Exhibit 10(o)

 

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Published CUSIP Number: 737629AA3

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

Dated as of December 22, 2005

 

among

 

POTLATCH CORPORATION,

POTLATCH HOLDINGS, INC.,

POTLATCH OPERATING COMPANY

and

POTLATCH FOREST PRODUCTS CORPORATION

 

as Borrowers

 

Certain Material Subsidiaries of the Borrowers

from time to time party hereto

as Guarantors

 

BANK OF AMERICA, N.A.

as Administrative Agent, Swing Line Lender and an L/C Issuer

 

and

 

THE LENDERS PARTY HERETO

 

BANC OF AMERICA SECURITIES LLC

as Sole Lead Arranger and Sole Book Manager

 

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TABLE OF CONTENTS

 

Section

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          Page

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ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

   1

1.01

    

Defined Terms

   1

1.02

    

Other Interpretive Provisions

   28

1.03

    

Accounting Terms

   29

1.04

    

Rounding

   30

1.05

    

References to Agreements and Laws

   30

1.06

    

Exchange Rates; Currency Equivalents

   30

1.07

    

Additional Alternative Currencies

   31

1.08

    

Change of Currency

   32

1.09

    

Times of Day

   32

1.10

    

Letter of Credit Amounts

   32

ARTICLE II COMMITMENTS AND CREDIT EXTENSIONS

   32

2.01

    

Committed Loans

   32

2.02

    

Borrowings, Conversions and Continuations of Committed Loans

   33

2.03

    

Letters of Credit

   35

2.04

    

Swing Line Loans

   45

2.05

    

Prepayments

   48

2.06

    

Termination or Reduction of Commitments

   48

2.07

    

Repayment of Loans

   49

2.08

    

Interest

   49

2.09

    

Fees

   50

2.10

    

Computation of Interest and Fees

   50

2.11

    

Evidence of Debt

   50

2.12

    

Payments Generally

   51

2.13

    

Sharing of Payments

   53

2.14

    

Increase in Aggregate Commitments

   53

2.15

    

Extension Option

   54

2.16

    

Joint and Several Liability of Borrowers

   55

2.17

    

Appointment of the Administrative Borrower

   56

ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY

   57

3.01

    

Taxes

   57

3.02

    

Illegality

   58

3.03

    

Inability to Determine Rates

   58

3.04

    

Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate
Loans

   59

3.05

    

Funding Losses

   59

3.06

    

Matters Applicable to all Requests for Compensation

   60

3.07

    

Survival

   60

ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

   61

4.01

    

Conditions to Closing Date

   61

4.02

    

Conditions to Effective Date

   62

4.03

    

Conditions to all Credit Extensions

   63

ARTICLE V REPRESENTATIONS AND WARRANTIES

   64

5.01

    

Financial Condition

   64

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5.02

    

No Material Change; No Internal Control Event

   65

5.03

    

Organization and Good Standing

   65

5.04

    

Power; Authorization; Enforceable Obligations

   65

5.05

    

No Conflicts

   66

5.06

    

No Default

   66

5.07

    

Ownership

   66

5.08

    

Indebtedness

   66

5.09

    

Litigation

   66

5.10

    

Taxes

   67

5.11

    

Compliance with Law

   67

5.12

    

ERISA

   67

5.13

    

Corporate Structure; Capital Stock, Etc.

   68

5.14

    

Governmental Regulations, Etc.

   69

5.15

    

Purpose of Loans and Letters of Credit

   69

5.16

    

Environmental Matters

   69

5.17

    

Solvency

   70

5.18

    

Investments

   70

5.19

    

Disclosure

   70

5.20

    

No Burdensome Restrictions

   70

5.21

    

Brokers’ Fees

   71

5.22

    

Labor Matters

   71

5.23

    

REIT Status

   71

ARTICLE VI AFFIRMATIVE COVENANTS

   71

6.01

    

Information Covenants

   71

6.02

    

Preservation of Existence, Franchises and REIT Status

   74

6.03

    

Books and Records

   74

6.04

    

Compliance with Law

   75

6.05

    

Payment of Taxes and Other Claims

   75

6.06

    

Insurance

   75

6.07

    

Maintenance of Property; Management of Timberlands

   75

6.08

    

Use of Proceeds

   75

6.09

    

Audits/Inspections

   75

6.10

    

Financial Covenants

   76

6.11

    

Additional Guarantors

   76

6.12

    

Performance of Obligations

   77

ARTICLE VII NEGATIVE COVENANTS

   77

7.01

    

Indebtedness

   77

7.02

    

Liens

   78

7.03

    

Nature of Business

   80

7.04

    

Consolidation, Merger, Dissolution, etc.

   80

7.05

    

Asset Dispositions

   81

7.06

    

Investments

   81

7.07

    

Restricted Payments

   83

7.08

    

Limitation on Actions with Respect to Other Indebtedness

   83

7.09

    

Transactions with Affiliates

   84

7.10

    

Fiscal Year; Organizational Documents

   84

7.11

    

Limitation on Restricted Actions

   85

7.12

    

Ownership of Subsidiaries

   85

7.13

    

Sale Leasebacks

   85

7.14

    

No Further Negative Pledges

   86

 

ii

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7.15

    

Subsidiaries

   86

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

   86

8.01

    

Events of Default

   86

8.02

    

Remedies Upon Event of Default

   89

8.03

    

Application of Funds

   90

ARTICLE IX ADMINISTRATIVE AGENT

   90

9.01

    

Appointment and Authority

   90

9.02

    

Rights as a Lender

   91

9.03

    

Exculpatory Provisions

   91

9.04

    

Reliance by Administrative Agent

   92

9.05

    

Delegation of Duties

   92

9.06

    

Resignation of Administrative Agent

   92

9.07

    

Non-Reliance on Administrative Agent and Other Lenders

   93

9.08

    

No Other Duties, Etc.

   94

9.09

    

Administrative Agent May File Proofs of Claim

   94

9.10

    

Guaranty Matters

   95

ARTICLE X MISCELLANEOUS

   95

10.01

    

Amendments, Etc.

   95

10.02

    

Notices; Effectiveness; Electronic Communication

   96

10.03

    

No Waiver; Cumulative Remedies

   98

10.04

    

Attorney Costs, Expenses and Taxes

   98

10.05

    

Expenses; Indemnity; Damage Waiver

   99

10.06

    

Payments Set Aside

   100

10.07

    

Successors and Assigns

   101

10.08

    

Treatment of Certain Information; Confidentiality

   105

10.09

    

Set-off

   106

10.10

    

Interest Rate Limitation

   106

10.11

    

Counterparts; Amendment and Restatement of Existing Credit Agreement

   106

10.12

    

Integration

   107

10.13

    

Survival of Representations and Warranties

   107

10.14

    

Severability

   107

10.15

    

Tax Forms

   107

10.16

    

Replacement of Lenders

   109

10.17

    

Governing Law

   110

10.18

    

Waiver of Right to Trial by Jury

   110

10.19

    

USA Patriot Act Notice

   111

10.20

    

Judgment Currency

   111

ARTICLE XI. GUARANTY

   111

11.01

    

The Guaranty

   111

11.02

    

Obligations Unconditional

   112

11.03

    

Reinstatement

   113

11.04

    

Certain Additional Waivers

   113

11.05

    

Remedies

   113

11.06

    

Rights of Contribution

   114

11.07

    

Guarantee of Payment; Continuing Guarantee

   114

 

iii

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SCHEDULES

 

1.01

  

Existing Letters of Credit

2.01

  

Commitments and Applicable Percentages

5.04

  

Required Consents, Authorizations, Notices and Filings

5.09

  

Litigation

5.12

  

ERISA

5.13

  

Subsidiaries

5.16

  

Environmental Disclosures

7.01

  

Existing Indebtedness

7.02

  

Existing Liens

7.06

  

Existing Investments

10.02

  

Administrative Agent’s Office, Certain Addresses for Notices

10.07

  

Processing and Recordation Fees

 

EXHIBITS

 

    

Form of

A

  

Committed Loan Notice

B

  

Swing Line Loan Notice

C

  

Note

D

  

Compliance Certificate

E

  

Assignment and Assumption

F

  

Joinder Agreement

G

  

Notice of Prepayment

 

iv

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AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of
December 22, 2005, among (i) Potlatch Corporation, a Delaware corporation
(“Existing Potlatch”), which is to be merged with and into Potlatch Opco (as
defined below) following the REIT Conversion (as defined herein), with Potlatch
Opco being the surviving entity, (ii) Potlatch Holdings, Inc., a Delaware
corporation (“Holdings”), which is to be renamed “Potlatch Corporation” after
the consummation of the Merger (as defined herein), (iii) Potlatch Operating
Company, a Delaware corporation (“Potlatch Opco”), a wholly owned qualified REIT
subsidiary of Holdings, (iv) Potlatch Forest Products Corporation, a Delaware
corporation (“TRS”), a wholly owned taxable REIT subsidiary of Existing Potlatch
which will become a wholly owned taxable REIT subsidiary of Potlatch Opco upon
consummation of the Merger (collectively, the “Borrowers”), (v) certain Material
Subsidiaries of the Borrowers from time to time party hereto as guarantors (the
“Guarantors”), (vi) each lender from time to time party hereto (collectively,
the “Lenders” and individually, a “Lender”), and (vii) BANK OF AMERICA, N.A., as
Administrative Agent, Swing Line Lender and an L/C Issuer.

 

WHEREAS, Existing Potlatch is party to that certain Credit Agreement, dated as
of June 29, 2004, as amended or modified from time to time thereafter (as so
amended or modified, the “Existing Credit Agreement”), among Existing Potlatch,
certain Subsidiaries of Existing Potlatch from time to time party thereto as
guarantors, the lenders from time to time party thereto (the “Existing Lenders”)
and Bank of America, N.A., as administrative agent for the lenders thereunder,
pursuant to which the Existing Lenders agreed to make loans and other financial
accommodations to Existing Potlatch in the amount of up to $125,000,000 pursuant
to the terms and conditions contained therein.

 

WHEREAS, the Lenders have agreed to amend and restate the Existing Credit
Agreement to provide for, among other things, $175,000,000 in revolving loans
and other financial accommodations to the Borrowers on the terms and conditions
contained herein.

 

In consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

  1.01 Defined Terms.

 

As used in this Agreement, the following terms shall have the meanings set forth
below:

 

“Acquisition”, by any Person, means the acquisition by such Person of all of the
Capital Stock or all or substantially all of the Property of another Person or a
division or business unit thereof, whether or not involving a merger or
consolidation with such other Person.

 

1

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“Administrative Agent” means Bank of America in its capacity as administrative
agent under any of the Loan Documents, or any successor administrative agent.

 

“Administrative Agent’s Office” means the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.02, or such other address or
account as the Administrative Agent may from time to time notify the
Administrative Borrower and the Lenders.

 

“Administrative Borrower” means (x) prior to consummation of the Merger,
Existing Potlatch and (y) after consummation of the Merger, Holdings.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

 

“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. “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. Without limiting the generality
of the foregoing, a Person shall be deemed to be Controlled by another Person if
such other Person possesses, directly or indirectly, power to vote 10% or more
of the securities having ordinary voting power for the election of directors,
managing general partners or the equivalent.

 

“Aggregate Commitments” means the Commitments of all the Lenders, as such amount
may be reduced or increased as set forth herein. The Aggregate Commitments as of
the Closing Date shall be ONE HUNDRED SEVENTY-FIVE MILLION DOLLARS
($175,000,000).

 

“Agreement” means this Credit Agreement.

 

“Agreement Currency” has the meaning specified in Section 10.20.

 

“Alternative Currency” means Euro and each other currency (other than Dollars)
that is approved in accordance with Section 1.07.

 

“Alternative Currency Equivalent” means, at any time, with respect to any amount
denominated in Dollars, the equivalent amount thereof in the applicable
Alternative Currency as determined by the Administrative Agent or the L/C
Issuer, as applicable, at such time on the basis of the Spot Rate (determined in
respect of the most recent Revaluation Date) for the purchase of such
Alternative Currency with Dollars.

 

“Applicable Percentage” means with respect to any Lender at any time, the
percentage (carried out to the ninth decimal place) of the Aggregate Commitments
represented by such Lender’s Commitment at such time; provided that if the
commitment of each Lender to make Loans and the obligation of the L/C Issuer to
make L/C Credit Extensions have been terminated pursuant to Section 8.02 or if
the Aggregate Commitments have expired, then the Applicable Percentage of each
Lender shall be determined based on the Applicable Percentage of such Lender
most recently in effect, giving effect to any subsequent assignments. The
initial Applicable Percentage of each

 

2

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Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the
Assignment and Assumption pursuant to which such Lender becomes a party hereto,
as applicable.

 

“Applicable Rate” means, from time to time, for the purposes of calculating
(a) the commitment fee for the purposes of Section 2.09(a), (b) the interest
rate applicable to Eurodollar Rate Loans for the purposes of Section 2.08,
(c) the interest rate applicable to Base Rate Loans for the purposes of
Section 2.08 or (d) the Letter of Credit Fee for the purposes of
Section 2.03(i), the following percentages per annum, based upon the Funded
Indebtedness to Capitalization Ratio as set forth in the most recent Compliance
Certificate received by the Administrative Agent pursuant to Section 6.01(c):

 

Applicable Rate

 

Pricing
Level

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Funded Indebtedness to Capitalization Ratio

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

   Eurodollar
Loans

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

    Base Rate
Loans

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    Letter of
Credit Fee

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

    Commitment
Fee

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I

  

Less than 25.0%

   0.625 %   0 %   0.625 %   0.150 %

II

  

Greater than or equal to 25.0% but less than 37.5%

   0.875 %   0 %   0.875 %   0.200 %

III

  

Greater that or equal to 37.5% but less than 45.0%

   1.125 %   0.125 %   1.125 %   0.250 %

IV

  

Greater than or equal to 45% but less than 52.5%

   1.375 %   0.375 %   1.375 %   0.300 %

V

  

Greater than or equal to 52.5%

   1.625 %   0.625 %   1.625 %   0.350 %

 

Any increase or decrease in the Applicable Rate resulting from a change in the
Funded Indebtedness to Capitalization Ratio shall become effective as of the
first Business Day immediately following the date a Compliance Certificate is
delivered pursuant to Section 6.01(c); provided, however, that if a Compliance
Certificate is not delivered when due in accordance with such Section, then
Pricing Level V shall apply as of the first Business Day after the date on which
such Compliance Certificate was required to have been delivered until such
Compliance Certificate is actually delivered. Notwithstanding the foregoing, the
Applicable Rate shall initially be set at Pricing Level II in the table above
and will remain no lower than Pricing Level II until the first Business Day
immediately following the date on which the

 

3

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Borrowers have delivered the Compliance Certificate for the fiscal quarter
ending on March 31, 2006.

 

“Applicable Time” means, with respect to any borrowings and payments in any
Alternative Currency, the local time in the place of settlement for such
Alternative Currency as may be determined by the Administrative Agent or the L/C
Issuer, as the case may be, to be necessary for timely settlement on the
relevant date in accordance with normal banking procedures in the place of
payment.

 

“Approved Fund” means any Fund that is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

 

“Arranger” means Banc of America Securities LLC, in its capacity as sole lead
arranger and sole book manager.

 

“Asset Disposition” means any disposition (including pursuant to a Sale and
Leaseback Transaction) of any or all of the Property (including without
limitation the Capital Stock of a Subsidiary) of any Consolidated Party whether
by sale, lease, licensing, transfer or otherwise, but other than pursuant to any
casualty or condemnation event; provided, however, that (i) the term “Asset
Disposition” shall be deemed to include any “Asset Sale” (or any comparable
term) under, and as defined in, the Senior Subordinated Note Indenture or the
documents evidencing or governing any Subordinated Indebtedness and (ii) the
term “Asset Disposition” shall not include (a) an Equity Issuance, (b) the sale
of conservation easements on timberlands or the sale of inventory, electricity,
timber or other assets in the ordinary course of business (other than a sale of
a fee interest in timberlands), (c) asset transfers necessary to effectuate the
REIT Conversion, (d) the exchange of Property for similar or like-kind Property
in connection with an exchange under Section 1031 of the Code and (e) the sale
of timberlands in the ordinary course of business in an amount not to exceed
$20,000,000 in the aggregate for all such sales in any fiscal year.

 

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one
another or two or more Approved Funds managed by the same investment advisor.

 

“Assignment and Assumption” means an Assignment and Assumption substantially in
the form of Exhibit E.

 

“Attorney Costs” means and includes all reasonable fees, expenses and
disbursements of any law firm or other external counsel and, without
duplication, the allocated cost of internal legal services and all out-of-pocket
expenses and disbursements of internal counsel.

 

“Attributable Indebtedness” means, on any date, (a) in respect of any capital
lease of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of
the remaining lease payments under the relevant lease that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a Capital Lease.

 

4

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“Audited Financial Statements” means the audited consolidated balance sheet of
Existing Potlatch and its Subsidiaries for the fiscal year ended December 31,
2004, and the related consolidated statements of income or operations,
shareholders’ equity and cash flows for such fiscal year of Existing Potlatch
and its Subsidiaries, including the notes thereto.

 

“Availability Period” means the period from and including the Closing Date to
the earliest of (a) the Maturity Date, (b) the date of termination of the
Aggregate Commitments pursuant to Section 2.06, and (c) the date of termination
of the commitment of each Lender to make Loans and of the obligation of the L/C
Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

“Bank of America” means Bank of America, N.A. and its successors.

 

“Bankruptcy Code” means the Bankruptcy Code in Title 11 of the United States
Code, as amended, modified, succeeded or replaced from time to time.

 

“Base Rate” means for any day a fluctuating rate per annum equal to the higher
of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in
effect for such day as publicly announced from time to time by Bank of America
as its “prime rate.” The “prime rate” is a rate set by Bank of America based
upon various factors including Bank of America’s costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in such rate announced by Bank of America shall take effect at
the opening of business on the day specified in the public announcement of such
change.

 

“Base Rate Committed Loan” means a Committed Loan that is a Base Rate Loan.

 

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

 

“Borrower Materials” has the meaning specified in Section 6.01.

 

“Borrowers” has the meaning specified in the introductory paragraph hereto.

 

“Borrowing” means a Committed Borrowing or a Swing Line Borrowing, as the
context may require.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where the Administrative Agent’s Office is located and, if
such day relates to any Eurodollar Rate Loan, means any such day on which
dealings in Dollar deposits are conducted by and between banks in the London
interbank eurodollar market.

 

“Capital Lease” means, as applied to any Person, any lease of any Property
(whether real, personal or mixed) by that Person as lessee which, in accordance
with GAAP, is required to be accounted for as a capital lease on the balance
sheet of that Person.

 

“Capital Stock” means (i) in the case of a corporation, capital stock, (ii) in
the case of an association or business entity, any and all shares, interests,
participations, rights or other

 

5

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equivalents (however designated) of capital stock, (iii) in the case of a
partnership, partnership interests (whether general or limited), (iv) in the
case of a limited liability company, membership interests and (v) any other
interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person.

 

“Cash Collateralize” has the meaning specified in Section 2.03(g).

 

“Cash Equivalents” means, as at any date, (a) securities issued or directly and
fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than twelve
(12) months from the date of acquisition, (b) Dollar denominated time deposits
and certificates of deposit of (i) any Lender, (ii) any domestic commercial bank
of recognized standing having capital and surplus in excess of $500,000,000 or
(iii) any bank whose short-term commercial paper rating from S&P is at least A-1
or the equivalent thereof or from Moody’s is at least P-1 or the equivalent
thereof (any such bank being an “Approved Bank”), in each case with maturities
of not more than 270 days from the date of acquisition, (c) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody’s and maturing within six
(6) months of the date of acquisition, (d) repurchase agreements entered into by
any Person with a bank or trust company (including any of the Lenders) or
recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States in which such Person shall have a perfected first priority security
interest (subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the repurchase
obligations and (e) Investments, classified in accordance with GAAP as current
assets, in money market investment programs registered under the Investment
Company Act of 1940, as amended, which are administered by reputable financial
institutions having capital of at least $500,000,000 and the portfolios of which
are limited to Investments of the character described in the foregoing
subdivisions (a) through (d).

 

“Change of Control” means the occurrence of any of the following: (i) any
“person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in
Rule l3d-3 under the Securities Exchange Act of 1934) of more than 35% of then
outstanding Voting Stock of (x) prior to consummation of the Merger, Existing
Potlatch and (y) after consummation of the Merger, Holdings, in each case
measured by voting power rather than the number of shares; provided, however,
that for the purposes hereof any Person shall not be deemed to be a “beneficial
owner” (as defined in Rule l3d-3 under the Securities Exchange Act of 1934) of
shares tendered pursuant to a tender offer or exchange offer paid by or on
behalf of that Person or any Affiliate of that Person until the tendered shares
are accepted for purchase or exchange and, provided further, however, that no
Person who is a “beneficial owner” of Voting Stock of Existing Potlatch as of
the Closing Date (an “Existing Holder”) or a Permitted Transferee (as
hereinafter defined) (collectively a “Permitted Holder”) shall be deemed to have
become the “beneficial owner” of Voting Stock of Existing Potlatch or Holdings,
as applicable, as a result of the formation of a “syndicate” or “group” (each
within the meaning of Section l3d-3 of the Securities Exchange Act of 1934) with
one or more other Permitted Holders to the extent of the Voting Stock of
Existing Potlatch as to which such other Permitted Holder or Permitted Holders
is a “beneficial owner” as of the

 

6

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Closing Date; (ii) any Borrower shall merge or consolidate with any Person other
than in a transaction permitted under Section 7.04; (iii) Continuing Directors
shall fail to constitute a majority of the members of the board of directors of
(x) prior to consummation of the Merger, Existing Potlatch and (y) after
consummation of the Merger, Holdings; (iv) any Asset Disposition shall be made
that (of itself or when combined with any or all other Asset Dispositions)
constitutes a sale of all or substantially all of the assets of the Borrowers
and their Subsidiaries, taken as a whole; (v) any event shall occur that
constitutes a “Change of Control” (or any comparable term) under, and as defined
in, the documents evidencing or governing any Subordinated Indebtedness;
(vi) any event shall occur that requires any Borrower or any Subsidiary to
repay, redeem, or repurchase (or to offer to repay, redeem or repurchase) any
Indebtedness outstanding in a principal amount in excess of $50,000,000 by
reason of any change of ownership or control affecting a Borrower or such
Subsidiary; or (vii) (x) prior to consummation of the Merger, Existing Potlatch
shall fail to own, directly or indirectly, 100% of the Voting Stock of each
other Borrower or (y) after consummation of the Merger, Holdings shall fail to
own, directly or indirectly, 100% of the Voting Stock of each other Borrower.
For the purposes hereof, “Permitted Transferee” shall mean any direct or
indirect transferee of Voting Stock of the Borrowers from an Existing Holder
(1) by gift, bequest, distribution from (or deposit into) a trust or other
transfer without consideration, (2) by succession or testamentary disposition
upon death or (3) to a spouse or former spouse pursuant to an agreement for
division of community property or other property settlement agreement in
connection with a marital dissolution or legal separation. A Permitted
Transferee shall be deemed to be the “beneficial owner” of any such Voting Stock
as of the Closing Date.

 

“Closing Date” means the first date all the conditions precedent in Section 4.01
are satisfied in accordance with Section 4.01.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Commitment” means, as to each Lender, its obligation to (a) make Committed
Loans to the Borrowers pursuant to Section 2.01, (b) purchase participations in
L/C Obligations, and (c) purchase participations in Swing Line Loans, in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and
Assumption pursuant to which such Lender becomes a party hereto, as applicable,
as such amount may be adjusted from time to time in accordance with this
Agreement.

 

“Committed Borrowing” means a borrowing consisting of simultaneous Committed
Loans of the same Type and, in the case of Eurodollar Rate Loans, having the
same Interest Period made by each of the Lenders pursuant to Section 2.01.

 

“Committed Loan” has the meaning specified in Section 2.01.

 

“Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a
conversion of Committed Loans from one Type to the other, or (c) a continuation
of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing,
shall be substantially in the form of Exhibit A.

 

7

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“Compliance Certificate” means a certificate substantially in the form of
Exhibit D.

 

“Consolidated Capital Expenditures” means, as of any date for the four fiscal
quarter period ending on such date with respect to the Consolidated Parties on a
consolidated basis, all capital expenditures, as determined in accordance with
GAAP; provided, however, that Consolidated Capital Expenditures shall not
include Eligible Reinvestments made with proceeds of any Involuntary Disposition
but shall include those capital expenditures related to timberland operations.

 

“Consolidated EBITDDA” means, as of any date for the four fiscal quarter period
ending on such date with respect to the Consolidated Parties on a consolidated
basis, the sum of (i) Consolidated Net Income, plus (ii) an amount which, in the
determination of Consolidated Net Income, has been deducted for (A) Consolidated
Interest Expense, (B) income taxes, (C) depreciation, depletion and amortization
expense and (D) any prepayment penalty, make-whole premium or loss associated
with the Repayment of any Indebtedness permitted hereunder.

 

“Consolidated Interest Expense” means, as of any date for the four fiscal
quarter period ending on such date with respect to the Consolidated Parties on a
consolidated basis, interest expense (including the amortization of debt
discount and premium, the interest component under Capital Leases and the
implied interest component under Synthetic Lease Obligations), all as determined
in accordance with GAAP.

 

“Consolidated Net Income” means, as of any date for the four fiscal quarter
period ending on such date with respect to the Consolidated Parties on a
consolidated basis, net income (excluding non-cash, non-recurring extraordinary
items) after interest expense, income taxes, depreciation, depletion and
amortization expense, all as determined in accordance with GAAP.

 

“Consolidated Net Worth” means, as of any date, shareholders’ equity or net
worth of the Consolidated Parties on a consolidated basis, as of such date, as
determined in accordance with GAAP; provided, however, that for the purpose of
calculating Consolidated Net Worth with respect to Section 6.10(b) and the
calculation of the Funded Indebtedness to Capitalization Ratio, such calculation
shall exclude (i.e., there will be added back to Consolidated Net Worth) any
year-end non-cash adjustment (on an after-tax basis) to other comprehensive
income to reflect any Additional Minimum Liability; provided, however, the
aggregate incremental amount of all such charges added back to Consolidated Net
Worth pursuant to this proviso after the 2004 fiscal year (i.e. excluding any
such charges for fiscal year 2004 and prior years) shall not exceed $75,000,000.
For purposes hereof, “Additional Minimum Liability” means, as of any date, with
respect to any Pension Plan, the sum of the absolute values of (x) the unfunded
accumulated benefit obligation existing as of the end of the fiscal year then
ending or the most recently ended fiscal year, as applicable, plus (y) the
Borrowers’ prepaid pension asset position existing as of the end of the fiscal
year then ending or the most recently ended fiscal year, as applicable.

 

“Consolidated Parties” means a collective reference to the Borrowers and their
Subsidiaries, and “Consolidated Party” means any one of them.

 

8

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“Consolidated Total Capitalization” means, as of any date of determination,
(i) Funded Indebtedness of the Consolidated Parties on a consolidated basis as
of such date plus (ii) Consolidated Net Worth as of such date.

 

“Control” has the meaning specified in the definition of “Affiliate.”

 

“Credit Extension” means each of the following: (a) a Borrowing and (b) an L/C
Credit Extension.

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

“Default” means any event or condition that constitutes an Event of Default or
that, with the giving of any notice, the passage of time, or both, would be an
Event of Default.

 

“Default Rate” means (a) when used with respect to Obligations other than Letter
of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the
Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum;
provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate
shall be an interest rate equal to the interest rate (including any Applicable
Rate) otherwise applicable to such Loan plus 2% per annum, and (b) when used
with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus
2% per annum.

 

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of
the Committed Loans, participations in L/C Obligations or participations in
Swing Line Loans required to be funded by it hereunder within one Business Day
of the date required to be funded by it hereunder, (b) has otherwise failed to
pay over to the Administrative Agent or any other Lender any other amount
required to be paid by it hereunder within one Business Day of the date when
due, unless the subject of a good faith dispute, or (c) has been deemed
insolvent or become the subject of a bankruptcy or insolvency proceeding.

 

“Discretionary L/C Issuer” has the meaning specified in Section 2.03(b)(v).

 

“Dollar” and “$” mean lawful money of the United States.

 

“Dollar Equivalent” means, at any time, (a) with respect to any amount
denominated in Dollars, such amount, and (b) with respect to any amount
denominated in any Alternative Currency, the equivalent amount thereof in
Dollars as determined by the Administrative Agent or the L/C Issuer, as the case
may be, at such time on the basis of the Spot Rate (determined in respect of the
most recent Revaluation Date) for the purchase of Dollars with such Alternative
Currency.

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
any political subdivision of the United States.

 

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“E&P Declaration” means the declaration of the E&P Distribution.

 

“E&P Declaration Date” means the date of the E&P Declaration.

 

“E&P Distribution” means the distribution of that certain earnings and profits
distribution to be made by Existing Potlatch or Holdings during the 2006 fiscal
year in connection with the REIT Conversion.

 

“Effective Date” means the first date all the conditions precedent in
Section 4.02 are satisfied in accordance with Section 4.02 (or, in the case of
Section 4.02(b) and (c), satisfied or waived by the Person entitled to receive
the applicable payment).

 

“Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an
Approved Fund; and (d) any other Person (other than a natural person) approved
by (i) the Administrative Agent, the L/C Issuer and the Swing Line Lender, and
(ii) unless an Event of Default has occurred and is continuing, the Company
(each such approval not to be unreasonably withheld or delayed); provided that
notwithstanding the foregoing, “Eligible Assignee” shall not include any
Borrower or any of the Borrowers’ Affiliates or Subsidiaries.

 

“Eligible Reinvestment” means (i) any acquisition (whether or not constituting a
capital expenditure, but not constituting an Acquisition) of assets or any
business (or any substantial part thereof) used or useful in the same or a
similar line of business as the Borrowers and their Subsidiaries were engaged in
on the Closing Date (or any reasonable extensions or expansions thereof) and
(ii) any Permitted Acquisition. The term “Eligible Reinvestment” shall not
include any item which is not a permitted application of proceeds of an “Asset
Sale” (or any comparable term) under, and as defined in the documents evidencing
or governing any Subordinated Indebtedness.

 

“EMU” means the economic and monetary union in accordance with the Treaty of
Rome 1957, as amended by the Single European Act 1986, the Maastricht Treaty of
1992 and the Amsterdam Treaty of 1998.

 

“EMU Legislation” means the legislative measures of the European Council for the
introduction of, changeover to or operation of a single or unified European
currency.

 

“Environmental Laws” means any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including those related to
hazardous substances or wastes, air emissions and discharges to waste or public
systems.

 

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of a Borrower or any of its Subsidiaries directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any

 

10

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contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.

 

“Equity Issuance” means any issuance by any Consolidated Party to any Person of
(a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to
the exercise of options or warrants, (c) any shares of its Capital Stock
pursuant to the conversion of any debt securities to equity or (d) any options
or warrants relating to its Capital Stock. The term “Equity Issuance” shall not
be deemed to include (a) any Asset Disposition, (b) issuances pursuant to
(x) employee plans of the Borrowers that are in place as of the Closing Date to
the extent such issuances are permitted pursuant to the documentation governing
those plans as in effect as of the Closing Date or (y) new employee plans of the
Borrowers to the extent such issuances are consistent with past practices of the
Borrowers or (c) the conversion of the shares of Capital Stock of Existing
Potlatch into the shares of Capital Stock of Holdings as part of the REIT
Conversion.

 

“ERISA” means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with a Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by a Borrower or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by a Borrower or any ERISA Affiliate from a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a plan amendment as
a termination under Sections 4041 or 4041A of ERISA with respect to, or the
commencement of proceedings by the PBGC to terminate a Pension Plan or
Multiemployer Plan; (e) an event or condition which constitutes grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon a Borrower or any ERISA Affiliate.

 

“Euro” and “EUR” mean the lawful currency of the Participating Member States in
accordance with the EMU Legislation.

 

“Eurodollar Rate” means, for any Interest Period with respect to a Eurodollar
Rate Loan, the rate per annum equal to the British Bankers Association LIBOR
Rate (“BBA LIBOR”), as published by Reuters (or other commercially available
source providing quotations of BBA LIBOR as designated by the Administrative
Agent from time to time) at approximately 11:00 a.m., London time, two
(2) Business Days prior to the commencement of such Interest Period, for Dollar
deposits (for delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period. If such rate is not available at such time
for any reason, then the “Eurodollar Rate” for such Interest Period shall be the
rate per annum determined by the Administrative Agent to be the rate at which
deposits in Dollars for delivery on the first day of

 

11

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such Interest Period in same day funds in the approximate amount of the
Eurodollar Rate Loan being made, continued or converted by Bank of America and
with a term equivalent to such Interest Period would be offered by Bank of
America’s London Branch to major banks in the London interbank eurodollar market
at their request at approximately 11:00 a.m. (London time) two (2) Business Days
prior to the commencement of such Interest Period.

 

“Eurodollar Rate Loan” means a Committed Loan that bears interest at a rate
based on the Eurodollar Rate.

 

“Event of Default” has the meaning specified in Section 8.01.

 

“Existing Credit Agreement” has the meaning specified in the introductory
Whereas clause.

 

“Existing Letters of Credit” means the letters of credit outstanding on the
Closing Date and identified on Schedule 1.01.

 

“Existing Potlatch” has the meaning specified in the introductory paragraph
hereto.

 

“Federal Funds Rate” means, for any day, the rate per annum (rounded upward, if
necessary, to a whole multiple of 1/100 of 1%) 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 charged to Bank of America on
such day on such transactions as determined by the Administrative Agent.

 

“Fee Letter” means the letter agreement, dated October 18, 2005, among the
Borrowers, the Administrative Agent and the Arranger.

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrowers are residents for tax
purposes. For purposes of this definition, the United States, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.

