative
agent, swing line lender and letter of credit issuer, as the same may be
amended, restated, refinanced or otherwise modified from time to time.

 

“Servicer” means at any time the Person (which may be the Administrative Agent)
then authorized pursuant to Article VI to service, administer and collect
Receivables.

 

“Servicer Termination Event” has the meaning set forth in Section 6.1.

 

“Servicing Fee” has the meaning set forth in Section 6.7.

 

“Servicing Reserve” means, the product (expressed as a percentage) of (a) 1.0%,
times (b) a fraction, the numerator of which is the highest Days Sales
Outstanding for the most recent 12 months and the denominator of which is 360.

 

“Settlement Date” means either a Monthly Payment Date or a Capital Settlement
Date.

 

“Subsidiary” of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, limited liability company, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

 

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“Transaction Documents” means, collectively, this Agreement, each Purchase
Notice, the Sale Agreement, each Control Agreement, the Fee Letter, each
Subordinated Note issued pursuant to the Sale Agreement, and all other
instruments, documents and agreements required to be executed and delivered
pursuant hereto.

 

“UCC” means the Uniform Commercial Code as from time to time in effect in the
specified jurisdiction.

 

“Unused Fee” has the meaning set forth in the Fee Letter.

 

“Wells” has the meaning set forth in the preamble to this Agreement.

 

“Yield” means for each day for each Purchaser, an amount equal to the product of
the applicable Yield Rate multiplied by the Capital of such Purchaser,
annualized on a 360-day basis.

 

“Yield Rate” means LMIR (or, solely in the instances set forth in Section 1.7,
the Alternate Base Rate).

 

“Yield Reserve” means for any Calculation Period, the product (expressed as a
percentage) of (i) 1.5 times (ii) the Alternate Base Rate as of the immediately
preceding Cut-Off Date (without taking into account any Applicable Margin) times
(iii) a fraction, the numerator of which is the highest Days Sales Outstanding
for the most recent 12 Calculation Periods and the denominator of which is 360.

 

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