Ex-4.2



 







EXHIBIT 4.2





Published CUSIP Number: 10218JAA3

Revolving Credit CUSIP Number: 10218JAB1



 

 






CREDIT AGREEMENT

dated as of May 31, 2006




by and among




BOWATER INCORPORATED,

as Borrower,




the Lenders referred to herein,




WACHOVIA BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

Swingline Lender and Issuing Lender,




JPMORGAN CHASE BANK, N.A. and UBS SECURITIES LLC,

each as a Syndication Agent,




and




WELLS FARGO FOOTHILL, LLC

as Documentation Agent




WACHOVIA CAPITAL MARKETS, LLC,

as Sole Book Manager




WACHOVIA CAPITAL MARKETS, LLC,

as Lead Arranger




 

 






i









 












Table of Contents




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	ARTICLE I DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 1.1	 	Definitions	 	 	1	 
	 
	 	SECTION 1.2	 	Other Definitions and Provisions	 	 	29	 
	 
	 	SECTION 1.3	 	Accounting Terms	 	 	29	 
	 
	 	SECTION 1.4	 	UCC Terms	 	 	30	 
	 
	 	SECTION 1.5	 	Rounding	 	 	30	 
	 
	 	SECTION 1.6	 	References to Agreement and Laws	 	 	30	 
	 
	 	SECTION 1.7	 	Times of Day	 	 	30	 
	 
	 	SECTION 1.8	 	Letter of Credit Amounts	 	 	30	 
	 
	 	SECTION 1.9	 	Amount of Obligations	 	 	30	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II REVOLVING CREDIT FACILITY	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 2.1	 	Revolving Credit Loans	 	 	31	 
	 
	 	SECTION 2.2	 	Swingline Loans	 	 	31	 
	 
	 	SECTION 2.3	 	Procedure for Advances of Revolving Credit Loans and Swingline Loans	 	 	32	 
	 
	 	SECTION 2.4	 	Repayment and Prepayment of Revolving Credit and Swingline Loans	 	 	33	 
	 
	 	SECTION 2.5	 	Permanent Reduction of the Commitment	 	 	34	 
	 
	 	SECTION 2.6	 	Termination of Credit Facility	 	 	35	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III LETTER OF CREDIT FACILITY	 	 	35	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 3.1	 	L/C Commitment	 	 	35	 
	 
	 	SECTION 3.2	 	Procedure for Issuance of Letters of Credit	 	 	35	 
	 
	 	SECTION 3.3	 	Commissions and Other Charges	 	 	36	 
	 
	 	SECTION 3.4	 	L/C Participations	 	 	36	 
	 
	 	SECTION 3.5	 	Reimbursement Obligation of the Borrower	 	 	37	 
	 
	 	SECTION 3.6	 	Obligations Absolute	 	 	38	 
	 
	 	SECTION 3.7	 	Effect of Letter of Credit Application	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV GENERAL LOAN PROVISIONS	 	 	39	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 4.1	 	Interest	 	 	39	 
	 
	 	SECTION 4.2	 	Notice and Manner of Conversion or Continuation of Loans	 	 	40	 
	 
	 	SECTION 4.3	 	Fees	 	 	41	 
	 
	 	SECTION 4.4	 	Manner of Payment	 	 	41	 
	 
	 	SECTION 4.5	 	Evidence of Indebtedness	 	 	42	 
	 
	 	SECTION 4.6	 	Adjustments	 	 	42	 
	 
	 	SECTION 4.7	 	Nature of Obligations of Lenders
Regarding Extensions of Credit;	 	 	 	 
	 
	 	 	 	Assumption by the Administrative Agent	 	 	43	 
	 
	 	SECTION 4.8	 	Changed Circumstances	 	 	44	 
	 
	 	SECTION 4.9	 	Indemnity	 	 	44	 






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	 	 	 	 	 	 	Page	 
	 
	 	SECTION 4.10	 	Increased Costs	 	 	45	 
	 
	 	SECTION 4.11	 	Taxes	 	 	46	 
	 
	 	SECTION 4.12	 	Mitigation Obligations; Replacement of Lenders	 	 	48	 
	 
	 	SECTION 4.13	 	Security	 	 	49	 
	 
	 	SECTION 4.14	 	Additional Subsidiary Borrowers	 	 	49	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V CLOSING; CONDITIONS OF CLOSING AND BORROWING	 	 	51	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 5.1	 	Closing	 	 	51	 
	 
	 	SECTION 5.2	 	Conditions to Closing and Initial Extensions of Credit	 	 	51	 
	 
	 	SECTION 5.3	 	Conditions to All Extensions of Credit	 	 	54	 
	 
	 	SECTION 5.4	 	Post-Closing Conditions	 	 	55	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER	 	 	56	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 6.1	 	Representations and Warranties	 	 	56	 
	 
	 	SECTION 6.2	 	Survival of Representations and Warranties, Etc	 	 	64	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII FINANCIAL INFORMATION AND NOTICES	 	 	64	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 7.1	 	Financial Statements and Projections	 	 	64	 
	 
	 	SECTION 7.2	 	Officer’s Compliance Certificate	 	 	65	 
	 
	 	SECTION 7.3	 	Accountants’ Certificate	 	 	65	 
	 
	 	SECTION 7.4	 	Other Reports	 	 	65	 
	 
	 	SECTION 7.5	 	Notice of Litigation and Other Matters	 	 	66	 
	 
	 	SECTION 7.6	 	Accuracy of Information	 	 	67	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII AFFIRMATIVE COVENANTS	 	 	67	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 8.1	 	Preservation of Corporate Existence and Related Matters	 	 	67	 
	 
	 	SECTION 8.2	 	Maintenance of Property; Reinvestment	 	 	67	 
	 
	 	SECTION 8.3	 	Insurance	 	 	68	 
	 
	 	SECTION 8.4	 	Accounting Methods and Financial Records	 	 	68	 
	 
	 	SECTION 8.5	 	Payment of Taxes	 	 	69	 
	 
	 	SECTION 8.6	 	Compliance With Laws and Approvals	 	 	69	 
	 
	 	SECTION 8.7	 	Environmental Laws	 	 	69	 
	 
	 	SECTION 8.8	 	Compliance with ERISA	 	 	69	 
	 
	 	SECTION 8.9	 	Visits and Inspections	 	 	70	 
	 
	 	SECTION 8.10	 	Additional Subsidiaries	 	 	70	 
	 
	 	SECTION 8.11	 	Use of Proceeds	 	 	71	 
	 
	 	SECTION 8.12	 	Further Assurances	 	 	71	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX FINANCIAL COVENANTS	 	 	71	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 9.1	 	Consolidated Senior Secured Leverage Ratio	 	 	72	 
	 
	 	SECTION 9.2	 	Interest Coverage Ratio	 	 	72	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X NEGATIVE COVENANTS	 	 	72	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 10.1	 	Limitations on Indebtedness	 	 	72	 
	 
	 	SECTION 10.2	 	Limitations on Liens	 	 	75	 






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	 	 	 	 	 	 	Page	 
	 
	 	SECTION 10.3	 	Limitations on Loans, Advances, Investments and Acquisitions	 	 	76	 
	 
	 	SECTION 10.4	 	Limitations on Mergers and Liquidation	 	 	77	 
	 
	 	SECTION 10.5	 	Limitations on Asset Dispositions	 	 	78	 
	 
	 	SECTION 10.6	 	Limitations on Dividends and Distributions	 	 	79	 
	 
	 	SECTION 10.7	 	Limitations on Exchange and Issuance of Capital Stock	 	 	80	 
	 
	 	SECTION 10.8	 	Transactions with Affiliates	 	 	80	 
	 
	 	SECTION 10.9	 	Certain Accounting Changes; Organizational Documents	 	 	80	 
	 
	 	SECTION 10.10	 	Amendments; Payments and Prepayments of Indebtedness	 	 	80	 
	 
	 	SECTION 10.11	 	Restrictive Agreements	 	 	82	 
	 
	 	SECTION 10.12	 	Nature of Business	 	 	82	 
	 
	 	SECTION 10.13	 	Impairment of Security Interests	 	 	82	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI DEFAULT AND REMEDIES	 	 	83	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 11.1	 	Events of Default	 	 	83	 
	 
	 	SECTION 11.2	 	Remedies	 	 	85	 
	 
	 	SECTION 11.3	 	Rights and Remedies Cumulative; Non-Waiver; etc	 	 	86	 
	 
	 	SECTION 11.4	 	Crediting of Payments and Proceeds	 	 	87	 
	 
	 	SECTION 11.5	 	Administrative Agent May File Proofs of Claim	 	 	87	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XII THE ADMINISTRATIVE AGENT	 	 	88	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 12.1	 	Appointment and Authority	 	 	88	 
	 
	 	SECTION 12.2	 	Rights as a Lender	 	 	88	 
	 
	 	SECTION 12.3	 	Exculpatory Provisions	 	 	89	 
	 
	 	SECTION 12.4	 	Reliance by the Administrative Agent	 	 	89	 
	 
	 	SECTION 12.5	 	Delegation of Duties	 	 	90	 
	 
	 	SECTION 12.6	 	Resignation of Administrative Agent	 	 	90	 
	 
	 	SECTION 12.7	 	Non-Reliance on Administrative Agent and Other Lenders	 	 	91	 
	 
	 	SECTION 12.8	 	No Other Duties, etc	 	 	91	 
	 
	 	SECTION 12.9	 	Collateral and Guaranty Matters	 	 	91	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIII MISCELLANEOUS	 	 	92	 
	 
	 	 	 	 	 	 	 	 
	 
	 	SECTION 13.1	 	Notices	 	 	92	 
	 
	 	SECTION 13.2	 	Amendments, Waivers and Consents	 	 	93	 
	 
	 	SECTION 13.3	 	Expenses; Indemnity	 	 	95	 
	 
	 	SECTION 13.4	 	Right of Set-off	 	 	97	 
	 
	 	SECTION 13.5	 	Governing Law	 	 	97	 
	 
	 	SECTION 13.6	 	Waiver of Jury Trial	 	 	98	 
	 
	 	SECTION 13.7	 	Reversal of Payments	 	 	98	 
	 
	 	SECTION 13.8	 	Injunctive Relief; Punitive Damages	 	 	98	 
	 
	 	SECTION 13.9	 	Accounting Matters	 	 	99	 
	 
	 	SECTION 13.10	 	Successors and Assigns; Participations	 	 	99	 
	 
	 	SECTION 13.11	 	Confidentiality	 	 	102	 
	 
	 	SECTION 13.12	 	Performance of Duties	 	 	103	 
	 
	 	SECTION 13.13	 	All Powers Coupled with Interest	 	 	103	 
	 
	 	SECTION 13.14	 	Survival of Indemnities	 	 	103	 
	 
	 	SECTION 13.15	 	Titles and Captions	 	 	103	 






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	 	 	 	 	 	 	Page	 
	 
	 	SECTION 13.16	 	Severability of Provisions	 	 	103	 
	 
	 	SECTION 13.17	 	Counterparts	 	 	103	 
	 
	 	SECTION 13.18	 	Integration	 	 	103	 
	 
	 	SECTION 13.19	 	Term of Agreement	 	 	103	 
	 
	 	SECTION 13.20	 	Advice of Counsel, No Strict Construction	 	 	104	 
	 
	 	SECTION 13.21	 	USA Patriot Act	 	 	104	 
	 
	 	SECTION 13.22	 	Inconsistencies with Other Documents; Independent Effect of Covenants	 	 	104	 






v









 






EXHIBITS




	 	 	 	 	 
	Exhibit A-1

	 	-
	 	Form of Revolving Credit Note
	Exhibit A-2

	 	-
	 	Form of Swingline Note
	Exhibit B

	 	-
	 	Form of Notice of Borrowing
	Exhibit C

	 	-
	 	Form of Notice of Account Designation
	Exhibit D

	 	-
	 	Form of Notice of Prepayment
	Exhibit E

	 	-
	 	Form of Notice of Conversion/Continuation
	Exhibit F

	 	-
	 	Form of Officer’s Compliance Certificate
	Exhibit G

	 	-
	 	Form of Assignment and Assumption
	Exhibit H

	 	-
	 	Form of Subsidiary Guaranty Agreement
	Exhibit I

	 	-
	 	Form of Collateral Agreement
	Exhibit J

	 	-
	 	Form of Intercompany Subordination Agreement






SCHEDULES




	 	 	 	 	 
	Schedule 1.1(a)

	 	-
	 	Existing Letters of Credit
	Schedule 1.1(b)

	 	-
	 	Specified Existing Notes
	Schedule 6.1(b)

	 	-
	 	Subsidiaries and Capitalization
	Schedule 6.1(i-1)

	 	-
	 	ERISA Plans
	Schedule 6.1(i-2)

	 	-
	 	Canadian Plans
	Schedule 6.1(l)

	 	-
	 	Significant Indebtedness
	Schedule 6.1(n)

	 	-
	 	Burdensome Provisions
	Schedule 6.1(t)

	 	-
	 	Litigation
	Schedule 10.1

	 	-
	 	Permitted Indebtedness
	Schedule 10.2

	 	-
	 	Existing Liens
	Schedule 10.3

	 	-
	 	Existing Loans, Advances and Investments
	Schedule 10.8

	 	-
	 	Transactions with Affiliates






vi









 






     CREDIT AGREEMENT, dated as of May 31, 2006, by and among BOWATER INCORPORATED, a Delaware
corporation (the “Borrower”), the lenders who are party to this Agreement pursuant to the
execution of the authorization (the “Lender Authorization”) attached hereto as Annex
A or who may become a party to this Agreement pursuant to Section 13.10 hereof, as
Lenders, and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as Administrative
Agent for the Lenders.