 

“Fully Satisfied” means, with respect to the Obligations as of any date, that,
as of such date, (a) all principal of and interest accrued to such date which
constitute Obligations shall have been irrevocably paid in full in cash, (b) all
fees, expenses and other amounts then due and payable which constitute
Obligations shall have been irrevocably paid in cash, and (c) the Commitments
shall have been expired or terminated in full.

 

“Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

 

12

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“Funded Indebtedness” means, with respect to any Person, without duplication,
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
Property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of Property or services purchased by such Person (other
than trade debt incurred in the ordinary course of business and due within six
months of the incurrence thereof) which would appear as liabilities on a balance
sheet of such Person, (e) the implied principal component of all obligations of
such Person under Capital Leases, (f) the maximum amount of all performance and
standby letters of credit issued or bankers’ acceptances facilities created for
the account of such Person and, without duplication, all drafts drawn thereunder
(to the extent unreimbursed), (g) all preferred Capital Stock issued by such
Person and which by the terms thereof could be (at the request of the holders
thereof or otherwise) subject to mandatory sinking fund payments, redemption or
other acceleration (other than as a result of a Change of Control or an Asset
Disposition that does not in fact result in a redemption of such preferred
Capital Stock) at any time prior to the Maturity Date, (h) the principal portion
of all obligations of such Person under Synthetic Lease Obligations, (i) all
obligations of such Person to repurchase any securities issued by such Person at
any time prior to the Maturity Date which repurchase obligations are related to
the issuance thereof, including, without limitation, obligations commonly known
as residual equity appreciation potential shares, (j) the aggregate amount of
uncollected accounts receivable of such Person subject at such time to a sale of
receivables (or similar transaction) (whether or not such transaction would be
reflected on the balance sheet of such Person in accordance with GAAP), (k) all
Funded Indebtedness of others secured by (or for which the holder of such Funded
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on, or payable out of the proceeds of production from, Property owned
or acquired by such Person, whether or not the obligations secured thereby have
been assumed, (l) all Guarantees of such Person with respect to Funded
Indebtedness of another Person and (m) the Funded Indebtedness of any
partnership or unincorporated joint venture in which such Person is a general
partner or a joint venturer to the extent such Indebtedness is recourse to such
Person.

 

“Funded Indebtedness to Capitalization Ratio” means, as of the end of any fiscal
quarter, the ratio of (a) Funded Indebtedness of the Consolidated Parties on a
consolidated basis on the last day of such period to (b) Consolidated Total
Capitalization on the last day of such period.

 

“FRB” means the Board of Governors of the Federal Reserve System of the United
States.

 

“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 any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court,

 

13

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administrative tribunal, 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).

 

“Granting Lender” has the meaning specified in Section 10.07(h).

 

“Guarantee” means, as to any Person, (a) any obligation (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection), contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation payable or
performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation, (ii) to purchase or lease
property, securities or services for the purpose of assuring the obligee in
respect of such Indebtedness or other obligation of the payment or performance
of such Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity or level
of income or cash flow of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (iv) entered into for
the purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any uncontested Lien on any assets of such Person securing any Indebtedness
or other obligation of any other Person, whether or not such Indebtedness or
other obligation is assumed by such Person. The amount of any Guarantee shall be
deemed to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the guaranteeing Person in good
faith. The term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantors” means, collectively, each Person that subsequently becomes a
Guarantor hereunder pursuant to Section 6.11 by executing a Joinder Agreement in
substantially the form of Exhibit F, and “Guarantor” means any one of them. As
of the Closing Date there are no Guarantors party hereto.

 

“Guaranty” means the Guaranty made by the Guarantors in favor of the
Administrative Agent, on behalf of the Lenders, pursuant to Article XI hereof.

 

“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

 

“Holdings” has the meaning specified in the introductory paragraph hereto.

 

“Holdings Registration Statement” means that certain Registration Statement on
Form S-4 filed by Holdings with the SEC on September 19, 2005, as amended by
that certain First

 

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Amendment dated as of October 31, 2005 and that certain Second Amendment dated
as of December 2, 2005.

 

“Increase Effective Date” has the meaning set forth in Section 2.14.

 

“Indebtedness” means, with respect to any Person, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person either evidenced by bonds, debentures, notes or similar instruments, or
upon which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
Property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of Property or services purchased by such Person (other
than trade debt incurred in the ordinary course of business and due within six
months of the incurrence thereof) which would appear as liabilities on a balance
sheet of such Person, (e) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements under which such Person
must make payments notwithstanding the failure of the counter-party to deliver
the goods or services which such counter-party is required to deliver thereunder
(and, for the avoidance of doubt shall not include arrangements under which such
Person must pay for capacity or availability that must be delivered or made
available to entitle the counter-party to payment, notwithstanding that such
Person may not use such capacity or availability), (f) the implied principal
component of all obligations of such Person under Capital Leases, (g) all net
obligations of such Person under Swap Contracts, (h) the maximum amount of all
performance and standby letters of credit issued or bankers’ acceptances
facilities created for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent unreimbursed), (i) all preferred Capital
Stock issued by such Person and which by the terms thereof could be (at the
request of the holders thereof or otherwise) subject to mandatory sinking fund
payments, redemption or other acceleration (other than as a result of a Change
of Control or an Asset Disposition that does not in fact result in a redemption
of such preferred Capital Stock) at any time prior to the Maturity Date, (j) the
principal portion of all obligations of such Person under Synthetic Lease
Obligations and other Off-Balance Sheet Liabilities (excluding Operating Leases
to the extent they would otherwise be included), (k) all obligations of such
Person to repurchase any securities issued by such Person at any time prior to
the Maturity Date which repurchase obligations are related to the issuance
thereof, including, without limitation, obligations commonly known as residual
equity appreciation potential shares, (l) the aggregate amount of uncollected
accounts receivable of such Person subject at such time to a sale of receivables
(or similar transaction) (whether or not such transaction would be reflected on
the balance sheet of such Person in accordance with GAAP), (m) all Indebtedness
of others secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on, or
payable out of the proceeds of production from, Property owned or acquired by
such Person, whether or not the obligations secured thereby have been assumed,
(n) all Guarantees of such Person with respect to Indebtedness of another Person
and (o) the Indebtedness of any partnership or unincorporated joint venture in
which such Person is a general partner or a joint venturer to the extent such
Indebtedness is recourse to such Person. The amount of any net obligation under
any Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date. The amount of any Capital Lease or Synthetic Lease
Obligation as of any date shall be deemed to be the amount of Attributable
Indebtedness in respect thereof as of such date.

 

15

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“Indemnified Liabilities” has the meaning set forth in Section 10.05.

 

“Indemnitees” has the meaning set forth in Section 10.05.

 

“Information” has the meaning specified in Section 10.08.

 

“Interest Coverage Ratio” means, as of the end of any fiscal quarter of the
Consolidated Parties, the ratio of (a) Consolidated EBITDDA as of such date to
(b) Consolidated Interest Expense as of such date.

 

“Interest Payment Date” means, (a) as to any Loan other than a Base Rate Loan,
the last day of each Interest Period applicable to such Loan and the Maturity
Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan
exceeds three (3) months, the respective dates that fall every three (3) months
after the beginning of such Interest Period shall also be Interest Payment
Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last
Business Day of each March, June, September and December and the Maturity Date.

 

“Interest Period” means, as to each Eurodollar Rate Loan, the period commencing
on the date such Eurodollar Rate Loan is disbursed or converted to or continued
as a Eurodollar Rate Loan and ending on the date one, two, three or six
(6) months thereafter, as selected by the Administrative Borrower in the
Committed Loan Notice; provided further that:

 

(i) any Interest Period that would otherwise end on a day that is not a Business
Day shall be extended to the next succeeding Business Day unless such Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Business Day;

 

(ii) any Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and

 

(iii) no Interest Period shall extend beyond the Maturity Date.

 

“Internal Control Event” means a material weakness in, or fraud that involves
management or other employees who have a significant role in, any Borrower’s
internal controls over financial reporting, in each case as described in the
Securities Laws.

 

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of capital stock or other securities of another Person, (b) a loan,
advance or capital contribution to, Guarantee or assumption of debt of, or
purchase or other acquisition of any other debt or equity participation or
interest in, another Person, including any partnership or joint venture interest
in such other Person, or (c) the purchase or other acquisition (in one
transaction or a series of transactions) of assets of another Person that
constitute a business unit or product line (other than (i) equipment, timber,
timberlands, inventory and supplies in the ordinary course of business and
(ii) any acquisition of assets constituting Consolidated Capital Expenditures).
For purposes of covenant

 

16

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compliance, the amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of such
Investment.

 

“Involuntary Disposition” means any loss of, damage to or destruction of, or any
condemnation or other taking for public use of, any Property of any Consolidated
Party.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter of
Credit Application, and any other document, agreement and instrument entered
into by the L/C Issuer and a Borrower (or any Subsidiary) or in favor the L/C
Issuer and relating to any such Letter of Credit.

 

“Joinder Agreement” means a Joinder Agreement substantially in the form of
Exhibit F hereto, executed and delivered by a new Guarantor in accordance with
the provisions of Section 6.11.

 

“Judgment Currency” has the meaning specified in Section 10.20.

 

“Laws” means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

 

“L/C Advance” means, with respect to each Lender, such Lender’s funding of its
participation in any L/C Borrowing in accordance with its Applicable Percentage.
All L/C Advances shall be denominated in Dollars.

 

“L/C Borrowing” means an extension of credit resulting from a drawing under any
Letter of Credit which has not been reimbursed on the date when made or
refinanced as a Committed Borrowing. All L/C Borrowings shall be denominated in
Dollars.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance
thereof or extension of the expiry date thereof, or the renewal or increase of
the amount thereof.

 

“L/C Documents” means, with respect to any Letter of Credit, such Letter of
Credit, any amendments thereto, any documents delivered in connection therewith,
any application therefor, and any agreements, instruments, guarantees or other
documents (whether general in application or applicable only to such Letter of
Credit) governing or providing for (i) the rights and obligations of the parties
concerned or at risk or (ii) any collateral security for such obligations.

 

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“L/C Issuer” means Bank of America in its capacity as issuer of Letters of
Credit hereunder, any Discretionary L/C Issuer, any Lender that has issued an
Existing Letter of Credit, or any successor issuer of Letters of Credit
hereunder.

 

“L/C Obligations” means, as at any date of determination, the aggregate amount
available to be drawn under all outstanding Letters of Credit plus the aggregate
of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of
computing the amount available to be drawn under any Letter of Credit, the
amount of such Letter of Credit shall be determined in accordance with
Section 1.10. For all purposes of this Agreement, if on any date of
determination a Letter of Credit has expired by its terms but any amount may
still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP,
such Letter of Credit shall be deemed to be “outstanding” in the amount so
remaining available to be drawn.

 

“Lender” has the meaning specified in the introductory paragraph hereto and, as
the context requires, includes the L/C Issuer and the Swing Line Lender.

 

“Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify the Administrative
Borrower and the Administrative Agent.

 

“Letter of Credit” means any letter of credit issued hereunder and shall include
the Existing Letters of Credit. A Letter of Credit may be issued in Dollars or
in an Alternative Currency and may be a sight draft commercial letter of credit
or a standby letter of credit.

 

“Letter of Credit Application” means an application and agreement for the
issuance or amendment of a Letter of Credit in the form from time to time in use
by the L/C Issuer.

 

“Letter of Credit Expiration Date” means the day that is thirty (30) days prior
to the Maturity Date then in effect (or, if such day is not a Business Day, the
next preceding Business Day).

 

“Letter of Credit Sublimit” means an amount equal to THIRTY-FIVE MILLION DOLLARS
($35,000,000). The Letter of Credit Sublimit is part of, and not in addition to,
the Aggregate Commitments.

 

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), other security interest or
charge (including any conditional sale or other title retention agreement, and
any financing lease having substantially the same economic effect as any of the
foregoing, but excluding operating leases).

 

“Loan” means an extension of credit by a Lender to the Borrowers under Article
II in the form of a Committed Loan or a Swing Line Loan.

 

“Loan Documents” means this Agreement, each Note, each Joinder Agreement and the
Fee Letter.

 

“Loan Parties” means, collectively, the Borrowers and each Guarantor.

 

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“Mandatory Cash Collateralization Date” has the meaning specified in
Section 2.03(b)(vi).

 

“Material Adverse Effect” means (a) a material adverse effect upon, the
operations, business, assets, properties, liabilities (actual or contingent),
condition (financial or otherwise) or prospects of the Borrowers or the
Borrowers and their Subsidiaries taken as a whole; (b) a material impairment of
the ability of the Borrowers or the Borrowers and their Subsidiaries taken as a
whole to perform its material obligations under any Loan Document to which it is
a party; or (c) a material adverse effect upon the material rights and remedies
of the Administrative Agent and the Lenders under the Loan Documents.

 

“Material Domestic Subsidiary” means any Domestic Subsidiary that is a Material
Subsidiary.

 

“Material Foreign Subsidiary” means any foreign Subsidiary that is a Material
Subsidiary.

 

“Material Subsidiary” means as of any date of determination any Subsidiary, that
together with its Subsidiaries on a consolidated basis, accounts for (or to
which may be attributed) 5% or more of the net assets (determined on a
consolidated basis) of the Consolidated Parties. As of the Closing Date the
Borrowers have no Material Subsidiaries which are not Borrowers.

 

“Maturity Date” means the later of (a) December 22, 2008 and (b) if maturity is
extended pursuant to Section 2.15, such extended maturity date as determined
pursuant to such Section.

 

“Merger” means the merger of Existing Potlatch with and into Potlatch Opco on
the terms set forth in the Merger Agreement.

 

“Merger Agreement” means the Agreement and Plan of Merger dated September 19,
2005, by and among Existing Potlatch, Holdings and Potlatch Opco, which is
included as Annex A to the proxy statement/prospectus that is part of the
Holdings Registration Statement.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

“Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA and subject to Title IV of ERISA, to which any
Borrower or any ERISA Affiliate makes or is obligated to make contributions, or
during the preceding five plan years, has made or been obligated to make
contributions.

 

“Multiple Employer Plan” means a Plan (other than a Multiemployer Plan) which
any Consolidated Party or any ERISA Affiliate and at least one employer other
than the Consolidated Parties or any ERISA Affiliate are contributing sponsors.

 

“Net Cash Proceeds” means the aggregate cash or Cash Equivalents proceeds
received by any Consolidated Party in respect of any Asset Disposition, Equity
Issuance or Involuntary Disposition, net of (a) direct costs (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), (b) taxes paid or payable as a result thereof and (c) in the case

 

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of any Asset Disposition, the amount necessary to Repay any Indebtedness either
secured by a Permitted Lien on the related Property or incurred in connection
with the Property that is included in such Asset Disposition; it being
understood that “Net Cash Proceeds” shall include, without limitation, any cash
or Cash Equivalents received upon the sale or other disposition of any non-cash
consideration received by any such Consolidated Party in any Asset Disposition,
Equity Issuance or Involuntary Disposition. In addition, the “Net Cash Proceeds”
of any Asset Disposition shall include any other amounts which constitute “Net
Proceeds” (or any comparable term) of such transaction under, and as defined in
the documents evidencing or governing any Subordinated Indebtedness.

 

“Note” means a promissory note made by the Borrowers in favor of a Lender
evidencing Loans made by such Lender, substantially in the form of Exhibit C.

 

“Notice of Prepayment” means a notice of prepayment of Loans pursuant to
Section 2.05(a), which shall be substantially in the form of Exhibit G.

 

“Obligations” means all advances to, and debts, liabilities, obligations,
covenants and duties of, any Loan Party arising under any Loan Document or
otherwise with respect to any Loan or Letter of Credit, whether direct or
indirect (including those acquired by assumption), absolute or contingent, due
or to become due, now existing or hereafter arising and including (i) interest
and fees that accrue after the commencement by or against any Loan Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming such
Person as the debtor in such proceeding, regardless of whether such interest and
fees are allowed claims in such proceeding and (ii) any Swap Contract of any
Loan Party to which a Lender or any Affiliate of such Lender is a party
(determined at the time such Swap Contract was entered into).

 

“Off-Balance Sheet Liabilities” means, with respect to any Person as of any date
of determination thereof, without duplication and to the extent not included as
a liability on the consolidated balance sheet of such Person and its
Subsidiaries in accordance with GAAP: (a) with respect to any asset
securitization or similar transaction (including any accounts receivable
purchase facility) (i) the unrecovered investment of purchasers or transferees
of assets so transferred and (ii) any other payment, recourse, repurchase, hold
harmless, indemnity or similar obligation of such Person or any of its
Subsidiaries in respect of assets transferred or payments made in respect
thereof, other than limited recourse provisions that are customary for
transactions of such type and that neither (x) have the effect of limiting the
loss or credit risk of such purchasers or transferees with respect to payment or
performance by the obligors of the assets so transferred nor (y) impair the
characterization of the transaction as a true sale under applicable Laws
(including Debtor Relief Laws); or (b) the monetary obligations under any
financing lease (excluding any operating lease) or so-called “synthetic,” tax
retention or off-balance sheet lease transaction which, upon the application of
any Debtor Relief Law to such Person or any of its Subsidiaries, would be
characterized as indebtedness; or (c) the monetary obligations under any sale
and leaseback transaction which does not create a liability on the consolidated
balance sheet of such Person and its Subsidiaries; or (d) any other monetary
obligation arising with respect to any other transaction which (i) upon the
application of any Debtor Relief Law to such Person or any of its Subsidiaries,
would be characterized as indebtedness or (ii) is the functional equivalent of
or takes the place of borrowing but which does not constitute a liability on the
consolidated balance sheet of such Person and its Subsidiaries

 

20

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(for purposes of this clause (d), any transaction structured to provide tax
deductibility as interest expense of any dividend, coupon or other periodic
payment will be deemed to be the functional equivalent of a borrowing).

 

“Operating Lease” means, as applied to any Person, any lease (including, without
limitation, leases which may be terminated by the lessee at any time) of any
Property (whether real, personal or mixed) which is not a Capital Lease other
than any such lease in which that Person is the lessor.

 

“Organization Documents” means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws (or equivalent or
comparable constitutive documents with respect to any non-U.S. jurisdiction);
(b) with respect to any limited liability company, the certificate or articles
of formation or organization and operating agreement; and (c) with respect to
any partnership, joint venture, trust or other form of business entity, the
partnership, joint venture or other applicable agreement of formation or
organization and any agreement, instrument, filing or notice with respect
thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.

 

“Outstanding Amount” means (i) with respect to Committed Loans and Swing Line
Loans on any date, the aggregate outstanding principal amount thereof after
giving effect to any borrowings and prepayments or repayments of Committed Loans
and Swing Line Loans, as the case may be, occurring on such date; and (ii) with
respect to any L/C Obligations on any date, the Dollar Equivalent of the
aggregate outstanding amount of such L/C Obligations on such date after giving
effect to any L/C Credit Extension occurring on such date and any other changes
in the aggregate amount of the L/C Obligations as of such date, including as a
result of any reimbursements of outstanding unpaid drawings under any Letters of
Credit or any reductions in the maximum amount available for drawing under
Letters of Credit taking effect on such date.

 

“Overnight Rate” means, for any day, (a) with respect to any amount denominated
in Dollars, the Federal Funds Rate for that day, and (b) with respect to any
amount denominated in an Alternative Currency, the rate of interest per annum at
which overnight deposits in the applicable Alternative Currency, in an amount
approximately equal to the amount with respect to which such rate is being
determined, would be offered for such day by a branch or Affiliate of Bank of
America in the applicable offshore interbank market for such currency to major
banks in such interbank market.

 

“Participant” has the meaning specified in Section 10.07(d).

 

“Participating Member State” means each state so described in any EMU
Legislation.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Plan” means any “employee pension benefit plan” (as such term is
defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by a Borrower or any
ERISA Affiliate or to which any Borrower or any ERISA Affiliate contributes or
has an obligation to contribute, or in the case of a multiple

 

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employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.

 

“Permitted Acquisition” means an Acquisition by any Borrower or any Subsidiary
of a Borrower that is permitted pursuant to the terms of Section 7.06(g).

 

“Permitted Asset Disposition” means any Asset Disposition permitted by
Section 7.05.

 

“Permitted Investments” means, at any time, Investments by the Consolidated
Parties permitted to exist at such time pursuant to the terms of Section 7.06.

 

“Permitted Liens” means, at any time, Liens in respect of Property of the
Consolidated Parties permitted to exist at such time pursuant to the terms of
Section 7.02.

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

“Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) established by a Borrower or, with respect to any such
plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.

 

“Potlatch Opco” has the meaning specified in the introductory paragraph hereto.

 

“Pro Forma Basis” means, for purposes of calculating (utilizing the principles
set forth in the second paragraph of Section 1.03) compliance with each of the
financial covenants set forth in Section 6.10(a)-(c) in respect of a proposed
transaction, that such transaction shall be deemed to have occurred as of the
first day of the four fiscal-quarter period ending as of the most recent fiscal
quarter end preceding the date of such transaction with respect to which the
Administrative Agent has received the Required Financial Information. As used
herein, “transaction” shall mean (i) any incurrence or assumption of
Indebtedness as referred to in Section 7.01(f), (ii) any Asset Disposition as
referred to in Section 7.05, (iii) any Acquisition as referred to in
Section 7.06(g) or (iv) any Restricted Payment as referred to in
Section 7.07(e). In connection with any calculation of the financial covenants
set forth in Section 6.10(a)-(c) upon giving effect to a transaction on a Pro
Forma Basis:

 

(A) for purposes of any such calculation in respect of any incurrence or
assumption of Indebtedness as referred to in Section 7.01(f), any Indebtedness
which is retired in connection with such transaction shall be excluded and
deemed to have been retired as of the first day of the applicable period;

 

(B) for purposes of any such calculation in respect of any Asset Disposition as
referred to in Section 7.05, (1) income statement items (whether positive or
negative) attributable to the Property disposed of shall be excluded and (2) any
Indebtedness which is retired in connection with such transaction shall be
excluded and deemed to have been retired as of the first day of the applicable
period; and

 

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(C) for purposes of any such calculation in respect of any Acquisition as
referred to in Section 7.06(g), (1) any Indebtedness incurred by any
Consolidated Party in connection with such transaction (x) shall be deemed to
have been incurred as of the first day of the applicable period and (y) if such
Indebtedness has a floating or formula rate, shall have an implied rate of
interest for the applicable period for purposes of this definition determined by
utilizing the rate which is or would be in effect with respect to such
Indebtedness as at the relevant date of determination, (2) income statement
items (whether positive or negative) attributable to the Person or Property
acquired shall be included beginning as of the first day of the applicable
period and (3) pro forma adjustments may be included to the extent that such
adjustments would be permitted under GAAP and give effect to events that are
(x) directly attributable to such transaction, (y) expected to have a continuing
impact on the Consolidated Parties and (z) factually supportable.

 

(D) for purposes of any such calculation in connection with the making of any
Restricted Payment referred to in Section 7.07(e), any Indebtedness incurred (or
to be incurred) by any Consolidated Party in connection with such payment or
repurchases shall be deemed to have been incurred as of the first day of the
applicable period.

 

“Pro Forma Compliance Certificate” means a certificate of a Responsible Officer
of the Administrative Borrower delivered to the Administrative Agent in
connection with (i) any incurrence or assumption of Indebtedness as referred to
in Section 7.01(f), (ii) any Asset Disposition as referred to in Section 7.05,
(iii) any Acquisition as referred to in Section 7.06(g) and (iv) any Restricted
Payment made pursuant to Section 7.07(e), as applicable, and containing
reasonably detailed calculations, upon giving effect to the applicable
transaction on a Pro Forma Basis, of the Funded Indebtedness to Capitalization
Ratio, the Interest Coverage Ratio and Consolidated Net Worth as of the most
recent fiscal quarter end preceding the date of the applicable transaction with
respect to which the Administrative Agent shall have received the Required
Financial Information.

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.

 

“Register” has the meaning set forth in Section 10.07(c).

 

“Reimbursement Agreement” shall mean any agreement set forth on Schedule 2.03
hereto.

 

“REIT” means a Real Estate Investment Trust as defined in Sections 856-860 of
the Code.

 

“REIT Conversion” means the consummation of certain asset transfers as described
in the proxy statement/prospectus that is part of the Holdings Registration
Statement, to include certain intercompany asset transfers such that
substantially all of the manufacturing and certain other real estate and
personal property assets are held by TRS.

 

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“Related Parties” means, with respect to any Person, such Person’s Affiliates
and the partners, directors, officers, employees, agents and advisors of such
Person and of such Person’s Affiliates.

 

“Repay” or “Repayment” means with respect to Indebtedness, to permanently pay,
prepay, redeem, repurchase, retire, defease (including by way of depositing
money or securities with the trustee with respect thereto before due for the
purpose of paying when due), establish a sinking fund or similar payment or
acquire for value.

 

“Reportable Event” means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.

 

“Request for Credit Extension” means (a) with respect to a Borrowing, conversion
or continuation of Committed Loans, a Committed Loan Notice, (b) with respect to
an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to
a Swing Line Loan, a Swing Line Loan Notice.

 

“Required Financial Information” means, with respect to each fiscal period or
quarter of the Borrowers, (a) the financial statements required to be delivered
pursuant to Section 6.01(a) or (b) for such fiscal period or quarter, and
(b) the certificate of a Responsible Officer of the Administrative Borrower
required by Section 6.01(c) to be delivered with the financial statements
described in clause (a) above.

 

“Required Lenders” means, as of any date of determination, Lenders having more
than 50% of the Aggregate Commitments or, if the commitment of each Lender to
make Loans and the obligation of the L/C Issuer to make L/C Credit Extensions
have been terminated pursuant to Section 8.02, Lenders holding in the aggregate
more than 50% of the Total Outstandings (with the aggregate amount of each
Lender’s risk participation and funded participation in L/C Obligations and
Swing Line Loans being deemed “held” by such Lender for purposes of this
definition); provided that the Commitment of, and the portion of the Total
Outstandings held or deemed held by, any Defaulting Lender shall be excluded for
purposes of making a determination of Required Lenders.

 

“Responsible Officer” of any Person means any of the chief executive officer,
chief operating officer, president, vice president, chief financial officer,
treasurer or other duly elected officer of such Person. Any document delivered
hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Loan Party and such
Responsible Officer shall be conclusively presumed to have acted on behalf of
such Loan Party.

 

“Restricted Payment” means (i) any dividend or other payment or distribution,
direct or indirect, on account of any shares of any class of Capital Stock of
any Consolidated Party, now or hereafter outstanding (including without
limitation any payment in connection with any dissolution, merger, consolidation
or disposition involving any Consolidated Party) to the holders, in their
capacity as such, of any shares of any class of Capital Stock of any
Consolidated Party, now or hereafter outstanding (other than dividends or
distributions payable in Capital Stock of the applicable Person and dividends or
distributions payable (directly or indirectly through Subsidiaries)

 

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to a Borrower), (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
shares of any class of Capital Stock of any Consolidated Party, now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the surrender of,
any outstanding warrants, options or other rights to acquire shares of any class
of Capital Stock of any Consolidated Party, now or hereafter outstanding, and
(iv) any payment or prepayment of principal of, or premium, if any, on
(including any redemption, purchase, retirement, defeasance, sinking fund or
similar payment with respect to) the Senior Subordinated Notes. Notwithstanding
the foregoing, the term Restricted Payment shall not include any redemption of
share purchase rights issued pursuant to any customary shareholder rights plan
implemented by the Administrative Borrower from time to time (as the same may be
amended from time to time), for a redemption price not to exceed $0.01 per share
purchase right.

 

“Revaluation Date” means with respect to any Letter of Credit, each of the
following: (a) each date of issuance of any Letter of Credit, (b) each date of
an amendment of any Letter of Credit having the effect of increasing the amount
thereof (solely with respect to the increased amount), (c) each date of any
payment by the L/C Issuer of any Letter of Credit denominated in an Alternative
Currency, (d) the last Business Day of each calendar month and (e) such
additional dates as the Administrative Agent or the L/C Issuer shall require.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.

 

“Sale and Leaseback Transaction” means any arrangement pursuant to which any
Consolidated Party, directly or indirectly, becomes liable as lessee, guarantor
or other surety with respect to any lease, whether an Operating Lease or a
Capital Lease, of any Property (a) which such Consolidated Party has sold or
transferred (or is to sell or transfer) to a Person which is not a Consolidated
Party or (b) which such Consolidated Party intends to use for substantially the
same purpose as any other Property which has been sold or transferred (or is to
be sold or transferred) by such Consolidated Party to another Person which is
not a Consolidated Party in connection with such lease, provided that any
transaction that satisfies the conditions in preceding subsection (a) or
(b) shall not constitute a “Sale and Leaseback Transaction” where lessor under
such lease is organized under the laws of a jurisdiction outside of the United
States, the Property is located in the United States and the obligations in
respect of the lease or incurred in connection therewith for which the
Consolidated Party is liable have been defeased.

 

“Same Day Funds” means (a) with respect to disbursements and payments in
Dollars, immediately available funds, and (b) with respect to disbursements and
payments in an Alternative Currency, same day or other funds as may be
determined by the Administrative Agent or the L/C Issuer, as applicable, to be
customary in the place of disbursement or payment for the settlement of
international banking transactions in the relevant Alternative Currency.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.

 

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“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act
of 1934, Sarbanes-Oxley and the applicable accounting and auditing principles,
rules, standards and practices promulgated, approved or incorporated by the SEC
or the Public Company Accounting Oversight Board, as each of the foregoing may
be amended and in effect on any applicable date hereunder.

 

“Senior Subordinated Note” means any one of the 10.0% Senior Subordinated Notes
due 2011, issued by Existing Potlatch in favor of the Senior Subordinated
Noteholders pursuant to the Senior Subordinated Note Indenture, as such Senior
Subordinated Notes may be amended, exchanged, modified, restated or supplemented
and in effect from time to time in accordance with the terms hereof and thereof.

 

“Senior Subordinated Note Indenture” means the Indenture, dated as of June 29,
2001, by and among Existing Potlatch and the Trustee for the Senior Subordinated
Noteholders, as the same may be amended, modified, restated or supplemented and
in effect from time to time in accordance with the terms hereof and thereof.

 

“Senior Subordinated Noteholder” means any one of the holders from time to time
of the Senior Subordinated Notes.

 

“Single Employer Plan” means any Plan which is covered by Title IV of ERISA, but
which is not a Multiemployer Plan or a Multiple Employer Plan.

 

“Solvent” or “Solvency” means, with respect to any Person as of a particular
date, that on such date (i) such Person is able to pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (ii) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability to
pay as such debts and liabilities mature in their ordinary course, (iii) such
Person is not engaged in a business or a transaction, and is not about to engage
in a business or a transaction, for which such Person’s Property would
constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which such Person is engaged or is to
engage, (iv) the fair market value of the Property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person and (v) the present fair market value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.

 

“SPC” has the meaning specified in Section 10.07(h).

 

“Spot Rate” for a currency means the rate determined by the Administrative Agent
or the L/C Issuer, as applicable, to be the rate quoted by the Person acting in
such capacity as the spot rate for the purchase by such Person of such currency
with another currency through its principal foreign exchange trading office at
approximately 11:00 a.m. on the date two Business Days prior to the date as of
which the foreign exchange computation is made; provided that the Administrative
Agent or the L/C Issuer may obtain such spot rate from another financial

 

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institution designated by the Administrative Agent or the L/C Issuer if the
Person acting in such capacity does not have as of the date of determination a
spot buying rate for any such currency; and provided further that the L/C Issuer
may use such spot rate quoted on the date as of which the foreign exchange
computation is made in the case of any Letter of Credit denominated in an
Alternative Currency.

 

“Subordinated Indebtedness” means Indebtedness outstanding under the Senior
Subordinated Note Indenture and the Senior Subordinated Notes and any other
Indebtedness of the Borrowers which by its terms is subordinated to the
Obligations in a manner and to an extent acceptable to the Required Lenders.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of
a Borrower.

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a “Master Agreement”), including
any such obligations or liabilities under any Master Agreement.

 

“Swap Termination Value” means, in respect of any one or more Swap Contracts,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Contracts, (a) for any date on or after the date
such Swap Contracts have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to
the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

 

“Swing Line” means the revolving credit facility made available by the Swing
Line Lender pursuant to Section 2.04.

 

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“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to
Section 2.04.

 

“Swing Line Lender” means Bank of America in its capacity as provider of Swing
Line Loans, or any successor swing line lender hereunder.

 

“Swing Line Loan” has the meaning specified in Section 2.04(a).

 

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to
Section 2.04(b), which, if in writing, shall be substantially in the form of
Exhibit B.

 

“Swing Line Sublimit” means an amount equal to the lesser of (a) TEN MILLION
DOLLARS ($10,000,000) and (b) the Aggregate Commitments. The Swing Line Sublimit
is part of, and not in addition to, the Aggregate Commitments.

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under
(a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do not
appear on the balance sheet of such Person but which, upon the insolvency or
bankruptcy of such Person, would be characterized as the indebtedness of such
Person (without regard to accounting treatment). In no event shall any Operating
Lease be construed as a Synthetic Lease Obligation.

 

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all
L/C Obligations.

 

“TRS” has the meaning specified in the introductory paragraph hereto.

 

“Type” means, with respect to a Committed Loan, its character as a Base Rate
Loan or a Eurodollar Rate Loan.

 

“Unfunded Pension Liability” means the excess of a Pension Plan’s benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Pension Plan’s assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.

 

“United States” and “U.S.” mean the United States of America.

 

“Unreimbursed Amount” has the meaning set forth in Section 2.03(c)(i).