STATEMENT OF PURPOSE




     The Borrower has requested, and the Lenders have agreed, to extend certain credit facilities
to the Borrower on the terms and conditions of this Agreement.



     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, such parties hereby agree as follows:



ARTICLE I




DEFINITIONS




     SECTION 1.1 Definitions. The following terms when used in this Agreement shall have
the meanings assigned to them below:



     “Administrative Agent” means Wachovia, in its capacity as Administrative Agent
hereunder, and any successor thereto appointed pursuant to Section 12.6.



     “Administrative Agent’s Office” means the office of the Administrative Agent specified
in or determined in accordance with the provisions of Section 13.1(c).



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



     “Affiliate” means, with respect to any Person, any other Person which directly or
indirectly through one or more intermediaries, controls, or is controlled by, or is under common
control with, such first Person or any of its Subsidiaries. As used in this definition, the term
“control” means (a) the power to vote ten percent (10%) or more of the securities or other equity
interests of a Person having ordinary voting power (excluding, however, a Person or group whose
ownership in another Person is permitted to be reported on Schedule 13G pursuant to Rule 13d-1(b)
under the Securities Exchange Act of 1934, as amended) or (b) the possession, directly or
indirectly, of any other power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or otherwise. Notwithstanding
the foregoing, (i) no individual shall be an Affiliate of the Borrower or any of its Subsidiaries
solely and exclusively by reason of his or her being a director, officer or employee of the
Borrower or any of its Subsidiaries and (ii) none of the Subsidiaries of the Borrower shall be
Affiliates of the Borrower or any of its Subsidiaries.



     “Aggregate Credit Exposure” means the sum of (a) the aggregate amount of outstanding
Loans and (b) the aggregate amount of outstanding Canadian Loans.



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     “Agreement” means this Credit Agreement, as amended, restated, supplemented or
otherwise modified from time to time.



     “Applicable Law” means all applicable provisions of constitutions, laws, statutes,
ordinances, rules, treaties, regulations, permits, licenses, approvals, legally binding policies,
interpretations and orders of courts or Governmental Authorities and all orders and decrees of all
courts and arbitrators.



     “Applicable Margin” means the corresponding percentages per annum as set forth below
based on the Average Utilization:



	 	 	 	 	 	 	 	 	 	 	 
	Pricing	 	 	 	 	 	 
	Level	 	Average Utilization Percentage	 	LIBOR +	 	Base Rate +
	I
	 	Greater than 75%	 	 	2.25	%	 	 	1.00	%
	 
	 	 	 	 	 	 	 	 	 	 

	II
	 	Greater than 35%, but less than or equal to 75%	 	 	2.00	%	 	 	0.75	%
	 
	 	 	 	 	 	 	 	 	 	 
	III
	 	Less than or equal to 35%	 	 	1.75	%	 	 	0.50	%





The Applicable Margin shall be determined by the Administrative Agent and adjusted quarterly
on the date (each a “Calculation Date”) ten (10) Business Days after the end of each fiscal
quarter of the Borrower; provided that the Applicable Margin shall be based on Pricing
Level III until the first Calculation Date occurring after the Closing Date and, thereafter the
Pricing Level shall be determined by reference to the Average Utilization Percentage as of the last
day of the most recently ended fiscal quarter of the Borrower preceding the applicable Calculation
Date. The Applicable Margin shall be effective from one Calculation Date until the next
Calculation Date. Any adjustment in the Applicable Margin shall be applicable to all Extensions of
Credit then existing or subsequently made or issued.




     “Approved Fund” means any Person (other than a natural Person), including, without
limitation, any special purpose entity, 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; provided, that such Approved Fund must be administered, managed or
underwritten 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.



     “Asset Coverage Amount” means, as of any date of determination, an amount equal to
ninety percent (90%) of the net book value of the Coverage Assets as set forth on the Consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries most recently delivered pursuant to
Sections 5.2 or 7.1 hereof.



     “Asset Disposition” means the disposition of any or all of the assets (including,
without limitation, the Capital Stock of a Subsidiary or any ownership interest in a joint venture)
of the
Borrower or any of its Subsidiaries whether by sale, lease, transfer or otherwise. The term
“Asset Disposition” shall not include any Insurance and Condemnation Event.



2









 





     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is required by
Section 13.10), and accepted by the Administrative Agent, in substantially the form of
Exhibit G or any other form approved by the Administrative Agent.



     “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, the
capitalized amount or principal 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.



     “Average Utilization” means, for any calendar quarter, the average daily principal
balance of Loans outstanding during such calendar quarter.



     “Base Rate” means, at any time, the higher of (a) the Prime Rate and (b) the Federal
Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take effect simultaneously
with the corresponding change or changes in the Prime Rate or the Federal Funds Rate.



     “Base Rate Loan” means any Loan bearing interest at a rate based upon the Base Rate as
provided in Section 4.1(a).



     “BCFC Notes” means the 7.95% Notes due 2011 issued pursuant to the Indenture dated as
of October 31, 2001 among Bowater Canada Finance Corporation, as Issuer, the Borrower, as
Guarantor, and The Bank of New York, as Trustee.



     “Borrower” has the meaning assigned thereto in the introductory paragraph hereto.



     “Borrowing Limit” means, at any time, the lesser of:



     (a) the aggregate principal amount of the Commitments at such time less, except with
respect to Sections 2.4(b) and 5.2(e)(iii),




     (i) in the case of any request for Revolving Credit Loans, the sum of all outstanding
Swingline Loans and L/C Obligations;




     (ii) in the case of any request for Swingline Loans, the sum of all outstanding
Revolving Credit Loans and L/C Obligations; or




     (iii) in the case of any request for issuance of a Letter of Credit, the sum of all
outstanding Loans; and



     (b) the amount which, when aggregated with the aggregate amount of all other Consolidated
Total Senior Secured Indebtedness, does not exceed the Asset Coverage Amount.



     “Bowater-Calhoun Arrangement” means that certain intercompany loan arrangement
pursuant to which:



3









 





     (a) the Borrower loaned $33,294,000 of proceeds of the McMinn County pollution control bonds
to Calhoun Newsprint Company as evidenced by an intercompany note payable to the Borrower; and



     (b) Calhoun Newsprint Company loaned such proceeds back to the Borrower as evidenced by an
intercompany note payable to Calhoun Newsprint Company and secured by the Borrower’s intercompany
note receivable referred to in clause (a).



     “Business Day” means (a) for all purposes other than as set forth in clause (b) below,
any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina,
New York, New York and Toronto, Ontario, are open for the conduct of their commercial banking
business, and (b) with respect to all notices and determinations in connection with, and payments
of principal and interest on, any LIBOR Rate Loan, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in Dollar deposits in the London
interbank market.



     “Calculation Date” has the meaning assigned thereto in the definition of Applicable
Margin.



     “Canadian Administrative Agent” means The Bank of Nova Scotia in its capacity as the
administrative agent under the Canadian Credit Agreement.



     “Canadian Borrower” means Bowater Canadian Forest Products Inc., as borrower under the
Canadian Credit Facility.



     “Canadian Collateral” means the “Collateral” as defined in the Canadian Credit
Agreement.



     “Canadian Credit Agreement” means that certain credit agreement dated as of even date
herewith by and among the Canadian Borrower, as borrower, the U.S. Borrower, as guarantor, the
lenders party thereto, as lenders, and The Bank of Nova Scotia, as administrative agent.



     “Canadian Credit Facility” means that certain revolving credit facility established
pursuant to the Canadian Credit Agreement.



     “Canadian Credit Party” means the Canadian Borrower and each Canadian Guarantor.



     “Canadian Employee Benefit Plan” means (a) any employee benefit plan that is
maintained for the benefit of employees or former employees of the Canadian Borrower or any of the
Canadian Subsidiaries registered in accordance with the ITA or other Applicable Law which the
Borrower or any of its Subsidiaries sponsors, maintains, or to which it makes, is making, or is
obligated to make, contributions or (b) any Canadian Pension Plan or Canadian Multiemployer Plan
that has at any time within the preceding six (6) years been maintained for the employees of the
Borrower or any of its Subsidiaries, and shall not include any Employee Benefit Plan.



     “Canadian Extensions of Credit” means the “Extensions of Credit” as defined in the
Canadian Credit Agreement.



4









 





     “Canadian Guarantors” means the “Guarantors” as defined in the Canadian Credit
Agreement.



     “Canadian Lender” means any “Lender” as defined in the Canadian Credit Agreement.



     “Canadian Loans” means “Loans” as defined in the Canadian Credit Agreement.



     “Canadian Multiemployer Plan” means a “multi-employer pension plan” as defined by
Applicable Laws and registered in accordance with the ITA or other Applicable Laws and as to which
the Borrower or any of its Subsidiaries is making, or is accruing an obligation to make, or has
accrued an obligation to make, contributions within the preceding six (6) years, and shall not
include any Multiemployer Plan.



     “Canadian Obligations” means the “Obligations” as defined in the Canadian Credit
Agreement.



     “Canadian Pension Plan” means any Canadian Employee Benefit Plan, other than a
Canadian Multiemployer Plan, which is registered in accordance with the ITA or other Applicable Law
and which (a) is maintained for the employees of the Borrower or any of its Subsidiaries or (b) has
at any time within the preceding six (6) years been maintained for the employees of the Borrower or
any of its Subsidiaries which the Borrower or any of its Subsidiaries sponsors, maintains, or to
which it makes, is making or is obligated to make, contributions, and shall not include any Pension
Plan.



     “Canadian Required Agreement Lenders” means the “Required Agreement Lenders” as
defined in the Canadian Credit Agreement.



     “Canadian Secured Parties” means the “Secured Parties” as defined in the Canadian
Credit Agreement.



     “Canadian Subsidiary” means any Subsidiary that is organized under the laws of Canada
or any province or political subdivision thereof.



     “Capital Asset” means, with respect to the Borrower and its Subsidiaries, any asset
that should, in accordance with GAAP, be classified and accounted for as a capital asset on a
Consolidated balance sheet of the Borrower and its Subsidiaries.



     “Capital Expenditures” means, with respect to the Borrower and its Subsidiaries for
any period, the aggregate cost of all Capital Assets acquired by the Borrower and its Subsidiaries
during such period, as determined in accordance with GAAP.



     “Capital Lease” means any lease of any property by the Borrower or any of its
Subsidiaries, as lessee, that should, in accordance with GAAP, be classified and accounted for as a
capital lease on a Consolidated balance sheet of the Borrower and its Subsidiaries.



     “Capital Stock” means (a) in the case of a corporation, capital stock, (b) in the case
of an association or business entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of capital stock, (c) in the case of a partnership,
partnership



5









 







interests (whether general or limited), (d) in the case of a limited liability company,
membership interests and (e) 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 Equivalents” means, collectively:




     (a) marketable obligations issued or unconditionally guaranteed by the United States,
Canada or any agency thereof maturing within two hundred seventy (270) days from the date of
acquisition thereof;




     (b) commercial paper maturing no more than two hundred seventy (270) days from the date
of creation thereof and currently having the highest rating obtainable from either S&P,
Moody’s or DBRS;




     (c) certificates of deposit, time deposits and bankers’ acceptances maturing no more
than two hundred seventy (270) days from the date of creation thereof issued by commercial
banks incorporated under the laws of the United States or Canada, each having combined
capital, surplus and undivided profits of not less than $500,000,000 and having a rating of
“A” or better by a nationally recognized rating agency; provided that the aggregate
amount invested in such certificates of deposit shall not at any time exceed $5,000,000 for
any one such certificate of deposit and $10,000,000 for any one such bank;




     (d) repurchase obligations for underlying securities of the types described in, and
satisfying the requirements specified in, clauses (a) and (c) above entered into with any
bank satisfying the requirements specified in clause (c) above;




     (e) demand deposit accounts maintained in the ordinary course of business; and




     (f) (i) money market mutual or similar funds which (A) invest solely in assets of the
types described in clauses (a) through (e) above, without regard to the limitations as to
the maturity of such obligations, bankers’ acceptances, time deposits, certificates of
deposit, repurchase agreements or commercial paper set forth above, (B) are rated at least
“AAm” or “AAmg” or their equivalent by both S&P and Moody’s, provided that there is no
“r-highlighter” affixed to such rating and (C) comply with Rule 2a-7 of the Investment
Company Act of 1940, as amended; and




          (ii) the money market fund called Columbia Cash Reserves, so long as Columbia Cash
Reserves continues to buy only “first tier” securities as defined by Rule 2a-7 of the
Investment Company Act of 1940, as amended.



     “Change in Control” means an event or series of events by which (a) any person or
group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended) shall obtain ownership or control in one or more series of transactions of more than
thirty-five percent (35%) of the Capital Stock or thirty-five percent (35%) of the voting power of
the Borrower entitled to vote in the election of members of the board of directors of the Borrower,
(b) during any period of twenty-five (25) consecutive calendar months, a majority of



6









 




the members of
the board of directors of the Borrower cease to be composed of Continuing Directors, or (c) there
shall have occurred under any indenture or other instrument evidencing any Indebtedness of the
Borrower or any of its Subsidiaries in excess of $25,000,000 any “change in control” or similar
provision (as set forth in the indenture, agreement or other evidence of such Indebtedness)
obligating the Borrower to repurchase, redeem or repay all or any part of such Indebtedness or
Capital Stock provided for therein (provided that if such obligation is contingent on any
other event or circumstance, then such “change in control” shall not constitute a Change in Control
hereunder unless such other event or circumstance also has occurred or exists). For the purposes
hereof, “Continuing Directors” means, during any period of twenty-five (25) consecutive calendar
months, individuals (i) who were members of the board of directors on the first day of such period,
(ii) whose election or nomination to the board of directors was approved by individuals who
comprised a majority of the board of directors on the first day of such period or (iii) whose
election or nomination to the board of directors was approved by (A) individuals who were members
of the board of directors on the first day of such period or (B) individuals whose election or
nomination to the board of directors was approved by a majority of the board of directors on the
first day of such period; provided that in each case such individuals referenced in clause
(A) and clause (B) constituted a majority of the board of directors at the time of such election or
nomination.




     “Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change
in any law, rule, regulation or treaty or in the administration, interpretation or application
thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or
directive (whether or not having the force of law) by any Governmental Authority.



     “Closing Date” means the date of this Agreement or such later Business Day upon which
each condition described in Section 5.2 shall be satisfied or waived in all respects in a
manner acceptable to the Administrative Agent, in its sole discretion.



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



     “Collateral” means the collateral security for the Obligations pledged or granted
pursuant to the Security Documents.



     “Collateral Agreement” means the collateral agreement of even date executed by the
Credit Parties in favor of the Administrative Agent, for the benefit of itself and the other
Secured Parties, substantially in the form of Exhibit I, as amended, restated, supplemented or
otherwise modified from time to time.



     “Commitment” means (a) as to any Lender, the obligation of such Lender to make
Extensions of Credit to the Borrower hereunder in an aggregate principal amount at any time
outstanding not to exceed the amount set forth opposite such Lender’s name on the Register, as such
amount may be modified at any time or from time to time pursuant to the terms hereof and
(b) as to all Lenders, the aggregate commitment of all Lenders to make Extensions of Credit,
as such amount may be modified at any time or from time to time pursuant to the terms hereof. The
Commitment of all the Lenders on the Closing Date shall be $415,000,000.



7









 





     “Commitment Percentage” means, as to any Lender at any time, the ratio of (a) the
amount of the Commitment of such Lender to (b) the Commitments of all the Lenders.



     “Consolidated” means, when used with reference to financial statements or financial
statement items of any Person, such statements or items on a consolidated basis in accordance with
applicable principles of consolidation under GAAP.



     “Consolidated Adjusted EBITDA” means, for any period, the sum for the Borrower and its
Consolidated Subsidiaries (determined on a Consolidated basis, without duplication, in accordance
with GAAP) of the following: (a) Consolidated EBITDA for such period plus (b) any net gain
on any Asset Disposition during such period minus (c) any net loss on any Asset Disposition
during such period; provided that, for purposes of this Agreement, Consolidated Adjusted
EBITDA shall be adjusted on a pro forma basis, in a manner consistent with
Regulation S-X of the SEC or otherwise reasonably acceptable to the Administrative Agent, to
include or exclude, as applicable, as of the first day of any applicable period, (A) any Permitted
Acquisition closed during such period or (B) any permitted Asset Disposition closed during such
period (other than Asset Dispositions permitted pursuant to Section 10.5(a)-(g)) of assets
having an aggregate fair market value (at the time of the closing of such Asset Disposition) in
excess of $50,000,000.



     “Consolidated EBITDA” means, for any period, the sum for the Borrower and its
Consolidated Subsidiaries (determined on a Consolidated basis, without duplication, in accordance
with GAAP) of the following:




     (a) Consolidated Net Income for such period,




     plus




     (b) the sum of the following to the extent deducted in determining Consolidated Net
Income for such period:




     (i) income taxes for such period (or minus, to the extent added in
determining Consolidated Net Income for such period, income tax benefit for such
period);




     (ii) amortization, depreciation, depletion and other non-cash charges for such
period;




     (iii) Consolidated Interest Expense for such period;




     (iv) any extraordinary charges for such period;




     (v) any unusual or non-recurring charges for such period up to an amount not to
exceed five percent (5%) of the Consolidated EBITDA of the Borrower and its Subsidiaries (as calculated without giving effect to this
clause (v) or clause (vi) below);


     (vi) any cost savings and synergies associated with a Permitted Acquisition not
to exceed five percent (5%) of the Consolidated EBITDA of the

8









 









Borrower and its
Subsidiaries (as calculated without giving effect to this clause (vi) or clause (v)
above); and




     (vii) any net loss on any Asset Disposition during such period,




     less




     (c) the sum of the following to the extent included in determining Consolidated Net
Income for such period:




     (i) the aggregate amount of interest income for such period;




     (ii) any extraordinary gains during such period;




     (iii) any unusual or non-recurring gains during such period; and




     (iv) any net gain on any Asset Disposition during such period;


provided that, for purposes of this Agreement, Consolidated EBITDA shall be adjusted on a
pro forma basis, in a manner consistent with Regulation S-X of the SEC or otherwise
reasonably acceptable to the Administrative Agent, to include or exclude, as applicable, as of the
first day of any applicable period, (A) any Permitted Acquisition closed during such period or (B)
any permitted Asset Disposition closed during such period (other than Asset Dispositions permitted
pursuant to Section 10.5(a)-(g)) of assets having an aggregate fair market value (at the
time of the closing of such Asset Disposition) in excess of $50,000,000.




     “Consolidated Interest Expense” means, with respect to the Borrower and its
Consolidated Subsidiaries for any period, the gross interest expense (including, without
limitation, interest expense attributable to Capital Leases and plus the net amount payable
(or minus the net amount receivable) under any Interest Rate Contracts of the Borrower and
its Consolidated Subsidiaries), all determined for such period on a Consolidated basis without
duplication, in accordance with GAAP.



     “Consolidated Net Income” means, with respect to the Borrower and its Consolidated
Subsidiaries, for any period of determination, the net income (or loss) of the Borrower and its
Consolidated Subsidiaries for such period, determined on a Consolidated basis in accordance with
GAAP.



     “Consolidated Senior Secured Leverage Ratio” means, as of any date of determination,
the ratio of (a) Consolidated Total Senior Secured Indebtedness on such date to (b) Consolidated
EBITDA for the period of four (4) consecutive fiscal quarters ending on or immediately prior to
such date.



     “Consolidated Subsidiary” means, for any Person, each Subsidiary of such Person
(whether now existing or hereafter created or acquired) the financial statements of which shall be
(or should have been) consolidated with the financial statements of such Person in accordance with
GAAP, excluding in any event any QSPE.



9









 





     “Consolidated Total Indebtedness” means, as of any date of determination, without
duplication, all Indebtedness (excluding clause (h) of the definition thereof) of the Borrower and
its Consolidated Subsidiaries.



     “Consolidated Total Leverage Ratio” means, as of any date of determination, the ratio
of (a) Consolidated Total Indebtedness on such date to (b) Consolidated EBITDA for the period of
four (4) consecutive fiscal quarters ending on or immediately prior to such date.



     “Consolidated Total Senior Secured Indebtedness” means,




     (a) for purposes of determining the Consolidated Senior Secured Leverage Ratio, as of
any date of determination with respect to the Borrower and its Consolidated Subsidiaries on
a Consolidated basis, without duplication, the sum of (i) all outstanding Extensions of
Credit (including, without limitation, each outstanding Letter of Credit and each
outstanding Swingline Loan) under the Credit Facility plus (ii) all outstanding
Canadian Extensions of Credit (including, without limitation, each outstanding letter of
credit and each outstanding swingline loan) plus (iii) all other outstanding
Indebtedness (other than any Hedging Agreement) of the Borrower and its Consolidated
Subsidiaries which is secured by any assets of the Borrower and its Consolidated
Subsidiaries; and




     (b) for all other purposes, as of any date of determination with respect to the
Borrower and its Consolidated Subsidiaries on a Consolidated basis, without duplication, the
sum of (i) all outstanding Extensions of Credit (including, without limitation, each
outstanding Letter of Credit and each outstanding Swingline Loan) under the Credit Facility
plus (ii) all other outstanding Indebtedness (other than any Hedging Agreement) of
the Borrower and its Consolidated Subsidiaries which is secured by a Lien on the Coverage
Assets.



     “Coverage Assets” means all accounts receivable (excluding any intercompany accounts
receivable) and all inventory of the Borrower and its Consolidated Subsidiaries other than accounts
receivable and inventory of the Canadian Borrower or any Consolidated Subsidiary of the Canadian
Borrower.



     “Credit Facility” means, collectively, the Revolving Credit Facility, the Swingline
Facility and the L/C Facility.



     “Credit Parties” means, collectively, the Borrower and the Subsidiary Guarantors.



     “DBRS” means Dominion Bond Rating Service Limited and any successor thereto.



     “Default” means any of the events specified in Section 11.1 which with the
passage of time, the giving of notice or any other condition, would constitute an Event of Default.



     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the
Revolving Credit Loans, participations in L/C Obligations or participations in Swingline 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 (1) Business Day of the



10









 







date when
due, unless such amount is the subject of a good faith dispute, or (c) has been deemed insolvent or
become the subject of a bankruptcy, receivership or insolvency proceeding.



     “Disputes” means any dispute, claim or controversy arising out of, connected with or
relating to this Agreement or any other Loan Document, between or among parties hereto and to the
other Loan Documents.



     “Dollars” or “$” means, unless otherwise qualified, dollars in lawful currency of the
United States.



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



     “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, (ii) the Swingline Lender, (iii) each Issuing Lender and (iv) unless a Default or Event of
Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably
withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee”
shall not include the Borrower or any of the Borrower’s Affiliates or Subsidiaries.



     “Employee Benefit Plan” means (a) any employee benefit plan within the meaning of
Section 3(3) of ERISA that is maintained for employees of the Borrower or any of its Subsidiaries
which the Borrower or any of its Subsidiaries or any of their ERISA Affiliates sponsors, maintains,
or to which it makes, is making, or is obligated to make, contributions or (b) any Pension Plan or
Multiemployer Plan that has at any time within the preceding six (6) years been maintained for the
employees of the Borrower or any of its Subsidiaries or any of their current or former ERISA
Affiliates.



     “Environmental Claims” means any and all administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, accusations, allegations, notices of
noncompliance or violation, investigations (other than internal reports prepared by any Person in
the ordinary course of business and not in response to any third party action or request of any
kind) or proceedings relating in any way to any actual or alleged violation of or liability under
any Environmental Law or relating to any permit issued, or any approval given, under any such
Environmental Law, including, without limitation, any and all claims by Governmental Authorities
for enforcement, cleanup, removal, response, remedial or other actions or damages, contribution,
indemnification cost recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to human health or the environment.



     “Environmental Laws” means any and all federal, foreign, state, provincial and local
laws, statutes, ordinances, codes, rules, legally binding policies, standards and regulations,
permits, licenses, approvals, interpretations and orders of courts or Governmental
Authorities, relating to the protection of human health or the environment, including, but not
limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Materials.



11









 





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



     “ERISA Affiliate” means any Person who together with the Borrower or any of its
Subsidiaries is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o)
of the Code or Section 4001(b) of ERISA.