 

  1.02 Other Interpretive Provisions.

 

(a) The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.” The word “will” shall be construed to have the same
meaning and effect as the word “shall.” Unless the context requires otherwise,
(i) any definition of or reference to any agreement, instrument or other
document (including any Organization Document) shall be construed as referring
to such

 

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agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to include
such Person’s successors and assigns, (iii) the words “herein,” “hereof” and
“hereunder,” and words of similar import when used in any Loan Document, shall
be construed to refer to such Loan Document in its entirety and not to any
particular provision thereof, (iv) all references in a Loan Document to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, the Loan Document in
which such references appear, (v) any reference to any law shall include all
statutory and regulatory provisions consolidating, amending, replacing or
interpreting such law and any reference to any law or regulation shall, unless
otherwise specified, refer to such law or regulation as amended, modified or
supplemented from time to time, and (vi) the words “asset” and “property” shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

(b) In the computation of periods of time from a specified date to a later
specified date, the word “from” means “from and including;” the words “to” and
“until” each mean “to but excluding;” and the word “through” means “to and
including.”

 

(c) Section headings herein and in the other Loan Documents are included for
convenience of reference only and shall not affect the interpretation of this
Agreement or any other Loan Document.

 

  1.03 Accounting Terms.

 

(a) All accounting terms not specifically or completely defined herein shall be
construed in conformity with, and all financial data (including financial ratios
and other financial calculations) required to be submitted pursuant to this
Agreement shall be prepared in conformity with, GAAP applied on a consistent
basis, as in effect from time to time, applied in a manner consistent with that
used in preparing the Audited Financial Statements, except as otherwise
specifically prescribed herein.

 

(b) If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in any Loan Document, and either the
Administrative Borrower or the Required Lenders shall so request, the
Administrative Agent, the Lenders and the Borrowers shall negotiate in good
faith to amend such ratio or requirement to preserve the original intent thereof
in light of such change in GAAP (subject to the approval of the Required
Lenders); provided that, until so amended, (i) such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein and
(ii) the Administrative Borrower shall provide to the Administrative Agent and
the Lenders financial statements and other documents required under this
Agreement or as reasonably requested hereunder setting forth a reconciliation
between calculations of such ratio or requirement made before and after giving
effect to such change in GAAP.

 

(c) Notwithstanding the above, the parties hereto acknowledge and agree that,
for purposes of all calculations made under the financial covenants set forth in
Section 6.10

 

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(including without limitation for purposes of the definitions of “Applicable
Rate” and “Pro Forma Basis” set forth in Section 1.01), (i) after consummation
of any Asset Disposition for consideration (cash and non-cash) in excess of
$50,000,000 (A) income statement items (whether positive or negative) and
capital expenditures attributable to the Property disposed of shall be excluded
to the extent relating to any period occurring prior to the date of such
transaction and (B) Indebtedness which is retired shall be excluded and deemed
to have been retired as of the first day of the applicable period and (ii) after
consummation of any Acquisition for an Investment for consideration (cash and
non-cash) in excess of $50,000,000 (A) income statement items (whether positive
or negative) and capital expenditures attributable to the Person or Property
acquired shall, to the extent not otherwise included in such income statement
items for the Consolidated Parties in accordance with GAAP or in accordance with
any defined terms set forth in Section 1.01, be included to the extent relating
to any period applicable in such calculations, (B) to the extent not retired in
connection with such Acquisition, Indebtedness of the Person or Property
acquired shall be deemed to have been incurred as of the first day of the
applicable period and (C) pro forma adjustments may be included to the extent
that such adjustments would be permitted under GAAP and give effect to items
that are (x) directly attributable to such transaction, (y) expected to have a
continuing impact on the Consolidated Parties and (z) factually supportable.

 

  1.04 Rounding.

 

Any financial ratios required to be maintained by the Borrowers on a
consolidated basis pursuant to this Agreement shall be calculated by dividing
the appropriate component by the other component, carrying the result to one
place more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

 

  1.05 References to Agreements and Laws.

 

Unless otherwise expressly provided herein, (a) references to Organization
Documents, agreements (including the Loan Documents) and other contractual
instruments shall be deemed to include all subsequent amendments, restatements,
extensions, supplements and other modifications thereto, but only to the extent
that such amendments, restatements, extensions, supplements and other
modifications are not prohibited by any Loan Document; and (b) references to any
Law shall include all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting such Law.

 

  1.06 Exchange Rates; Currency Equivalents.

 

(a) The Administrative Agent or the L/C Issuer, as applicable, shall determine
the Spot Rates as of each Revaluation Date to be used for calculating Dollar
Equivalent amounts of Credit Extensions and Outstanding Amounts denominated in
Alternative Currencies. Such Spot Rates shall become effective as of such
Revaluation Date and shall be the Spot Rates employed in converting any amounts
between the applicable currencies until the next Revaluation Date to occur.
Except for purposes of financial statements delivered by Loan Parties hereunder
or calculating financial covenants hereunder or except as otherwise provided
herein, the applicable amount of any currency (other than Dollars) for purposes
of the Loan Documents shall be such

 

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Dollar Equivalent amount as so determined by the Administrative Agent or the L/C
Issuer, as applicable.

 

(b) Wherever in this Agreement in connection with the issuance, amendment or
extension of a Letter of Credit, an amount, such as a required minimum or
multiple amount, is expressed in Dollars, but such Letter of Credit is
denominated in an Alternative Currency, such amount shall be the relevant
Alternative Currency Equivalent of such Dollar amount (rounded to the nearest
unit of such Alternative Currency, with 0.5 of a unit being rounded upward), as
determined by the Administrative Agent or the L/C Issuer, as applicable.

 

  1.07 Additional Alternative Currencies.

 

The Administrative Borrower may from time to time request that Letters of Credit
be issued in a currency other than those specifically listed in the definition
of “Alternative Currency;” provided that such requested currency is a lawful
currency (other than Dollars) that is readily available and freely transferable
and convertible into Dollars. Such request shall be subject to the approval of
the Administrative Agent and the L/C Issuer. Any such request shall be made to
the Administrative Agent not later than 11:00 a.m., twenty (20) Business Days
prior to the date of the desired Credit Extension (or such other time or date as
may be agreed by the Administrative Agent and the L/C Issuer, in their sole
discretion). The L/C Issuer shall notify the Administrative Agent, not later
than 11:00 a.m., ten (10) Business Days after receipt of such request whether it
consents, in its sole discretion, to the issuance of Letters of Credit in such
requested currency. Any failure by the L/C Issuer to respond to such request
within the time period specified in the preceding sentence shall be deemed to be
a refusal by the L/C Issuer to permit Letters of Credit to be issued in such
requested currency. If the Administrative Agent and the L/C Issuer consent to
the issuance of Letters of Credit in such requested currency, the Administrative
Agent shall so notify the Administrative Borrower and such currency shall
thereupon be deemed for all purposes to be an Alternative Currency hereunder for
purposes of any Letter of Credit issuances. If the Administrative Agent shall
fail to obtain consent to any request for an additional currency under this
Section 1.07, the Administrative Agent shall promptly so notify the
Administrative Borrower.

 

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  1.08 Change of Currency.

 

(a) Each obligation of the Borrowers to make a payment denominated in the
national currency unit of any member state of the European Union that adopts the
Euro as its lawful currency after the date hereof shall be redenominated into
Euro at the time of such adoption (in accordance with the EMU Legislation). If,
in relation to the currency of any such member state, the basis of accrual of
interest expressed in this Agreement in respect of that currency shall be
inconsistent with any convention or practice in the London interbank market for
the basis of accrual of interest in respect of the Euro, such expressed basis
shall be replaced by such convention or practice with effect from the date on
which such member state adopts the Euro as its lawful currency; provided that if
any Credit Extension in the currency of such member state is outstanding
immediately prior to such date, such replacement shall take effect, with respect
to such Credit Extension, at the end of the then current Interest Period.

 

(b) Each provision of this Agreement shall, upon written notice to the
Administrative Borrower explaining the basis for such construction, be subject
to such reasonable changes of construction as the Administrative Agent may from
time to time specify to be appropriate to reflect the adoption of the Euro by
any member state of the European Union and any relevant market conventions or
practices relating to the Euro.

 

(c) Each provision of this Agreement also shall, upon written notice to the
Administrative Borrower explaining the basis for such construction, be subject
to such reasonable changes of construction as the Administrative Agent may from
time to time specify to be appropriate to reflect a change in currency of any
other country and any relevant market conventions or practices relating to the
change in currency.

 

  1.09 Times of Day.

 

Unless otherwise specified, all references herein to times of day shall be
references to Pacific time (daylight or standard, as applicable).

 

  1.10 Letter of Credit Amounts.

 

Unless otherwise specified herein, the amount of a Letter of Credit at any time
shall be deemed to be the stated amount of such Letter of Credit in effect at
such time; provided, however, that with respect to any Letter of Credit that, by
its terms or the terms of any Issuer Document related thereto, provides for one
or more automatic increases in the stated amount thereof, the amount of such
Letter of Credit shall be deemed to be the maximum stated amount of such Letter
of Credit after giving effect to all such increases, whether or not such maximum
stated amount is in effect at such time.

 

ARTICLE II

COMMITMENTS AND CREDIT EXTENSIONS

 

  2.01 Committed Loans.

 

Subject to the terms and conditions set forth herein, each Lender severally
agrees to make loans (each such loan, a “Committed Loan”) for the account of any
Borrower as designated by

 

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the Administrative Borrower pursuant to Section 2.02(a) from time to time, on
any Business Day during the Availability Period, in an aggregate amount not to
exceed at any time outstanding the amount of such Lender’s Commitment; provided,
however, that after giving effect to any Committed Borrowing, (i) the Total
Outstandings shall not exceed the Aggregate Commitments, and (ii) the aggregate
Outstanding Amount of the Committed Loans of any Lender, plus such Lender’s
Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus
such Lender’s Applicable Percentage of the Outstanding Amount of all Swing Line
Loans shall not exceed such Lender’s Commitment. Within the limits of each
Lender’s Commitment, and subject to the other terms and conditions hereof, any
of the Borrowers may borrow under this Section 2.01, prepay under Section 2.05,
and reborrow under this Section 2.01. Committed Loans may be Base Rate Loans or
Eurodollar Rate Loans, as further provided herein.

 

  2.02 Borrowings, Conversions and Continuations of Committed Loans.

 

(a) Each Committed Borrowing, each conversion of Committed Loans from one Type
to the other, and each continuation of Eurodollar Rate Loans shall be made upon
irrevocable notice from the Administrative Borrower to the Administrative Agent,
which may be given by telephone (provided that such telephonic notice complies
with the information requirements of the form of Committed Loan Notice attached
hereto). Each such notice must be received by the Administrative Agent not later
than 10:00 a.m. (i) three Business Days prior to the requested date of any
Borrowing of, conversion to or continuation of Eurodollar Rate Loans, and
(ii) on the requested date of any Borrowing of Base Rate Committed Loans. Each
telephonic notice by the Administrative Borrower pursuant to this
Section 2.02(a) must be confirmed promptly by delivery to the Administrative
Agent of a written Committed Loan Notice, appropriately completed and signed by
a Responsible Officer of the Administrative Borrower. Each Borrowing of,
conversion to or continuation of Eurodollar Rate Loans shall be in a principal
amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Except
as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to
Base Rate Committed Loans shall be in a principal amount of $500,000 or a whole
multiple of $100,000 in excess thereof. Each Committed Loan Notice (whether
telephonic or written) shall specify (i) the applicable Borrower to which the
proceeds of the Loan shall be disbursed, (ii) whether the Administrative
Borrower is requesting a Committed Borrowing, a conversion of Committed Loans
from one Type to the other, or a continuation of Eurodollar Rate Loans,
(iii) the requested date of the Borrowing, conversion or continuation, as the
case may be (which shall be a Business Day), (iv) the principal amount of
Committed Loans to be borrowed, converted or continued, (v) the Type of
Committed Loans to be borrowed or to which existing Committed Loans are to be
converted, and (vi) if applicable, the duration of the Interest Period with
respect thereto. If the Administrative Borrower fails to specify a Type of
Committed Loan in a Committed Loan Notice or if the Administrative Borrower
fails to give a timely notice requesting a conversion or continuation, then the
applicable Committed Loans shall be made as, or converted to, Base Rate Loans.
Any such automatic conversion to Base Rate Loans shall be effective as of the
last day of the Interest Period then in effect with respect to the applicable
Eurodollar Rate Loans. If the Administrative Borrower requests a Borrowing of,
conversion to, or continuation of Eurodollar Rate Loans in any such Committed
Loan Notice, but fails to specify an Interest Period, it will be deemed to have
specified an Interest Period of one month. Notwithstanding the foregoing, all
Borrowings made on the Effective Date shall be made as Base Rate Loans unless
the Administrative Agent shall have received an appropriate funding indemnity
letter (covering

 

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those Lenders not party to the Existing Credit Agreement) executed by the
Borrowers and reasonably acceptable to the Administrative Agent at least three
(3) Business Days prior to the Effective Date.

 

(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall
promptly notify each Lender of the amount of its Applicable Percentage of the
applicable Committed Loans, and if no timely notice of a conversion or
continuation is provided by the Administrative Borrower, the Administrative
Agent shall notify each Lender of the details of any automatic conversion to
Base Rate Loans described in the preceding subsection. In the case of a
Committed Borrowing, each Lender shall make the amount of its Committed Loan
available to the Administrative Agent in immediately available funds at the
Administrative Agent’s Office not later than 12:00 noon on the Business Day
specified in the applicable Committed Loan Notice. Upon satisfaction of the
applicable conditions set forth in Section 4.02 (and, if such Borrowing is the
initial Credit Extension, Section 4.01), the Administrative Agent shall make all
funds so received available to the applicable Borrower designated to receive the
proceeds of the Loan in the Committed Loan Notice in like funds as received by
the Administrative Agent either by (i) crediting the account of applicable
Borrower on the books of Bank of America with the amount of such funds or
(ii) wire transfer of such funds, in each case in accordance with instructions
provided to (and reasonably acceptable to) the Administrative Agent by the
Administrative Borrower; provided, however, that if, on the date the Committed
Loan Notice with respect to such Borrowing is given by the Administrative
Borrower, there are L/C Borrowings outstanding, then the proceeds of such
Borrowing shall be applied, first, to the payment in full of any such L/C
Borrowings, and second, to the applicable Borrower as provided above.

 

(c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued
or converted only on the last day of an Interest Period for such Eurodollar Rate
Loan. During the existence of a Default, no Loans may be requested as, converted
to or continued as Eurodollar Rate Loans without the consent of the Required
Lenders.

 

(d) The Administrative Agent shall promptly notify the Administrative Borrower
and the Lenders of the interest rate applicable to any Interest Period for
Eurodollar Rate Loans upon determination of such interest rate. The
determination of the Eurodollar Rate by the Administrative Agent shall be
conclusive in the absence of manifest error. At any time that Base Rate Loans
are outstanding, the Administrative Agent shall notify the Administrative
Borrower and the Lenders of any change in Bank of America’s prime rate used in
determining the Base Rate promptly following the public announcement of such
change.

 

(e) After giving effect to all Committed Borrowings, all conversions of
Committed Loans from one Type to the other, all continuations of Committed Loans
as the same Type and all Swing Line Loans, the sum of (i) the number of Interest
Periods in effect with respect to Committed Loans and (ii) Swing Line Loans
shall not exceed ten (10) at any one time.

 

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  2.03 Letters of Credit.

 

(a) The Letter of Credit Commitment.

 

(i) Subject to the terms and conditions set forth herein, (A) the L/C Issuer
agrees, in reliance upon the agreements of the other Lenders set forth in this
Section 2.03, (1) from time to time on any Business Day during the period from
the Closing Date until the Letter of Credit Expiration Date, to issue Letters of
Credit denominated in Dollars or in one or more Alternative Currencies for the
account of any Borrower or any Subsidiary, and to amend or renew Letters of
Credit previously issued by it, in accordance with subsection (b) below, and
(2) to honor drafts under the Letters of Credit; and (B) the Lenders severally
agree to participate in Letters of Credit issued for the account of any of the
Borrowers and any drawings thereunder; provided that the L/C Issuer shall not be
obligated to make any L/C Credit Extension with respect to any Letter of Credit,
and no Lender shall be obligated to participate in any Letter of Credit if as of
the date of such L/C Credit Extension, (x) the Total Outstandings would exceed
the Aggregate Commitments, (y) the aggregate Outstanding Amount of the Committed
Loans of any Lender, plus such Lender’s Applicable Percentage of the Outstanding
Amount of all L/C Obligations, plus such Lender’s Applicable Percentage of the
Outstanding Amount of all Swing Line Loans would exceed such Lender’s Commitment
or (z) the Outstanding Amount of the L/C Obligations would exceed the Letter of
Credit Sublimit. Each request by the Administrative Borrower for the issuance or
amendment of a Letter of Credit shall be deemed to be a representation by the
Borrowers that the L/C Credit Extension so requested complies with the
conditions set forth in the proviso to the preceding sentence. Within the
foregoing limits, and subject to the terms and conditions hereof, the Borrowers’
ability to obtain Letters of Credit shall be fully revolving, and accordingly
the Borrowers may, during the foregoing period, obtain Letters of Credit to
replace Letters of Credit that have expired or that have been drawn upon and
reimbursed. All Existing Letters of Credit shall be deemed to have been issued
pursuant hereto, and from and after the Closing Date shall be subject to and
governed by the terms and conditions hereof. Each Letter of Credit Application
shall be prepared and signed by the Administrative Borrower; provided, however,
that the Administrative Borrower shall be permitted to designate any Borrower,
Subsidiary or other third party as the account party for the requested Letter of
Credit, although, notwithstanding such designation, the Borrowers shall be the
actual account party for all purposes of this Agreement for such Letters of
Credit and such designation shall not affect the Borrowers’ reimbursement
obligations hereunder with respect to such Letter of Credit.

 

(ii) The L/C Issuer shall be under no obligation to issue any Letter of Credit
if:

 

(A) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain the L/C Issuer from issuing
such Letter of Credit, or any Law applicable to the L/C Issuer or any request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over the L/C Issuer shall prohibit, or request that
the L/C Issuer refrain from, the issuance of letters of credit generally or such
Letter of Credit in particular or shall impose upon the L/C Issuer with respect
to such Letter of Credit any restriction, reserve or capital requirement (for
which the L/C Issuer is not otherwise compensated hereunder) not in effect on
the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss,
cost or

 

35

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expense which was not applicable on the Closing Date and which the L/C Issuer in
good faith deems material to it;

 

(B) subject to Section 2.03(b)(iii), the expiry date of such requested Letter of
Credit would occur more than twenty (20) months from the date of issuance,
unless the Required Lenders have approved such expiry date;

 

(C) subject to Section 2.03(b)(vi), the expiry date of such requested Letter of
Credit would occur after the Letter of Credit Expiration Date;

 

(D) the issuance of such Letter of Credit would violate one or more policies of
the L/C Issuer applicable to all applicants for letters of credit of the L/C
Issuer generally;

 

(E) such Letter of Credit is in an initial stated amount less than $25,000 (or
such lesser amount as may be agreed to by the Borrowers, the L/C Issuer and the
Administrative Agent), or is to be denominated in a currency other than Dollars
or an Alternative Currency; or

 

(F) a default of any Lender’s obligations to fund under Section 2.04(c) exists
or any Lender is at such time a Defaulting Lender hereunder, unless the L/C
Issuer has entered into satisfactory arrangements with the Borrowers or such
Lender to eliminate the L/C Issuer’s risk with respect to such Lender.

 

(iii) The L/C Issuer shall be under no obligation to amend any Letter of Credit
if (A) the L/C Issuer would have no obligation at such time to issue such Letter
of Credit in its amended form under the terms hereof, or (B) the beneficiary of
such Letter of Credit does not accept the proposed amendment to such Letter of
Credit.

 

(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension
Letters of Credit.

 

(i) Each Letter of Credit shall be issued or amended, as the case may be, upon
the request of the Administrative Borrower delivered to the L/C Issuer (with a
copy to the Administrative Agent) in the form of a Letter of Credit Application,
appropriately completed and signed by a Responsible Officer of the
Administrative Borrower. Such Letter of Credit Application must be received by
the L/C Issuer and the Administrative Agent (A) not later than 11:00 a.m. at
least two Business Days (or such later date and time as the Administrative Agent
and the L/C Issuer may agree in a particular instance in their sole discretion)
prior to the proposed issuance date or date of amendment, as the case may be, of
any Letter of Credit denominated in Dollars and (B) not later than 11:00 a.m. at
least ten Business Days (or such later date and time as the L/C Issuer may agree
in a particular instance in its sole discretion) prior to the proposed issuance
date or date of amendment, as the case may be, of any Letter of Credit
denominated in an Alternative Currency. In the case of a request for an initial
issuance of a Letter of Credit, such Letter of Credit Application shall specify
in form and detail satisfactory to the L/C Issuer: (A) the proposed issuance
date of the requested Letter of Credit (which shall be a Business Day); (B) the
amount thereof; (C) the expiry date thereof; (D) the name and address of

 

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the beneficiary thereof; (E) the documents to be presented by such beneficiary
in case of any drawing thereunder; (F) the full text of any certificate to be
presented by such beneficiary in case of any drawing thereunder; and (G) such
other matters as the L/C Issuer may require. In the case of a request for an
amendment of any outstanding Letter of Credit, such Letter of Credit Application
shall specify in form and detail satisfactory to the L/C Issuer (A) the Letter
of Credit to be amended; (B) the proposed date of amendment thereof (which shall
be a Business Day); (C) the nature of the proposed amendment; and (D) such other
matters as the L/C Issuer may require. Additionally, the Borrower for whose
account the Letter of Credit is being issued shall furnish through the
Administrative Borrower to the L/C Issuer and the Administrative Agent such
other documents and information pertaining to such requested Letter of Credit
issuance or amendment, including any Issuer Documents, as the L/C Issuer or the
Administrative Agent may reasonably require.

 

(ii) Promptly after receipt of any Letter of Credit Application, the L/C Issuer
will confirm with the Administrative Agent (by telephone or in writing) that the
Administrative Agent has received a copy of such Letter of Credit Application
from the Administrative Borrower and, if not, the L/C Issuer will provide the
Administrative Agent with a copy thereof. Unless the L/C Issuer has received
written notice from any Lender, the Administrative Agent or any Loan Party, at
least one Business Day prior to the requested date of issuance or amendment of
the applicable Letter of Credit, that one or more applicable conditions
contained in Article IV shall not then be satisfied, then, subject to the terms
and conditions hereof, the L/C Issuer shall, on the requested date, issue a
Letter of Credit for the account of the Borrower for whose account the Letter of
Credit is being issued or enter into the applicable amendment, as the case may
be, in each case in accordance with the L/C Issuer’s usual and customary
business practices. Immediately upon the issuance of each Letter of Credit, each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the L/C Issuer a risk participation in such Letter of Credit in an
amount equal to the product of such Lender’s Applicable Percentage times the
amount of such Letter of Credit. The Administrative Agent will promptly notify
each Lender of the issuance or amendment of any Letter of Credit.

 

(iii) If the Administrative Borrower so requests in any applicable Letter of
Credit Application, the L/C Issuer may, in its sole and absolute discretion,
agree to issue a Letter of Credit that has automatic extension provisions (each,
an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension
Letter of Credit must permit the L/C Issuer to prevent any such extension at
least once in each twelve-month period (commencing with the date of issuance of
such Letter of Credit) by giving prior notice to the beneficiary thereof not
later than a day (the “Non-Extension Notice Date”) in each such twelve-month
period to be agreed upon at the time such Letter of Credit is issued. Unless
otherwise directed by the L/C Issuer, the Administrative Borrower shall not be
required to make a specific request to the L/C Issuer for any such extension.
Once an Auto- Extension Letter of Credit has been issued, the Lenders shall be
deemed to have authorized (but may not require) the L/C Issuer to permit the
extension of such Letter of Credit at any time to an expiry date not later than
the Letter of Credit Expiration Date; provided, however, that the L/C Issuer
shall not permit any such extension if (A) the L/C

 

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Issuer has determined that it would not be permitted, or would have no
obligation, at such time to issue such Letter of Credit in its revised form (as
extended) under the terms hereof (by reason of the provisions of clause (ii) or
(iii) of Section 2.03(a) or otherwise), or (B) it has received notice (which may
be by telephone or in writing) on or before the day that is five (5) Business
Days before the Non- Extension Notice Date (1) from the Administrative Agent
that the Required Lenders have elected not to permit such extension or (2) from
the Administrative Agent, any Lender or a Borrower that one or more of the
applicable conditions specified in Section 4.02 is not then satisfied, and in
such case directing the L/C Issuer not to permit such extension.

 

(iv) Promptly after its delivery of any Letter of Credit or any amendment to a
Letter of Credit to an advising bank with respect thereto or to the beneficiary
thereof, the L/C Issuer will also deliver to the Administrative Borrower and the
Administrative Agent a true and complete copy of such Letter of Credit or
amendment.

 

(v) Any Lender with a Commitment (in such capacity, a “Discretionary L/C
Issuer”) may from time to time, at the written request of the Administrative
Borrower (with a copy to the Administrative Agent) and with the consent of the
Administrative Agent (such consent not to be unreasonably withheld), and in such
Lender’s sole discretion, agree to issue one or more Letters of Credit for the
account of the Borrower designated in such request on the same terms and
conditions in all respects as are applicable to the Letters of Credit issued by
the L/C Issuer hereunder by executing and delivering to the Administrative Agent
a written agreement to such effect, among (and in form and substance
satisfactory to) the Borrowers, the Administrative Agent and such Discretionary
L/C Issuer. With respect to each of the Letters of Credit issued (or to be
issued) thereby, each of the Discretionary L/C Issuers shall have all of the
same rights and obligations under and in respect of this Agreement and the other
Loan Documents, and shall be entitled to all of the same benefits (including,
without limitation, the rights, obligations and benefits set forth in
Sections 2.03, 9.07 and 10.01), as are afforded to the L/C Issuer hereunder and
thereunder. The Administrative Agent shall promptly notify each of the Lenders
with a Commitment of the appointment of any Discretionary L/C Issuer. Each
Discretionary L/C Issuer shall provide to the Administrative Agent, on a monthly
basis, a report that details the activity with respect to each Letter of Credit
issued by such Discretionary L/C Issuer (including an indication of the maximum
amount then in effect with respect to each such Letter of Credit).

 

(vi) The L/C Issuer may, in its sole discretion, issue one or more Letters of
Credit hereunder, with expiry dates that would occur after the Letter of Credit
Expiration Date (and after the Maturity Date), to the extent the Borrowers have
agreed to fully Cash Collateralize the L/C Obligations relating to such Letters
of Credit on the date that is five (5) Business Days prior to the Maturity Date
(the “Mandatory Cash Collateralization Date”) in accordance with the terms of
Section 2.03(g). In the event the Borrowers fail to Cash Collateralize the
outstanding L/C Obligations on the Mandatory Cash Collateralization Date, each
outstanding Letter of Credit shall automatically be deemed to be drawn in full
and the Borrowers shall be deemed to have requested a Base Rate Committed Loan
to be funded by the Lenders on the Mandatory Cash Collateralization Date to
reimburse such drawing (with the proceeds of such Loan being used to Cash

 

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Collateralize outstanding L/C Obligations as set forth in Section 2.03(g)) in
accordance with the provisions of Section 2.03(c). If a Base Rate Committed Loan
cannot be made because the conditions set forth in Section 4.02 cannot be
satisfied or for any other reason, the Borrowers shall be deemed to have
incurred an L/C Borrowing from the L/C Issuer and each Lender shall be obligated
to fund its Applicable Percentage of such L/C Borrowing in the form of an L/C
Advance in accordance with the provisions of Section 2.03(c) (with the proceeds
of such L/C Advance being used to Cash Collateralize outstanding L/C Obligations
as set forth in Section 2.03(g)). The funding by a Lender of its Applicable
Percentage of such Base Rate Committed Loan or such L/C Advance, as applicable,
to Cash Collateralize the outstanding L/C Obligations on the Mandatory Cash
Collateralization Date shall be deemed payment by such Lender in respect of its
participation interest in such L/C Obligations.

 

(c) Drawings and Reimbursements; Funding of Participations.

 

(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a
drawing under such Letter of Credit, the L/C Issuer shall notify the
Administrative Borrower and the Administrative Agent thereof. Not later than
11:00 a.m. on the date of any payment by the L/C Issuer under a Letter of Credit
to be reimbursed in Dollars, or the Applicable Time on the date of any payment
by the L/C Issuer under a Letter of Credit to be reimbursed in an Alternative
Currency (each such date, an “Honor Date”), the Borrowers shall reimburse the
L/C Issuer through the Administrative Agent in an amount equal to the amount of
such drawing. In the case of a Letter of Credit denominated in Dollars, the
Borrowers shall reimburse the L/C Issuer in Dollars. In the case of a Letter of
Credit denominated in an Alternative Currency, the Borrowers shall reimburse the
L/C Issuer in Dollars unless the L/C Issuer (at its option) shall specify in
such notice that it will require payment in the currency in which the drawing is
made. In the case of any such reimbursement in Dollars of a drawing under a
Letter of Credit denominated in an Alternative Currency, the L/C Issuer shall
notify the Administrative Borrower of the Dollar Equivalent of the amount of the
drawing promptly following the determination thereof. If the Borrowers fail to
so reimburse the L/C Issuer by such time, the Administrative Agent shall
promptly notify each Lender of the Honor Date, the amount of the unreimbursed
drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Applicable
Percentage thereof. In such event, the Borrowers shall be deemed to have
requested a Committed Borrowing of Base Rate Committed Loans to be disbursed on
the Honor Date in an amount equal to the Unreimbursed Amount, without regard to
the minimum and multiples specified in Section 2.02 for the principal amount of
Base Rate Loans, but subject to the amount of the unutilized portion of the
Aggregate Commitments and the conditions set forth in Section 4.02 (other than
the delivery of a Loan Notice). Any notice given by the L/C Issuer or the
Administrative Agent pursuant to this Section 2.03(c)(i) may be given by
telephone if immediately confirmed in writing; provided that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of
such notice.

 

(ii) Each Lender (including the Lender acting as L/C Issuer) shall upon any
notice pursuant to Section 2.03(c)(i) make funds available to the Administrative
Agent for the account of the L/C Issuer at the Administrative Agent’s Office in
Dollars in an

 

39

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amount equal to its Applicable Percentage of the Unreimbursed Amount not later
than 11:00 a.m. on the Business Day specified in such notice by the
Administrative Agent, whereupon, subject to the provisions of
Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed
to have made a Base Rate Committed Loan to the Borrowers in such amount. The
Administrative Agent shall remit the funds so received to the L/C Issuer in
Dollars, or if requested by the L/C Issuer, the equivalent amount thereof in an
Alternative Currency as determined by the Administrative Agent at such time on
the basis of the Spot Rate (determined as of such funding date) for the purchase
of such Alternative Currency with Dollars.

 

(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a
Committed Borrowing of Base Rate Loans because the conditions set forth in
Section 4.02 cannot be satisfied or for any other reason, the Borrowers shall be
deemed to have incurred from the L/C Issuer an L/C Borrowing in the amount of
the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be
due and payable on demand (together with interest) and shall bear interest at
the Default Rate. In such event, each Lender’s payment to the Administrative
Agent for the account of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be
deemed payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Lender in satisfaction of its participation
obligation under this Section 2.03.

 

(iv) Until each Lender funds its Committed Loan or L/C Advance pursuant to this
Section 2.03(c) to reimburse the L/C Issuer for any amount drawn under any
Letter of Credit, interest in respect of such Lender’s Applicable Percentage of
such amount shall be solely for the account of the L/C Issuer.

 

(v) Each Lender’s obligation to make Committed Loans or L/C Advances to
reimburse the L/C Issuer for amounts drawn under Letters of Credit, as
contemplated by this Section 2.03(c), shall be absolute and unconditional and
shall not be affected by any circumstance, including (A) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have
against the L/C Issuer, the Borrowers or any other Person for any reason
whatsoever; (B) the occurrence or continuance of a Default; (C) any other
occurrence, event or condition, whether or not similar to any of the foregoing;
or (D) with respect to the obligation of each Lender to fund and satisfy its
participation in an L/C Borrowing in accordance with this Section 2.03, the
occurrence of the Letter of Credit Expiration Date or the Maturity Date or the
termination of the Commitments hereunder; provided, however, that each Lender’s
obligation to make Committed Loans pursuant to this Section 2.03(c) is subject
to the conditions set forth in Section 4.02 (other than delivery by the
Administrative Borrower of a Committed Loan Notice). No such making of an L/C
Advance shall relieve or otherwise impair the obligation of the Borrowers to
reimburse the L/C Issuer for the amount of any payment made by the L/C Issuer
under any Letter of Credit, together with interest as provided herein.

 

(vi) If any Lender fails to make available to the Administrative Agent for the
account of the L/C Issuer any amount required to be paid by such Lender pursuant
to the foregoing provisions of this Section 2.03(c) by the time specified in
Section 2.03(c)(ii), the L/C Issuer shall be entitled to recover from such
Lender (acting through the

 

40

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Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
is immediately available to the L/C Issuer at a rate per annum equal to the
greater of the Federal Funds Rate and a rate determined by the L/C Issuer in
accordance with banking industry rules on interbank compensation. A certificate
of the L/C Issuer submitted to any Lender (through the Administrative Agent)
with respect to any amounts owing under this clause (vi) shall be conclusive
absent manifest error.

 

(d) Repayment of Participations.

 

(i) At any time after the L/C Issuer has made a payment under any Letter of
Credit and has received from any Lender such Lender’s L/C Advance in respect of
such payment in accordance with Section 2.03(c), if the Administrative Agent
receives for the account of the L/C Issuer any payment in respect of the related
Unreimbursed Amount or interest thereon (whether directly from the Borrowers or
otherwise, including proceeds of Cash Collateral applied thereto by the
Administrative Agent), the Administrative Agent will distribute to such Lender
its Applicable Percentage thereof (appropriately adjusted, in the case of
interest payments, to reflect the period of time during which such Lender’s L/C
Advance was outstanding) in the same funds as those received by the
Administrative Agent.