     “Eurodollar Reserve Percentage” means, for any day, the percentage (expressed as a
decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for
such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor)
for determining the maximum reserve requirement (including, without limitation, any basic,
supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category
of liabilities for a member bank of the Federal Reserve System in New York City.



     “Event of Default” means any of the events specified in Section 11.1;
provided that any requirement for passage of time, giving of notice, or any other
condition, has been satisfied.



     “Exchangeable Shares” means those shares of Capital Stock issued by Bowater Canada,
Inc. and listed on the Toronto Stock Exchange (under stock symbol BWX) which are exchangeable at
any time at the option of the holder of such shares into common stock of the Borrower and which
entitle the holder thereof to similar voting rights and dividend payments (on a per share basis) as
those granted to holders of the common stock of the Borrower.



     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any
Issuing Lender or any other recipient of any payment to be made by or on account of any obligation
of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), 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 such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which its applicable
Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar
tax imposed by any other jurisdiction in which the Borrower is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section
4.12(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is
attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in
Law) to comply with Section 4.11(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment),
to receive additional amounts from the Borrower with respect to such withholding tax pursuant to
Section 4.11(a).



     “Existing Facilities” means the collective reference to (a) the credit facility
established pursuant to that certain Credit Agreement dated as of April 22, 2004 (as amended,
restated, supplemented or modified) by and among the Canadian Borrower and the Borrower, as
borrowers, JPMorgan Chase Bank, as U.S. administrative agent, The Bank of Nova Scotia, as Canadian
administrative agent and the lenders party thereto and (b) the conduit facility established
pursuant that certain Loan Agreement dated as of December 19, 2002 (as amended, restated,
supplemented or modified) by and among Bowater Funding Inc., as
borrower, the

12









 





Borrower, as initial
servicer, the lenders party thereto, SunTrust Capital Markets, Inc. and Wachovia Bank, National
Association, as co-agents, and SunTrust Capital Markets, Inc., as administrative agent.



     “Existing Letters of Credit” means those letters of credit existing on the Closing
Date and identified on Schedule 1.1(a).



     “Existing Notes” means the collective reference to each of the senior unsecured notes
and debentures set forth on Schedule 10.1.



     “Extensions of Credit” means, as to any Lender at any time, (a) an amount equal to the
sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then
outstanding, (ii) such Lender’s Commitment Percentage of the L/C Obligations then outstanding and
(iii) such Lender’s Commitment Percentage of the Swingline Loans then outstanding or (b) the making
of any Loan or participation in any Swingline Loan or any Letter of Credit by such Lender, as the
context requires.



     “FDIC” means the Federal Deposit Insurance Corporation, or any successor thereto.



     “Federal Funds Rate” means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers on such day (or, if such day is not a Business Day, for
the immediately preceding Business Day), as published by the Federal Reserve Bank of New York on
the Business Day next succeeding such day, provided that if such rate is not so published
for any day which is a Business Day, the average of the quotation for such day on such transactions
received by the Administrative Agent from three Federal Funds brokers of recognized standing
selected by the Administrative Agent.



     “Fee Letter” means the separate fee letter agreement executed by the Borrower and
Wachovia and/or certain of its affiliates dated April 3, 2006.



     “Fiscal Year” means the fiscal year of the Borrower and its Subsidiaries ending on
December 31.



     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction
other than that in which the Borrower is resident 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.



     “Foreign Pledge Documents” means any pledge agreements, charges and other similar
documents and agreements granting a lien on the Capital Stock of any first-tier Foreign
Subsidiary of the Borrower in favor of the Administrative Agent, for the ratable benefit of
itself and the other Secured Parties.



     “Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.



     “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



13









 







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 Approvals” means all authorizations, consents, approvals, permits,
licenses and exemptions of, registrations and filings with, and reports to, all Governmental
Authorities.



     “Governmental Authority” means the government of the United States, Canada or any
other nation, or of any political subdivision thereof, whether state, provincial or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government (including any supra-national bodies such as the European Union or the
European Central Bank).



     “Guaranty Obligation” means, with respect to the Borrower and its Subsidiaries,
without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which
such Person has directly or indirectly guaranteed any Indebtedness of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness (whether arising by virtue of partnership arrangements, by
agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part); provided, that the term
Guaranty Obligation shall not include endorsements for collection or deposit in the ordinary course
of business.



     “Hazardous Materials” means any substances or materials (a) which are or become
defined as hazardous wastes, hazardous substances, pollutants, contaminants, chemical substances or
mixtures or toxic substances under any Environmental Law, (b) which are toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to
human health or the environment and are or become regulated by any Governmental Authority, (c) the
presence of which require investigation or remediation under any Environmental Law or common law,
(d) the discharge or emission or release of which requires a permit or license under any
Environmental Law or other Governmental Approval, (e) which are deemed to constitute a nuisance or
a trespass which pose a health or safety hazard to Persons or neighboring properties, (f) which
consist of underground or aboveground storage tanks, whether empty, filled or partially filled with
any substance, or (g) which contain, without limitation,
asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or
synthetic gas.



     “Hedging Agreement” means any agreement with respect to any Interest Rate Contract,
forward rate agreement, commodity swap, forward foreign exchange agreement, currency swap
agreement, cross-currency rate swap agreement, currency option agreement or other agreement



14









 







or arrangement designed to alter the risks of any Person arising from fluctuations in interest rates,
currency values or commodity prices, all as amended, restated, supplemented or otherwise modified
from time to time.



     “Hedging Obligations” means all existing or future payment and other obligations owing
by any Credit Party under any Hedging Agreement (which such Hedging Agreement is permitted
hereunder) with any Person that is a Lender or an Affiliate of a Lender at the time such Hedging
Agreement is executed.



     “Immaterial Subsidiary” means:



     (a) each QSPE;



     (b) any Domestic Subsidiary that is not a Wholly-Owned Subsidiary to the extent that (i) there
is a provision in the organizational documents of such Domestic Subsidiary or (ii) the Borrower or
any of its Subsidiaries is party to a legally enforceable agreement, in either case that would
prohibit such Domestic Subsidiary from being a Subsidiary Guarantor without the consent (or the
approval of directors appointed by) a third party owner of such Domestic Subsidiary; and



     (c) any individual Domestic Subsidiary having total assets with a book value that is less than
one percent (1%) of the aggregate book value of the total Consolidated assets of the Borrower and
its Subsidiaries (as of the most recent date for which financial statements have been delivered).



     “Indebtedness” means, with respect to any Person at any date and without duplication,
the sum of the following:



     (a) all liabilities, obligations and indebtedness for borrowed money of such Person,
including, but not limited to, obligations evidenced by bonds, debentures, notes or other similar
instruments of such Person;



     (b) all obligations of such Person to pay the deferred purchase price of property or services
(including, without limitation, all obligations under non-competition, earn-out or similar
agreements in connection with an acquisition), except trade payables and accrued obligations
arising in the ordinary course of business, so long as such trade accounts payable are payable
within ninety (90) days of the date the respective goods are delivered or the respective services
are rendered;



     (c) the Attributable Indebtedness of such Person with respect to such Person’s obligations in
respect of Capital Leases and Synthetic Leases (regardless of whether accounted for as indebtedness
under GAAP);



     (d) all Indebtedness of any other Person secured by a Lien on any asset owned by such Person
(including indebtedness arising under conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;



     (e) all Guaranty Obligations of such Person;



15









 





     (f) all obligations, contingent or otherwise, of such Person in connection with letters of
credit, whether or not drawn, including, without limitation, any reimbursement obligation, and
bankers’ acceptances issued for the account of such Person;



     (g) all cash obligations of any such Person to redeem, repurchase, exchange, defease or
otherwise make payments in respect of Capital Stock of such Person, unless such redemption,
repurchase, exchange, defeasance or other payment is contingent (unless such contingency has been
satisfied) or is not required prior to the date that is ninety-one (91) days after the Maturity
Date;



     (h) all Net Hedging Obligations of such Person; and




     (i) the outstanding attributed principal amount under any asset securitization program of such
Person.



     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture (other than a joint venture that is itself a corporation or limited
liability company) in which such Person is a general partner or a joint venturer, unless such
Person is not legally liable therefor under Applicable Law or as a result of any legally
enforceable contractual limitation with respect to such Indebtedness.



     “Indemnified Taxes” means Taxes and Other Taxes other than Excluded Taxes.



     “Insurance and Condemnation Event” means the receipt by the Borrower or any of its
Subsidiaries of any cash insurance proceeds or condemnation award payable by reason of theft, loss,
physical destruction or damage, taking or similar event with respect to any of their respective
property or assets.



     “Intercompany Subordination Agreement” means an Intercompany Subordination Agreement
substantially in the form of Exhibit J by and among the Administrative Agent and the applicable
Credit Parties or Subsidiaries thereof party thereto.



     “Interest Period” has the meaning assigned thereto in Section 4.1(b).



     “Interest Rate Contract” means any interest rate swap agreement, interest rate cap
agreement, interest rate floor agreement, interest rate collar agreement, interest rate option or
any other agreement regarding the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of any Person and any confirming letter executed pursuant
to such agreement, all as amended, restated, supplemented or otherwise modified from time to time.



     “ISP98” means the International Standby Practices (1998 Revision, effective January 1,
1999), International Chamber of Commerce Publication No. 590.



     “Issuing Lender” means (a) with respect to Letters of Credit issued hereunder on or
after the Closing Date, Wachovia, in its capacity as issuer thereof, or any successor thereto or
any other Lender designated as an Issuing Lender by the Borrower (with reasonable prior notice of
such designation by the Borrower to the Administrative Agent) and (b) with respect to the Existing
Letters of Credit, the issuers thereof as identified on Schedule 1.1(a).



16









 





     “ITA” means the Income Tax Act (Canada), as amended or modified from time to time.



     “L/C Commitment” means the lesser of (a) One Hundred Million Dollars ($100,000,000)
and (b) the aggregate Commitments of the Lenders.



     “L/C Facility” means the letter of credit facility established pursuant to Article
III.



     “L/C Obligations” means at any time, an amount equal to the sum of (a) the aggregate
undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount
of drawings under Letters of Credit which have not then been reimbursed pursuant to Section
3.5.



     “L/C Participants” means the collective reference to all of the Lenders other than the
applicable Issuing Lender.



     “L/C Supporting Documentation” has the meaning assigned thereto in Section
3.2.



     “Lender” means each Person agreeing to be bound by the terms of this Agreement as a
Lender (including, without limitation, each Issuing Lender and the Swingline Lender unless the
context otherwise requires) pursuant to a Lender Authorization and each Person that hereafter
becomes a party to this Agreement as a Lender pursuant to Section 13.10.



     “Lender Authorization” has the meaning assigned thereto in the introductory paragraph
hereto.



     “Lending Office” means, with respect to any Lender, the office of such Lender
maintaining such Lender’s Extensions of Credit.



     “Letter of Credit Application” means an application, in the form specified by the
applicable Issuing Lender from time to time, requesting the applicable Issuing Lender to issue a
Letter of Credit.



     “Letters of Credit” means the collective reference to letters of credit issued
pursuant to Section 3.1 and the Existing Letters of Credit.



     “LIBOR” means the rate of interest per annum determined on the basis of the rate for
deposits in Dollars in minimum amounts of at least $5,000,000 for a period equal to the applicable
Interest Period which appears on the Telerate Page 3750 at approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of the applicable Interest Period
(rounded upward, if necessary, to the nearest 1/100th of 1%). If, for any reason,
such rate does not appear on Telerate Page 3750, then “LIBOR” shall be determined by the
Administrative Agent to be the arithmetic average of the rate per annum at which deposits in
Dollars in minimum amounts of at least $5,000,000 would be offered by first class banks in the
London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) two
(2) Business Days prior to the first day of the applicable Interest Period for a period equal to
such Interest Period. Each calculation by the Administrative Agent of LIBOR shall be conclusive
and binding for all purposes, absent manifest error.



17









 





     “LIBOR Rate” means a rate per annum (rounded upwards, if necessary, to the next higher
1/100th of 1%) determined by the Administrative Agent pursuant to the following formula:



	 	 	 	 	 	 	 
	 

	 	LIBOR Rate =
	 	LIBOR	 	 
	 

	 	 	 	 

1.00-Eurodollar Reserve Percentage
	 	 






     “LIBOR Rate Loan” means any Loan bearing interest at a rate based upon the LIBOR
Rate as provided in Section 4.1(a).



     “Lien” means, with respect to any asset, any mortgage, leasehold mortgage, lien,
pledge, charge, security interest, hypothec, hypothecation, assignment by way of security or
encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person
shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title
retention agreement relating to such asset.



     “Loan Documents” means, collectively, this Agreement, each Note, the Letter of Credit
Applications, the Subsidiary Guaranty Agreement, the Security Documents, the Intercreditor
Agreement and each other document, instrument, certificate and agreement executed and delivered by
the Borrower or any of its Subsidiaries in connection with this Agreement or otherwise referred to
herein or contemplated hereby (excluding any Hedging Agreement), all as may be amended, restated,
supplemented or otherwise modified from time to time.



     “Loans” means the collective reference to the Revolving Credit Loans and the Swingline
Loans, and “Loan” means any of such Loans.



     “Material Adverse Effect” means, with respect to the Borrower or any of its
Subsidiaries, a material adverse effect on (a) the business, assets, liabilities (actual or
contingent), operations or condition (financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole, or (b) the ability of any such Person to perform its obligations under the Loan
Documents to which it is a party.



     “Material Subsidiary” means:




     (a) each Domestic Subsidiary of the Borrower, other than, the Immaterial Subsidiaries;
and




     (b) each Subsidiary that, notwithstanding the definition of Immaterial Subsidiary, is
designated as a Material Subsidiary pursuant to Section 8.10(b).



     Notwithstanding anything to the contrary contained in this Agreement or any other Loan
Document, any Subsidiary that owns (i) a Material Subsidiary or (ii) provides a guaranty of the
Existing Notes or any Indebtedness incurred to refinance, refund, renew or extend the Existing
Notes as permitted pursuant to Section 10.1(d), in either case shall be a Material
Subsidiary.



     “Maturity Date” means the earliest to occur of:



18









 






     (a) May 25, 2011; provided, however, that such date shall be accelerated to the
date which is ninety-one (91) days prior to the then current maturity date of any Specified
Existing Note if on the date which is one hundred twenty (120) days prior to the then
current maturity date of such Specified Existing Note either (i) the remaining outstanding
principal balance thereof (excluding any such balance as to which sums have been set aside
for the payment thereof pursuant to any defeasance or sinking fund or escrow arrangement or
similar provisions) is in excess of $75,000,000 or (ii) the Aggregate Credit Exposure is in
excess of $100,000,000 and the outstanding principal balance of such Specified Existing Note
(excluding any such balance as to which sums have been set aside for the payment thereof
pursuant to any defeasance or sinking fund or escrow arrangement or similar provisions) has
not been paid in full;




     (b) the date of termination of the entire Commitment by the Borrower pursuant to
Section 2.5; or




     (c) the date of termination of the Commitment by the Administrative Agent on behalf of
the Lenders pursuant to Section 11.2(a).



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



     “Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of
ERISA to which the Borrower or any of its Subsidiaries or any of their ERISA Affiliates is making,
or is accruing an obligation to make, or has accrued an obligation to make contributions within the
preceding six (6) years.



     “Net Cash Proceeds” means, as applicable;




     (a) with respect to any Asset Disposition, the gross cash proceeds received by the
Borrower or any of its Subsidiaries therefrom less the sum of the following, without
duplication, (i) selling expenses incurred in connection with such Asset Disposition
(including reasonable brokers’ fees and commissions, legal, accounting and other
professional and transactional fees, transfer and similar taxes and the Borrower’s
reasonable good faith estimate of income taxes paid or payable in connection with such
sale), (ii) reasonable reserves with respect to post-closing adjustments, indemnities and
other contingent liabilities established in connection with such Asset Disposition
(provided that, to the extent and at the time any such amounts are released from
such reserve, such amounts shall constitute Net Cash Proceeds), (iii) the principal amount,
premium or penalty, if any, interest and other amounts on any Indebtedness secured by a Lien
on the assets (or a portion thereof) sold in such Asset Disposition, which Indebtedness is
repaid with such proceeds and (iv) the Borrower’s reasonable good faith estimate of cash
payments required to be made within ninety (90) days of such Asset
Disposition with respect to retained liabilities directly related to the assets (or a
portion thereof) sold in such Asset Disposition (provided that, to the extent that
cash proceeds are not used to make payments in respect of such retained liabilities within
ninety (90) days of such Asset Disposition, such cash proceeds shall constitute Net Cash
Proceeds); and



19









 






     (b) with respect to any Insurance and Condemnation Event, the gross cash proceeds
received by the Borrower or any of its Subsidiaries therefrom less the sum of the
following, without duplication, (i) all fees and expenses in connection therewith and (ii)
the principal amount, premium or penalty, if any, interest and other amounts on any
Indebtedness secured by a Lien on the assets (or a portion thereof) subject to such
Insurance and Condemnation Event, which Indebtedness is repaid in connection therewith.



     “Net Hedging Obligations” means, with respect to any Hedging Agreement as of any date,
the Termination Value of such Hedging Agreement on such date.



     “New Material Subsidiary” has the meaning assigned thereto in Section 8.10.



     “Notes” means the collective reference to the Revolving Credit Notes and the Swingline
Note.



     “Notice of Account Designation” has the meaning assigned thereto in Section
2.3(b).



     “Notice of Borrowing” has the meaning assigned thereto in Section 2.3(a).



     “Notice of Conversion/Continuation” has the meaning assigned thereto in Section
4.2.



     “Notice of Prepayment” has the meaning assigned thereto in Section 2.4(c).



     “Obligations” means, in each case, whether now in existence or hereafter arising: (a)
the principal of and interest on (including interest accruing after the filing of any bankruptcy or
similar petition) the Loans, (b) the L/C Obligations, (c) all Hedging Obligations and (d) all other
fees and commissions (including reasonable attorneys’ fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing by the Borrower or
any of its Subsidiaries to the Lenders or the Administrative Agent, in each case under any Loan
Document, with respect to any Loan or Letter of Credit, of every kind, nature and description,
direct or indirect, absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note.



     “OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.



     “Officer’s Compliance Certificate” means a certificate of the chief financial officer,
the treasurer, or the assistant treasurer of the Borrower substantially in the form of Exhibit F.



     “Operating Lease” means, as to any Person as determined in accordance with GAAP, any
lease of property (whether real, personal or mixed) by such Person as lessee which is not a Capital
Lease.



     “Other Taxes” means all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.



20









 





     “Participant” has the meaning assigned thereto in Section 13.10(d).



     “PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.



     “Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which
is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (a) is
maintained for the employees of the Borrower or any of its Subsidiaries or any of their ERISA
Affiliates or (b) has at any time within the preceding six (6) years been maintained for the
employees of the Borrower or any of its Subsidiaries or any of their current or former ERISA
Affiliates which the Borrower or any of its Subsidiaries or any of their ERISA Affiliates sponsors,
maintains, or to which it makes, is making or is obligated to make, contributions.



     “Permitted Acquisition” means any investment by the Borrower or any of its
Subsidiaries in the form of the acquisition of all or substantially all of the business or assets,
or any portion of the business or assets that constitutes a line of business, a business unit or a
division (whether by the acquisition of Capital Stock, assets or any combination thereof), of any
other Person if each such acquisition or investment meets all of the following requirements:




     (a) with respect to any acquisition:




     (i) such acquisition is not a hostile acquisition (with evidence thereof to be
provided to the Administrative Agent or the Canadian Administrative Agent upon its
reasonable request);




     (ii) the Person or business to be acquired shall be in a substantially similar
line of business as the Borrower and its Subsidiaries pursuant to Section
10.12;




     (iii) if such transaction is a merger or consolidation involving a Credit Party
or a Canadian Credit Party, the surviving Person shall be a Credit Party or Canadian
Credit Party and no Change of Control shall have been effected thereby;




     (iv) if the acquisition will result in the acquisition of, or creation of, any
New Material Subsidiary, the Borrower shall comply with Section 8.10 hereof;




     (v) no Default or Event of Default shall have occurred and be continuing both
before and after giving effect to such acquisition; and




     (vi) after giving effect to the acquisition, at least (A) $50,000,000 in
availability shall exist under the Credit Facility and (B) $25,000,000 in
availability shall exist under the Canadian Credit Facility; and




     (b) with respect to any acquisition for which the Permitted Acquisition Consideration
is greater than $50,000,000 or any acquisition funded (in whole or in part) by Extensions of
Credit or Canadian Extensions of Credit (in addition to the requirements set forth in clause
(a) above):



21









 






     (i) no less than fifteen (15) Business Days prior to the proposed closing date
of such acquisition, the Borrower shall have delivered written notice of such
acquisition to the Administrative Agent and the Canadian Administrative Agent, which
notice shall include the proposed closing date of such acquisition;




     (ii) no later than five (5) Business Days prior to the proposed closing date of
such acquisition, the Borrower shall have delivered to the Administrative Agent and
the Canadian Administrative Agent an Officer’s Compliance Certificate demonstrating,
in form and substance reasonably satisfactory thereto, (A) pro forma
compliance (as of the most recent fiscal quarter ended for which financial
statements have been delivered pursuant hereto, adjusted to give effect the
acquisition and any Extensions of Credit or Canadian Extensions of Credit made or to
be made in connection therewith) with each covenant contained in Article IX
and (B) a pro forma Consolidated Senior Secured Leverage Ratio (as
of the most recent fiscal quarter ended for which financial statements have been
delivered pursuant hereto, adjusted to give effect the acquisition and any
Extensions of Credit or Canadian Extensions of Credit made or to be made in
connection therewith) not to exceed 1.00 to 1.00;




     (iii) no later than five (5) Business Days prior to the proposed closing date
of such acquisition, the Borrower, to the extent requested by the Administrative
Agent or the Canadian Administrative Agent, (A) shall have delivered to the
Administrative Agent or the Canadian Administrative Agent, as applicable, promptly
upon the finalization thereof, copies of substantially final Permitted Acquisition
Documents, which shall be in form and substance reasonably satisfactory to the
Administrative Agent or the Canadian Administrative Agent, as applicable, and (B)
shall have delivered to, or made available for inspection by, the Administrative
Agent or the Canadian Administrative Agent, as applicable, substantially complete
Permitted Acquisition Diligence Information, which shall be in form and substance
reasonably satisfactory to the Administrative Agent or the Canadian Administrative
Agent, as applicable;




     (iv) the Borrower shall provide such other documents and other information as
may be reasonably requested by the Administrative Agent or the Canadian
Administrative Agent in connection with the acquisition; and




     (v) the Borrower shall demonstrate, in form and substance reasonably
satisfactory to the Administrative Agent and the Canadian Administrative Agent, that
the entity to be acquired had positive Consolidated EBITDA for the four (4) fiscal
quarter period ended prior to the proposed closing date of such acquisition (it
being agreed and acknowledged that clause (b)(vi) of the definition of
“Consolidated EBITDA” shall be calculated solely with respect to the Person or
business to be acquired); and




     (c) with respect to any acquisition for which the Permitted Acquisition Consideration
is less than $50,000,000 and such acquisition is not funded (in whole or in



22









 







part) by
Extensions of Credit or Canadian Extensions of Credit (in addition to the requirements set
forth in clause (a) above):




     (i) no more than ten (10) days following the closing date of such acquisition,
the Borrower shall have delivered written notice of such acquisition to the
Administrative Agent and the Canadian Administrative Agent, which notice shall
include the closing date of such acquisition; and




     (ii) to the extent requested by the Administrative Agent or the Canadian
Administrative Agent, the Borrower shall have delivered to the Administrative Agent
or the Canadian Administrative Agent, as applicable, promptly upon the finalization
thereof (but no later than fifteen (15) days after the closing date of such
acquisition) copies of substantially final Permitted Acquisition Documents.


Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents,
the Borrower shall have obtained the prior written consent of the Required Lenders prior to the
consummation of such acquisition if (1) the Permitted Acquisition Consideration for any such
acquisition (or series of related acquisitions), together with all other acquisitions consummated
during the previous twelve (12) month period exceeds $100,000,000 in the aggregate (excluding any
portion of the acquisitions paid with the proceeds from any equity issuance by the Borrower) and
(2) the Permitted Acquisition Consideration for such acquisition (or series of related
acquisitions), together with all other acquisitions consummated during the term of this Agreement,
exceeds $300,000,000 in the aggregate (excluding any portion of the acquisitions paid with the
proceeds from any equity issuance by the Borrower).




     “Permitted Acquisition Consideration” means the aggregate amount of the purchase price
(including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable
thereunder), deferred payments, or Capital Stock of the Borrower, net of the applicable acquired
company’s cash and Cash Equivalent balance as shown on its most recent financial statements
delivered in connection with the applicable Permitted Acquisition) to be paid on a singular basis
in connection with any applicable Permitted Acquisition as set forth in the applicable Permitted
Acquisition Documents executed by the Borrower or any of its Subsidiaries in order to consummate
the applicable Permitted Acquisition.