 

(ii) If any payment received by the Administrative Agent for the account of the
L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any
of the circumstances described in Section 10.06 (including pursuant to any
settlement entered into by the L/C Issuer in its discretion), each Lender shall
pay to the Administrative Agent for the account of the L/C Issuer its Applicable
Percentage thereof on demand of the Administrative Agent, plus interest thereon
from the date of such demand to the date such amount is returned by such Lender,
at a rate per annum equal to the Federal Funds Rate from time to time in effect.
The obligations of the Lenders under this clause shall survive the payment in
full of the Obligations and the termination of this Agreement.

 

(e) Obligations Absolute. The obligation of the Borrowers to reimburse the L/C
Issuer for each drawing under each Letter of Credit and to repay each L/C
Borrowing shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
including the following:

 

(i) any lack of validity or enforceability of such Letter of Credit, this
Agreement, or any other agreement or instrument relating thereto;

 

(ii) the existence of any claim, counterclaim, set-off, defense or other right
that any Borrower or any Subsidiary may have at any time against any beneficiary
or any transferee of such Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the L/C Issuer or any other
Person, whether in connection with this Agreement, the transactions contemplated
hereby or by such Letter of Credit or any agreement or instrument relating
thereto, or any unrelated transaction;

 

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(iii) any draft, demand, certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
or any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under such Letter of Credit;

 

(iv) any payment by the L/C Issuer under such Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of such Letter of Credit; or any payment made by the L/C Issuer under such
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of such Letter of Credit, including any arising in connection with
any proceeding under any Debtor Relief Law;

 

(v) any adverse change in the relevant exchange rates or in the availability of
the relevant Alternative Currency to any Borrower or any Subsidiary or in the
relevant currency markets generally; or

 

(vi) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, any Borrower or any
Subsidiary.

 

The Administrative Borrower shall promptly examine a copy of each Letter of
Credit and each amendment thereto that is delivered to it and, in the event of
any claim of noncompliance with the Administrative Borrower’s’ instructions or
other irregularity, the Administrative Borrower will immediately notify the L/C
Issuer. The Borrowers shall be conclusively deemed to have waived any such claim
against the L/C Issuer and its correspondents unless such notice is given as
aforesaid.

 

(f) Role of L/C Issuer. Each Lender and each Borrower agree that, in paying any
drawing under a Letter of Credit, the L/C Issuer shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. None of the L/C Issuer,
the Administrative Agent, any of their respective Related Parties nor any
correspondent, participant or assignee of the L/C Issuer shall be liable to any
Lender for (i) any action taken or omitted in connection herewith at the request
or with the approval of the Lenders or the Required Lenders, as applicable;
(ii) any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any document or instrument related to any Letter of Credit or
Issuer Document. The Borrowers hereby assume all risks of the acts or omissions
of any beneficiary or transferee with respect to its use of any Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Borrowers’ pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. None
of the L/C Issuer, the Administrative Agent, any of their respective Related
Parties nor any correspondent, participant or assignee of the L/C Issuer, shall
be liable or responsible for any of the matters described in clauses (i) through
(v) of Section 2.03(e); provided, however, that anything in such clauses to the
contrary

 

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notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the
L/C Issuer may be liable to the Borrowers, to the extent, but only to the
extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrowers which the Borrowers prove were caused by the L/C
Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and not in limitation
of the foregoing, the L/C Issuer may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary, and the L/C Issuer shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.

 

(g) Cash Collateral.

 

(i) Upon the request of the Administrative Agent, (A) if the L/C Issuer has
honored any full or partial drawing request under any Letter of Credit and such
drawing has resulted in an L/C Borrowing, or (B) if, as of the Letter of Credit
Expiration Date, any Letter of Credit may for any reason remain outstanding and
partially or wholly undrawn, the Borrowers shall immediately Cash Collateralize
the then Outstanding Amount of all L/C Obligations (in an amount equal to such
Outstanding Amount determined as of the date of such L/C Borrowing or the
Mandatory Cash Collateralization Date, as the case may be).

 

(ii) In addition, if the Administrative Agent notifies the Administrative
Borrower at any time that the Outstanding Amount of all L/C Obligations at such
time exceeds the Letter of Credit Sublimit then in effect, then, within two
Business Days after receipt of such notice, the Borrowers shall Cash
Collateralize the L/C Obligations in an amount equal to the amount by which the
Outstanding Amount of all L/C Obligations exceeds the Letter of Credit Sublimit.

 

(iii) The Administrative Agent may, at any time and from time to time after the
initial deposit of Cash Collateral, request that additional Cash Collateral be
provided in order to protect against the results of exchange rate fluctuations.

 

For purposes hereof, “Cash Collateralize” means to pledge and deposit with or
deliver to the Administrative Agent, until the cause for such cash collateral no
longer exists, for the benefit of the L/C Issuer and the Lenders, as collateral
for the outstanding L/C Obligations, cash or deposit account balances in an
amount equivalent to the outstanding L/C Obligations pursuant to documentation
in form and substance reasonably satisfactory to the Administrative Agent and
the L/C Issuer (which documents are hereby consented to by the Lenders). The
Borrowers hereby grant to the Administrative Agent, for the benefit of the L/C
Issuer and the Lenders, a security interest in all such cash, deposit accounts
and all balances therein and all proceeds of the foregoing; provided that the
security interest granted hereunder shall not be effective until such time as
the Borrowers are obligated to Cash Collateralize the L/C Obligations as set
forth above. Cash

 

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collateral shall be maintained in blocked, non-interest bearing deposit accounts
at Bank of America.

 

(h) Applicability of ISP AND UCP. Unless otherwise expressly agreed by the L/C
Issuer and the Borrowers when a Letter of Credit is issued (including any such
agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP
shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform
Customs and Practice for Documentary Credits, as most recently published by the
International Chamber of Commerce at the time of issuance shall apply to each
commercial Letter of Credit.

 

(i) Letter of Credit Fees. The Borrowers shall pay to the Administrative Agent
for the account of each Lender in accordance with its Applicable Percentage in
Dollars a Letter of Credit fee for each Letter of Credit equal to the Applicable
Rate times the Dollar Equivalent of the daily amount available to be drawn under
such Letter of Credit. For purposes of computing the daily amount available to
be drawn under any Letter of Credit, the amount of such Letter of Credit shall
be determined in accordance with Section 1.10. Such letter of credit fees shall
be computed on a quarterly basis in arrears. Such letter of credit fees shall be
due and payable on the first Business Day after the end of each March, June,
September and December, commencing with the first such date to occur after the
issuance of such Letter of Credit, on the Letter of Credit Expiration Date and
thereafter on demand. If there is any change in the Applicable Rate during any
quarter, the daily amount available to be drawn under each Letter of Credit
shall be computed and multiplied by the Applicable Rate separately for each
period during such quarter that such Applicable Rate was in effect.

 

(j) Fronting Fee and Processing Charges Payable to L/C Issuer. The Borrowers
shall pay directly to the L/C Issuer for its own account a fronting fee in
Dollars or such Alternative Currency as shall be separately agreed, for each
Letter of Credit equal to 0.125% times the Dollar Equivalent of the daily amount
available to be drawn under such Letter of Credit. For purposes of computing the
daily amount available to be drawn under any Letter of Credit, the amount of
such Letter of Credit shall be determined in accordance with Section 1.10. Such
letter of credit fees shall be computed on a quarterly basis in arrears. Such
fronting fee for each Letter of Credit shall be due and payable on the first
Business Day after the end of each March, June, September and December,
commencing with the first such date to occur after the issuance of such Letter
of Credit, on the Letter of Credit Expiration Date and thereafter on demand. In
addition, the Borrowers shall pay directly to the L/C Issuer for its own account
the customary issuance, presentation, amendment and other processing fees, and
other standard costs and charges, of the L/C Issuer relating to letters of
credit as from time to time in effect in Dollars or such Alternative Currency as
shall be separately agreed. Such customary fees and standard costs and charges
are due and payable on demand and are nonrefundable.

 

(k) Conflict with L/C Documents. In the event of any conflict between this
Agreement and any L/C Document (including any Letter of Credit Application),
this Agreement shall control with respect to the Persons who are parties to this
Agreement and such L/C Document. Notwithstanding the generality of the
foregoing, each of the Reimbursement Agreements set forth on Schedule 2.03 is
and shall be deemed amended such that the representations and warranties,
covenants and events of default (and definitions related thereto) set out in
such Reimbursement Agreements (the “Existing Provisions”), except to the extent
they relate specifically to the relevant

 

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bonds or relevant remarketing program, conform with the representations and
warranties, covenants and events of default (and definitions related thereto)
set out in this Agreement (the “Incorporated Provisions”). Such amendments shall
survive (i) the payment in full of all obligations due the Lenders by the
Borrowers under this Agreement, (ii) the termination (for any reason) of this
Agreement, (iii) the sale or participation (in whole or in part) of a Lender’s
interest in this Agreement, or (iv) any other event which has the effect of
terminating the obligations of the Borrowers to the Lenders under this
Agreement. Upon the happening of one of the events set forth in the immediately
preceding sentence, the Borrowers agree to promptly execute a modification of
the relevant Reimbursement Agreement(s) to confirm such amendment.
Notwithstanding the preceding sentence or the failure of any such modification
to be executed, the Borrowers must remain in compliance with the Incorporated
Provisions as if set forth in the relevant Reimbursement Agreement(s). Any
future modification of or amendment to the Incorporated Provisions shall be a
modification of or amendment to the relevant Reimbursement Agreement(s) for
purposes of compliance with such agreements. Likewise, if the Administrative
Agent and the Required Lenders grant a waiver of compliance of the Incorporated
Provisions for any period, such waiver shall be deemed to be a waiver of
compliance of the relevant Reimbursement Agreement(s) for the limited period of
time for which the waiver was granted.

 

  2.04 Swing Line Loans.

 

(a) The Swing Line. Subject to the terms and conditions set forth herein, the
Swing Line Lender agrees to make loans (each such loan, a “Swing Line Loan”) for
the account of any of the Borrowers from time to time on any Business Day during
the Availability Period in an aggregate amount not to exceed at any time
outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that
such Swing Line Loans, when aggregated with the Applicable Percentage of the
Outstanding Amount of Committed Loans and L/C Obligations of the Lender acting
as Swing Line Lender, may exceed the amount of such Lender’s Commitment;
provided, however, that after giving effect to any Swing Line Loan, (i) the
Total Outstandings shall not exceed the Aggregate Commitments, and (ii) the
aggregate Outstanding Amount of the Committed Loans of any Lender, plus such
Lender’s Applicable Percentage of the Outstanding Amount of all L/C Obligations,
plus such Lender’s Applicable Percentage of the Outstanding Amount of all Swing
Line Loans shall not exceed such Lender’s Commitment. Within the foregoing
limits, and subject to the other terms and conditions hereof, any of the
Borrowers may borrow under this Section 2.04, prepay under Section 2.05, and
reborrow under this Section 2.04. Immediately upon the making of a Swing Line
Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally
agrees to, purchase from the Swing Line Lender a risk participation in such
Swing Line Loan in an amount equal to the product of such Lender’s Applicable
Percentage times the amount of such Swing Line Loan.

 

(b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the
Administrative Borrower’s irrevocable notice to the Swing Line Lender and the
Administrative Agent, which may be given by telephone (provided that such
telephonic notice complies with the informational requirements of the form of
Swing Line Loan Notice attached hereto). Each such notice must be received by
the Swing Line Lender and the Administrative Agent not later than 12:00 noon on
the requested borrowing date, and shall specify (i) the amount to be borrowed,
which shall be a minimum of $100,000 (and in integral multiples of $100,000),
(ii) the requested borrowing date, which shall be a Business Day and (iii) the
Borrower to which the funds are to

 

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be disbursed. Each such telephonic notice must be confirmed promptly by delivery
to the Swing Line Lender and the Administrative Agent of a written Swing Line
Loan Notice, appropriately completed and signed by a Responsible Officer of the
Administrative Borrower. Promptly after receipt by the Swing Line Lender of any
telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the
Administrative Agent (by telephone or in writing) that the Administrative Agent
has also received such Swing Line Loan Notice and, if not, the Swing Line Lender
will notify the Administrative Agent (by telephone or in writing) of the
contents thereof. Unless the Swing Line Lender has received notice (by telephone
or in writing) from the Administrative Agent (including at the request of any
Lender) prior to 12:00 noon on the date of the proposed Swing Line Borrowing
(A) directing the Swing Line Lender not to make such Swing Line Loan as a result
of the limitations set forth in the proviso to the first sentence of
Section 2.04(a), or (B) that one or more of the applicable conditions specified
in Article IV is not then satisfied, then, subject to the terms and conditions
hereof, the Swing Line Lender will, not later than 2:30 p.m. on the borrowing
date specified in such Swing Line Loan Notice, make the amount of its Swing Line
Loan available to the Borrowers.

 

(c) Refinancing of Swing Line Loans.

 

(i) The Swing Line Lender at any time in its sole and absolute discretion may
request, on behalf of the Borrowers (which hereby irrevocably authorizes the
Swing Line Lender to so request on its behalf), that each Lender make a Base
Rate Committed Loan in an amount equal to such Lender’s Applicable Percentage of
the amount of Swing Line Loans then outstanding. Such request shall be made in
writing (which written request shall be deemed to be a Committed Loan Notice for
purposes hereof) and in accordance with the requirements of Section 2.02,
without regard to the minimum and multiples specified therein for the principal
amount of Base Rate Loans, but subject to the unutilized portion of the
Aggregate Commitments and the conditions set forth in Section 4.02. The Swing
Line Lender shall furnish the Administrative Borrower with a copy of the
applicable Committed Loan Notice promptly after delivering such notice to the
Administrative Agent. Each Lender shall make an amount equal to its Applicable
Percentage of the amount specified in such Committed Loan Notice available to
the Administrative Agent in immediately available funds for the account of the
Swing Line Lender at the Administrative Agent’s Office not later than 11:00 a.m.
on the day specified in such Committed Loan Notice, whereupon, subject to
Section 2.04(c)(ii), each Lender that so makes funds available shall be deemed
to have made a Base Rate Committed Loan to the Borrowers in such amount. The
Administrative Agent shall remit the funds so received to the Swing Line Lender.

 

(ii) If for any reason any Swing Line Loan cannot be refinanced by such a
Committed Borrowing in accordance with Section 2.04(c)(i), the request for Base
Rate Committed Loans submitted by the Swing Line Lender as set forth herein
shall be deemed to be a request by the Swing Line Lender that each of the
Lenders fund its risk participation in the relevant Swing Line Loan and each
Lender’s payment to the Administrative Agent for the account of the Swing Line
Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such
participation.

 

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(iii) If any Lender fails to make available to the Administrative Agent for the
account of the Swing Line Lender any amount required to be paid by such Lender
pursuant to the foregoing provisions of this Section 2.04(c) by the time
specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to
recover from such Lender (acting through the Administrative Agent), on demand,
such amount with interest thereon for the period from the date such payment is
required to the date on which such payment is immediately available to the Swing
Line Lender at a rate per annum equal to the Federal Funds Rate from time to
time in effect. A certificate of the Swing Line Lender submitted to any Lender
(through the Administrative Agent) with respect to any amounts owing under this
clause (iii) shall be conclusive absent manifest error.

 

(iv) Each Lender’s obligation to make Committed Loans or to purchase and fund
risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (A) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, the Borrowers or any
other Person for any reason whatsoever, (B) the occurrence or continuance of a
Default, or (C) any other occurrence, event or condition, whether or not similar
to any of the foregoing; provided, however, that each Lender’s obligation to
make Committed Loans pursuant to this Section 2.04(c) is subject to the
conditions set forth in Section 4.02. No such funding of risk participations
shall relieve or otherwise impair the obligation of the Borrowers to repay Swing
Line Loans, together with interest as provided herein.

 

(d) Repayment of Participations.

 

(i) At any time after any Lender has purchased and funded a risk participation
in a Swing Line Loan, if the Swing Line Lender receives any payment on account
of such Swing Line Loan, the Swing Line Lender will distribute to such Lender
its Applicable Percentage of such payment (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Lender’s
risk participation was funded) in the same funds as those received by the Swing
Line Lender.

 

(ii) If any payment received by the Swing Line Lender in respect of principal or
interest on any Swing Line Loan is required to be returned by the Swing Line
Lender under any of the circumstances described in Section 10.06 (including
pursuant to any settlement entered into by the Swing Line Lender in its
discretion), each Lender shall pay to the Swing Line Lender its Applicable
Percentage thereof on demand of the Administrative Agent, plus interest thereon
from the date of such demand to the date such amount is returned, at a rate per
annum equal to the Federal Funds Rate. The Administrative Agent will make such
demand upon the request of the Swing Line Lender.

 

(e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be
responsible for invoicing the Borrowers for interest on the Swing Line Loans.
Until each Lender funds its Base Rate Committed Loan or risk participation
pursuant to this Section 2.04 to refinance such Lender’s Applicable Percentage
of any Swing Line Loan, interest in respect of such Applicable Percentage shall
be solely for the account of the Swing Line Lender.

 

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(f) Payments Directly to Swing Line Lender. The Borrowers shall make all
payments of principal and interest in respect of the Swing Line Loans directly
to the Swing Line Lender.

 

  2.05 Prepayments.

 

(a) Voluntary Prepayments. The Borrowers shall have the right to prepay Loans in
whole or in part from time to time; provided, however, that (i) a Notice of
Prepayment must be received by the Administrative Agent not later than 9:00 a.m.
(A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans
and (B) on the date of prepayment of Base Rate Committed Loans and (ii) each
partial prepayment of (A) Eurodollar Rate Loans shall be in a minimum principal
amount of $5,000,000 and integral multiples of $1,000,000 in excess thereof (or,
the then remaining principal balance of the Committed Loans, if less) and
(B) Base Rate Loans shall be in a minimum principal amount of $500,000 and
integral multiples of $100,000 in excess thereof (or, the then remaining
principal balance of the Committed Loans, if less) or, in the case of Swing Line
Loans, in a minimum principal amount of $500,000 and multiples of $100,000 in
excess thereof. Subject to the foregoing terms, amounts prepaid under this
Section 2.05(a) shall be applied as the Administrative Borrower may notify the
Administrative Agent; provided that if the Administrative Borrower shall fail to
specify its elected application with respect to any voluntary prepayment in the
Notice of Prepayment, such voluntary prepayment shall be applied first to Swing
Line Loans and then to Committed Loans, and with respect to Committed Loans
first to Base Rate Loans and then to Eurodollar Loans in direct order of
Interest Period maturities. All prepayments under this Section 2.05(a) shall be
subject to Section 3.05, but otherwise without premium or penalty and shall be
accompanied by interest on the principal amount prepaid through the date of
prepayment.

 

(b) If for any reason the Total Outstandings at any time exceed the Aggregate
Commitments then in effect, the Borrowers shall immediately either prepay Loans
or Cash Collateralize the L/C Obligations or both in an aggregate amount equal
to such excess; provided, however, that the Borrowers shall not be required to
Cash Collateralize the L/C Obligations pursuant to this Section 2.05(b) unless
after the prepayment in full of the Loans the Total Outstandings exceed the
Aggregate Commitments then in effect.

 

  2.06 Termination or Reduction of Commitments.

 

The Borrowers may, upon notice from the Administrative Borrower to the
Administrative Agent, terminate the Aggregate Commitments, or from time to time
permanently reduce the Aggregate Commitments; provided that (i) any such notice
shall be received by the Administrative Agent not later than 9:00 a.m. five
(5) Business Days prior to the date of termination or reduction, (ii) any such
partial reduction shall be in an aggregate amount of $5,000,000 or any whole
multiple of $1,000,000 in excess thereof, (iii) the Borrowers shall not
terminate or reduce the Aggregate Commitments if, after giving effect thereto
and to any concurrent prepayments hereunder, the Total Outstandings would exceed
the Aggregate Commitments, and (iv) if, after giving effect to any reduction of
the Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line
Sublimit exceeds the amount of the Aggregate Commitment, the Letter of Credit
Sublimit and/or the Swing Line Sublimit, as applicable, shall be automatically
reduced by the amount of such excess. The Administrative Agent will

 

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promptly notify the Lenders of any such notice of termination or reduction of
the Aggregate Commitments. Any reduction of the Aggregate Commitments shall be
applied to the Commitment of each Lender according to its Applicable Percentage.
All commitment fees accrued until the effective date of any termination of the
Aggregate Commitments shall be paid on the effective date of such termination.

 

  2.07 Repayment of Loans.

 

(a) Revolving Loans. The Borrowers shall repay to the Lenders on the Maturity
Date the aggregate principal amount of Committed Loans outstanding on such date.

 

(b) Swingline Loans. The Borrowers shall repay each Swing Line Loan on the
earlier to occur of (i) the date seven (7) Business Days after such Loan is made
and (ii) the Maturity Date.

 

  2.08 Interest.

 

(a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate
Loan shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to the Eurodollar Rate for such
Interest Period plus the Applicable Rate; (ii) each Base Rate Committed Loan
shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Base Rate plus the
Applicable Rate; and (iii) each Swing Line Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to, at the Borrowers’ option, (x) the Base Rate plus the
Applicable Rate or (y) such other rate mutually agreed to by the Borrowers and
the Swing Line Lender at the time of the borrowing of such Swing Line Loan.

 

(b) If any amount payable by the Borrowers under any Loan Document is not paid
when due (without regard to any applicable grace periods), whether at stated
maturity, by acceleration or otherwise, such amount shall thereafter bear
interest at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws. Furthermore,
unless otherwise agreed to by the Required Lenders while any Event of Default
exists, the Borrowers shall pay interest on the principal amount of all
outstanding Obligations hereunder at a fluctuating interest rate per annum at
all times equal to the Default Rate to the fullest extent permitted by
applicable Laws. Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be due and payable upon demand.

 

(c) Interest on each Loan shall be due and payable in arrears on each Interest
Payment Date applicable thereto and at such other times as may be specified
herein. Interest hereunder shall be due and payable in accordance with the terms
hereof before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.

 

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  2.09 Fees.

 

In addition to certain fees described in subsections (i) and (j) of
Section 2.03:

 

(a) Commitment Fee. The Borrowers shall pay to the Administrative Agent for the
account of each Lender in accordance with its Applicable Percentage, a
commitment fee equal to the Applicable Rate times the actual daily amount by
which the Aggregate Commitments exceed the sum of (i) the Outstanding Amount of
Committed Loans and (ii) the Outstanding Amount of L/C Obligations. The
commitment fee shall accrue at all times during the Availability Period,
including at any time during which one or more of the conditions in Article IV
is not met, and shall be due and payable quarterly in arrears on the first
Business Day to occur after the last day of each March, June, September and
December, commencing with the first such date to occur after the Closing Date,
and on the Maturity Date. The commitment fee shall be calculated quarterly in
arrears, and if there is any change in the Applicable Rate during any quarter,
the actual daily amount shall be computed and multiplied by the Applicable Rate
separately for each period during such quarter that such Applicable Rate was in
effect.

 

(b) Other Fees. The Borrowers shall pay to the Arranger and the Administrative
Agent for their own respective accounts fees in the amounts and at the times
specified in the Fee Letter. Such fees shall be fully earned when paid and shall
not be refundable for any reason whatsoever.

 

  2.10 Computation of Interest and Fees.

 

All computations of interest for Base Rate Loans when the Base Rate is
determined by Bank of America’s “prime rate” shall be made on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed. All other
computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more fees or interest, as applicable,
being paid than if computed on the basis of a 365-day year). Interest shall
accrue on each Loan for the day on which the Loan is made, and shall not accrue
on a Loan, or any portion thereof, for the day on which the Loan or such portion
is paid, provided that any Loan that is repaid on the same day on which it is
made shall, subject to Section 2.12(a), bear interest for one day.

 

  2.11 Evidence of Debt.

 

(a) The Credit Extensions made by each Lender shall be evidenced by one or more
accounts or records maintained by such Lender and by the Administrative Agent in
the ordinary course of business. The accounts or records maintained by the
Administrative Agent and each Lender shall be conclusive absent manifest error
of the amount of the Credit Extensions made by the Lenders to the Borrowers and
the interest and payments thereon. Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of the
Borrowers hereunder to pay any amount owing with respect to the Obligations. In
the event of any conflict between the accounts and records maintained by any
Lender and the accounts and records of the Administrative Agent in respect of
such matters, the accounts and records of the Administrative Agent shall control
in the absence of manifest error. Upon the request of any Lender made through
the Administrative Agent, the Borrowers shall execute and deliver to such Lender
(through the Administrative Agent) a Note, which shall evidence such Lender’s
Loans in addition to such accounts or records. Each Lender may attach schedules
to its Note and endorse thereon the date, Type (if applicable), amount and
maturity of its Loans and payments with respect thereto.

 

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(b) In addition to the accounts and records referred to in subsection (a), each
Lender and the Administrative Agent shall maintain in accordance with its usual
practice accounts or records evidencing the purchases and sales by such Lender
of participations in Letters of Credit and Swing Line Loans. In the event of any
conflict between the accounts and records maintained by the Administrative Agent
and the accounts and records of any Lender in respect of such matters, the
accounts and records of the Administrative Agent shall control in the absence of
manifest error.

 

  2.12 Payments Generally.

 

(a) All payments to be made by the Borrowers shall be made without condition or
deduction for any counterclaim, defense, recoupment or setoff. Except as
otherwise expressly provided herein, all payments by the Borrowers hereunder
shall be made to the Administrative Agent, for the account of the respective
Lenders to which such payment is owed, at the Administrative Agent’s Office in
Dollars and in Same Day Funds not later than 12:00 noon on the date specified
herein. The Administrative Agent will promptly distribute to each Lender its
Applicable Percentage (or other applicable share as provided herein) of such
payment in like funds as received by wire transfer to such Lender’s Lending
Office. All payments received by the Administrative Agent (i) after 2:00 p.m.,
in the case of payments in Dollars, or (ii) after the Applicable Time specified
by the Administrative Agent in the case of payments in an Alternative Currency,
shall in each case be deemed received on the next succeeding Business Day and
any applicable interest or fee shall continue to accrue. If any payment to be
made by the Borrowers shall come due on a day other than a Business Day, payment
shall be made on the next following Business Day, and such extension of time
shall be reflected in computing interest or fees, as the case may be.

 

(b)(i) Funding by Lenders; Presumption by Administrative Agent. Unless the
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Committed Borrowing of Eurodollar Rate Loans (or, in the
case of any Committed Borrowing of Base Rate Loans, prior to 12:00 noon on the
date of such Committed Borrowing) that such Lender will not make available to
the Administrative Agent such Lender’s share of such Committed Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with Section 2.02 (or, in the case of a Committed
Borrowing of Base Rate Loans, that such Lender has made such share available in
accordance with and at the time required by Section 2.02) and may, in reliance
upon such assumption, make available to the Borrowers a corresponding amount. In
such event, if a Lender has not in fact made its share of the applicable
Committed Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrowers severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount in immediately available funds
with interest thereon, for each day from and including the date such amount is
made available to the Borrowers to but excluding the date of payment to the
Administrative Agent, at (A) in the case of a payment to be made by such Lender,
the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation and (B) in the case of a payment to be made by the Borrowers, the
interest rate applicable to Base Rate Loans. If the Borrowers and such Lender
shall pay such interest to the Administrative Agent for the same or an
overlapping period, the Administrative Agent shall promptly remit to the
Borrowers the amount of such interest paid by the Borrowers for such

 

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period. If such Lender pays its share of the applicable Committed Borrowing to
the Administrative Agent, then the amount so paid shall constitute such Lender’s
Committed Loan included in such Committed Borrowing. Any payment by the
Borrowers shall be without prejudice to any claim the Borrowers may have against
a Lender that shall have failed to make such payment to the Administrative
Agent.

 

(ii) Payments by Borrowers; Presumptions by Administrative Agent. Unless the
Administrative Agent shall have received notice from the Administrative Borrower
prior to the date on which any payment is due to the Administrative Agent for
the account of the Lenders or the L/C Issuer hereunder that the Borrowers will
not make such payment, the Administrative Agent may assume that the Borrowers
have made such payment on such date in accordance herewith and may, in reliance
upon such assumption, distribute to the Lenders or the L/C Issuer, as the case
may be, the amount due. In such event, if the Borrowers have not in fact made
such payment, then each of the Lenders or the L/C Issuer, as the case may be,
severally agrees to repay to the Administrative Agent forthwith on demand the
amount so distributed to such Lender or the L/C Issuer, in immediately available
funds with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation.

 

A notice of the Administrative Agent to any Lender or the Borrowers with respect
to any amount owing under this subsection (b) shall be conclusive, absent
manifest error.

 

(c) If any Lender makes available to the Administrative Agent funds for any Loan
to be made by such Lender as provided in the foregoing provisions of this
Article II, and such funds are not made available to the Borrowers by the
Administrative Agent because the conditions to the applicable Credit Extension
set forth in Article IV are not satisfied or waived in accordance with the terms
hereof, the Administrative Agent shall return such funds (in like funds as
received from such Lender) to such Lender, without interest; provided that if
such funds are not returned by the Administrative Agent to the applicable Lender
within one Business Day of receipt thereof by the Administrative Agent, the
funds shall be returned with interest at a rate per annum equal to the Federal
Funds Rate from time to time in effect.

 

(d) The obligations of the Lenders hereunder to make Committed Loans, to fund
participations in Letters of Credit and Swing Line Loans and to make payments
pursuant to Section 10.05(c) are several and not joint. The failure of any
Lender to make any Committed Loan or to fund any such participation on any date
required hereunder shall not relieve any other Lender of its corresponding
obligation to do so on such date, and no Lender shall be responsible for the
failure of any other Lender to so make its Committed Loan or purchase its
participation.

 

(e) Nothing herein shall be deemed to obligate any Lender to obtain the funds
for any Loan in any particular place or manner or to constitute a representation
by any Lender that it has obtained or will obtain the funds for any Loan in any
particular place or manner.

 

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  2.13 Sharing of Payments.

 

If, other than as expressly provided elsewhere herein, any Lender shall obtain
on account of the Committed Loans made by it, or the participations in L/C
Obligations or in Swing Line Loans held by it, any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its ratable share (or other share contemplated hereunder) thereof,
such Lender shall immediately (a) notify the Administrative Agent of such fact,
and (b) purchase from the other Lenders such participations in the Committed
Loans made by them and/or such subparticipations in the participations in L/C
Obligations or Swing Line Loans held by them, as the case may be, as shall be
necessary to cause such purchasing Lender to share the excess payment in respect
of such Committed Loans or such participations, as the case may be, pro rata
with each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from the purchasing Lender under any of the
circumstances described in Section 10.06 (including pursuant to any settlement
entered into by the purchasing Lender in its discretion), such purchase shall to
that extent be rescinded and each other Lender shall repay to the purchasing
Lender the purchase price paid therefor, together with an amount equal to such
paying Lender’s ratable share (according to the proportion of (i) the amount of
such paying Lender’s required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered, without
further interest thereon. The Borrowers agree that any Lender so purchasing a
participation from another Lender may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 10.09) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrowers in the amount of such participation.
The Administrative Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations purchased under this
Section and will in each case notify the Lenders following any such purchases or
repayments. Each Lender that purchases a participation pursuant to this Section
shall from and after such purchase have the right to give all notices, requests,
demands, directions and other communications under this Agreement with respect
to the portion of the Obligations purchased to the same extent as though the
purchasing Lender were the original owner of the Obligations purchased.

 

  2.14 Increase in Aggregate Commitments.

 

(a) Provided there exists no Default, upon notice from the Administrative
Borrower to the Administrative Agent (which shall promptly notify the Lenders),
the Borrowers may from time to time, request an increase in the Aggregate
Commitments in an aggregate amount for all such increases not to exceed
$75,000,000; provided, however, that (i) the maximum amount of the Aggregate
Commitments after giving effect to any such increase shall not exceed
$250,000,000 and (ii) the Borrowers may make a maximum of three such requests.
The aggregate amount of any individual increase hereunder shall be in a minimum
amount of $5,000,000 (and in integral multiples of $1,000,000 in excess
thereof). To achieve the full amount of a requested increase, the Borrowers may
solicit increased commitments from existing Lenders and also invite additional
Eligible Assignees to become Lenders; provided, however, that no existing Lender
shall be obligated and/or required to accept an increase in its Commitment
pursuant to this Section 2.14 unless it specifically consents to such increase
in writing. Any Lender or Eligible Assignee agreeing to increase its Commitment
or provide a new

 

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Commitment pursuant to this Section 2.14 shall, in connection therewith, deliver
to the Administrative Agent a new commitment agreement in form and substance
satisfactory to the Administrative Agent and its counsel.

 

(b) If the Aggregate Commitments are increased in accordance with this Section,
the Administrative Agent and the Borrowers shall determine the effective date
(the “Increase Effective Date”) and the final allocation of such increase. The
Administrative Agent shall promptly notify the Administrative Borrower and the
Lenders of the final allocation of such increase and the Increase Effective Date
and Schedule 2.01 hereto shall be deemed amended to reflect such increase and
final allocation. As a condition precedent to such increase, in addition to any
deliveries pursuant to subsection (a) above, the Borrowers shall deliver to the
Administrative Agent each of the following in form and substance satisfactory to
the Administrative Agent: (1) a certificate of each Loan Party dated as of the
Increase Effective Date (in sufficient copies for each Lender) signed by a
Responsible Officer of such Loan Party (i) certifying and attaching the
resolutions adopted by such Loan Party approving or consenting to such increase,
and (ii) certifying that, before and after giving effect to such increase,
(A) the representations and warranties contained in Article V and the other Loan
Documents are true and correct on and as of the Increase Effective Date, except
to the extent that such representations and warranties specifically refer to an
earlier date, in which case they are true and correct as of such earlier date,
and except that for purposes of this Section 2.14, the representations and
warranties contained in subsections (a) and (b) of Section 5.01 shall be deemed
to refer to the most recent statements furnished pursuant to subsections (a) and
(b), respectively, of Section 6.01, and (B) no Default exists; (2) a statement
of reaffirmation from each Loan Party pursuant to which each such Loan Party
ratifies this Agreement and the other Loan Documents and acknowledges and
reaffirms that, after giving effect to such increase, it is bound by all terms
of this Agreement and the other Loan Documents; (3) if the increase is being
provided by an existing Lender, and such Lender is then in possession of a
Committed Note, a revised Committed Note in favor of such Lender reflecting such
Lender’s Commitment after giving effect to such increase; and (4) if the
increase is being provided by a new Lender, a Committed Note in favor of such
Lender if so requested by such Lender. The Borrowers shall prepay any Committed
Loans outstanding on the Increase Effective Date (and pay any additional amounts
required pursuant to Section 3.05) to the extent necessary to keep the
outstanding Committed Loans ratable with any revised Applicable Percentages
arising from any nonratable increase in the Commitments under this Section.