     “Permitted Acquisition Diligence Information” means with respect to any acquisition
proposed by the Borrower or any of its Subsidiaries, to the extent applicable and in the possession
of the Borrower or any of its Subsidiaries, all material financial information, all material
contracts, all material customer lists, all material supply agreements, and all other material
information, in each case, reasonably requested to be delivered to the Administrative Agent or the
Canadian Administrative Agent in connection with such acquisition (except to the extent that any
such information is (a) subject to any confidentiality agreement, unless mutually
agreeable arrangements can be made to preserve such information as confidential, (b)
classified or (c) subject to any attorney-client privilege).



     “Permitted Acquisition Documents” means with respect to any acquisition proposed by
the Borrower or any of its Subsidiaries, the purchase agreement, sale agreement, merger



23









 







agreement
or other similar agreement evidencing such acquisition (whichever is applicable), including,
without limitation, all schedules and exhibits thereto and each other material document executed,
delivered, contemplated by or prepared in connection therewith and any amendment, modification or
supplement to any of the foregoing.



     “Permitted Liens” means the Liens permitted pursuant to Section 10.2.



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



     “Prime Rate” means, at any time, the rate of interest per annum publicly announced
from time to time by Wachovia as its prime rate. Each change in the Prime Rate shall be effective
as of the opening of business on the day such change in such prime rate occurs. The parties hereto
acknowledge that the rate announced publicly by Wachovia as its prime rate is an index or base rate
and shall not necessarily be its lowest or best rate charged to its customers or other banks.



     “QSPE” means each of the following: (a) Calhoun Note Holdings AT LLC, (b) Calhoun Note
Holdings TI LLC, (c) Bowater Catawba Note Holdings I LLC, (d) Bowater Catawba Note Holdings II LLC,
(e) Bowater Saluda Note Holdings LLC, (f) Timber Note Holding LLC and (g) any other qualified
special purpose entity created to facilitate the sale and/or the monetization of receivables from
the sale of timberlands pursuant to Section 10.5(g); provided that:




     (i) no portion of the Indebtedness or any other obligations (contingent or otherwise)
of any such Person (1) may be guaranteed by the Borrower or any of its Subsidiaries, (2) may
be recourse to or obligate the Borrower or any of its Subsidiaries in any way or (3) may
subject any property or asset of the Borrower or any of its Subsidiaries, directly or
indirectly, contingently or otherwise, to the satisfaction thereof (other than, in the case
of clauses (1) (solely with respect to guaranties of make-whole premiums), (2) and (3),
pursuant to Standard Securitization Undertakings);




     (ii) the Borrower and its Subsidiaries may not have any material contract, agreement,
arrangement or understanding with any such Person other than on terms no less favorable to
the Borrower or any of its Subsidiaries than those that might be obtained at the time from
Persons that are not Affiliates of the Borrower or any of its Subsidiaries; and




     (iii) the Borrower and its Subsidiaries may not (A) have any obligation to maintain or
preserve the financial condition of any such Person or (B) cause any such Person to achieve
certain levels of operating results.



     “Register” has the meaning assigned thereto in Section 13.10(c).



     “Reimbursement Obligation” means the obligation of the Borrower to reimburse the
applicable Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of
Credit.



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



24









 





     “Required Agreement Lenders” means, at any date, any combination of Lenders having
more than fifty percent (50%) of the sum of the aggregate amount of the Commitment under this
Credit Facility or, if the Commitment under this Credit Facility has been terminated, any
combination of Lenders holding more than fifty percent (50%) of the aggregate Extensions of Credit.



     “Required Lenders” means, at any date, any combination of Lenders and Canadian Lenders
having more than fifty percent (50%) of the sum of (a) the aggregate amount of the Commitment under
this Credit Facility (or if the Commitment has been terminated, the aggregate amount of Extensions
of Credit under this Credit Facility) plus (b) the aggregate amount of the commitments
under the Canadian Credit Facility (or, if the commitments under the Canadian Credit Facility have
been terminated, the aggregate amount of the Canadian Extensions of Credit).



     “Responsible Officer” means, as to any Person, the chief executive officer, president,
chief financial officer, controller, treasurer or assistant treasurer of such Person or any other
officer of such Person reasonably acceptable to the Administrative Agent and the Canadian
Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of
a Person shall be conclusively presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such Person and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Person.



     “Restricted Subsidiary” means any Person that is a “Restricted Subsidiary” pursuant to
the definition thereof as contained in the Existing Notes as in effect as of the Closing Date, for
so long as such Existing Notes or any Indebtedness incurred to refinance such Existing Notes is
outstanding and includes provisions restricting the granting of a lien on the capital stock or
indebtedness of such Restricted Subsidiaries.



     “Revolving Credit Facility” means the revolving credit facility established pursuant
to Article II.



     “Revolving Credit Loan” means any revolving loan made to the Borrower pursuant to
Section 2.1, and all such revolving loans collectively as the context requires.



     “Revolving Credit Note” means a promissory note made by the Borrower in favor of a
Lender evidencing the Revolving Credit Loans made by such Lender, substantially in the form of
Exhibit A-1, and any amendments, supplements and modifications thereto, any substitutes therefor,
and any replacements, restatements, renewals or extension thereof, in whole or in part.



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



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



     “Sanctioned Entity” shall mean (a) an agency of the government of, (b) an organization
directly or indirectly controlled by, or (c) a person resident in a country that is subject to a
sanctions program identified on the list maintained by OFAC and available at



25









 







http://www.treas.gov/offices/enforcement/ofac/sanctions/index.html, or as otherwise
published from time to time as such program may be applicable to such agency, organization or
person.



     “Sanctioned Person” shall mean a person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/
enforcement/ofac/sdn/index.html, or as otherwise published from time to time.



     “Secured Parties” means the Administrative Agent, the Lenders and/or any party to a
Hedging Agreement that was a Lender or an Affiliate of a Lender at the time such Hedging Agreement
was executed.



     “Security Documents” means the collective reference to the Collateral Agreement, the
Subsidiary Guaranty Agreement, each Foreign Pledge Agreement and each other agreement or writing
pursuant to which any Credit Party purports to pledge or grant a security interest in any property
or assets securing the Obligations or any such Person purports to guaranty the payment and/or
performance of the Obligations, in each case, as amended, restated, supplemented or otherwise
modified from time to time.



     “Significant Indebtedness” means Indebtedness (other than the Obligations and the
Canadian Obligations) of the Borrower and its Subsidiaries the outstanding principal amount of
which is in excess of $25,000,000.



     “Solvent” means, as to the Borrower and its Subsidiaries on a particular date, that
any such Person (a) has capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage and is able to pay its debts as they
mature, (b) has assets having a value, both at fair valuation and at present fair saleable value,
greater than the amount required to pay its probable liabilities (including contingencies), and (c)
does not believe that it will incur debts or liabilities beyond its ability to pay such debts or
liabilities as they mature.



     “Specified Existing Notes” means each of the Existing Notes which (a) as of the
Closing Date, matures or is subject to mandatory redemption prior to May 25, 2011 and (b) has an
outstanding principal amount, as of the Closing Date, in excess of $75,000,000. The Specified
Existing Notes shall be set forth on Schedule 1.1(b).



     “Standard Securitization Undertakings” means, collectively, (i) customary arms-length
servicing obligations (together with any related performance guaranties), (ii) obligations
(together with any related performance guaranties) to refund the purchase price or grant purchase
price credits for dilutive events or misrepresentation (in each case unrelated to the
collectibility of receivables or creditworthiness of the associated account debtors), (iii)
representations, warranties, covenants and indemnities (together with any related performance
guaranties) of a type that are reasonably customary in accounts receivable securitizations and (iv)
in the case of a QSPE, a guarantee by the
Borrower or its Subsidiaries of any make whole premium (but not any principal or interest) on
Indebtedness of such QSPE.



     “Subordinated Indebtedness” means the collective reference to any Indebtedness of the
Borrower or any of its Subsidiaries subordinated in right and time of payment to the Obligations



26









 







and containing such other terms and conditions, in each case as are satisfactory to the
Administrative Agent and the Canadian Administrative Agent.



     “Subsidiary” means as to any Person, any corporation, partnership, limited liability
company or other entity of which more than fifty percent (50%) of the outstanding Capital Stock
having ordinary voting power to elect a majority of the board of directors or other persons or
governing body performing similar functions of such corporation, partnership, limited liability
company or other entity is at the time directly or indirectly owned or controlled by such Person
and/or one or more Subsidiaries of such Person (irrespective of whether, at the time, Capital Stock
of any other class or classes of such corporation, partnership, limited liability company or other
entity shall have or might have voting power by reason of the happening of any contingency);
provided, however, that no QSPE shall be a Subsidiary. Unless otherwise qualified,
references to “Subsidiary” or “Subsidiaries” herein shall refer to those of the Borrower.



     “Subsidiary Borrower” means any Domestic Subsidiary of the Borrower that is designated
as a borrower under this agreement in accordance with the terms of Section 4.14.



     “Subsidiary Guarantors” means each direct or indirect Material Subsidiary of the
Borrower (a) in existence on the Closing Date or (b) which becomes a party to the Subsidiary
Guaranty Agreement in accordance with Section 8.10.



     “Subsidiary Guaranty Agreement” means the unconditional guaranty agreement of even
date executed by the Subsidiary Guarantors in favor of the Administrative Agent for the ratable
benefit of the Secured Parties, substantially in the form of Exhibit H, as amended, restated,
supplemented or otherwise modified from time to time.



     “Swingline Commitment” means the lesser of (a) Ten Million Dollars ($10,000,000) and
(b) the Commitment.



     “Swingline Facility” means the swingline facility established pursuant to Section
2.2.



     “Swingline Lender” means Wachovia in its capacity as swingline lender hereunder.



     “Swingline Loan” means any swingline loan made by the Swingline Lender to the Borrower
pursuant to Section 2.2, and all such swingline loans collectively as the context requires.



     “Swingline Note” means a promissory note made by the Borrower in favor of the
Swingline Lender evidencing the Swingline Loans made by the Swingline Lender, substantially in the
form of Exhibit A-2, and any amendments, supplements and modifications thereto, any substitutes
therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part.



     “Swingline Termination Date” means the first to occur of (a) the resignation of
Wachovia as Administrative Agent in accordance with Section 12.6 and (b) the Maturity Date.



27









 





     “Synthetic Lease” means any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such transaction is
considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease in
accordance with GAAP.



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



     “Termination Event” means except for any such event or condition that could not
reasonably be expected to have a Material Adverse Effect: (a) a “Reportable Event” described in
Section 4043 of ERISA for which the notice requirement has not been waived by the PBGC, or (b) the
withdrawal of the Borrower or any of its Subsidiaries or any of their ERISA Affiliates from a
Pension Plan during a plan year in which it was a “substantial employer” as defined in Section
4001(a)(2) of ERISA, or (c) the termination of a Pension Plan, the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination, under
Section 4041 of ERISA or similar provision of other Applicable Law, if the plan assets are not
sufficient to pay all plan liabilities, or (d) the institution of proceedings to terminate, or the
appointment of a trustee with respect to, any Pension Plan by the PBGC or any other applicable
Governmental Authority under other Applicable Law, or (e) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA or other Applicable Law for the termination of,
or the appointment of a trustee to administer, any Pension Plan, or (f) the imposition of a Lien
pursuant to Section 412 of the Code or Section 302 of ERISA or the provisions of any other
Applicable Law, or (g) the partial or complete withdrawal of the Borrower or any of its
Subsidiaries or of any of their ERISA Affiliates from a Multiemployer Plan if withdrawal liability
is asserted by such plan, or (h) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i) any event or
condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or
the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of
ERISA, or (j) the termination of a Canadian Pension Plan, the filing of a notice of intent to
terminate a Canadian Pension Plan or the treatment of a Canadian Pension Plan amendment as a
termination, under Applicable Law, if the plan assets are not sufficient to pay all plan
liabilities, or (k) the institution of proceedings to terminate, or the appointment of a trustee
with respect to, any Canadian Pension Plan by any applicable Governmental Authority under
Applicable Law, or (l) any other event or condition which would constitute grounds under Applicable
Law for the termination of, or the appointment of a trustee to administer, any Canadian Pension
Plan, or (m) the partial or complete withdrawal of the Borrower or any of its Subsidiaries from a
Canadian Multiemployer Plan if withdrawal liability is asserted by such plan, or (n) any event or
condition which results in the reorganization or insolvency of a Canadian Multiemployer Plan, or
(o) any event or condition which results in the termination of a Canadian Multiemployer Plan or the
institution by any Governmental Authority of proceedings to terminate a Canadian Multiemployer
Plan.



     “Termination Value” means, in respect of any one or more Hedging Agreements, after
taking into account the effect of any legally enforceable netting agreement relating to such
Hedging Agreements, (a) for any date on or after the date such Hedging Agreements have been closed
out and termination value(s) determined in accordance therewith, such termination



28









 







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 Hedging Agreements, as determined based upon one or more
mid-market or other readily available quotations provided by any recognized dealer in such Hedging
Agreements (which may include a Lender or any Affiliate of a Lender).