 

(c) This Section shall supersede any provisions in Sections 2.12 or 10.01 to the
contrary.

 

  2.15 Extension Option.

 

Upon the written request of the Administrative Borrower, which request shall be
delivered to the Administrative Agent not more than 120 days, and not less than
90 days, prior to the then existing Maturity Date, the Lenders shall have the
option, in each Lender’s sole and absolute discretion (without any obligation
whatsoever so to do) of extending the Maturity Date for an additional one-year
period. Each Lender shall notify the Administrative Borrower and the
Administrative Agent not less than 45 days prior to the then existing Maturity
Date whether or not it chooses to extend the Maturity Date for such an
additional one-year period (but any Lender

 

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which fails to give such notice within such period shall be deemed not to have
extended). The Maturity Date shall only be so extended to the first anniversary
thereof if all of the then current Lenders consent to such extension in writing
in accordance with the terms hereof.

 

  2.16 Joint and Several Liability of Borrowers.

 

(a) Each of the Borrowers is accepting joint and several liability hereunder in
consideration of the financial accommodation to be provided by the Lenders under
this Agreement, for the mutual benefit, directly and indirectly, of each of the
Borrowers and in consideration of the undertakings of each of the Borrowers to
accept joint and several liability for the obligations of each of them.

 

(b) Each of the Borrowers jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers with respect to the payment and
performance of all of the Obligations arising under this Agreement and the other
Loan Documents, it being the intention of the parties hereto that all the
Obligations shall be the joint and several obligations of each of the Borrowers
without preferences or distinction among them.

 

(c) If and to the extent that any of the Borrowers shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such
event, the other Borrowers will make such payment with respect to, or perform,
such Obligation.

 

(d) The obligations of each Borrower under the provisions of this Section 2.16
constitute full recourse obligations of such Borrower, enforceable against it to
the full extent of its properties and assets.

 

(e) Except as otherwise expressly provided herein, to the extent permitted by
law, each Borrower (in its capacity as a joint and several obligor in respect of
the obligations of the other Borrowers) hereby waives notice of acceptance of
its joint and several liability, notice of occurrence of any Default or Event of
Default (except to the extent notice is expressly required to be given pursuant
to the terms of this Agreement), or of any demand for any payment under this
Agreement, notice of any action at any time taken or omitted by the
Administrative Agent or the Lenders under or in respect of any of the
obligations hereunder, any requirement of diligence and, generally, all demands,
notices and other formalities of every kind in connection with this Agreement.
Each Borrower hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by the Administrative Agent or the Lenders at any time or times
in respect of any default by the other Borrowers in the performance or
satisfaction of any term, covenant, condition or provision of this Agreement,
any and all other indulgences whatsoever by the Administrative Agent or the
Lenders in respect of any of the obligations hereunder, and the taking,
addition, substitution or release, in whole or in part, at any time or times, of
any security for any of such obligations or the addition, substitution or
release, in whole or in part, of any other Borrower. Without limiting the
generality of the foregoing, each Borrower (in its capacity as a joint and
several obligor in respect of the obligations of the other Borrowers) assents to
any other action or delay in acting or any failure to

 

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act on the part of the Administrative Agent or the Lenders, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations thereunder
which might, but for the provisions of this Section 2.16, afford grounds for
terminating, discharging or relieving such Borrower, in whole or in part, from
any of its obligations under this Section 2.16, it being the intention of each
Borrower that, so long as any of the Obligations hereunder remain unsatisfied,
the obligations of such Borrower under this Section 2.16 shall not be discharged
except by performance and then only to the extent of such performance. The
obligations of each Borrower under this Section 2.16 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Borrower
or a Lender. The joint and several liability of the Borrowers hereunder shall
continue in full force and effect notwithstanding any absorption, merger,
amalgamation or any other change whatsoever in the name, membership,
constitution or place of formation of any Borrower or any of the Lenders.

 

(f) The provisions of this Section 2.16 are made for the benefit of the Lenders
and their successors and assigns, and may be enforced by them from time to time
against any of the Borrowers as often as occasion therefor may arise and without
requirement on the part of the Lenders first to marshal any of its claims or to
exercise any of its rights against the other Borrowers or to exhaust any
remedies available to it against the other Borrowers or to resort to any other
source or means of obtaining payment of any of the Obligations hereunder or to
elect any other remedy. The provisions of this Section 2.16 shall remain in
effect until all the Obligations shall have been paid in full or otherwise fully
satisfied. If at any time, any payment, or any part thereof, made in respect of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Lenders upon the insolvency, bankruptcy or reorganization of any of the
Borrowers, or otherwise, the provisions of this Section 2.16 will forthwith be
reinstated and in effect as though such payment had not been made.

 

(g) Notwithstanding any provision to the contrary contained herein or in any of
the other Loan Documents, to the extent the obligations of any Borrower shall be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of such Borrower
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code of the United States).

 

  2.17 Appointment of the Administrative Borrower.

 

Existing Potlatch and Holdings, as applicable, and TRS and Potlatch Opco hereby
appoint the Administrative Borrower to act as its agent for all purposes under
this Agreement (including, without limitation, with respect to all matters
related to the borrowing and repayment of Loans) and agree that (a) the
Administrative Borrower may execute such documents on behalf of Existing
Potlatch and Holdings, as applicable, and TRS and Potlatch Opco as the
Administrative Borrower deems appropriate in its sole discretion and Existing
Potlatch and Holdings, as applicable, and TRS and Potlatch Opco shall be
obligated by all of the terms of any such document executed on its behalf,
(b) any notice or communication delivered by the Administrative Agent or the
Lender to the Administrative Borrower shall be deemed delivered to Existing
Potlatch and Holdings, as applicable, and TRS and Potlatch Opco and (c) the
Administrative Agent or the Lenders may

 

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accept, and be permitted to rely on, any document, instrument or agreement
executed by the Administrative Borrower on behalf of Existing Potlatch and
Holdings, as applicable, and TRS and Potlatch Opco.

 

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY

 

  3.01 Taxes.

 

(a) Any and all payments by the Borrowers to or for the account of the
Administrative Agent or any Lender under any Loan Document shall be made free
and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the case of the
Administrative Agent and each Lender, taxes imposed on or measured by its
overall net income, and franchise taxes imposed on it (in lieu of net income
taxes), by the jurisdiction (or any political subdivision thereof) under the
Laws of which the Administrative Agent or such Lender, as the case may be, is
organized or maintains a lending office (all such non-excluded taxes, duties,
levies, imposts, deductions, assessments, fees, withholdings or similar charges,
and liabilities being hereinafter referred to as “Taxes”). If the Borrowers
shall be required by any Laws to deduct any Taxes from or in respect of any sum
payable under any Loan Document to the Administrative Agent or any Lender,
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section), each of the Administrative Agent and such Lender receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrowers shall make such deductions, (iii) the Borrowers shall
pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable Laws, and (iv) within 30 days after the
date of such payment, the Borrowers shall furnish to the Administrative Agent
(which shall forward the same to such Lender) the original or a certified copy
of a receipt evidencing payment thereof.

 

(b) In addition, the Borrowers agree to pay any and all present or future stamp,
court or documentary taxes and any other excise or property taxes or charges or
similar levies which arise from any payment made under any Loan Document or from
the execution, delivery, performance, enforcement or registration of, or
otherwise with respect to, any Loan Document (hereinafter referred to as “Other
Taxes”).

 

(c) If the Borrowers shall be required to deduct or pay any Taxes or Other Taxes
from or in respect of any sum payable under any Loan Document to the
Administrative Agent or any Lender, the Borrowers shall also pay to the
Administrative Agent or to such Lender, as the case may be, at the time interest
is paid, such additional amount that the Administrative Agent or such Lender
specifies is necessary to preserve the after-tax yield (after factoring in all
taxes, including taxes imposed on or measured by net income) that the
Administrative Agent or such Lender would have received if such Taxes or Other
Taxes had not been imposed.

 

(d) The Borrowers agree to indemnify the Administrative Agent and each Lender
for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other
Taxes imposed or asserted by any jurisdiction on amounts payable under this
Section) paid by the Administrative Agent and such Lender, (ii) amounts payable
under Section 3.01(c) and (iii) any liability

 

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(including additions to tax, penalties, interest and expenses) arising therefrom
or with respect thereto, in each case whether or not such Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. Payment under this subsection (d) shall be made within 30 days after
the date the Lender or the Administrative Agent makes a demand therefor.

 

(e) If any Loan Party is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 3.01, then such Lender will agree
to use reasonable efforts to change the jurisdiction of its applicable Lending
Office so as to eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender, is not
otherwise disadvantageous to such Lender.

 

  3.02 Illegality.

 

If any Lender reasonably determines that any Law has made it unlawful, or that
any Governmental Authority has asserted that it is unlawful, for any Lender or
its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans,
or to determine or charge interest rates based upon the Eurodollar Rate, then,
on notice thereof by such Lender to the Administrative Borrower through the
Administrative Agent, any obligation of such Lender to make or continue
Eurodollar Rate Loans or to convert Base Rate Committed Loans to Eurodollar Rate
Loans shall be suspended until such Lender notifies the Administrative Agent and
the Administrative Borrower that the circumstances giving rise to such
determination no longer exist, which such Lender agrees to do promptly after
permitted by applicable Laws. Upon receipt of such notice, the Borrowers shall,
upon demand from such Lender (with a copy to the Administrative Agent), prepay
or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate
Loans, either on the last day of the Interest Period therefor, if such Lender
may lawfully continue to maintain such Eurodollar Rate Loans to such day, or
immediately, if such Lender may not lawfully continue to maintain such
Eurodollar Rate Loans. Upon any such prepayment or conversion, the Borrowers
shall also pay accrued interest on the amount so prepaid or converted. Each
Lender agrees to designate a different Lending Office if such designation will
avoid the need for such notice and will not, in the good faith judgment of such
Lender, otherwise be materially disadvantageous to such Lender.

 

  3.03 Inability to Determine Rates.

 

If the Required Lenders reasonably determine that by reason of circumstances
affecting the relevant market adequate and reasonable means do not exist for
determining the Eurodollar Rate for any requested Interest Period with respect
to a proposed Eurodollar Rate Loan, or that the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan does
not adequately and fairly reflect the cost to such Lenders of funding such Loan,
the Administrative Agent will promptly so notify the Administrative Borrower and
each Lender. Thereafter, the obligation of the Lenders to make or maintain
Eurodollar Rate Loans shall be suspended until the Administrative Agent (upon
the instruction of the Required Lenders) revokes such notice. Upon receipt of
such notice, the Borrowers may revoke any pending request for a Borrowing of,
conversion to or continuation of Eurodollar Rate Loans or, failing that, will be
deemed to have converted such request into a request for a Committed Borrowing
of Base Rate Loans in the amount specified therein.

 

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  3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on
Eurodollar Rate Loans.

 

(a) If any Lender reasonably determines that as a result of the introduction of
or any change in or in the interpretation of any Law, or such Lender’s
compliance therewith, there shall be any increase in the cost to such Lender of
agreeing to make or making, funding or maintaining Eurodollar Rate Loans or (as
the case may be) issuing or participating in Letters of Credit, or a reduction
in the amount received or receivable by such Lender in connection with any of
the foregoing (excluding for purposes of this subsection (a) any such increased
costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to
which Section 3.01 shall govern), (ii) changes in the basis of taxation of
overall net income or overall gross income by the United States or any foreign
jurisdiction or any political subdivision of either thereof under the Laws of
which such Lender is organized or has its Lending Office, and (iii) reserve
requirements contemplated by Section 3.04(c)), then from time to time upon
demand of such Lender (with a copy of such demand to the Administrative Agent),
the Borrowers shall pay to such Lender such additional amounts as will
compensate such Lender for such increased cost or reduction.

 

(b) If any Lender determines that the introduction of any Law regarding capital
adequacy or any change therein or in the interpretation thereof, or compliance
by such Lender (or its Lending Office) therewith, has the effect of reducing the
rate of return on the capital of such Lender or any corporation controlling such
Lender as a consequence of such Lender’s obligations hereunder (taking into
consideration its policies with respect to capital adequacy), then from time to
time upon demand of such Lender (with a copy of such demand to the
Administrative Agent), the Borrowers shall pay to such Lender such additional
amounts as will compensate such Lender for such reduction.

 

(c) The Borrowers shall pay to each Lender, as long as such Lender shall be
required to maintain reserves with respect to liabilities or assets consisting
of or including Eurocurrency funds or deposits (currently known as “Eurocurrency
liabilities”), additional interest on the unpaid principal amount of each
Eurodollar Rate Loan equal to the actual costs of such reserves allocated to
such Loan by such Lender (as determined by such Lender in good faith, which
determination shall be conclusive absent manifest error), which shall be due and
payable on each date on which interest is payable on such Loan, provided the
Borrowers shall have received at least 15 days’ prior notice (with a copy to the
Administrative Agent) of such additional interest from such Lender. If a Lender
fails to give notice 15 days prior to the relevant Interest Payment Date, such
additional interest shall be due and payable 15 days from receipt of such
notice.

 

  3.05 Funding Losses.

 

Upon demand of any Lender (with a copy to the Administrative Agent) from time to
time, the Borrowers shall promptly compensate such Lender for and hold such
Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a) any continuation, conversion, payment or prepayment of any Loan other than a
Base Rate Loan on a day other than the last day of the Interest Period for such
Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or
otherwise);

 

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(b) any failure by the Borrowers (for a reason other than the failure of such
Lender to make a Loan) to prepay, borrow, continue or convert any Loan other
than a Base Rate Loan on the date or in the amount notified by the
Administrative Borrower; or

 

(c) any failure by the Borrowers to make payment of any Loan or drawing under
any Letter of Credit (or interest due thereon) denominated in an Alternative
Currency on its scheduled due date or any payment thereof in a different
currency; or

 

(d) any assignment of a Eurodollar Rate Loan on a day other than the last day of
the Interest Period therefor as a result of a request by the Administrative
Borrower pursuant to Section 10.16;

 

including any loss of anticipated profits, any foreign currency exchange losses
and any loss or expense arising from the liquidation or reemployment of funds
obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained or from the performance of any
foreign currency exchange contract. The Borrowers shall also pay any customary
administrative fees charged by such Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrowers to the Lenders
under this Section 3.05, each Lender shall be deemed to have funded each
Eurodollar Rate Loan made by it at the Eurodollar Rate for such Loan by a
matching deposit or other borrowing in the London interbank eurodollar market
for a comparable amount and for a comparable period, whether or not such
Eurodollar Rate Loan was in fact so funded.

 

  3.06 Matters Applicable to all Requests for Compensation.

 

(a) A certificate of the Administrative Agent or any Lender claiming
compensation under this Article III and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, the Administrative Agent or such
Lender may use any reasonable averaging and attribution methods.

 

(b) Upon any Lender’s making a claim for compensation under Section 3.01 or
3.04, the Borrowers may replace such Lender in accordance with Section 10.16.

 

  3.07 Survival.

 

All of the Borrowers’ obligations under this Article III shall survive
termination of the Aggregate Commitments and repayment of all other Obligations
hereunder.

 

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ARTICLE IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

  4.01 Conditions to Closing Date.

 

The occurrence of the Closing Date is subject to satisfaction of the following
conditions precedent:

 

(a) Loan Documents, Organization Documents, Etc. The Administrative Agent’s
receipt of the following, each of which shall be originals or facsimiles
(followed promptly by originals) unless otherwise specified, each properly
executed by a Responsible Officer of the signing Loan Party, each dated the
Closing Date (or, in the case of certificates of governmental officials, a
recent date before the Closing Date) and each in form and substance satisfactory
to the Administrative Agent, its legal counsel and each of the Lenders:

 

(i) executed counterparts of this Agreement and the other Loan Documents;

 

(ii) a Note executed by the Borrowers in favor of each Lender requesting a Note;

 

(iii) copies of the Organization Documents of each Loan Party certified by a
secretary or assistant secretary of such Loan Party to be true and correct as of
the Closing Date;

 

(iv) such certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of each Loan Party as the
Administrative Agent may require evidencing the identity, authority and capacity
of each Responsible Officer thereof authorized to act as a Responsible Officer
in connection with this Agreement and the other Loan Documents to which such
Loan Party is a party; and

 

(v) such documents and certifications as the Administrative Agent may reasonably
require to evidence that each Loan Party is duly organized or formed, and is
validly existing, in good standing and qualified to engage in business in
(A) the jurisdiction of its incorporation or organization and (B) each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect.

 

(b) Opinions of Counsel. The Administrative Agent shall have received (i) a
legal opinion of Ralph M. Davisson, Vice President and General Counsel of the
Borrowers and (ii) a legal opinion of Pillsbury Winthrop Shaw Pittman LLP,
special counsel to the Borrowers, in each case dated as of the Closing Date and
in form and substance reasonably satisfactory to the Administrative Agent;

 

(c) Officer’s Certificates. The Administrative Agent shall have received a
certificate or certificates executed by a Responsible Officer of the Borrowers
as of the Closing Date, in form and substance satisfactory to the Administrative
Agent, stating that (A) the conditions specified in Sections 4.02(a) and
(b) have been satisfied as of the Closing Date, (B) the Borrowers are in
compliance with all existing material financial obligations, (C) all
governmental, shareholder and third party consents and approvals, if any, with
respect to the Loan Documents and the transactions contemplated thereby have
been obtained (and attaching copies thereof), (D) no action, suit, investigation
or proceeding is pending or threatened in any court or before any arbitrator or
governmental instrumentality that purports to affect any Borrower or any
transaction contemplated by the Loan Documents, if such action, suit,
investigation or proceeding could have a Material Adverse Effect, and
(E) immediately after giving effect to the initial Loans hereunder, (1) no

 

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Default or Event of Default exists and (2) all representations and warranties
contained herein and in the other Loan Documents are true and correct in all
material respects.

 

(d) No Material Adverse Change. There shall not have occurred a material adverse
change since December 31, 2004 in the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise) or prospects of the
Borrowers and their Subsidiaries taken as a whole or in the facts and
information regarding such entities as represented to date, it being understood
that the execution of the Merger Agreement on the terms disclosed by the
Borrowers in the Holdings Registration Statement, shall not constitute such a
material adverse change.

 

(e) Debt Ratings. The Administrative Agent shall have received a certificate
executed by a Responsible Officer of Existing Potlatch as of the Closing Date,
in form and substance satisfactory to the Administrative Agent, stating that
(i) S&P and Moody’s have been advised of the REIT Conversion and the entering
into of this Agreement by the Borrowers, and (ii) the Debt Ratings of Existing
Potlatch in effect on the Closing Date are BB or better from S&P and B2 or
better from Moody’s.

 

Without limiting the generality of the provisions of Section 9.04, for purposes
of determining compliance with the conditions specified in this Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.

 

  4.02 Conditions to Effective Date.

 

The occurrence of the Effective Date, the effectiveness of this Agreement and
the obligation of each Lender to make its initial Credit Extension hereunder is
subject to satisfaction of the following conditions precedent (in addition to
the condition that the Closing Date shall have occurred:

 

(a) REIT Conversion. The Administrative Agent shall have received evidence, in
form and substance satisfactory to the Administrative Agent (which shall include
receipt of a copy of a legal opinion from the Borrowers’ special REIT counsel as
to REIT status), that the Borrowers shall have consummated, or concurrently with
the Effective Date are consummating, the REIT Conversion.

 

(b) Fees. Any fees required to be paid on or before the Effective Date shall
have been paid.

 

(c) Attorney Costs. The Borrowers shall have paid all Attorney Costs of the
Administrative Agent to the extent invoiced prior to or on the Effective Date.

 

(d) Existing Credit Agreement. The Administrative Agent shall have received
evidence, in form and substance satisfactory to the Administrative Agent, that
all obligations of Existing Potlatch and its Subsidiaries under the Existing
Credit Agreement have been, or concurrently with the Effective Date are being,
paid and fully satisfied.

 

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(e) Accuracy of Representations and Warranties. The representations and
warranties of the Loan Parties contained in Article V or any other Loan
Document, or which are contained in any document furnished at any time under or
in connection herewith or therewith, shall be true and correct on and as of the
Effective Date.

 

(f) No Default. No Default shall exist and be continuing as of the Effective
Date.

 

(g) Other. Receipt by the Lenders of such other documents, instruments,
agreements or information as reasonably requested by any Lender, including, but
not limited to, information regarding litigation, tax, accounting, labor,
insurance, pension liabilities (actual or contingent), real estate leases,
material contracts, debt agreements, property ownership and contingent
liabilities of the Consolidated Parties.

 

(h) Outside Date. The Effective Date shall have occurred by January 3, 2006.

 

Without limiting the generality of the provisions of Section 9.04, for purposes
of determining compliance with the conditions specified in this Section 4.02,
each Lender that has signed this Agreement shall be deemed to have consented to,
approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Effective Date specifying its
objection thereto.

 

  4.03 Conditions to all Credit Extensions.

 

The obligation of each Lender to honor any Request for Credit Extension (other
than a Committed Loan Notice requesting only a conversion of Committed Loans to
the other Type, or a continuation of Eurodollar Rate Loans) is subject to the
following conditions precedent:

 

(a) The representations and warranties of the Borrowers and each other Loan
Party contained in Article V or any other Loan Document, or which are contained
in any document furnished at any time under or in connection herewith or
therewith, shall be true and correct on and as of the date of such Credit
Extension, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct as of such earlier date, and except that for purposes of this
Section 4.03, the representations and warranties contained in Sections 5.01(a)
and (b) shall be deemed to refer to the most recent statements furnished
pursuant to clauses (a) and (b), respectively, of Section 6.01.

 

(b) No Default shall exist, or would result from, such proposed Credit
Extension.

 

(c) There shall not have been commenced against any Consolidated Party an
involuntary case under any applicable Debtor Relief Law, now or hereafter in
effect, or any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or for the
winding up or liquidation of its affairs, and such involuntary case or other
case, proceeding or other action shall remain undismissed.

 

(d) The Administrative Agent and, if applicable, the L/C Issuer shall have
received a Request for Credit Extension in accordance with the requirements
hereof.

 

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(e) In the case of a Credit Extension to be denominated in an Alternative
Currency, there shall not have occurred any change in national or international
financial, political or economic conditions or currency exchange rates or
exchange controls which in the reasonable opinion of the Administrative Agent or
the L/C Issuer (in the case of any Letter of Credit to be denominated in an
Alternative Currency) would make it impracticable for such Credit Extension to
be denominated in the relevant Alternative Currency.

 

Each Request for Credit Extension (other than a Committed Loan Notice requesting
only a conversion of Committed Loans to the other Type or a continuation of
Eurodollar Rate Loans) submitted by the Administrative Borrower shall be deemed
to be a representation and warranty by the Borrowers that the conditions
specified in Sections 4.03(a), (b) and (c) have been satisfied on and as of the
date of the applicable Credit Extension.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

The Loan Parties, jointly and severally, represent and warrant to the
Administrative Agent and the Lenders that:

 

  5.01 Financial Condition.

 

(a) The audited consolidated balance sheets and income statements of the
Consolidated Parties for the fiscal years ended December 31, 2002, December 31,
2003 and December 31, 2004 (including the notes thereto) (i) have been audited
by KPMG LLP, (ii) have been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby, except as otherwise expressly
noted therein and (iii) present fairly (on the basis disclosed in the footnotes
to such financial statements) in all material respects the consolidated
financial condition, results of operations and cash flows of the Consolidated
Parties as of such date and for such periods. The unaudited interim balance
sheets of the Consolidated Parties as at the end of, and the related unaudited
interim statements of earnings and of cash flows for, each quarterly period
ended after December 31, 2004 and prior to the Closing Date (i) have been
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby, except as otherwise expressly noted therein and (ii) present
fairly (on the basis disclosed in the footnotes to such financial statements) in
all material respects the consolidated financial condition, results of
operations and cash flows of the Consolidated Parties as of such date and for
such periods. During the period from December 31, 2004 to and including the
Closing Date, there has been no sale, transfer or other disposition by any
Consolidated Party of any material part of the business or property of the
Consolidated Parties, taken as a whole, and no purchase or other acquisition by
any of them of any business or property (including any Capital Stock of any
other Person) material in relation to the consolidated financial condition of
the Consolidated Parties, taken as a whole, in each case, which is not reflected
in the foregoing financial statements or in the notes thereto and has not
otherwise been disclosed in writing to the Lenders on or prior to the Closing
Date. As of the Closing Date, the Borrowers and their Subsidiaries have no
material liabilities (contingent or otherwise) that are not reflected in the
foregoing financial statements or in the notes thereto.

 

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(b) The financial statements delivered pursuant to Section 6.01(a) and (b) have
been prepared in accordance with GAAP (except as may otherwise be permitted
under Section 6.01(a) and (b)) and present fairly (on the basis disclosed in the
footnotes to such financial statements) the consolidated financial condition,
results of operations and cash flows of the Consolidated Parties as of such date
and for such periods.

 

  5.02 No Material Change; No Internal Control Event.

 

(a) Since the date of the Audited Financial Statements, there has been no event
or circumstance, either individually or in the aggregate, that has had or could
reasonably be expected to have a Material Adverse Effect other than facts,
circumstances, changes or events which, as of the Closing Date, have been
disclosed in the Borrowers’ public filings with the SEC (to the extent so
disclosed).

 

(b) Since the date of the Audited Financial Statements, no Internal Control
Event has occurred that has not been (i) disclosed to the Administrative Agent
and the Lenders and (ii) remedied or otherwise diligently addressed (or is in
the process of being diligently addressed) by the Borrowers and/or the
applicable Loan Party in accordance with recommendations made by the Borrowers’
and/or such Loan Party’s auditors.

 

  5.03 Organization and Good Standing.

 

Each of the Consolidated Parties (a) is duly organized, validly existing and is
in good standing under the Laws of the jurisdiction of its incorporation or
organization, (b) has the corporate or other necessary power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
and (c) is duly qualified as a foreign entity and in good standing under the
Laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, other than in such
jurisdictions where the failure to be so qualified and in good standing would
not reasonably be expected to have a Material Adverse Effect.

 

  5.04 Power; Authorization; Enforceable Obligations.

 

Each of the Loan Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Loan Documents
to which it is a party, and in the case of the Borrowers, to obtain extensions
of credit hereunder, and has taken all necessary corporate or other necessary
action to authorize the borrowings and other extensions of credit on the terms
and conditions of this Agreement and to authorize the execution, delivery and
performance of the Loan Documents to which it is a party. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Loan Party in connection with the borrowings or
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents to which such Loan
Party is a party, except for consents, authorizations, notices and filings
described in Schedule 5.04, all of which have been obtained or made or have the
status described in such Schedule 5.04. This Agreement has been, and each other
Loan Document to which any Loan Party is a party will be, duly executed and
delivered on behalf of the Loan Parties. This Agreement constitutes, and each
other Loan Document to which any Loan

 

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Party is a party when executed and delivered will constitute, a legal, valid and
binding obligation of such Loan Party enforceable against such party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).

 

  5.05 No Conflicts.

 

Neither the execution and delivery of the Loan Documents, nor the consummation
of the transactions contemplated therein, nor performance of and compliance with
the terms and provisions thereof by such Loan Party will (a) violate or conflict
with any provision of its articles or certificate of incorporation or bylaws or
other organizational or governing documents of such Person, (b) violate,
contravene or materially conflict with any Law or any other law, regulation
(including, without limitation, Regulation U or Regulation X), order, writ,
judgment, injunction, decree or permit applicable to it, (c) violate, contravene
or conflict with contractual provisions of, or cause an event of default under,
any material indenture, loan agreement, mortgage, deed of trust, contract or
other agreement or instrument to which it is a party or by which it may be bound
or (d) result in or require the creation of any Lien upon or with respect to its
properties.

 

  5.06 No Default.

 

No Consolidated Party is in default in any respect under any contract, lease,
loan agreement, indenture, mortgage, security agreement or other agreement or
obligation to which it is a party or by which any of its properties is bound
which default could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred or exists except as previously
disclosed in writing to the Lenders.

 

  5.07 Ownership.

 

Each Consolidated Party is the owner of, and has good and marketable title to,
all of its respective assets except for defects in title as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Property of the Borrowers and their Subsidiaries are not
subject to any Lien other than Permitted Liens.

 

  5.08 Indebtedness.

 

Except as otherwise permitted under Section 7.01, the Consolidated Parties have
no Indebtedness.

 

  5.09 Litigation.

 

Except as disclosed on Schedule 5.09, there does not exist any pending or, to
the knowledge of the Borrowers, threatened action, suit or legal, equitable,
arbitration or administrative proceeding against any Consolidated Party which
could reasonably be expected to have a Material Adverse Effect.

 

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  5.10 Taxes.

 

Each Consolidated Party has filed, or caused to be filed, all material tax
returns (Federal, state, local and foreign) required to be filed and paid
(a) all amounts of material taxes shown thereon to be due (including interest
and penalties) and (b) all other material taxes, fees, assessments and other
governmental charges (including mortgage recording taxes, documentary stamp
taxes and intangibles taxes) owing by it, except for such taxes (i) which are
not yet delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. No Loan Party is aware as of the Closing Date of any
proposed material tax assessments against it or any other Consolidated Party.

 

  5.11 Compliance with Law.

 

Each Consolidated Party is in compliance with all Laws and all other laws,
rules, regulations, orders and decrees (including without limitation
Environmental Laws) applicable to it, or to its properties, unless such failure
to comply could not reasonably be expected to have a Material Adverse Effect. No
Law could reasonably be expected to cause a Material Adverse Effect.

 

  5.12 ERISA.

 

Except as disclosed and described in Schedule 5.12 attached hereto:

 

(a) During the five-year period prior to the date on which this representation
is made or deemed made: (i) no ERISA Event has occurred, and, to the best
knowledge of the Responsible Officers of the Loan Parties, no event or condition
has occurred or exists as a result of which any ERISA Event could reasonably be
expected to occur, with respect to any Plan; (ii) no “accumulated funding
deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of
the Code, whether or not waived, has occurred with respect to any Plan;
(iii) each Plan has been maintained, operated, and funded in compliance with its
own terms and in material compliance with the provisions of ERISA, the Code, and
any other applicable Federal or state laws; and (iv) no Lien in favor of the
PBGC or a Plan has arisen or is reasonably likely to arise on account of any
Plan.

 

(b) The actuarial present value of all “benefit liabilities” (as defined in
Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer
Plan, as of the last annual valuation date prior to the date on which this
representation is made or deemed made (determined, in each case, in accordance
with Financial Accounting Standards Board Statement 87, utilizing the actuarial
assumptions used in such Plan’s most recent actuarial valuation report), did not
exceed as of such valuation date the fair market value of the assets of such
Plan.

 

(c) Neither any Consolidated Party nor any ERISA Affiliate has incurred, or, to
the best knowledge of the Responsible Officers of the Loan Parties, could be
reasonably expected to incur, any withdrawal liability under ERISA to any
Multiemployer Plan or Multiple Employer Plan. Neither any Consolidated Party nor
any ERISA Affiliate would become subject to any withdrawal liability under ERISA
if any Consolidated Party or any ERISA Affiliate were to withdraw completely
from all Multiemployer Plans and Multiple Employer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. Neither any Consolidated Party nor any ERISA Affiliate has received
any notification that any Multiemployer Plan is in reorganization (within the
meaning of Section 4241 of ERISA), is insolvent (within the

 

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meaning of Section 4245 of ERISA), or has been terminated (within the meaning of
Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the
Responsible Officers of the Loan Parties, reasonably expected to be in
reorganization, insolvent, or terminated.

 

(d) No prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) other than as exempted under Section 408 of ERISA or
breach of fiduciary responsibility has occurred with respect to a Plan which has
subjected or may subject any Consolidated Party or any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of
the Code, or under any agreement or other instrument pursuant to which any
Consolidated Party or any ERISA Affiliate has agreed or is required to indemnify
any Person against any such liability.

 

(e) Neither any Consolidated Party nor any ERISA Affiliate has any material
liability with respect to “expected post-retirement benefit obligations” within
the meaning of the Financial Accounting Standards Board Statement 106. Each Plan
which is a welfare plan (as defined in Section 3(1) of ERISA) to which
Sections 601-609 of ERISA and Section 4980B of the Code apply has been
administered in compliance in all material respects of such sections.

 

(f) Neither the execution and delivery of this Agreement nor the consummation of
the financing transactions contemplated hereunder will involve any transaction
which is subject to the prohibitions of Sections 404, 406 or 407 of ERISA or in
connection with which a tax could be imposed pursuant to Section 4975 of the
Code. The representation by the Loan Parties in the preceding sentence is
subject, in the event that the source of the funds used by the Lenders in
connection with this transaction is an insurance company’s general asset
account, to the application of Prohibited Transaction Class Exemption 95-60, 60
Fed. Reg. 35,925 (1995), compliance with the regulations issued under
Section 401(c)(1)(A) of ERISA, or the issuance of any other prohibited
transaction exemption or similar relief, to the effect that assets in an
insurance company’s general asset account do not constitute assets of an
“employee benefit plan” within the meaning of Section 3(3) of ERISA or a “plan”
within the meaning of Section 4975(e)(1) of the Code.