     “UCC” means the Uniform Commercial Code as in effect in the State of New York, as
amended or modified from time to time.



     “United States” means the United States of America.



     “Wachovia” means Wachovia Bank, National Association, a national banking association,
and its successors.



     “Wholly-Owned” means, with respect to a Subsidiary, that all of the shares of Capital
Stock of such Subsidiary are, directly or indirectly, owned or controlled by the Borrower and/or
one or more of its Wholly-Owned Subsidiaries (except for (a) directors’ qualifying shares or other
shares required by Applicable Law to be owned by a Person other than the Borrower and (b) the
Exchangeable Shares).



     SECTION 1.2 Other Definitions and Provisions. With reference to this Agreement and
each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a)
the definitions of terms herein shall apply equally to the singular and plural forms of the terms
defined, (b) whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms, (c) the words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”, (d) the word “will” shall be construed to
have the same meaning and effect as the word “shall”, (e) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring to such 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),
(f) any reference herein to any Person shall be construed to include such Person’s successors and
assigns, (g) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular provision hereof,
(h) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (i) 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, (j) the term “documents” includes any and all instruments, documents, agreements,
certificates, notices, reports, financial statements and other writings, however evidenced, whether
in physical or electronic form, (k) 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”, and (l) 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.



     SECTION 1.3 Accounting Terms. All accounting terms not specifically or completely
defined herein shall be construed in conformity with, and all financial data (including



29









 







financial
ratios and other financial calculations) required to be submitted pursuant to this Agreement shall
be prepared in conformity with GAAP as in effect from time to time, applied on a consistent basis
and in a manner consistent with that used in preparing the audited financial statements required by
Section 7.1(b), except as otherwise specifically prescribed herein.



     SECTION 1.4 UCC Terms. Terms defined in the UCC in effect on the Closing Date and not
otherwise defined herein shall, unless the context otherwise indicates, have the meanings provided
by those definitions. Subject to the foregoing, the term “UCC” refers, as of any date of
determination, to the UCC then in effect.



     SECTION 1.5 Rounding. Any financial ratios required to be maintained 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).



     SECTION 1.6 References to Agreement and Laws. Unless otherwise expressly provided
herein, (a) references to formation documents, governing 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 Applicable Law shall include all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or interpreting such
Applicable Law.



     SECTION 1.7 Times of Day. Unless otherwise specified, all references herein to times
of day shall be references to Eastern time (daylight or standard, as applicable).



     SECTION 1.8 Letter of Credit Amounts. Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to mean the maximum face
amount of such Letter of Credit after giving effect to all increases thereof contemplated by such
Letter of Credit or the Letter of Credit Application therefor, whether or not such maximum face
amount is in effect at such time.



     SECTION 1.9 Amount of Obligations. Unless otherwise specified, for purposes of this
Agreement, any determination of the amount of any outstanding Canadian Extensions of Credit
(including, without limitation, Canadian Loans) or Canadian Obligations shall be based upon the
Dollar Amount of such outstanding Canadian Extensions of Credit (including, without limitation,
Canadian Loans) or Canadian Obligations. For the purpose of this Section 1.9, “Dollar
Amount” means the amount of Dollars which is equivalent to the amount so expressed in Canadian
Dollars at the most favorable spot exchange rate reasonably determined by the Administrative Agent
to be available to it at the relevant time and “Canadian Dollar” means, at any time of
determination, the then official currency of Canada.



30









 





ARTICLE II




REVOLVING CREDIT FACILITY




     SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions of this
Agreement, and in reliance upon the representations and warranties set forth herein, each Lender
severally agrees to make Revolving Credit Loans to the Borrower from time to time from the Closing
Date through, but not including, the Maturity Date as requested by the Borrower in accordance with
the terms of Section 2.3; provided, that (a) the aggregate principal amount of all
outstanding Revolving Credit Loans (after giving effect to any amount requested) shall not exceed
the Borrowing Limit and (b) the principal amount of outstanding Revolving Credit Loans from any
Lender shall not at any time exceed such Lender’s Commitment less such Lender’s Commitment
Percentage of outstanding L/C Obligations and outstanding Swingline Loans. Each Revolving Credit
Loan by a Lender shall be in a principal amount equal to such Lender’s Commitment Percentage of the
aggregate principal amount of Revolving Credit Loans requested on such occasion. Subject to the
terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans
hereunder until the Maturity Date.



     SECTION 2.2 Swingline Loans.



     (a) Availability. Subject to the terms and conditions of this Agreement, the
Swingline Lender agrees to make Swingline Loans to the Borrower from time to time from the Closing
Date through, but not including, the Swingline Termination Date; provided, that the
aggregate principal amount of all outstanding Swingline Loans (after giving effect to any amount
requested), shall not exceed the lesser of (i) the Borrowing Limit and (ii) the Swingline
Commitment.



     (b) Refunding.



          (i) Swingline Loans shall be refunded by the Lenders on demand by the Swingline Lender. Such
refundings shall be made by the Lenders in accordance with their respective Commitment Percentages
and shall thereafter be reflected as Revolving Credit Loans of the Lenders on the books and records
of the Administrative Agent. Each Lender shall fund its respective Commitment Percentage of
Revolving Credit Loans as required to repay Swingline Loans outstanding to the Swingline Lender
upon demand by the Swingline Lender but in no event later than 1:00 p.m. on the next succeeding
Business Day after such demand is made. No Lender’s obligation to fund its respective Commitment
Percentage of a Swingline Loan shall be affected by any other Lender’s failure to fund its
Commitment Percentage of a Swingline Loan, nor shall any Lender’s Commitment Percentage be
increased as a result of any such failure of any other Lender to fund its Commitment Percentage of
a Swingline Loan.




          (ii) The Borrower shall pay to the Swingline Lender on demand the amount of such Swingline
Loans to the extent amounts received from the Lenders are not sufficient to repay in full the
outstanding Swingline Loans requested or required to be refunded. In addition, the Borrower hereby
authorizes the Administrative Agent to charge any account maintained by the Borrower with the
Swingline Lender (up to the amount available therein) in order to immediately pay the Swingline
Lender the amount of such Swingline Loans to the extent amounts received




31









 







from the Lenders are not
sufficient to repay in full the outstanding Swingline Loans requested or required to be refunded.
If any portion of any such amount paid to the Swingline Lender shall be recovered by or on behalf
of the Borrower from the Swingline Lender in bankruptcy or otherwise, the loss of the amount so
recovered shall be ratably shared among all the Lenders in accordance with their respective
Commitment Percentages (unless the amounts so recovered by or on behalf of the Borrower pertain to
a Swingline Loan extended after the occurrence and during the continuance of an Event of Default of
which the Administrative Agent has received notice in the manner required pursuant to Section
12.3 and which such Event of Default has not been waived by the Required Lenders, the Required
Agreement Lenders or the Lenders, as applicable).




          (iii) Each Lender acknowledges and agrees that its obligation to refund Swingline Loans in
accordance with the terms of this Section is absolute and unconditional and shall not be affected
by any circumstance whatsoever, including, without limitation, non-satisfaction of the conditions
set forth in Article V. Further, each Lender agrees and acknowledges that if prior to the
refunding of any outstanding Swingline Loans pursuant to this Section, one of the events described
in Section 11.1(i) or (j) shall have occurred, each Lender will, on the date the
applicable Revolving Credit Loan would have been made, purchase an undivided participating interest
in the Swingline Loan to be refunded in an amount equal to its Commitment Percentage of the
aggregate amount of such Swingline Loan. Each Lender will immediately transfer to the Swingline
Lender, in immediately available funds, the amount of its participation and upon receipt thereof
the Swingline Lender will deliver to such Lender a certificate evidencing such participation dated
the date of receipt of such funds and for such amount. Whenever, at any time after the Swingline
Lender has received from any Lender such Lender’s participating interest in a Swingline Loan, the
Swingline Lender receives any payment on account thereof, the Swingline Lender will distribute to
such Lender its participating interest in such amount (appropriately adjusted, in the case of
interest payments, to reflect the period of time during which such Lender’s participating interest
was outstanding and funded).




     SECTION 2.3 Procedure for Advances of Revolving Credit Loans and Swingline Loans.



     (a) Requests for Borrowing. The Borrower shall give the Administrative Agent
irrevocable prior written notice substantially in the form of Exhibit B (a “Notice of
Borrowing”) not later than 12:00 p.m. (i) on the same Business Day as each Base Rate Loan
(including each Swingline Loan) and (ii) at least three (3) Business Days before each LIBOR Rate
Loan, of its intention to borrow, specifying (A) the date of such borrowing, which shall be a
Business Day, (B) the amount of such borrowing, which shall be, (x) with respect to Base Rate Loans
(other than Swingline Loans) in an aggregate principal amount of $1,000,000 or a whole multiple of
$500,000 in excess thereof, (y) with respect to LIBOR Rate Loans in an aggregate principal amount
of $3,000,000 or a whole multiple of $1,000,000 in excess thereof and (z) with respect to Swingline
Loans in an aggregate principal amount of $100,000 or a whole multiple of $100,000 in excess
thereof, (C) whether such Loan is to be a Revolving Credit Loan or Swingline Loan, (D) in the case
of a Revolving Credit Loan whether the Loans are to be LIBOR Rate Loans or Base Rate Loans, and (E)
in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto. A Notice
of Borrowing received after 12:00 p.m. shall be deemed received



32









 







on the next Business Day. The
Administrative Agent shall promptly notify the Lenders of each Notice of Borrowing.



     (b) Disbursement of Revolving Credit and Swingline Loans. Not later than 2:00 p.m. on
the proposed borrowing date, (i) each Lender will make available to the Administrative Agent, for
the account of the Borrower, at the Administrative Agent’s Office in funds immediately available to
the Administrative Agent, such Lender’s Commitment Percentage of the Revolving Credit Loans to be
made on such borrowing date and (ii) the Swingline Lender will make available to the Administrative
Agent, for the account of the Borrower, at the Administrative Agent’s Office in funds immediately
available to the Administrative Agent, the Swingline Loans to be made on such borrowing date. The
Borrower hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of each
borrowing requested pursuant to this Section in immediately available funds by crediting or wiring
such proceeds to the deposit account of the Borrower identified in the most recent notice
substantially in the form of Exhibit C (a “Notice of Account Designation”) delivered by the
Borrower to the Administrative Agent or as may be otherwise agreed upon by the Borrower and the
Administrative Agent from time to time. Subject to Section 4.7 hereof, the Administrative
Agent shall not be obligated to disburse the portion of the proceeds of any Revolving Credit Loan
requested pursuant to this Section to the extent that any Lender has not made available to the
Administrative Agent its Commitment Percentage of such Loan. Revolving Credit Loans to be made for
the purpose of refunding Swingline Loans shall be made by the Lenders as provided in Section
2.2(b).



     SECTION 2.4 Repayment and Prepayment of Revolving Credit and Swingline Loans.



     (a) Repayment on Maturity Date. The Borrower hereby agrees to repay the outstanding
principal amount of (i) all Revolving Credit Loans in full on the Maturity Date, and (ii) all
Swingline Loans in accordance with Section 2.2(b), together, in each case, with all accrued
but unpaid interest thereon.



     (b) Mandatory Prepayments.




     (i) Borrowing Limit. If at any time the outstanding principal amount of all
Revolving Credit Loans plus the sum of all outstanding Swingline Loans and L/C
Obligations exceeds the Borrowing Limit, the Borrower agrees to repay (i) if such excess
results from a change to the Asset Coverage Amount, within three (3) Business Days following
the delivery of the applicable financial statements resulting in such change or (ii) in any
other circumstance, immediately upon notice from the Administrative Agent, by payment to the
Administrative Agent for the account of the Lenders, Extensions of Credit in an amount equal
to such excess with each such repayment applied first to the principal amount of
outstanding Swingline Loans, second to the principal amount of outstanding Revolving
Credit Loans and third, with respect to any Letters of Credit then outstanding, a
payment of cash collateral into a cash collateral account opened by the Administrative
Agent, for the benefit of the Lenders in an amount equal to the aggregate then undrawn and
unexpired amount of such Letters of Credit (such cash collateral to be applied in accordance
with Section 11.2(b)).



33









 






     (ii) Excess L/C Obligations. If at any time the outstanding amount of all L/C
Obligations exceeds the L/C Commitment, then, in each such case, the Borrower shall promptly
make a payment of cash collateral into a cash collateral account opened by the
Administrative Agent, for the benefit of itself and the Lenders, in an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit (such cash collateral
to be applied in accordance with Section 11.2(b)).