 

  5.13 Corporate Structure; Capital Stock, Etc.

 

The corporate capital and ownership structure of the Consolidated Parties as of
the Closing Date is as described on Schedule 5.13. Set forth on Schedule 5.13 is
a complete and accurate list as of the Closing Date with respect to each of the
Borrowers’ direct and indirect Subsidiaries of (i) jurisdiction of
incorporation, (ii) number of shares of each class of Capital Stock outstanding,
(iii) number and percentage of outstanding shares of each class owned (directly
or indirectly) by the Consolidated Parties and (iv) number and effect, if
exercised, of all outstanding options, warrants, rights of conversion or
purchase and all other similar rights with respect thereto as of the Closing
Date. The outstanding Capital Stock of all such Persons is validly issued, fully
paid and non-assessable and is owned by the Consolidated Parties, directly or
indirectly, in the manner set forth on Schedule 5.13, free and clear of all
Liens. Other than as set forth in Schedule 5.13, none of the Borrowers’
Subsidiaries has outstanding any securities convertible into or exchangeable for
its Capital Stock nor does any such Person have outstanding any rights to
subscribe for or to purchase or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to its Capital Stock.

 

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  5.14 Governmental Regulations, Etc.

 

(a) None of the transactions contemplated by this Agreement (including, without
limitation, the direct or indirect use of the proceeds of the Loans) will
violate or result in a violation of the Securities Act, the Securities Exchange
Act of 1934 or any of Regulations U and X. If requested by any Lender or the
Administrative Agent, the Borrowers will furnish to the Administrative Agent and
each Lender a statement, in conformity with the requirements of FR Form U-1
referred to in Regulation U, that no part of the Letters of Credit or proceeds
of the Loans will be used, directly or indirectly, for the purpose of “buying”
or “carrying” any “margin stock” within the meaning of Regulations U and X, or
for the purpose of purchasing or carrying or trading in any securities.

 

(b) None of the Consolidated Parties is (i) an “investment company”, or a
company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended, (ii) a “holding company” as defined
in, or otherwise subject to regulation under, the Public Utility Holding Company
Act of 1935, as amended or (iii) subject to regulation under any other Federal
or state statute or regulation which limits its ability to incur Indebtedness.

 

  5.15 Purpose of Loans and Letters of Credit.

 

The proceeds of the Loans hereunder shall be used solely by the Borrowers (a) to
pay the E&P Distribution and to pay transaction costs and fees associated with
the REIT Conversion and (ii) to provide for working capital, capital
expenditures and any other lawful corporate purposes of the Borrowers and their
Subsidiaries (including, without limitation, Permitted Acquisitions). The
Letters of Credit shall be used only for or in connection with credit support
required for bonds issued in respect of financings for which a Loan Party is
responsible for, directly or indirectly, repayment, appeal bonds, reimbursement
obligations arising in connection with surety and reclamation bonds, reinsurance
and obligations not otherwise aforementioned relating to transactions entered
into by the applicable account party in the ordinary course of business.

 

  5.16 Environmental Matters.

 

Except as disclosed and described on Schedule 5.16 or except as could not
reasonably be expected to result in a Material Adverse Effect:

 

(a) Each of the real Properties and all operations at the real Properties are in
compliance with all applicable Environmental Laws, there is no violation of any
Environmental Law with respect to the real Properties or the businesses, and to
the best knowledge of the Responsible Officers of the Loan Parties, there are no
conditions relating to the real Properties or the businesses that could give
rise to liability under any applicable Environmental Laws.

 

(b) None of the real Properties contains, or to the best knowledge of the
Responsible Officers of the Loan Parties, has previously contained, any
Hazardous Materials at, on or under the real Properties in amounts or
concentrations that constitute or constituted a violation of, or could give rise
to liability under, Environmental Laws.

 

(c) No Consolidated Party has received any written or verbal notice of, or
inquiry from any Governmental Authority alleging any violation, non-compliance,
liability or potential liability

 

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pursuant to, or regarding compliance with, Environmental Laws with regard to any
of the real Properties or the businesses, nor does any Responsible Officer of
any Loan Party have knowledge or reason to believe that any such notice will be
received or is being threatened.

 

(d) Hazardous Materials have not been transported or disposed of from the real
Properties, or generated, treated, stored or disposed of at, on or under any of
the real Properties or any other location, in each case by or on behalf of any
Consolidated Party in violation of, or in a manner that to the best knowledge of
the Responsible Officers of the Loan Parties could give rise to liability under,
any applicable Environmental Law.

 

(e) No judicial proceeding or governmental or administrative action is pending
or, to the best knowledge of the Responsible Officers of the Loan Parties,
threatened, under any Environmental Law to which any Consolidated Party is or
will be named as a party, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental Law with respect to
the Consolidated Parties, the real Properties or the businesses.

 

(f) There has been no release, or threat of release, of Hazardous Materials at
or from the real Properties, or arising from or related to the operations
(including, without limitation, disposal) of any Consolidated Party in
connection with the real Properties or otherwise in connection with the
businesses, in violation of or in amounts or in a manner that to the best
knowledge of the Responsible Officers of the Loan Parties could give rise to
liability under Environmental Laws.

 

  5.17 Solvency.

 

The Loan Parties are Solvent on a consolidated basis.

 

  5.18 Investments.

 

All Investments of each Consolidated Party are Permitted Investments.

 

  5.19 Disclosure.

 

Neither this Agreement nor any financial statements delivered to the Lenders nor
any other document, certificate or statement furnished to the Lenders by or on
behalf of any Consolidated Party in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein or herein not misleading.

 

  5.20 No Burdensome Restrictions.

 

No Consolidated Party is a party to any agreement or instrument or subject to
any other obligation or any charter or corporate restriction or any provision of
any applicable law, rule or regulation which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.

 

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  5.21 Brokers’ Fees.

 

No Consolidated Party has any obligation to any Person in respect of any
finder’s, broker’s, investment banking or other similar fee in connection with
any of the transactions contemplated under the Loan Documents.

 

  5.22 Labor Matters.

 

None of the Consolidated Parties has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years which
has had or could reasonably be expected to have a Material Adverse Effect.

 

  5.23 REIT Status.

 

Upon, and at all times after, consummation of the REIT Conversion, the
Administrative Borrower is duly organized as a REIT.

 

ARTICLE VI

AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, each Loan Party hereby covenants and agrees to the
following:

 

  6.01 Information Covenants.

 

The Loan Parties will furnish, or cause to be furnished, to the Administrative
Agent and each of the Lenders:

 

(a) Annual Financial Statements. As soon as available, but in any event no later
than the earlier of (i) the 90th day after the end of each fiscal year of the
Borrowers and (ii) the day that is three (3) Business Days after the date the
Borrowers’ annual report on Form 10-K is required to be filed with the SEC
(commencing with the 2005 fiscal year), a consolidated balance sheet and income
statement of the Consolidated Parties as of the end of such fiscal year,
together with related consolidated statements of retained earnings and cash
flows for such fiscal year, in each case setting forth in comparative form
consolidated figures for the preceding fiscal year, all such financial
information described above to be in reasonable form and detail and audited by
independent certified public accountants of recognized national standing
reasonably acceptable to the Administrative Agent and whose opinion shall be to
the effect that such financial statements have been prepared in accordance with
GAAP (except for changes with which such accountants concur) and shall not be
limited as to the scope of the audit or qualified as to the status of the
Consolidated Parties as a going concern or any other material qualifications or
exceptions.

 

(b) Quarterly Financial Statements. As soon as available, but in any event no
later than the earlier of (i) the 45th day after the end of each of the first
three fiscal quarters of each fiscal year of the Borrowers and (ii) the day that
is three (3) Business Days after the date the Borrowers’ quarterly report on
Form 10-Q is required to be filed with the SEC (commencing

 

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with the fiscal quarter ending March 31, 2006), a consolidated balance sheet and
income statement of the Consolidated Parties as of the end of such fiscal
quarter, together with related consolidated statements of cash flows for such
fiscal quarter, in each case setting forth in comparative form consolidated
figures for (x) the corresponding period of the preceding fiscal year with
respect to the income and cash flow statements of the Consolidated Parties and
(y) the end of the preceding fiscal year with respect to the balance sheet of
the Consolidated Parties, all such financial information described above to be
in reasonable form and detail and reasonably acceptable to the Administrative
Agent, and accompanied by a certificate of a Responsible Officer of the
Administrative Borrower to the effect that such quarterly financial statements
fairly present in all material respects the financial condition of the
Consolidated Parties and have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end audit adjustments.

 

(c) Officer’s Compliance Certificate. At the time of delivery of the financial
statements provided for in Sections 6.01(a) and 6.01(b) above, a duly completed
Compliance Certificate signed by a Responsible Officer of the Administrative
Borrower substantially in the form of Exhibit D (i) demonstrating compliance
with the financial covenants contained in Section 6.10 by calculation thereof as
of the end of each such fiscal period, (ii) stating that no Default or Event of
Default exists, or if any Default or Event of Default does exist, specifying the
nature and extent thereof and what action the Loan Parties propose to take with
respect thereto, (iii) demonstrating pursuant to a Pro Forma Compliance
Certificate, that upon giving effect on a Pro Forma Basis to each Asset
Disposition for Net Cash Proceeds in excess of $50,000,000 consummated in the
applicable period, the Loan Parties would be in compliance with the financial
covenants set forth in Section 6.10(a)-(c).

 

(d) Annual Budgets. Within 60 days after the end of each fiscal year of the
Borrowers, beginning with the fiscal year ending December 31, 2006, an annual
budget of the Consolidated Parties containing, among other things, pro forma
financial statements (including income statement, balance sheet and statement of
cash flows) for the next fiscal year.

 

(e) Auditor’s Reports. Promptly upon receipt thereof, a copy of any other report
or “management letter” submitted by independent accountants to any Consolidated
Party in connection with any annual, interim or special audit of the books of
such Person.

 

(f) Reports. Promptly upon transmission or receipt thereof, (i) copies of any
filings and registrations with, and reports to or from, the SEC, or any
successor agency, and copies of all financial statements, proxy statements,
notices and reports as any Consolidated Party shall send to its shareholders or
to a holder of any Indebtedness owed by any Consolidated Party in its capacity
as such a holder and (ii) upon the reasonable request of the Administrative
Agent, all reports and material written information to and from the United
States Environmental Protection Agency, or any state or local agency responsible
for environmental matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and safety
matters, or any successor agencies or authorities concerning environmental,
health or safety matters.

 

(g) Notices. Upon any Responsible Officer of a Loan Party obtaining knowledge
thereof, the Loan Parties will give written notice to the Administrative Agent
and the Lenders immediately of (i) the occurrence of an event or condition
consisting of a Default or Event of Default, specifying the nature and existence
thereof and what action the Loan Parties propose to

 

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take with respect thereto, and (ii) the occurrence of any of the following with
respect to any Consolidated Party: (A) the pendency or commencement of any
litigation, arbitral or governmental proceeding against such Person which if
adversely determined is likely to have a Material Adverse Effect, (B) the
institution of any proceedings against such Person with respect to, or the
receipt of notice by such Person of potential liability or responsibility for
violation, or alleged violation of any Federal, state or local law, rule or
regulation, including but not limited to, Environmental Laws, the violation of
which could have a Material Adverse Effect, (C) any material change in
accounting policies or financial reporting practices by such Person or (D) the
occurrence of any Internal Control Event.

 

(h) ERISA. Upon any Responsible Officer of a Loan Party obtaining knowledge
thereof, the Loan Parties will give written notice to the Administrative Agent
promptly (and in any event within fifteen Business Days) of: (i) any event or
condition, including, but not limited to, any Reportable Event, that
constitutes, or might reasonably lead to, an ERISA Event; (ii) with respect to
any Multiemployer Plan, the receipt of notice as prescribed in ERISA or
otherwise of any withdrawal liability assessed against the Loan Parties or any
ERISA Affiliates, or of a determination that any Multiemployer Plan is in
reorganization or insolvent (both within the meaning of Title IV of ERISA);
(iii) the failure to make full payment on or before the due date (including
extensions) thereof of all amounts which any Consolidated Party or any ERISA
Affiliate is required to contribute to each Plan pursuant to its terms and as
required to meet the minimum funding standard set forth in ERISA and the Code
with respect thereto; or (iv) any change in the funding status of any Plan, in
each case that could reasonably be expected to have a Material Adverse Effect,
together with a description of any such event or condition or a copy of any such
notice and a statement by an Responsible Officer of the Borrowers briefly
setting forth the details regarding such event, condition, or notice, and the
action, if any, which has been or is being taken or is proposed to be taken by
the Loan Parties with respect thereto. Promptly upon request, the Loan Parties
shall furnish the Administrative Agent and the Lenders with such additional
information concerning any Plan as may be reasonably requested, including, but
not limited to, copies of each annual report/return (Form 5500 series), as well
as all schedules and attachments thereto required to be filed with the
Department of Labor and/or the IRS pursuant to ERISA and the Code, respectively,
for each “plan year” (within the meaning of Section 3(39) of ERISA).

 

(i) Other Information. With reasonable promptness upon any such request, such
other information regarding the business, properties or financial condition of
any Consolidated Party as the Administrative Agent or any Lender may reasonably
request.

 

Documents required to be delivered pursuant to Section 6.01(a), (b) or (g) (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 (i) on which the Administrative Borrower posts
such documents, or provides a link thereto on the Administrative Borrower’s
website on the Internet at the website address listed on Schedule 10.02; or
(ii) on which such documents are posted on the Borrowers’ behalf on
IntraLinks/IntraAgency or another relevant website, if any, to which each Lender
and the Administrative Agent have access (whether a commercial, third-party
website or whether sponsored by the Administrative Agent); provided that:
(i) upon written request by the Administrative Agent, the Administrative
Borrower shall deliver paper copies of such documents to the Administrative
Agent until a written request to cease delivering paper copies is given by

 

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the Administrative Agent and (ii) the Administrative Borrower shall notify
(which may be by facsimile or electronic mail) the Administrative Agent and each
Lender of the posting of any such documents and provide to the Administrative
Agent by electronic mail electronic versions (i.e., soft copies) of such
documents. Notwithstanding anything contained herein, in every instance the
Administrative Borrower shall be required to provide paper copies of the
Compliance Certificates required by Section 6.01(c) to the Administrative Agent.
Except for such Compliance Certificates, the Administrative Agent shall have no
obligation to request the delivery or to maintain copies of the documents
referred to above, and in any event shall have no responsibility to monitor
compliance by the Borrowers with any such request for delivery, and each Lender
shall be solely responsible for requesting delivery to it or maintaining its
copies of such documents.

 

The Borrowers hereby acknowledge that (a) the Administrative Agent and/or the
Arranger will make available to the Lenders and the L/C Issuer materials and/or
information provided by or on behalf of the Borrowers hereunder (collectively,
“Borrower Materials”) by posting the Borrower Materials on IntraLinks or another
similar electronic system (the “Platform”) and (b) certain of the Lenders may be
“public-side” Lenders (i.e., Lenders that do not wish to receive material
non-public information with respect to the Borrowers or their securities) (each,
a “Public Lender”). The Borrowers hereby agree that (w) all Borrower Materials
that are to be made available to Public Lenders shall be clearly and
conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word
“PUBLIC” shall appear prominently on the first page thereof; (x) by marking
Borrower Materials “PUBLIC,” the Borrowers shall be deemed to have authorized
the Administrative Agent, the Arranger, the L/C Issuer and the Lenders to treat
such Borrower Materials as either publicly available information or not material
information (although it may be sensitive and proprietary) with respect to the
Borrowers or their securities for purposes of United States Federal and state
securities laws; (y) all Borrower Materials marked “PUBLIC” are permitted to be
made available through a portion of the Platform designated “Public Investor;”
and (z) the Administrative Agent and the Arranger shall be entitled to treat any
Borrower Materials that are not marked “PUBLIC” as being suitable only for
posting on a portion of the Platform not designated “Public Investor.”

 

  6.02 Preservation of Existence, Franchises and REIT Status.

 

Except as a result of or in connection with a dissolution, merger or disposition
of a Subsidiary not prohibited by Section 7.04 or Section 7.05, each Loan Party
will, and will cause each of its Subsidiaries to, do all things necessary to
(a) preserve and keep in full force and effect its existence, (b) where failure
to do so could reasonably be expected to have a Material Adverse Effect,
preserve and keep in full force and effect its rights, franchises and authority
and (c) in the case of the Administrative Borrower, upon and following
consummation of the REIT Conversion, maintain REIT status.

 

  6.03 Books and Records.

 

Each Loan Party will, and will cause each of its Subsidiaries to, keep complete
and accurate books and records of its transactions in accordance with good
accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).

 

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  6.04 Compliance with Law.

 

Each Loan Party will, and will cause each of its Subsidiaries to, comply with
all laws, rules, regulations and orders, and all applicable restrictions imposed
by all Governmental Authorities, applicable to it and its Property if
noncompliance with any such law, rule, regulation, order or restriction could
reasonably be expected to have a Material Adverse Effect.

 

  6.05 Payment of Taxes and Other Claims.

 

Each Loan Party will, and will cause each of its Subsidiaries to, pay and
discharge (a) all taxes, assessments and governmental charges or levies imposed
upon it, or upon its income or profits, or upon any of its properties, before
they shall become delinquent and (b) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien upon
any of its properties; provided, however, that no Consolidated Party shall be
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith by appropriate proceedings and as to which adequate
reserves therefor have been established in accordance with GAAP.

 

  6.06 Insurance.

 

Each Loan Party will, and will cause each of its Subsidiaries to, at all times
maintain in full force and effect insurance (including worker’s compensation
insurance, liability insurance, casualty insurance and business interruption
insurance) in such amounts, covering such risks and liabilities and with such
deductibles or self-insurance retentions as are in accordance with normal
industry practice.

 

  6.07 Maintenance of Property; Management of Timberlands.

 

Each Loan Party will, and will cause each of its Subsidiaries to, maintain and
preserve its properties and equipment material to the conduct of its business in
good repair, working order and condition, normal wear and tear and Involuntary
Dispositions excepted. Each Loan Party will, and will cause each of its
Subsidiaries to, manage its timberlands in accordance with the guidelines
established by either the American Forest & Paper Association’s Sustainable
Forestry Initiative or the Forest Stewardship Council.

 

  6.08 Use of Proceeds.

 

The Borrowers will use the proceeds of the Loans and will use the Letters of
Credit solely for the purposes set forth in Section 5.15.

 

  6.09 Audits/Inspections.

 

Upon reasonable notice and during normal business hours, each Loan Party will,
and will cause each of its Subsidiaries to, permit representatives appointed by
the Administrative Agent or the Required Lenders, including, without limitation,
independent accountants, agents, attorneys, and appraisers to visit and inspect
its property, including its books and records, its accounts receivable and
inventory, its facilities and its other business assets, and to make photocopies
or photographs thereof and to write down and record any information such
representative obtains and shall permit

 

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the Administrative Agent or its representatives to investigate and verify the
accuracy of information provided to the Lenders and to discuss all such matters
with the officers, employees and representatives of such Person; provided,
however, that when an Event of Default has occurred and is continuing, the
Administrative Agent or any Lender (or any of their respective representatives
or independent contractors) may do any of the foregoing at the expense of the
Borrowers at any time during normal business hours and, to the extent
commercially practicable, with advance notice.

 

  6.10 Financial Covenants.

 

(a) Funded Indebtedness to Capitalization Ratio. At all times the Funded
Indebtedness to Capitalization Ratio shall be less than or equal to 55.00%.

 

(b) Consolidated Net Worth. At all times Consolidated Net Worth shall be greater
than or equal to the applicable amount as determined in accordance with the grid
below, with the required Consolidated Net Worth amount to be increased on a
cumulative basis as of the end of each fiscal quarter of the Consolidated
Parties, commencing with the fiscal quarter ending March 31, 2006, by an amount
equal to 100% of the Net Cash Proceeds of any Equity Issuances consummated
during such fiscal quarter.

 

Period

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

 

Minimum Net Worth

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

Closing Date to but not including the E&P Declaration Date   $545,000,000 (which
represents 80% of Consolidated Net Worth as of June 30, 2005) E&P Declaration
Date to but not including the first Business Day after the date on which the
Administrative Borrower delivers the Required Financial Information for the
fiscal quarter during which the E&P Declaration Date occurred   (i) 80% of
Consolidated Net Worth as of June 30, 2005, less (ii) the amount by which
Consolidated Net Worth is reduced as a direct result of the E&P Declaration The
first Business Day after the date on which the Administrative Borrower delivers
the Required Financial Information for the fiscal quarter during which the E&P
Declaration Date occurred   80% of Consolidated Net Worth as of the last day of
the fiscal quarter during which the E&P Declaration Date occurred

 

(c) Interest Coverage Ratio. The Interest Coverage Ratio, as of the last day of
each fiscal quarter of the Consolidated Parties, shall be greater than or equal
to 2.75 to 1.00.

 

  6.11 Additional Guarantors.

 

Notify the Administrative Agent at the time that any Person becomes a
wholly-owned Material Subsidiary and promptly thereafter (and in any event
within 30 days), cause each such Person (other than any Foreign Subsidiary to
the extent the joinder as a Guarantor by such

 

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Foreign Subsidiary could reasonably be expected to (1) cause the undistributed
earnings of such Foreign Subsidiary as determined for United States federal
income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary’s United States parent or (2) result in any material adverse tax
consequences) to (i) become a Guarantor by executing and delivering to the
Administrative Agent a Joinder Agreement, and (ii) deliver to the Administrative
Agent documents of the types referred to in clauses (iii) and (iv) of
Section 4.01(a) and favorable opinions of counsel to such Person (which shall
cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to herein), all in form, content
and scope reasonably satisfactory to the Administrative Agent.

 

  6.12 Performance of Obligations.

 

Each of the Loan Parties will, and will cause each of its Subsidiaries to pay
when due all Indebtedness under all material agreements, indentures, mortgages,
security agreements or other debt instruments to which it is a party or by which
it is bound.

 

ARTICLE VII

NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding (to the extent such Letter of Credit is not fully Cash
Collateralized in accordance with Section 2.03(g)), each Loan Party hereby
covenants and agrees to the following:

 

  7.01 Indebtedness.

 

The Loan Parties will not permit any Consolidated Party to contract, create,
incur, assume or permit to exist any Indebtedness, except:

 

(a) Indebtedness arising under this Agreement and the other Loan Documents;

 

(b) Indebtedness of the Borrowers and their Subsidiaries set forth in
Schedule 7.01 (and renewals, refinancings and extensions thereof on terms and
conditions no less favorable to such Person than such existing Indebtedness);

 

(c) purchase money Indebtedness (including obligations in respect of Capital
Leases or Synthetic Lease Obligations) hereafter incurred by the Borrowers or
any of its Subsidiaries to finance the purchase of fixed assets provided that
(i) the total of all such Indebtedness for all such Persons taken together shall
not exceed an aggregate principal amount of $30,000,000 at any one time
outstanding; (ii) such Indebtedness when incurred shall not exceed the purchase
price of the asset(s) financed; and (iii) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing;

 

(d) obligations of the Borrowers in respect of Swap Contracts entered into in
order to manage existing or anticipated interest rate or exchange rate risks and
not for speculative purposes;

 

(e) intercompany Indebtedness and Guarantees permitted under Section 7.06;

 

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(f) in addition to the Indebtedness otherwise permitted by this Section 7.01,
other Indebtedness hereafter incurred by the Borrowers or any of its
Subsidiaries, provided that (i) with respect to any Indebtedness that exceeds
$1,000,000 in principal amount such Indebtedness shall be unsecured, (ii) the
Borrowers shall have delivered to the Administrative Agent a Pro Forma
Compliance Certificate demonstrating that, upon giving effect on a Pro Forma
Basis to the incurrence of such Indebtedness and to the concurrent retirement of
any other Indebtedness of any Consolidated Party, the Loan Parties would be in
compliance with the financial covenants set forth in Section 6.10(a)-(c),
(iii) the aggregate principal amount of such Indebtedness shall not exceed
$150,000,000 at any time and (iv) such Indebtedness is permitted under the
Senior Subordinated Note Indenture.

 

  7.02 Liens.

 

The Loan Parties will not permit any Consolidated Party to contract, create,
incur, assume or permit to exist any Lien with respect to any of its Property,
whether now owned or hereafter acquired, except for:

 

(a) Liens (other than Liens created or imposed under ERISA) for taxes,
assessments or governmental charges or levies not yet due or Liens for taxes
being contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established (and as to
which the Property subject to any such Lien is not yet subject to foreclosure,
sale or loss on account thereof);

 

(b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen and suppliers and other Liens imposed by law or pursuant to
customary reservations or retentions of title arising in the ordinary course of
business, provided that such Liens secure only amounts not yet due and payable
or, if due and payable, are unfiled and no other action has been taken to
enforce the same or are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such Lien is not yet
subject to foreclosure, sale or loss on account thereof);

 

(c) Liens (other than Liens created or imposed under ERISA) incurred or deposits
made by any Consolidated Party in the ordinary course of business in connection
with workers’ compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations, bids,
leases, government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);

 

(d) Liens in connection with attachments or judgments (including judgment or
appeal bonds) provided that the judgments secured shall, within 30 days after
the entry thereof, have been discharged or execution thereof stayed pending
appeal, or shall have been discharged within 30 days after the expiration of any
such stay;

 

(e) easements, rights-of-way, restrictions (including zoning restrictions),
minor defects or irregularities in title and other similar charges or
encumbrances not, in any material respect, impairing the use of the encumbered
Property for its intended purposes;

 

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(f) Liens on Property of any Person securing purchase money Indebtedness
(including Capital Leases and Synthetic Lease Obligations) of such Person
permitted under Section 7.01(c), provided that any such Lien attaches to such
Property concurrently with or within 90 days after the acquisition thereof;

 

(g) leases or subleases granted to others not interfering in any material
respect with the business of any Consolidated Party;

 

(h) any interest of title of a lessor under, and Liens arising from UCC
financing statements (or equivalent filings, registrations or agreements in
foreign jurisdictions) relating to, leases permitted by this Agreement;

 

(i) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods;

 

(j) Liens deemed to exist in connection with Investments in repurchase
agreements permitted under Section 7.06;

 

(k) normal and customary rights of setoff upon deposits of cash in favor of
banks or other depository institutions;

 

(l) Liens of a collection bank arising under Section 4-210 of the Uniform
Commercial Code on items in the course of collection;

 

(m) Liens of sellers of goods to the Borrowers and any of their Subsidiaries
arising under Article 2 of the Uniform Commercial Code or similar provisions of
applicable law in the ordinary course of business, covering only the goods sold
and securing only the unpaid purchase price for such goods and related expenses;

 

(n) any interest of title of a buyer in connection with, and Liens arising from
UCC financing statements relating to, a sale of receivables permitted by this
Agreement;

 

(o) Liens existing as of the Closing Date and set forth on Schedule 7.02;

 

(p) Liens on property of a Person existing at the time such Person is merged
with or into or consolidated with any Borrower or any Subsidiary of any
Borrower; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with such Borrower or such Subsidiary;

 

(q) Liens on property existing at the time of acquisition of the property by any
Borrower or any Subsidiary of any Borrower, provided that such Liens were in
existence prior to the contemplation of such acquisition;

 

(r) Liens incurred in the ordinary course of business of the Loan Parties which
are permitted under the Senior Subordinated Note Indenture with respect to
obligations that do not exceed $5,000,000 in the aggregate at any one time
outstanding;

 

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(s) Liens created or assumed in the ordinary course of business of exploring
for, developing or producing oil, gas or other minerals (including borrowings in
connection therewith) on, or any interest in, or on any proceeds from the sale
of, property acquired for such purposes, production therefrom (including the
proceeds thereof), or material or equipment located thereon;

 

(t) Liens arising from the pledge of any bonds, debentures, notes or similar
instruments which are purchased and held by any remarketing agent for the
account of, or as agent for, the Borrowers;

 

(u) conservation easements on timberlands; and

 

(v) any extension, renewal or replacement, in whole or in part, of any Lien
described in the foregoing clauses (a) through (u); provided that any such
extension, renewal or replacement shall be no more restrictive in any material
respect than the Lien extended, renewed or replaced and shall not extend to any
other Property of the Loan Parties other than such item of Property originally
covered by such Lien or by improvement thereof or additions or accessions
thereto.

 

  7.03 Nature of Business.

 

The Loan Parties will not permit any Consolidated Party to materially alter the
character or conduct of the business conducted by such Person as of the Closing
Date other than in connection with the consummation of the Merger and the REIT
Conversion as described in the Holdings Registration Statement.

 

  7.04 Consolidation, Merger, Dissolution, etc.

 

Except in connection with a Permitted Asset Disposition or pursuant to the
Merger, the Loan Parties will not permit any Consolidated Party to enter into
any transaction of merger or consolidation or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution); provided that,
notwithstanding the foregoing provisions of this Section 7.04 but subject to the
terms of Sections 7.11 and 7.12, (a) any Borrower may merge or consolidate with
any of its Subsidiaries, provided that such Borrower shall be the continuing or
surviving corporation, (b) any Loan Party other than the Administrative Borrower
may merge or consolidate with any other Loan Party other than the Administrative
Borrower; provided that in the case of the merger of any Borrower, such Borrower
shall be the continuing or surviving corporation,, (c) any Consolidated Party
which is not a Loan Party may be merged or consolidated with or into any Loan
Party other than the Administrative Borrower, provided that such Loan Party
shall be the continuing or surviving corporation, (d) any Consolidated Party
which is not a Loan Party may be merged or consolidated with or into any other
Consolidated Party which is not a Loan Party, (e) any Subsidiary of a Borrower
may merge with any Person that is not a Loan Party in connection with an Asset
Disposition permitted under Section 7.05, (f) any Borrower or any Subsidiary of
any Borrower may merge with any Person other than a Consolidated Party in
connection with a Permitted Acquisition, provided that, if such transaction
involves a Borrower, such Borrower shall be the continuing or surviving
corporation and (g) any wholly owned Subsidiary of such Borrower may dissolve,

 

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liquidate or wind up its affairs at any time provided that such dissolution,
liquidation or winding up, as applicable, could not have a Material Adverse
Effect.

 

  7.05 Asset Dispositions.

 

The Loan Parties will not permit any Consolidated Party to make any Asset
Disposition or enter into any agreement to make any Asset Disposition, except,
so long as such Asset Disposition is permitted under the Senior Subordinated
Note Indenture:

 

(a) any Consolidated Party may sell, lease, transfer or otherwise dispose of
equipment or real property to the extent that (i) such property is exchanged for
credit against the purchase price of similar replacement property or (ii) the
proceeds of any such transaction are reasonably promptly applied to the purchase
price of such replacement property;

 

(b) any Subsidiary may sell, lease, transfer or otherwise dispose of Property to
the Borrowers or to a wholly-owned Subsidiary; provided that if the transferor
of such Property is a Guarantor, the transferee thereof must either be a
Borrower or a Guarantor;

 

(c) Asset Dispositions permitted by Section 7.04

 

(d) Asset Dispositions by the Borrowers and their Subsidiaries of Property
pursuant to sale-leaseback transactions to the extent such disposition is
permitted by Section 7.13;

 

(e) the Borrowers and their Subsidiaries may sell, lease, transfer or otherwise
dispose of assets, to the extent not otherwise permitted under this
Section 7.05; provided that (i) at the time of such Asset Disposition, no
Default shall exist or would result therefrom, (ii) in connection with Asset
Dispositions the aggregate Net Cash Proceeds of which are in excess of
$50,000,000, the Borrowers shall have delivered to the Administrative Agent a
Pro Forma Compliance Certificate demonstrating that, upon giving effect to such
Asset Disposition on a Pro Forma Basis, the Loan Parties would be in compliance
with the financial covenants set forth in Section 6.10(a)-(c) and (iii) the
aggregate Net Cash Proceeds of all fee interests in timberlands (i.e., excluding
ordinary course sales of timber and 1031 like-kind exchanges) sold, leased,
transferred or otherwise disposed of pursuant to this clause (e) over the term
of this Agreement shall not exceed $150,000,000;

 

provided, however, that any Asset Disposition pursuant to clauses (a) through
(e) shall be for fair market value.

 

  7.06 Investments.

 

The Loan Parties will not permit any Consolidated Party to make any Investments,
except for:

 

(a) Investments consisting of cash and Cash Equivalents;

 

(b) Investments consisting of accounts receivable created, acquired or made by
any Consolidated Party in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;

 

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(c) Investments consisting of Capital Stock, obligations, securities or other
property received by any Consolidated Party in settlement of accounts receivable
(created in the ordinary course of business) from bankrupt obligors;

 

(d) Investments existing as of the Closing Date and set forth in Schedule 7.06;

 

(e) Investments consisting of advances or loans to directors, officers,
employees, agents, customers or suppliers that do not exceed $5,000,000 in the
aggregate at any one time outstanding; provided that all such advances must be
in compliance with applicable Laws, including, but not limited to, the
Sarbanes-Oxley;

 

(f) Investments in any Loan Party;

 

(g) Investments consisting of an Acquisition by any Borrower or any Subsidiary
of any Borrower, provided that (i) the Property acquired (or the Property of the
Person acquired) in such Acquisition is used or useful in the same or a similar
line of business as the Borrowers and their Subsidiaries were engaged in on the
Closing Date (or any reasonable extensions or expansions thereof), (ii) in the
case of an Acquisition of the Capital Stock of another Person, the board of
directors (or other comparable governing body) of such other Person shall have
duly approved such Acquisition, (iii) the Borrowers shall have delivered to the
Administrative Agent, to the extent the aggregate consideration paid in
connection with such Acquisition is equal to or greater than $50,000,000, (A) a
Pro Forma Compliance Certificate demonstrating that, upon giving effect to such
Acquisition on a Pro Forma Basis, the Loan Parties would be in compliance with
the financial covenants set forth in Section 6.10(a)-(c) and (B) a certificate
of a Responsible Officer of the Borrowers (1) demonstrating that, upon giving
effect to such Acquisition, at least 90% of Consolidated EBITDDA for the most
recently ended fiscal year period for each of the Consolidated Parties and the
acquired Person or Property preceding the date of such Acquisition with respect
to which the Administrative Agent shall have received the Required Financial
Information has been audited in accordance with GAAP, in the case of the
Borrowers, as required by Section 6.01(a) and, in the case of the acquired
Person or Property, by an independent certified public accountant of recognized
national standing reasonably acceptable to the Administrative Agent (whose
opinion shall not be limited as to the scope or qualified as to going concern
status or any other material qualifications or exceptions) and (2) to the extent
that audited financial information for the acquired Person or Property is
required under the terms of the foregoing clause (1), certifying that the
quarterly financial statements with respect to the Person or Property acquired
for each fiscal quarter period ending after the date of the last audit and
immediately prior to the date of such Acquisition have been prepared in
accordance with GAAP (subject to audit adjustments and the absence of footnotes)
and reviewed by independent certified public accountants of recognized national
standing reasonably acceptable to the Administrative Agent, (iv) the
representations and warranties made by the Loan Parties in any Loan Document
shall be true and correct in all material respects at and as if made as of the
date of such Acquisition (after giving effect thereto) except to the extent such
representations and warranties expressly relate to an earlier date, (v) if such
transaction involves the purchase of an interest in a partnership between any
Borrower (or a Subsidiary of any Borrower) as a general partner and entities
unaffiliated with such Borrower or such Subsidiary as the other partners, such
transaction shall be effected by having such equity interest acquired by a
corporate holding company directly or indirectly wholly-owned by such Borrower
newly formed for the sole purpose of effecting such transaction, (vi) after
giving effect to

 

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such Acquisition, there shall be at least $50,000,000 of availability existing
under the Aggregate Commitments and (vii) the aggregate consideration (including
cash and non-cash consideration and any assumption of Indebtedness, but
excluding consideration consisting of any Capital Stock of the Borrowers issued
to the seller of the Capital Stock or Property acquired in such Acquisition and
consideration consisting of the Net Cash Proceeds of any Equity Issuance by the
Borrowers consummated subsequent to the Closing Date and the proceeds of any
Asset Disposition, or Involuntary Disposition, consummated subsequent to the
Closing Date) paid by the Consolidated Parties for all such Acquisitions
occurring after the Closing Date, together with Investments made pursuant clause
(i) of this Section, shall not exceed $175,000,000;

 

(h) Investments by a Loan Party in Potlatch Employee Benefits Organization,
Inc., Potlatch Foundation II and Potlatch Foundation for Higher Education, in
each case in accordance with past practices of such Loan Party; or

 

(i) other Investments which, together with Investments permitted under clause
(g) of this Section, shall not exceed $175,000,000 in the aggregate over the
term of this Agreement.

 

  7.07 Restricted Payments.

 

The Loan Parties will not permit any Consolidated Party to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except (a) to make dividends or other distributions payable to any Loan
Party (directly or indirectly through Subsidiaries), (b) as permitted by
Section 7.06, Section 7.08 or Section 7.09, (c) so long as such payments are
permitted under the Senior Subordinated Note Indenture, the Borrowers shall be
permitted to pay dividends and distributions to the shareholders of the
Administrative Borrower, provided (i) no Default or Event of Default shall exist
on the date of, or shall result from, the making of any such distributions and
(ii) upon giving effect on a Pro Forma Basis to such transaction, the Borrowers
would be in compliance with the financial covenants set forth in
Section 6.10(a)-(c); (d) to make distributions necessary solely for the purposes
of maintaining the Administrative Borrower’s REIT status (including the E&P
Distribution, the cash portion of which shall not exceed $100,000,000); and
(e) so long as no Default or Event of Default exists or would otherwise result
therefrom and the Borrowers can demonstrate (i) availability under the Aggregate
Commitments of at least $50,000,000 and (ii) pursuant to a Pro Forma Compliance
Certificate, compliance with the financial covenants set forth in
Section 6.10(a)-(c), in each case on a Pro Forma Basis after giving effect
thereto, the Borrowers shall be permitted to Repay from time to time all or any
portion of the principal amount, together with any required or market premium
and any other costs, of the Senior Subordinated Notes to the extent not
prohibited under the Senior Subordinated Note Indenture.

 

  7.08 Limitation on Actions with Respect to Other Indebtedness.

 

No Loan Party will, nor will it permit any of its Subsidiaries to:

 

(a) upon the occurrence and continuance of a Default or Event of Default
(i) amend or modify any of the terms of any Indebtedness of such Person (other
than Indebtedness arising under the Loan Documents) if such amendment or
modification would add or change any terms in a manner materially adverse to the
Lenders, or (ii) materially shorten the final maturity or average life

 

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to maturity thereof or require any payment thereon to be made sooner than
originally scheduled or increase the interest rate or fees applicable thereto,
or (iii) make (or give any notice with respect thereto) any voluntary or
optional payment or prepayment thereof, or make (or give any notice with respect
thereto) any redemption or acquisition for value or defeasance (including
without limitation, by way of depositing money or securities with the trustee
with respect thereto before due for the purpose of paying when due), refund,
refinance or exchange with respect thereto; provided, however that the Borrowers
may Repay Indebtedness in accordance with Section 7.07;

 

(b) after the issuance thereof, amend or modify any of the terms of any
Subordinated Indebtedness of such Person if such amendment or modification would
(i) add or change any terms in a manner materially adverse to such Person or to
the Lenders, (ii) materially shorten the final maturity or average life to
maturity thereof, (iii) require any payment thereon to be made sooner than
originally scheduled, (iv) increase the interest rate or fees applicable thereto
or (v) change any subordination provision thereof in a manner adverse to the
Lenders;

 

(c) make interest payments in respect of any Subordinated Indebtedness in
violation of the applicable subordination provisions;

 

(d) make (or give any notice with respect thereto) any voluntary or optional
payment or prepayment in respect of any Subordinated Indebtedness;

 

(e) make (or give any notice with respect thereto) any redemption, acquisition
for value or defeasance (including without limitation, by way of depositing
money or securities with the trustee with respect thereto before due for the
purpose of paying when due), refund, refinance or exchange of any Subordinated
Indebtedness; or

 

(f) designate any other Indebtedness of such Person as “Designated Senior Debt”
(as such term is used in the Senior Subordinated Note Indenture) other than
Indebtedness designated as “Designated Senior Debt” as of the Closing Date and
identified as such on Schedule 7.01.

 

  7.09 Transactions with Affiliates.

 

The Loan Parties will not permit any Consolidated Party to enter into or permit
to exist any transaction or series of transactions with any officer, director,
shareholder, Subsidiary or Affiliate of such Person other than (a) advances of
working capital to any Loan Party, (b) transfers of cash and assets to any Loan
Party, (c) intercompany transactions expressly permitted by Section 7.01,
Section 7.04, Section 7.05, Section 7.06, or Section 7.07, (d) normal
compensation and reimbursement of expenses of officers and directors,
(e) agreements and arrangements entered into with employees of the Loan Parties
in connection with termination of their employment therewith, and (f) except as
otherwise specifically limited in this Agreement, other transactions which are
entered into in the ordinary course of such Person’s business on terms and
conditions substantially as favorable to such Person as would be obtainable by
it in a comparable arms-length transaction with a Person other than an officer,
director, shareholder, Subsidiary or Affiliate.

 

  7.10 Fiscal Year; Organizational Documents.

 

Except in connection with the REIT Conversion or pursuant to the Merger, the
Loan Parties will not permit any Consolidated Party to (a) change its fiscal
year or (b) amend, modify or change

 

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its articles of incorporation (or corporate charter or other similar
organizational document) or bylaws (or other similar document) to the extent
such change, amendment or modification could reasonably be expected to have a
Material Adverse Effect.

 

  7.11 Limitation on Restricted Actions.

 

The Loan Parties will not permit any Consolidated Party to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Loan Party on its Capital Stock
or with respect to any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness or other obligation owed to any Loan Party,
(c) make loans or advances to any Loan Party, (d) sell, lease or transfer any of
its Property to any Loan Party, or (e) act as a Loan Party and pledge its assets
pursuant to the Loan Documents or any renewals, refinancings, exchanges,
refundings or extension thereof, except (in respect of any of the matters
referred to in clauses (a)-(d) above) for such encumbrances or restrictions
existing under or by reason of (i) this Agreement and the other Loan Documents,
(ii) the Senior Subordinated Note Indenture and the Senior Subordinated Notes,
in each case as in effect as of the Closing Date, (iii) applicable law, (iv) any
document or instrument governing Indebtedness incurred pursuant to
Section 7.01(c), provided that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection therewith,
(v) any Permitted Lien or any document or instrument governing any Permitted
Lien, provided that any such restriction contained therein relates only to the
asset or assets subject to such Permitted Lien or (vi) customary restrictions
and conditions contained in any agreement relating to the sale of any Property
permitted under Section 7.05 pending the consummation of such sale.

 

  7.12 Ownership of Subsidiaries.

 

Notwithstanding any other provisions of this Agreement to the contrary, the Loan
Parties will not permit any Consolidated Party to (i) permit any Person (other
than the Borrowers or any wholly owned Subsidiary of a Borrower) to own any
Capital Stock of any Subsidiary of the Borrowers, except (A) to qualify
directors where required by applicable law or to satisfy other requirements of
applicable law with respect to the ownership of Capital Stock of Foreign
Subsidiaries, (B) as a result of or in connection with a dissolution, merger,
consolidation or disposition of a Subsidiary not prohibited by Section 7.04 or
Section 7.05 or (C) in connection with the ownership of an interest in a joint
venture permitted under Section 7.06, (ii) permit any Subsidiary of the
Borrowers to issue or have outstanding any shares of preferred Capital Stock or
(iii) permit, create, incur, assume or suffer to exist any Lien on any Capital
Stock of any Subsidiary of the Borrowers, except for Permitted Liens.

 

  7.13 Sale Leasebacks.

 

The Loan Parties will not permit any Consolidated Party to enter into any Sale
and Leaseback Transaction, except to the extent the aggregate net book value of
the Property sold or transferred (or to be sold or transferred) in connection
with all such Sale and Leaseback Transactions does not exceed $25,000,000.

 

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  7.14 No Further Negative Pledges.

 

The Loan Parties will not permit any Consolidated Party to enter into, assume or
become subject to any agreement prohibiting or otherwise restricting the
existence of any Lien upon any of its Property in favor of the Administrative
Agent (for the benefit of the Lenders) for the purpose of securing the
Obligations, whether now owned or hereafter acquired, or requiring the grant of
any security for any obligation if such Property is given as security for the
Obligations, except (a) in connection with any document or instrument governing
Indebtedness incurred pursuant to Section 7.01(c), provided that any such
restriction contained therein relates only to the asset or assets constructed or
acquired in connection therewith, (b) in connection with any Permitted Lien or
any document or instrument governing any Permitted Lien, provided that any such
restriction contained therein relates only to the asset or assets subject to
such Permitted Lien and (c) pursuant to customary restrictions and conditions
contained in any agreement relating to the sale of any Property permitted under
Section 7.05, pending the consummation of such sale.

 

  7.15 Subsidiaries.

 

The Loan Parties will not create, acquire or permit to exist any (a) new
Subsidiaries unless Section 6.11 hereof, if applicable, has been, or will be
concurrently complied with, or (b) Foreign Subsidiaries to the extent that the
revenue, assets and cash flows of the Foreign Subsidiaries would exceed in the
aggregate 15% of the revenue, assets and cash flows of the Consolidated Parties
on a consolidated basis.

 

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

 

  8.01 Events of Default.

 

Any of the following shall constitute an Event of Default:

 

(a) Non-Payment. The Borrowers or any other Loan Party fail to pay (i) when and
as required to be paid herein and in the currency required hereunder, any amount
of principal of any Loan or any L/C Obligation, or (ii) within five Business
Days after the same becomes due and in the currency required hereunder, any
interest on any Loan or on any L/C Obligation, or any commitment or other fee
due hereunder, or (iii) within five Business Days after the same becomes due and
in the currency required hereunder, any other amount payable hereunder or under
any other Loan Document; or

 

(b) Specific Covenants. The Borrowers shall

 

(i) default in the due performance or observance of any term, covenant or
agreement contained in Sections 6.02, 6.08, 6.10, 6.11 or Article VII;

 

(ii) default in the due performance or observance of any term, covenant or
agreement contained in Section 6.01(a), (b), (c) or (d) and such default shall
continue unremedied for a period of at least 5 Business Days after the earlier
of a Responsible Officer

 

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of a Borrower becoming aware of such default or written notice thereof by the
Administrative Agent or any Lender; or

 

(c) Other Defaults. Any Loan Party fails to perform or observe any other
covenant or agreement (not specified in subsection (a) or (b) above) contained
in any Loan Document on its part to be performed or observed and such failure
continues for 30 days after the earlier of a Responsible Officer of a Borrower
becoming aware of such default or written notice thereof by the Administrative
Agent or any Lender or, if such failure cannot reasonably be cured within such
30-day period, 60 days (but only to the extent such failure can reasonably be
cured within such 60-day period) so long as the Borrowers have diligently
commenced such cure and is diligently prosecuting the completion thereof; or

 

(d) Representations and Warranties. Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of the Borrowers or any
other Loan Party herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith shall prove untrue in any material
respect on the date as of which it was deemed to have been made; or

 

(e) Cross-Default. (i) Any Borrower or any Subsidiary (A) fails to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise beyond the applicable grace period with
respect thereto) in respect of any Indebtedness or Guarantee (other than
Indebtedness hereunder and Indebtedness under Swap Contracts) having an
aggregate principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $12,500,000, or (B) fails to observe or perform any
other agreement or condition relating to any such Indebtedness or Guarantee or
contained in any instrument or agreement evidencing, securing or relating
thereto beyond the applicable grace period with respect thereto, or any other
event occurs, the effect of which default or other event is to cause, or to
permit the holder or holders of such Indebtedness or the beneficiary or
beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to be demanded or to become due or to be
repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an
offer to repurchase, prepay, defease or redeem such Indebtedness to be made,
prior to its stated maturity, or such Guarantee to become payable or cash
collateral in respect thereof to be demanded; or (ii) there occurs under any
Swap Contract an Early Termination Date (as defined in such Swap Contract)
resulting from (A) any event of default under such Swap Contract as to which any
Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap
Contract) or (B) any Termination Event (as so defined) under such Swap Contract
as to which any Borrower or any Subsidiary is an Affected Party (as so defined)
and, in either event, the Swap Termination Value owed by such Borrower or such
Subsidiary as a result thereof is greater than $12,500,000; or

 

(f) Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries
institutes or consents to the institution of any proceeding under any Debtor
Relief Law, or makes an assignment for the benefit of creditors; or applies for
or consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all or any material
part of its property; or any receiver, trustee, custodian, conservator,
liquidator,

 

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rehabilitator or similar officer is appointed without the application or consent
of such Person and the appointment continues undischarged or unstayed for 60
calendar days; or any proceeding under any Debtor Relief Law relating to any
such Person or to all or any material part of its property is instituted without
the consent of such Person and continues undismissed or unstayed for 60 calendar
days, or an order for relief is entered in any such proceeding; or

 

(g) Inability to Pay Debts; Attachment. (i) A Borrower or any Subsidiary becomes
unable or admits in writing its inability or fails generally to pay its debts as
they become due, or (ii) any writ or warrant of attachment or execution or
similar process is issued or levied against all or any material part of the
property of any such Person and is not released, vacated or fully bonded within
30 days after its issue or levy; or

 

(h) Judgments. There is entered against any Borrower or any Subsidiary (i) a
final judgment or order for the payment of money in an aggregate amount
exceeding $12,500,000 (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage), or (ii) any one or
more non-monetary final judgments that have, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect and, in either
case, (A) enforcement proceedings are commenced by any creditor upon such
judgment or order, or (B) there is a period of 30 consecutive days during which
a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect; or

 

(i) ERISA. Any of the following events or conditions, if such event or condition
could reasonably be expected to result in taxes, penalties, and other
liabilities to any Consolidated Party in an aggregate amount greater than
$12,500,000: (i) any “accumulated funding deficiency,” as such term is defined
in Section 302 of ERISA and Section 412 of the Code, whether or not waived,
shall exist with respect to any Plan, or any lien shall arise on the assets of
any Consolidated Party or any ERISA Affiliate in favor of the PBGC or a Plan;
(ii) an ERISA Event shall occur with respect to a Single Employer Plan, which
is, in the reasonable opinion of the Administrative Agent, likely to result in
the termination of such Plan for purposes of Title IV of ERISA; (iii) an ERISA
Event shall occur with respect to a Multiemployer Plan or Multiple Employer
Plan, which is, in the reasonable opinion of the Administrative Agent, likely to
result in (A) the termination of such Plan for purposes of Title IV of ERISA, or
(B) any Consolidated Party or any ERISA Affiliate incurring any liability in
connection with a withdrawal from, reorganization of (within the meaning of
Section 4241 of ERISA), or insolvency (within the meaning of Section 4245 of
ERISA) of such Plan; or (iv) any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which may subject any Consolidated Party or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA
or Section 4975 of the Code, or under any agreement or other instrument pursuant
to which any Consolidated Party or any ERISA Affiliate has agreed or is required
to indemnify any person against any such liability; or

 

(j) Invalidity of Loan Documents. Any Loan Document, at any time after its
execution and delivery and for any reason other than as expressly permitted
hereunder or satisfaction in full of all the Obligations, ceases to be in full
force and effect; or any Loan Party contests in any manner the validity or
enforceability of any Loan Document; or any Loan Party denies that it has any or
further liability or obligation under any Loan Document, or purports to revoke,
terminate or rescind any Loan Document;

 

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(k) Change of Control. There occurs any Change of Control with respect to the
Borrowers; or

 

(l) Senior Subordinated Debt Documentation. (i) There shall occur and be
continuing any “Event of Default” (or any comparable term) under, and as defined
in the documents evidencing or governing any Subordinated Debt, (ii) any of the
Obligations for any reason shall cease to be “Designated Senior Debt” (or any
comparable term) under, and as defined in the documents evidencing or governing
any Subordinated Indebtedness, (iii) any Indebtedness other than the Obligations
shall constitute “Designated Senior Indebtedness” (or any comparable term)
under, and as defined in, the Senior Subordinated Note Indenture or any other
documents evidencing or governing any Subordinated Indebtedness or (iv) the
subordination provisions of the documents evidencing or governing any
Subordinated Indebtedness shall, in whole or in part, terminate, cease to be
effective or cease to be legally valid, binding and enforceable against any
holder of the applicable Subordinated Indebtedness.

 

  8.02 Remedies Upon Event of Default.

 

If any Event of Default occurs and is continuing, the Administrative Agent
shall, at the request of, or may, with the consent of, the Required Lenders,
take any or all of the following actions:

 

(a) declare the commitment of each Lender to make Loans and any obligation of
the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such
commitments and obligation shall be terminated;

 

(b) declare the unpaid principal amount of all outstanding Loans, all interest
accrued and unpaid thereon, and all other amounts owing or payable hereunder or
under any other Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrowers;

 

(c) require that the Borrowers Cash Collateralize the L/C Obligations (in an
amount equal to the then Outstanding Amount thereof); and

 

(d) exercise on behalf of itself and the Lenders all rights and remedies
available to it and the Lenders under the Loan Documents or applicable law;

 

provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to any Borrower under the Bankruptcy Code of the
United States, the obligation of each Lender to make Loans and any obligation of
the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the
unpaid principal amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable, and the
obligation of the Borrowers to Cash Collateralize the L/C Obligations as
aforesaid shall automatically become effective, in each case without further act
of the Administrative Agent or any Lender.

 

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  8.03 Application of Funds.

 

After the exercise of remedies provided for in Section 8.02 (or after the Loans
have automatically become immediately due and payable and the L/C Obligations
have automatically been required to be Cash Collateralized as set forth in the
proviso to Section 8.02), any amounts received on account of the Obligations
shall be applied by the Administrative Agent in the following order:

 

First, to payment of that portion of the Obligations constituting fees,
indemnities, expenses and other amounts (including Attorney Costs and amounts
payable under Article III) payable to the Administrative Agent in its capacity
as such;

 

Second, to payment of that portion of the Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the
Lenders (including Attorney Costs and amounts payable under Article III),
ratably among them in proportion to the amounts described in this clause Second
payable to them;

 

Third, to payment of that portion of the Obligations constituting accrued and
unpaid interest on the Loans and L/C Borrowings, ratably among the Lenders in
proportion to the respective amounts described in this clause Third payable to
them;

 

Fourth, to payment of that portion of the Obligations constituting unpaid
principal of the Loans, L/C Borrowings and Swap Contracts between any Loan Party
and any Lender or Affiliate of any Lender and to Cash Collateralize the undrawn
amounts of Letters of Credit, ratably among the Lenders in proportion to the
respective amounts described in this clause Fourth held by them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly
paid in full, to the Borrowers or as otherwise required by Law.

 

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Fourth above shall be
applied to satisfy drawings under such Letters of Credit as they occur. If any
amount remains on deposit as cash collateral after all Letters of Credit have
either been fully drawn or expired, such remaining amount shall be applied to
the other Obligations, if any, in the order set forth above.

 

ARTICLE IX

ADMINISTRATIVE AGENT

 

  9.01 Appointment and Authority.

 

Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of
America to act on its behalf as the Administrative Agent hereunder and under the
other Loan Documents and authorizes the Administrative Agent to take such
actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto. The provisions of this
Article are solely for the benefit of the Administrative Agent, the Lenders and
the L/C Issuer (other than

 

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with respect to the consent rights provided to the Borrowers in Section 9.06),
and neither the Borrowers nor any other Loan Party shall have rights as a third
party beneficiary of any of such provisions.

 

  9.02 Rights as a Lender.

 

The Person serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent and the term
“Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the
context otherwise requires, include the Person serving as the Administrative
Agent hereunder in its individual capacity. Such Person and its Affiliates may
accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with
the Borrowers or any Subsidiary or other Affiliate thereof as if such Person
were not the Administrative Agent hereunder and without any duty to account
therefor to the Lenders.

 

  9.03 Exculpatory Provisions.

 

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein and in the other Loan Documents. Without limiting the
generality of the foregoing, the Administrative Agent:

 

(a) shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing;

 

(b) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of the Lenders as shall be expressly provided for
herein or in the other Loan Documents), provided that the Administrative Agent
shall not be required to take any action that, in its opinion or the opinion of
its counsel, may expose the Administrative Agent to liability or that is
contrary to any Loan Document or applicable law; and

 

(c) shall not, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrowers or any of their Affiliates
that is communicated to or obtained by the Person serving as the Administrative
Agent or any of its Affiliates in any capacity.

 

The Administrative Agent shall not be liable for any action taken or not taken
by it (i) with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of
its own gross negligence or willful misconduct. The Administrative Agent shall
be deemed not to have knowledge of any Default unless and until notice
describing such Default is given to the Administrative Agent by the Borrowers, a
Lender or the L/C Issuer.

 

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The Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or (v) the satisfaction
of any condition set forth in Article IV or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the
Administrative Agent.

 

  9.04 Reliance by Administrative Agent.

 

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed by
it to be genuine and to have been signed, sent or otherwise authenticated by the
proper Person. The Administrative Agent also may rely upon any statement made to
it orally or by telephone and believed by it to have been made by the proper
Person, and shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of a Loan, or the issuance
of a Letter of Credit, that by its terms must be fulfilled to the satisfaction
of a Lender or the L/C Issuer, the Administrative Agent may presume that such
condition is satisfactory to such Lender or the L/C Issuer unless the
Administrative Agent shall have received notice to the contrary from such Lender
or the L/C Issuer prior to the making of such Loan or the issuance of such
Letter of Credit. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrowers), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

 

  9.05 Delegation of Duties.

 

The Administrative Agent may perform any and all of its duties and exercise its
rights and powers hereunder or under any other Loan Document by or through any
one or more sub-agents appointed by the Administrative Agent. The Administrative
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties. The
exculpatory provisions of this Article shall apply to any such sub-agent and to
the Related Parties of the Administrative Agent and any such sub-agent, and
shall apply to their respective activities in connection with the syndication of
the credit facilities provided for herein as well as activities as
Administrative Agent.

 

  9.06 Resignation of Administrative Agent.

 

The Administrative Agent may at any time give notice of its resignation to the
Lenders, the L/C Issuer and the Administrative Borrower. Upon receipt of any
such notice of resignation, the Required Lenders shall have the right, to
appoint a successor, which shall be a bank with an office in the United States,
or an Affiliate of any such bank with an office in the United States. So long as
no Default or Event of Default then exists the Borrower shall have the right to
consent

 

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to the appointment of such successor (such consent not to be unreasonably
withheld or delayed). If no such successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation, then the
retiring Administrative Agent may on behalf of the Lenders and the L/C Issuer
with, so long as no Default or Event of Default then exists, the consent of the
Borrowers (such consent not to be unreasonably withheld or delayed), appoint a
successor Administrative Agent meeting the qualifications set forth above;
provided that if the Administrative Agent shall notify the Borrowers and the
Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice
and (1) the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder and under the other Loan Documents and (2) all
payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender and
the L/C Issuer directly, until such time as the Required Lenders appoint a
successor Administrative Agent as provided for above in this Section. Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or retired) Administrative Agent, and the
retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already
discharged therefrom as provided above in this Section). The fees payable by the
Borrowers to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrowers and such
successor. After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article and Section 10.04
shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting as Administrative Agent.

 

Any resignation by Bank of America as Administrative Agent pursuant to this
Section shall also constitute its resignation as L/C Issuer and Swing Line
Lender. Upon the acceptance of a successor’s appointment as Administrative Agent
hereunder, (a) such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring L/C Issuer and Swing Line
Lender, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged
from all of their respective duties and obligations hereunder or under the other
Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit
in substitution for the Letters of Credit, if any, outstanding at the time of
such succession or make other arrangements satisfactory to the retiring L/C
Issuer to effectively assume the obligations of the retiring L/C Issuer with
respect to such Letters of Credit.

 

  9.07 Non-Reliance on Administrative Agent and Other Lenders.

 

Each Lender and the L/C Issuer acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender or any of
their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender and the L/C Issuer also acknowledges that it will,
independently and without reliance upon the Administrative Agent or any other
Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not

 

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taking action under or based upon this Agreement, any other Loan Document or any
related agreement or any document furnished hereunder or thereunder.

 

  9.08 No Other Duties, Etc.

 

Anything herein to the contrary notwithstanding, none of the Book Managers or
Arrangers listed on the cover page hereof shall have any powers, duties or
responsibilities under this Agreement or any of the other Loan Documents, except
in its capacity, as applicable, as the Administrative Agent, a Lender or the L/C
Issuer hereunder.

 

  9.09 Administrative Agent May File Proofs of Claim.

 

In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to any Loan Party, the Administrative Agent
(irrespective of whether the principal of any Loan or L/C Obligation shall then
be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrowers) shall be entitled and empowered, by intervention in such
proceeding or otherwise

 

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans, L/C Obligations and all other
Obligations that are owing and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of the Lenders, the L/C
Issuer and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders, the L/C
Issuer and the Administrative Agent and their respective agents and counsel and
all other amounts due the Lenders, the L/C Issuer and the Administrative Agent
under Sections 2.04(i) and (j), 2.10 and 10.04) allowed in such judicial
proceeding; and

 

(b) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender and the L/C Issuer to make such payments to the Administrative Agent
and, in the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders and the L/C Issuer, to pay to the
Administrative Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of the Administrative Agent and its agents and
counsel, and any other amounts due the Administrative Agent under Sections 2.10
and 10.04.

 

Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender or the L/C
Issuer any plan of reorganization, arrangement, adjustment or composition
affecting the Obligations or the rights of any Lender or to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding.

 

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  9.10 Guaranty Matters.

 

The Lenders and the L/C Issuer irrevocably authorize the Administrative Agent,
at its option and in its discretion, to release any Guarantor from its
obligations under the Guaranty if such Person ceases to be a Subsidiary as a
result of a transaction permitted hereunder.

 

Upon request by the Administrative Agent at any time, the Required Lenders will
confirm in writing the Administrative Agent’s authority to release any Guarantor
from its obligations under the Guaranty pursuant to this Section 9.10.

 

ARTICLE X

MISCELLANEOUS

 

  10.01  Amendments, Etc.

 

No amendment or waiver of any provision of this Agreement or any other Loan
Document, and no consent to any departure by the Borrowers or any other Loan
Party therefrom, shall be effective unless in writing signed by the Required
Lenders and the Borrowers or the applicable Loan Party, as the case may be, and
acknowledged by the Administrative Agent, and each such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such amendment, waiver or consent shall:

 

(a) extend or increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 8.02) without the written consent of such Lender;

 

(b) postpone any date fixed by this Agreement or any other Loan Document for any
payment (excluding mandatory prepayments) of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document without the written consent of each Lender directly affected thereby;

 

(c) reduce the principal of, or the rate of interest specified herein on, any
Loan or L/C Borrowing, or (subject to clause (v) of the second proviso to this
Section 10.01) any fees or other amounts payable hereunder or under any other
Loan Document, or change the manner of computation of any financial ratio
(including any change in any applicable defined term) used in determining the
Applicable Rate that would result in a reduction of any interest rate on any
Loan or any fee payable hereunder without the written consent of each Lender
directly affected thereby; provided, however, that only the consent of the
Required Lenders shall be necessary to amend the definition of “Default Rate” or
to waive any obligation of the Borrowers to pay interest at the Default Rate;

 

(d) change Section 2.13 or Section 8.03 in a manner that would alter the pro
rata sharing of payments required thereby without the written consent of each
Lender;

 

(e) change any provision of this Section or the definition of “Required Lenders”
or any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; or

 

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(f) release a material portion of the value of the Guarantees given by the
Guarantors without the written consent of each Lender;

 

and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the L/C Issuer in addition to the Lenders required above,
affect the rights or duties of the L/C Issuer under this Agreement or any Letter
of Credit Application relating to any Letter of Credit issued or to be issued by
it; (ii) no amendment, waiver or consent shall, unless in writing and signed by
the Swing Line Lender in addition to the Lenders required above, affect the
rights or duties of the Swing Line Lender under this Agreement; (iii) no
amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document; (iv) Section 10.07(h) may not be amended, waived or otherwise
modified without the consent of each Granting Lender all or any part of whose
Loans are being funded by an SPC at the time of such amendment, waiver or other
modification; and (v) the Fee Letter may be amended, or rights or privileges
thereunder waived, in a writing executed only by the parties thereto.
Notwithstanding anything to the contrary herein, no Defaulting Lender shall have
any right to approve or disapprove any amendment, waiver or consent hereunder,
except that the Commitment of such Lender may not be increased or extended
without the consent of such Lender.

 

  10.02  Notices; Effectiveness; Electronic Communication.

 

(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
subsection (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopier as follows, and all
notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, as follows:

 

(i) if to the Borrowers, the Administrative Agent, the L/C Issuer or the Swing
Line Lender, to the address, telecopier number, electronic mail address or
telephone number specified for such Person on Schedule 10.02; and

 

(ii) if to any other Lender, to the address, telecopier number, electronic mail
address or telephone number specified in its Administrative Questionnaire.

 

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in subsection (b) below, shall be effective as provided in such
subsection (b).

 

(b) Electronic Communications. Notices and other communications to the Lenders
and the L/C Issuer hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by the Administrative Agent, provided that the foregoing
shall not apply to notices to any Lender or the

 

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L/C Issuer pursuant to Article II if such Lender or the L/C Issuer, as
applicable, has notified the Administrative Agent that it is incapable of
receiving notices under such Article by electronic communication. The
Administrative Agent or any Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it, provided that approval of such procedures
may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

 

(c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT
PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE
BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM
LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF
ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT
PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event
shall the Administrative Agent or any of its Related Parties (collectively, the
“Agent Parties”) have any liability to the Borrowers, any Lender, the L/C Issuer
or any other Person for losses, claims, damages, liabilities or expenses of any
kind (whether in tort, contract or otherwise) arising out of the Borrowers’ or
the Administrative Agent’s transmission of Borrower Materials through the
Internet, except to the extent that such losses, claims, damages, liabilities or
expenses are determined by a court of competent jurisdiction by a final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Agent Party; provided, however, that in no event shall any
Agent Party have any liability to the Borrowers, any Lender, the L/C Issuer or
any other Person for indirect, special, incidental, consequential or punitive
damages (as opposed to direct or actual damages).

 

(d) Change of Address, Etc. Each of the Borrowers, the Administrative Agent, the
L/C Issuer and the Swing Line Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to the
other parties hereto. Each other Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to the
Borrowers, the Administrative Agent, the L/C Issuer and the Swing Line Lender.
In addition, each Lender agrees to notify the Administrative Agent from time to
time to ensure that the Administrative Agent has on record (i) an effective
address,

 

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contact name, telephone number, telecopier number and electronic mail address to
which notices and other communications may be sent and (ii) accurate wire
instructions for such Lender.

 

(e) Reliance by Administrative Agent, L/C Issuer and Lenders. The Administrative
Agent, the L/C Issuer and the Lenders shall be entitled to rely and act upon any
notices (including telephonic Committed Loan Notices and Swing Line Loan
Notices) purportedly given by or on behalf of the Borrowers even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof. The Borrowers shall indemnify the Administrative Agent, the L/C Issuer,
each Lender and the Related Parties of each of them from all losses, costs,
expenses and liabilities resulting from the reliance by such Person on each
notice purportedly given by or on behalf of the Borrowers. All telephonic
notices to and other telephonic communications with the Administrative Agent may
be recorded by the Administrative Agent, and each of the parties hereto hereby
consents to such recording.

 

  10.03  No Waiver; Cumulative Remedies.

 

No failure by any Lender or the Administrative Agent to exercise, and no delay
by any such Person in exercising, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.

 

  10.04   Attorney Costs, Expenses and Taxes.

 

The Borrowers agree (a) to pay or reimburse the Administrative Agent for all
costs and expenses incurred in connection with the development, preparation,
negotiation and execution of this Agreement and the other Loan Documents and any
amendment, waiver, consent or other modification of the provisions hereof and
thereof (whether or not the transactions contemplated hereby or thereby are
consummated), and the consummation and administration of the transactions
contemplated hereby and thereby, including all Attorney Costs, and (b) to pay or
reimburse the Administrative Agent and each Lender for all reasonable costs and
expenses incurred in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or the other Loan
Documents (including all such costs and expenses incurred during any “workout”
or restructuring in respect of the Obligations and during any legal proceeding,
including any proceeding under any Debtor Relief Law), including all Attorney
Costs. The foregoing costs and expenses shall include all search, filing,
recording, title insurance and appraisal charges and fees and taxes related
thereto, and other out-of-pocket expenses incurred by the Administrative Agent
and the cost of independent public accountants and other outside experts
retained by the Administrative Agent or any Lender. All amounts due under this
Section 10.04 shall be payable within ten Business Days after demand therefor.
The agreements in this Section shall survive the termination of the Aggregate
Commitments and repayment of all other Obligations.

 

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  10.05  Expenses; Indemnity; Damage Waiver.

 

(a) Costs and Expenses. The Borrowers shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates (including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent), in connection with the syndication of the credit facilities provided for
herein, the preparation, negotiation, execution, delivery and administration of
this Agreement and the other Loan 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), (ii) all reasonable
out-of-pocket expenses incurred by the L/C Issuer in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all out-of-pocket expenses incurred by the
Administrative Agent, any Lender or the L/C Issuer (including the fees, charges
and disbursements of any counsel for the Administrative Agent, any Lender or the
L/C Issuer), in connection with the enforcement or protection of its rights
(A) in connection with this Agreement and the other Loan Documents, including
its rights under this Section, or (B) in connection with the Loans made or
Letters of Credit issued hereunder, including all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.

 

(b) Indemnification by the Borrowers. The Borrowers shall indemnify the
Administrative Agent (and any sub-agent thereof), each Lender and the L/C
Issuer, and each Related Party of any of the foregoing Persons (each such Person
being called an “Indemnitee”) against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses (including
the fees, charges and disbursements of any counsel for any Indemnitee), incurred
by any Indemnitee or asserted against any Indemnitee by any third party or by
the Borrowers or any other Loan Party arising out of, in connection with, or as
a result of (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto of their respective obligations hereunder or
thereunder, the consummation of the transactions contemplated hereby or thereby,
or, in the case of the Administrative Agent (and any sub-agent thereof) and its
Related Parties only, the administration of this Agreement and the other Loan
Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the
proceeds therefrom (including any refusal by the L/C Issuer to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of
Credit), (iii) any actual or alleged presence or release of Hazardous Materials
on or from any property owned or operated by the Borrowers or any of their
Subsidiaries, or any Environmental Liability related in any way to the Borrowers
or any of their Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by the Borrowers or any other Loan Party, and regardless of whether any
Indemnitee is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee or (y) result from a claim
brought by any Borrower or any other Loan Party against an Indemnitee for breach
in bad faith of such Indemnitee’s obligations hereunder or under any other Loan
Document, if such

 

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Borrower or such Loan Party has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent jurisdiction.

 

(c) Reimbursement by Lenders. To the extent that the Borrowers for any reason
fail to indefeasibly pay any amount required under subsection (a) or (b) of this
Section to be paid by it to the Administrative Agent (or any sub-agent thereof),
the L/C Issuer or any Related Party of any of the foregoing, each Lender
severally agrees to pay to the Administrative Agent (or any such sub-agent), the
L/C Issuer or such Related Party, as the case may be, such Lender’s Applicable
Percentage (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount, provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent (or any such sub-agent) or the L/C Issuer in its capacity
as such, or against any Related Party of any of the foregoing acting for the
Administrative Agent (or any such sub-agent) or L/C Issuer in connection with
such capacity. The obligations of the Lenders under this subsection (c) are
subject to the provisions of Section 2.12(d).

 

(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable law, the Borrowers shall not assert, and hereby waive, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any other
Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Loan or Letter of Credit or the
use of the proceeds thereof. No Indemnitee referred to in subsection (b) above
shall be liable for any damages arising from the use by unintended recipients of
any information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or
thereby.

 

(e) Payments. All amounts due under this Section shall be payable not later than
ten Business Days after demand therefor.

 

(f) Survival. The agreements in this Section shall survive the resignation of
the Administrative Agent and the L/C Issuer, the replacement of any Lender, the
termination of the Aggregate Commitments and the repayment, satisfaction or
discharge of all the other Obligations.

 

  10.06  Payments Set Aside.

 

To the extent that any payment by or on behalf of the Borrowers is made to the
Administrative Agent or any Lender, or the Administrative Agent or any Lender
exercises its right of set-off, and such payment or the proceeds of such set-off
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Administrative Agent or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any
proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of
such recovery, the obligation or part thereof originally intended to be
satisfied shall be revived and continued in

 

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full force and effect as if such payment had not been made or such set-off had
not occurred, and (b) each Lender severally agrees to pay to the Administrative
Agent upon demand its applicable share of any amount so recovered from or repaid
by the Administrative Agent, plus interest thereon from the date of such demand
to the date such payment is made at a rate per annum equal to the Federal Funds
Rate from time to time in effect.

 

  10.07  Successors and Assigns.

 

(a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that neither the Borrowers nor
any other Loan Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Administrative
Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an Eligible Assignee in accordance
with the provisions of subsection (b) of this Section, (ii) by way of
participation in accordance with the provisions of subsection (d) of this
Section, (iii) by way of pledge or assignment of a security interest subject to
the restrictions of subsection (f) of this Section, or (iv) to an SPC in
accordance with the provisions of subsection (h) of this Section (and any other
attempted assignment or transfer by any party hereto shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to confer
upon any Person (other than the parties hereto, their respective successors and
assigns permitted hereby, Participants to the extent provided in subsection (d)
of this Section and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the L/C Issuer and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b) Assignments by Lenders. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans (including
for purposes of this subsection (b), participations in L/C Obligations and in
Swing Line Loans) at the time owing to it); provided that

 

(i) except in the case of an assignment of the entire remaining amount of the
assigning Lender’s Commitment and the Loans at the time owing to it or in the
case of an assignment to a Lender or an Affiliate of a Lender or an Approved
Fund with respect to a Lender, the aggregate amount of the Commitment (which for
this purpose includes Loans outstanding thereunder) or, if the Commitment is not
then in effect, the principal outstanding balance of the Loans of the assigning
Lender subject to each such assignment, determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent or, if “Trade Date” is specified in the Assignment and
Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each
of the Administrative Agent and, so long as no Event of Default has occurred and
is continuing, the Borrowers otherwise consent (each such consent not to be
unreasonably withheld or delayed); provided, however, that concurrent
assignments to members of an Assignee Group and concurrent assignments from
members of an Assignee Group to a single Eligible Assignee (or to an Eligible
Assignee and members of its Assignee Group) will be treated as a single
assignment for purposes of determining whether such minimum amount has been met;

 

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(ii) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement
with respect to the Loans or the Commitment assigned, except that this
clause (ii) shall not apply to rights in respect of Swing Line Loans;

 

(iii) any assignment of a Commitment must be approved by the Administrative
Agent, the L/C Issuer and the Swing Line Lender unless the Person that is the
proposed assignee is itself a Lender (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee); and

 

(iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee in the amount, if any, required as set forth in
Schedule 10.07, and the Eligible Assignee, if it shall not be a Lender, shall
deliver to the Administrative Agent an Administrative Questionnaire.

 

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to subsection (c) of this Section, from and after the effective date specified
in each Assignment and Assumption, the Eligible Assignee thereunder shall be a
party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall continue
to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04 with
respect to facts and circumstances occurring prior to the effective date of such
assignment. Upon request, the Borrowers (at their expense) shall execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
subsection shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
subsection (d) of this Section.

 

(c) Register. The Administrative Agent, acting solely for this purpose as an
agent of the Borrowers, shall maintain at the Administrative Agent’s Office a
copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Loans and L/C Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in
the Register shall be conclusive, and the Borrowers, the Administrative Agent
and the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by each of the Borrowers and the L/C Issuer at any
reasonable time and from time to time upon reasonable prior notice. In addition,
at any time that a request for a consent for a material or substantive change to
the Loan Documents is pending, any Lender may request and receive from the
Administrative Agent a copy of the Register.

 

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(d) Participations. Any Lender may at any time, without the consent of, or
notice to, the Borrowers or the Administrative Agent, sell participations to any
Person (other than a natural person or any Borrower or any of the Borrowers’
Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the Loans (including such Lender’s
participations in L/C Obligations and/or Swing Line Loans) owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrowers, the
Administrative Agent, the Lenders and the L/C Issuer shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, waiver or other modification described in the first proviso to
Section 10.01 that affects such Participant. Subject to subsection (e) of this
Section, the Borrowers agree that each Participant shall be entitled to the
benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to subsection (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 10.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.13 as though it were a
Lender.

 

(e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 3.01 or 3.04 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrowers’ prior written consent. A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 3.01 unless the Borrowers are notified of the participation
sold to such Participant and such Participant agrees, for the benefit of the
Borrowers, to comply with Section 3.01(e) as though it were a Lender.

 

(f) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement (including
under its Note, if any) to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided
that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

 

(g) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce

 

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Act, the New York State Electronic Signatures and Records Act, or any other
similar state laws based on the Uniform Electronic Transactions Act.

 

(h) Special Purpose Funding Vehicles. Notwithstanding anything to the contrary
contained herein, any Lender (a “Granting Lender”) may grant to a special
purpose funding vehicle identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the Borrowers (an “SPC”) the
option to provide all or any part of any Committed Loan that such Granting
Lender would otherwise be obligated to make pursuant to this Agreement; provided
that (i) nothing herein shall constitute a commitment by any SPC to fund any
Committed Loan, and (ii) if an SPC elects not to exercise such option or
otherwise fails to make all or any part of such Committed Loan, the Granting
Lender shall be obligated to make such Committed Loan pursuant to the terms
hereof or, if it fails to do so, to make such payment to the Administrative
Agent as is required under Section 2.12(b)(ii). Each party hereto hereby agrees
that (i) neither the grant to any SPC nor the exercise by any SPC of such option
shall increase the costs or expenses or otherwise increase or change the
obligations of the Borrowers under this Agreement (including its obligations
under Section 3.04), (ii) no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement for which a Lender would be liable, and
(iii) the Granting Lender shall for all purposes, including the approval of any
amendment, waiver or other modification of any provision of any Loan Document,
remain the lender of record hereunder. The making of a Committed Loan by an SPC
hereunder shall utilize the Commitment of the Granting Lender to the same
extent, and as if, such Committed Loan were made by such Granting Lender. In
furtherance of the foregoing, each party hereto hereby agrees (which agreement
shall survive the termination of this Agreement) that, prior to the date that is
one year and one day after the payment in full of all outstanding commercial
paper or other senior debt of any SPC, it will not institute against, or join
any other Person in instituting against, such SPC any bankruptcy,
reorganization, arrangement, insolvency, or liquidation proceeding under the
laws of the United States or any State thereof. Notwithstanding anything to the
contrary contained herein, any SPC may (i) with notice to, but without prior
consent of the Borrowers and the Administrative Agent and with the payment of a
processing fee in the amount of $2,500, assign all or any portion of its right
to receive payment with respect to any Committed Loan to the Granting Lender and
(ii) disclose on a confidential basis any non-public information relating to its
funding of Committed Loans to any rating agency, commercial paper dealer or
provider of any surety or Guarantee or credit or liquidity enhancement to such
SPC.

 

(i) Resignation as L/C Issuer or Swing Line Lender after Assignment.
Notwithstanding anything to the contrary contained herein, if at any time Bank
of America assigns all of its Commitment and Loans pursuant to subsection (b)
above, Bank of America may, (i) upon 30 days’ notice to the Borrowers and the
Lenders, resign as L/C Issuer and/or (ii) upon 30 days’ notice to the Borrowers,
resign as Swing Line Lender. In the event of any such resignation as L/C Issuer
or Swing Line Lender, the Borrowers shall be entitled to appoint from among the
Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided,
however, that no failure by the Borrowers to appoint any such successor shall
affect the resignation of Bank of America as L/C Issuer or Swing Line Lender, as
the case may be. If Bank of America resigns as L/C Issuer, it shall retain all
the rights, powers, privileges and duties of the L/C Issuer hereunder with
respect to all Letters of Credit outstanding as of the effective date of its
resignation as L/C Issuer and all L/C Obligations with respect thereto
(including the right to require the Lenders to make Base Rate Committed Loans or
fund risk participations in

 

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Unreimbursed Amounts pursuant to Section 2.03(c)). If Bank of America resigns as
Swing Line Lender, it shall retain all the rights of the Swing Line Lender
provided for hereunder with respect to Swing Line Loans made by it and
outstanding as of the effective date of such resignation, including the right to
require the Lenders to make Base Rate Committed Loans or fund risk
participations in outstanding Swing Line Loans pursuant to Section 2.04(c). Upon
the appointment of a successor L/C Issuer and/or Swing Line Lender, (a) such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the
case may be, and (b) the successor L/C Issuer shall issue letters of credit in
substitution for the Letters of Credit, if any, outstanding at the time of such
succession or make other arrangements satisfactory to Bank of America to
effectively assume the obligations of Bank of America with respect to such
Letters of Credit.

 

  10.08  Treatment of Certain Information; Confidentiality.

 

Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
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), (b) 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), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrowers and their obligations, (g) with the consent of the Borrowers or
(h) to the extent such Information (x) becomes publicly available other than as
a result of a breach of this Section or (y) becomes available to the
Administrative Agent, any Lender, the L/C Issuer or any of their respective
Affiliates on a nonconfidential basis from a source other than the Borrowers.

 

For purposes of this Section, “Information” means all information received from
the Borrowers or any Subsidiary relating to the Borrowers or any Subsidiary or
any of their respective businesses, other than any such information that is
available to the Administrative Agent, any Lender or the L/C Issuer on a
nonconfidential basis prior to disclosure by the Borrowers or any Subsidiary,
provided that, in the case of information received from the Borrowers or any
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.

 

Each of the Administrative Agent, the Lenders and the L/C Issuer acknowledges
that (a) the Information may include material non-public information concerning
the Borrowers or a

 

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Subsidiary, as the case may be, (b) it has developed compliance procedures
regarding the use of material non-public information and (c) it will handle such
material non-public information in accordance with applicable Law, including
Federal and state securities Laws.

 

  10.09  Set-off.

 

In addition to any rights and remedies of the Lenders provided by law, upon the
occurrence and during the continuance of any Event of Default, each Lender is
authorized at any time and from time to time, without prior notice to the
Borrowers or any other Loan Party, any such notice being waived by the Borrowers
(on its own behalf and on behalf of each Loan Party) to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Lender to or for the credit or the
account of the respective Loan Parties, and each Loan Party hereby grants a
security interest in all such deposits and indebtedness to the Administrative
Agent for the benefit of the Administrative Agent and the Lenders, against any
and all Obligations owing to such Lender hereunder or under any other Loan
Document, now or hereafter existing, irrespective of whether or not the
Administrative Agent or such Lender shall have made demand under this Agreement
or any other Loan Document and although such Obligations may be contingent or
unmatured or denominated in a currency different from that of the applicable
deposit or indebtedness. Each Lender agrees promptly to notify the Borrowers and
the Administrative Agent after any such set-off and application made by such
Lender; provided, however, that the failure to give such notice shall not affect
the validity of such set-off and application.

 

  10.10  Interest Rate Limitation.

 

Notwithstanding anything to the contrary contained in any Loan Document, the
interest paid or agreed to be paid under the Loan Documents shall not exceed the
maximum rate of non-usurious interest permitted by applicable Law (the “Maximum
Rate”). If the Administrative Agent or any Lender shall receive interest in an
amount that exceeds the Maximum Rate, the excess interest shall be applied to
the principal of the Loans or, if it exceeds such unpaid principal, refunded to
the Borrowers. In determining whether the interest contracted for, charged, or
received by the Administrative Agent or a Lender exceeds the Maximum Rate, such
Person may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Obligations
hereunder.

 

  10.11  Counterparts; Amendment and Restatement of Existing Credit Agreement.

 

This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. The Borrowers, the Administrative Agent and the Lenders hereby
agree that at such time as this Agreement shall have become effective pursuant
to the terms of Section 4.02, (i) the Existing Credit Agreement automatically
shall be deemed amended and restated in its entirety by this Agreement and
(ii) all of the promissory notes executed in connection with the Existing Credit
Agreement automatically shall be substituted and replaced by the promissory
notes executed in

 

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connection with this Agreement, and the lenders under the Existing Credit
Agreement holding such notes agree to promptly return such prior notes to
Existing Potlatch marked “cancelled”.

 

  10.12  Integration.

 

This Agreement, together with the other Loan Documents, comprises the complete
and integrated agreement of the parties on the subject matter hereof and thereof
and supersedes all prior agreements, written or oral, on such subject matter. In
the event of any conflict between the provisions of this Agreement and those of
any other Loan Document, the provisions of this Agreement shall control;
provided that the inclusion of supplemental rights or remedies in favor of the
Administrative Agent or the Lenders in any other Loan Document shall not be
deemed a conflict with this Agreement. Each Loan Document was drafted with the
joint participation of the respective parties thereto and shall be construed
neither against nor in favor of any party, but rather in accordance with the
fair meaning thereof.

 

  10.13  Survival of Representations and Warranties.

 

All representations and warranties made hereunder and in any other Loan Document
or other document delivered pursuant hereto or thereto or in connection herewith
or therewith shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by
the Administrative Agent or any Lender or on their behalf and notwithstanding
that the Administrative Agent or any Lender may have had notice or knowledge of
any Default at the time of any Credit Extension, and shall continue in full
force and effect as long as any Loan or any other Obligation hereunder shall
remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

 

  10.14  Severability.

 

If any provision of this Agreement or the other Loan Documents is held to be
illegal, invalid or unenforceable, (a) the legality, validity and enforceability
of the remaining provisions of this Agreement and the other Loan Documents shall
not be affected or impaired thereby and (b) the parties shall endeavor in good
faith negotiations to replace the illegal, invalid or unenforceable provisions
with valid provisions the economic effect of which comes as close as possible to
that of the illegal, invalid or unenforceable provisions. The invalidity of a
provision in a particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

  10.15  Tax Forms.

 

(a) (i) Each Lender that is not a “United States person” within the meaning of
Section 7701(a)(30) of the Code (a “Foreign Lender”) shall deliver to the
Administrative Agent, prior to receipt of any payment subject to withholding
under the Code (or upon accepting an assignment of an interest herein), two duly
signed completed copies of either IRS Form W-8BEN or any successor thereto
(relating to such Foreign Lender and entitling it to an exemption from, or
reduction of, withholding tax on all payments to be made to such Foreign Lender
by the Borrowers pursuant to this Agreement) or IRS Form W-8ECI or any successor
thereto (relating to all payments to be made to such Foreign

 

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Lender by the Borrowers pursuant to this Agreement) or such other evidence
satisfactory to the Borrowers and the Administrative Agent that such Foreign
Lender is entitled to an exemption from, or reduction of, U.S. withholding tax,
including any exemption pursuant to Section 881(c) of the Code. Thereafter and
from time to time, each such Foreign Lender shall (A) promptly submit to the
Administrative Agent such additional duly completed and signed copies of one of
such forms (or such successor forms as shall be adopted from time to time by the
relevant United States taxing authorities) as may then be available under then
current United States laws and regulations to avoid, or such evidence as is
satisfactory to the Borrowers and the Administrative Agent of any available
exemption from or reduction of, United States withholding taxes in respect of
all payments to be made to such Foreign Lender by the Borrowers pursuant to this
Agreement, (B) promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction, and (C) take such steps as shall not be materially disadvantageous to
it, in the reasonable judgment of such Lender, and as may be reasonably
necessary (including the re-designation of its Lending Office) to avoid any
requirement of applicable Laws that the Borrowers make any deduction or
withholding for taxes from amounts payable to such Foreign Lender.

 

(ii) Each Foreign Lender, to the extent it does not act or ceases to act for its
own account with respect to any portion of any sums paid or payable to such
Lender under any of the Loan Documents (for example, in the case of a typical
participation by such Lender), shall deliver to the Administrative Agent on the
date when such Foreign Lender ceases to act for its own account with respect to
any portion of any such sums paid or payable, and at such other times as may be
necessary in the determination of the Administrative Agent (in the reasonable
exercise of its discretion), (A) two duly signed completed copies of the forms
or statements required to be provided by such Lender as set forth above, to
establish the portion of any such sums paid or payable with respect to which
such Lender acts for its own account that is not subject to U.S. withholding
tax, and (B) two duly signed completed copies of IRS Form W-8IMY (or any
successor thereto), together with any information such Lender chooses to
transmit with such form, and any other certificate or statement of exemption
required under the Code, to establish that such Lender is not acting for its own
account with respect to a portion of any such sums payable to such Lender.

 

(iii) The Borrowers shall not be required to pay any additional amount to any
Foreign Lender under Section 3.01 (A) with respect to any Taxes required to be
deducted or withheld on the basis of the information, certificates or statements
of exemption such Lender transmits with an IRS Form W-8IMY pursuant to this
Section 10.15(a) or (B) if such Lender shall have failed to satisfy the
foregoing provisions of this Section 10.15(a); provided that if such Lender
shall have satisfied the requirement of this Section 10.15(a) on the date such
Lender became a Lender or ceased to act for its own account with respect to any
payment under any of the Loan Documents, nothing in this Section 10.15(a) shall
relieve the Borrowers of their obligation to pay any amounts pursuant to
Section 3.01 in the event that, as a result of any change in any applicable law,
treaty or governmental rule, regulation or order, or any change in the
interpretation, administration or application thereof, such Lender is no longer
properly entitled to deliver forms,

 

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certificates or other evidence at a subsequent date establishing the fact that
such Lender or other Person for the account of which such Lender receives any
sums payable under any of the Loan Documents is not subject to withholding or is
subject to withholding at a reduced rate and provided further that if the L/C
Issuer shall issue, amend or extend any Letter of Credit from a branch or other
office in any jurisdiction at the request of (or with the consent of ) the
Borrowers and the L/C Issuer shall not be lawfully able or entitled to satisfy
the requirements of this Section 10.15(a) at the time of issuance, amendment or
extension of any Letter of Credit by reason of the selection of such branch or
office in such jurisdiction, nothing in this Section 10.15(a) shall relieve the
Borrowers of their obligation to pay any amounts pursuant to Section 3.01 owing
to the L/C Issuer.

 

(iv) The Administrative Agent may, without reduction, withhold any Taxes
required to be deducted and withheld from any payment under any of the Loan
Documents with respect to which the Borrowers are not required to pay additional
amounts under this Section 10.15(a).

 

(b) Upon the request of the Administrative Agent, each Lender that is a “United
States person” within the meaning of Section 7701(a)(30) of the Code shall
deliver to the Administrative Agent two duly signed completed copies of IRS Form
W-9. If such Lender fails to deliver such forms, then the Administrative Agent
may withhold from any interest payment to such Lender an amount equivalent to
the applicable back-up withholding tax imposed by the Code, without reduction.

 

(c) If any Governmental Authority asserts that the Administrative Agent did not
properly withhold or backup withhold, as the case may be, any tax or other
amount from payments made to or for the account of any Lender, such Lender shall
indemnify the Administrative Agent therefor, including all penalties and
interest, any taxes imposed by any jurisdiction on the amounts payable to the
Administrative Agent under this Section, and costs and expenses (including
Attorney Costs) of the Administrative Agent. The obligation of the Lenders under
this Section shall survive the termination of the Aggregate Commitments,
repayment of all other Obligations hereunder and the resignation of the
Administrative Agent.

 

10.16  Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if the Borrowers are required to pay any additional amount to
any Lender or any Governmental Authority for the account of any Lender pursuant
to Section 3.01, or if any Lender is a Defaulting Lender, then the Borrowers
may, at their sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 10.06), all of its interests, rights and
obligations under this Agreement and the related Loan Documents to an assignee
that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment), provided that:

 

(a) the Borrowers shall have paid to the Administrative Agent the assignment fee
specified in Section 10.07(b);

 

(b) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and L/C Advances, accrued interest thereon,
accrued fees and all other

 

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amounts payable to it hereunder and under the other Loan Documents (including
any amounts under Section 3.05) from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrowers (in the
case of all other amounts);

 

(c) in the case of any such assignment resulting from a claim for compensation
under Section 3.04 or payments required to be made pursuant to Section 3.01,
such assignment will result in a reduction in such compensation or payments
thereafter; and

 

(d) such assignment does not conflict with applicable Laws.

 

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the Borrowers to require such assignment and delegation
cease to apply.

 

  10.17  Governing Law.

 

(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH
LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN
NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWERS, THE
ADMINISTRATIVE AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWERS, THE
ADMINISTRATIVE AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER
DOCUMENT RELATED THERETO. THE BORROWERS, THE ADMINISTRATIVE AGENT AND EACH
LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

 

  10.18  Waiver of Right to Trial by Jury.

 

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED
ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER

 

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PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

  10.19  USA Patriot Act Notice.

 

Each Lender and the Administrative Agent (for itself and not on behalf of any
Lender) hereby notifies the Borrowers that pursuant to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”), it is required to obtain, verify and record information that
identifies the Borrowers, which information includes the name and address of the
Borrowers and other information that will allow such Lender or the
Administrative Agent, as applicable, to identify the Borrowers in accordance
with the Act.

 

  10.20  Judgment Currency.

 

If, for the purposes of obtaining judgment in any court, it is necessary to
convert a sum due hereunder or any other Loan Document in one currency into
another currency, the rate of exchange used shall be that at which in accordance
with normal banking procedures the Administrative Agent could purchase the first
currency with such other currency on the Business Day preceding that on which
final judgment is given. The obligation of the Borrowers in respect of any such
sum due from it to the Administrative Agent or the Lenders hereunder or under
the other Loan Documents shall, notwithstanding any judgment in a currency (the
“Judgment Currency”) other than that in which such sum is denominated in
accordance with the applicable provisions of this Agreement (the “Agreement
Currency”), be discharged only to the extent that on the Business Day following
receipt by the Administrative Agent of any sum adjudged to be so due in the
Judgment Currency, the Administrative Agent may in accordance with normal
banking procedures purchase the Agreement Currency with the Judgment Currency.
If the amount of the Agreement Currency so purchased is less than the sum
originally due to the Administrative Agent from the Borrowers in the Agreement
Currency, the Borrowers agree, as a separate obligation and notwithstanding any
such judgment, to indemnify the Administrative Agent or the Person to whom such
obligation was owing against such loss. If the amount of the Agreement Currency
so purchased is greater than the sum originally due to the Administrative Agent
in such currency, the Administrative Agent agrees to return the amount of any
excess to the Borrowers (or to any other Person who may be entitled thereto
under applicable law).

 

ARTICLE XI.

GUARANTY

 

  11.01  The Guaranty.

 

Each of the Guarantors hereby jointly and severally guarantees to each Lender,
each Affiliate of a Lender that enters into a Swap Contract, and the
Administrative Agent as hereinafter provided, as primary obligor and not as
surety, the prompt payment of the Obligations in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash

 

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collateralization or otherwise) strictly in accordance with the terms thereof.
The Guarantors hereby further agree that if any of the Obligations are not paid
in full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise), the
Guarantors will, jointly and severally, promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Obligations, the same will be promptly paid in
full when due (whether at extended maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise) in accordance
with the terms of such extension or renewal.

 

Notwithstanding any provision to the contrary contained herein or in any other
of the Loan Documents or Swap Contracts, the obligations of each Guarantor under
this Agreement and the other Loan Documents shall be limited to an aggregate
amount equal to the largest amount that would not render such obligations
subject to avoidance under the Debtor Relief Laws or any comparable provisions
of any applicable state law.

 

  11.02  Obligations Unconditional.

 

The obligations of the Guarantors under Section 11.01 are joint and several,
absolute and unconditional, irrespective of the value, genuineness, validity,
regularity or enforceability of any of the Loan Documents or Swap Contracts, or
any other agreement or instrument referred to therein, or any substitution,
release, impairment or exchange of any other guarantee of or security for any of
the Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 11.02 that the obligations of the Guarantors
hereunder shall be absolute and unconditional under any and all circumstances.
Each Guarantor agrees that such Guarantor shall have no right of subrogation,
indemnity, reimbursement or contribution against the Borrowers or any other
Guarantor for amounts paid under this Article XI until such time as the
Obligations have been Fully Satisfied. Without limiting the generality of the
foregoing, it is agreed that, to the fullest extent permitted by law, the
occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:

 

(a) at any time or from time to time, without notice to any Guarantor, the time
for any performance of or compliance with any of the Obligations shall be
extended, or such performance or compliance shall be waived;

 

(b) any of the acts mentioned in any of the provisions of any of the Loan
Documents, any Swap Contract between any Consolidated Party and any Lender, or
any Affiliate of a Lender, or any other agreement or instrument referred to in
the Loan Documents or such Swap Contracts shall be done or omitted;

 

(c) the maturity of any of the Obligations shall be accelerated, or any of the
Obligations shall be modified, supplemented or amended in any respect, or any
right under any of the Loan Documents, any Swap Contract between any
Consolidated Party and any Lender, or any Affiliate of a Lender, or any other
agreement or instrument referred to in the Loan Documents or such Swap Contracts
shall be waived or any other guarantee of any of the Obligations or any security
therefor shall be released, impaired or exchanged in whole or in part or
otherwise dealt with;

 

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(d) any Lien granted to, or in favor of, the Agent or any Lender or Lenders as
security for any of the Obligations shall fail to attach or be perfected; or

 

(e) any of the Obligations shall be determined to be void or voidable
(including, without limitation, for the benefit of any creditor of any
Guarantor) or shall be subordinated to the claims of any Person (including,
without limitation, any creditor of any Guarantor).

 

With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Loan Documents,
any Swap Contract between any Consolidated Party and any Lender, or any
Affiliate of a Lender, or any other agreement or instrument referred to in the
Loan Documents or such Swap Contracts, or against any other Person under any
other guarantee of, or security for, any of the Obligations.

 

  11.03  Reinstatement.

 

The obligations of the Guarantors under this Article XI shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of any Person in respect of the Obligations is rescinded or must be otherwise
restored by any holder of any of the Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, and each Guarantor
agrees that it will indemnify the Agent and each Lender on demand for all
reasonable costs and expenses (including, without limitation, fees and expenses
of counsel) incurred by the Agent or such Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.

 

  11.04  Certain Additional Waivers.

 

Each Guarantor agrees that such Guarantor shall have no right of recourse to
security for the Obligations, except through the exercise of rights of
subrogation pursuant to Section 11.02 and through the exercise of rights of
contribution pursuant to Section 11.06.

 

  11.05  Remedies.

 

The Guarantors agree that, to the fullest extent permitted by law, as between
the Guarantors, on the one hand, and the Agent and the Lenders, on the other
hand, the Obligations may be declared to be forthwith due and payable as
provided in Section 8.02 (and shall be deemed to have become automatically due
and payable in the circumstances provided in said Section 8.02) for purposes of
Section 11.01 notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing the Obligations from becoming
automatically due and payable) as against any other Person and that, in the
event of such declaration (or the Obligations being deemed to have become
automatically due and payable), the Obligations (whether or not due and payable
by any other Person) shall forthwith become due and payable by the Guarantors
for purposes of Section 11.01. The Guarantors acknowledge and agree that to the
extent their obligations hereunder become secured, the Lenders may exercise
their remedies thereunder in accordance with the terms of the applicable
security documents.

 

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  11.06  Rights of Contribution.

 

The Guarantors hereby agree as among themselves that, in connection with
payments made hereunder, each Guarantor shall have a right of contribution from
each other Guarantor in accordance with applicable Law. Such contribution rights
shall be subordinate and subject in right of payment to the Obligations until
such time as the Obligations have been Fully Satisfied, and none of the
Guarantors shall exercise any such contribution rights until the Obligations
have been Fully Satisfied.

 

  11.07  Guarantee of Payment; Continuing Guarantee.

 

The guarantee in this Article XI is a guaranty of payment and not of collection,
is a continuing guarantee, and shall apply to all Obligations whenever arising.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

BORROWERS:       POTLATCH CORPORATION        

a Delaware corporation

           

By:

 

/s/ Douglas D. Spedden

           

Name:

 

Douglas D. Spedden

           

Title:

 

Treasurer

        POTLATCH HOLDINGS, INC.,        

a Delaware corporation

           

By:

 

/s/ Douglas D. Spedden

           

Name:

 

Douglas D. Spedden

           

Title:

 

Treasurer

        POTLATCH OPERATING COMPANY        

a Delaware corporation

           

By:

 

/s/ Douglas D. Spedden

           

Name:

 

Douglas D. Spedden

           

Title:

 

Treasurer

        POTLATCH FOREST PRODUCTS CORPORATION        

a Delaware corporation

           

By:

 

/s/ Douglas D. Spedden

           

Name:

 

Douglas D. Spedden

           

Title:

 

Treasurer

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

ADMINISTRATIVE AGENT AND LENDERS:       BANK OF AMERICA, N.A.,        

as Administrative Agent

           

By:

 

/s/ Joan Mok

           

Name:

 

Joan Mok

           

Title:

 

Associate Vice President

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

BANK OF AMERICA, N.A.,

as a Lender, an L/C Issuer and Swing Line Lender

By:

 

/s/ Andrew Stinson

Name:

 

Andrew Stinson

Title:

 

Vice President