     (c) Optional Prepayments. The Borrower may at any time and from time to time prepay
Revolving Credit Loans and Swingline Loans, in whole or in part, with irrevocable prior written
notice to the Administrative Agent substantially in the form of Exhibit D (a “Notice of
Prepayment”) given not later than 12:00 p.m. (i) on the same Business Day as the prepayment of
each Base Rate Loan and each Swingline Loan and (ii) at least three (3) Business Days before the
prepayment of each LIBOR Rate Loan, specifying the date and amount of prepayment and whether the
prepayment is of LIBOR Rate Loans, Base Rate Loans, Swingline Loans or a combination thereof, and,
if of a combination thereof, the amount allocable to each. Upon receipt of such notice, the
Administrative Agent shall promptly notify each Lender. If any such notice is given, the amount
specified in such notice shall be due and payable on the date set forth in such notice. Partial
prepayments shall be in an aggregate amount of $1,000,000 or a whole multiple of $500,000 in excess
thereof with respect to Base Rate Loans (other than Swingline Loans), $3,000,000 or a whole
multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans and $100,000 or a whole
multiple of $100,000 in excess thereof with respect to Swingline Loans. A Notice of Prepayment
received after 12:00 p.m. shall be deemed received on the next Business Day



     (d) Limitation on Prepayment of LIBOR Rate Loans. The Borrower may not prepay any
LIBOR Rate Loan on any day other than on the last day of the Interest Period applicable thereto
unless such prepayment is accompanied by any amount required to be paid pursuant to Section
4.9 hereof.



     (e) Hedging Agreements. No repayment or prepayment pursuant to this Section shall
affect any of the Borrower’s obligations under any Hedging Agreement.



     SECTION 2.5 Permanent Reduction of the Commitment.



     (a) Voluntary Reduction. The Borrower shall have the right at any time and from time
to time, upon at least five (5) Business Days prior written notice to the Administrative Agent, to
permanently reduce, without premium or penalty, (i) the entire Commitment at any time or (ii)
portions of the Commitment, from time to time, in an aggregate principal amount not less than
$5,000,000 or any whole multiple of $5,000,000 in excess thereof. Any reduction of the Commitment
shall be applied to the Commitment of each Lender according to its Commitment Percentage. All
commitment fees accrued until the effective date of any termination of the Commitment shall be paid
on the effective date of such termination.



     (b) Corresponding Payment. Each permanent reduction permitted pursuant to this
Section shall be accompanied by a payment of principal sufficient to reduce the aggregate
outstanding Revolving Credit Loans, Swingline Loans and L/C Obligations, as applicable, after such
reduction to the Commitment as so reduced and if the Commitment as so reduced is less



34









 







than the
aggregate amount of all outstanding Letters of Credit, the Borrower shall be required to deposit
cash collateral in a cash collateral account opened by the Administrative Agent in an amount equal
to the aggregate then undrawn and unexpired amount of such Letters of Credit. Such cash collateral
shall be applied in accordance with Section 11.2(b). Any reduction of the Commitment to
zero shall be accompanied by payment of all outstanding Revolving Credit Loans and Swingline Loans
(and furnishing of cash collateral for all L/C Obligations) and shall result in the termination of
the Commitment and the Credit Facility. Such cash collateral shall be applied in accordance with
Section 11.2(b). If the reduction of the Commitment requires the repayment of any LIBOR
Rate Loan, such repayment shall be accompanied by any amount required to be paid pursuant to
Section 4.9 hereof.



     SECTION 2.6 Termination of Credit Facility. The Credit Facility shall terminate on
the Maturity Date.



ARTICLE III




LETTER OF CREDIT FACILITY




     SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, each Issuing
Lender, in reliance on the agreements of the other Lenders set forth in Section 3.4(a),
agrees to issue standby letters of
credit (“Letters of Credit”) for the account of the Borrower on any Business Day from
the Closing Date to but not including the fifth (5th) Business Day prior to the Maturity
Date in such form as may be approved from time to time by the applicable Issuing Lender;
provided, that no Issuing Lender shall have any obligation to issue any Letter of Credit
if, after giving effect to such issuance, (a) the aggregate amount of L/C Obligations would exceed
the L/C Commitment or (b) the aggregate amount of L/C Obligations would exceed the Borrowing Limit.
Each Letter of Credit shall (i) be denominated in Dollars in a minimum amount of $100,000 (or such
lesser amount as agreed to by the applicable Issuing Lender), (ii) be a standby letter of credit
issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise,
(iii) expire on a date that is no later than the earlier of (A) twelve (12) or thirteen (13) months
(as requested by the Borrower) after the date of issuance or last renewal of such Letter of Credit,
and (B) the fifth (5th) Business Day prior to the Maturity Date and (iv) be subject to
ISP98 and, to the extent not inconsistent therewith, the laws of the State of New York. No Issuing
Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance
would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits
imposed by, any Applicable Law. References herein to “issue” and derivations thereof with respect
to Letters of Credit shall also include extensions or modifications of any outstanding Letters of
Credit, unless the context otherwise requires. As of the Closing Date, each of the Existing
Letters of Credit shall constitute, for all purposes of this Agreement and the other Loan
Documents, a Letter of Credit issued and outstanding hereunder.



     SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time
to time request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing
Lender at such Issuing Lender’s Lending Office and to the Administrative Agent at the
Administrative Agent’s Office a Letter of Credit Application therefor, completed to the reasonable
satisfaction of the applicable Issuing Lender and the
Administrative Agent, and such other
certificates, documents and other papers and information as such Issuing Lender and the



35









 







Administrative Agent may reasonably request (the “L/C Supporting Documentation”). Upon
receipt of any Letter of Credit Application and the L/C Supporting Documentation, the applicable
Issuing Lender shall process such Letter of Credit Application and the L/C Supporting Documentation
delivered to it in connection therewith in accordance with its customary procedures and shall,
after approving the same and receiving confirmation from the Administrative Agent that sufficient
availability exists under the Credit Facility for the issuance of such Letter of Credit, subject to
Section 3.1 and Article V, promptly issue the Letter of Credit requested thereby
(but in no event shall the applicable Issuing Lender be required to issue any Letter of Credit
earlier than three (3) Business Days after its receipt of the Letter of Credit Application therefor
and the L/C Supporting Documentation relating thereto) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the applicable Issuing Lender
and the Borrower. The applicable Issuing Lender shall promptly furnish to the Borrower and the
Administrative Agent a copy of such Letter of Credit and the Administrative Agent shall promptly
notify each Lender of the issuance of such Letter of Credit and, upon request by any Lender,
furnish to such Lender a copy of such Letter of Credit and the amount of such Lender’s
participation therein.



     SECTION 3.3 Commissions and Other Charges.



     (a) Letter of Credit Commissions. The Borrower shall pay to the Administrative Agent,
for the account of the each applicable Issuing Lender and the L/C Participants, a letter of credit
commission with respect to each Letter of Credit in an amount equal to the face amount of such
Letter of Credit (as such amount may be reduced by (i) any permanent reduction of such Letter of
Credit or (ii) any amount which is drawn, reimbursed and no longer available under such Letter of
Credit) multiplied by the Applicable Margin with respect to LIBOR Rate Loans (determined on
a per annum basis). Such commission shall be payable quarterly in arrears on the last Business Day
of each calendar quarter, on the Maturity Date and thereafter on demand of the Administrative
Agent. The Administrative Agent shall, promptly following its receipt thereof, distribute to each
applicable Issuing Lender and the L/C Participants all commissions received pursuant to this
Section in accordance with their respective Commitment Percentages.



     (b) Issuance Fee. In addition to the foregoing commission, the Borrower shall pay to
the Administrative Agent, for the account of each applicable Issuing Lender, an issuance fee with
respect to each Letter of Credit issued by such Issuing Lender in an amount equal to the face
amount of such Letter of Credit multiplied by one-eighth of one percent (0.125%) per annum.
Such issuance fee shall be payable quarterly in arrears on the last Business Day of each calendar
quarter commencing with the first such date to occur after the issuance of such Letter of Credit,
on the Maturity Date and thereafter on demand of the applicable Issuing Lender.



     (c) Other Costs. In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse each Issuing Lender for such normal and customary costs and expenses as are
incurred or charged by such Issuing Lender in issuing, effecting payment under, amending or
otherwise administering any Letter of Credit.



     SECTION 3.4 L/C Participations.



36









 





     (a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant,
and, to induce such Issuing Lender to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from such Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C Participant’s own account and
risk an undivided interest equal to such L/C Participant’s Commitment Percentage in such Issuing
Lender’s obligations and rights under and in respect of each Letter of Credit issued by such
Issuing Lender hereunder and the amount of each draft paid by such Issuing Lender thereunder. Each
L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is
paid under any Letter of Credit issued by such Issuing Lender for which such Issuing Lender is not
reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise in accordance with
the terms of this Agreement, such L/C Participant shall pay to such Issuing Lender upon demand at
such Issuing Lender’s Lending Office an amount equal to such L/C Participant’s Commitment
Percentage of the amount of such draft, or any part thereof, which is not so reimbursed.



     (b) Upon becoming aware of any amount required to be paid by any L/C Participant to the
applicable Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by such Issuing Lender under any Letter of Credit issued by it, such Issuing
Lender shall notify the Administrative Agent and each L/C Participant of the amount and due date of
such required payment and such L/C Participant shall pay to such Issuing Lender the amount
specified on the applicable due date. If any such amount is paid to such Issuing Lender after the
date such payment is due, such L/C Participant shall pay to such Issuing Lender on demand, in
addition to such amount, the product of (i) such amount, multiplied by (ii) the daily
average Federal Funds Rate as determined by the Administrative Agent during the period from and
including the date such payment is due to the date on which such payment is immediately available
to such Issuing Lender, multiplied by (iii) a fraction, the numerator of which is the
number of days that elapse during such period and the denominator of which is 360. A certificate
of the applicable Issuing Lender with respect to any amounts owing under this Section shall be
conclusive in the absence of manifest error. With respect to payment to an Issuing Lender of the
unreimbursed amounts described in this Section, if the L/C Participants receive notice that any
such payment is due (A) prior to 2:00 p.m. on any Business Day, such payment shall be due that
Business Day, and (B) after 2:00 p.m. on any Business Day, such payment shall be due on the
following Business Day.



     (c) Whenever, at any time after the applicable Issuing Lender has made payment under any
Letter of Credit and has received from any L/C Participant its Commitment Percentage of such
payment in accordance with this Section, such Issuing Lender receives any payment related to such
Letter of Credit (whether directly from the Borrower or otherwise), or any payment of interest on
account thereof, such Issuing Lender will distribute to such L/C Participant its pro
rata share thereof; provided, that in the event that any such payment received by
such Issuing Lender shall be required to be returned by such Issuing Lender, such L/C Participant
shall return to such Issuing Lender the portion thereof previously distributed by such Issuing
Lender to it.



     SECTION 3.5 Reimbursement Obligation of the Borrower. In the event of any drawing
under any Letter of Credit, the Borrower agrees to reimburse (either with the proceeds of a
Revolving Credit Loan as provided for in this Section or with funds from other sources), in



37









 







same
day funds, the applicable Issuing Lender on each date on which such Issuing Lender notifies the
Borrower of the date and amount of a draft paid under any Letter of Credit for the amount of (a)
such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by such
Issuing Lender in connection with such payment. The applicable Issuing Lender shall promptly
deliver written notice of any drawing under any Letter of Credit issued by such Issuing Lender to
the Administrative Agent and the Borrower. Unless the Borrower shall immediately notify the
applicable Issuing Lender that the Borrower intends to reimburse such Issuing Lender for such
drawing from other sources or funds, the Borrower shall be deemed to have timely given a Notice of
Borrowing to the Administrative Agent requesting that the Lenders make a Revolving Credit Loan
bearing interest at the Base Rate on such date in the amount of (a) such draft so paid and (b) any
amounts referred to in Section 3.3(c) incurred by such Issuing Lender in connection with
such payment, and the Lenders shall make a Revolving Credit Loan bearing interest at the Base Rate
in such amount, the proceeds of which shall be applied to reimburse such Issuing Lender for the
amount of the related drawing and costs and
expenses. Each Lender acknowledges and agrees that its obligation to fund a Revolving Credit
Loan in accordance with this Section to reimburse the applicable Issuing Lender for any draft paid
under a Letter of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including, without limitation, non-satisfaction of the conditions set
forth in Section 2.3(a) or Article V. If the Borrower has elected to pay the
amount of such drawing with funds from other sources and shall fail to reimburse the applicable
Issuing Lender as provided above, the unreimbursed amount of such drawing shall bear interest at
the rate which would be payable on any outstanding Base Rate Loans which were then overdue from the
date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until
payment in full.



     SECTION 3.6 Obligations Absolute. The Borrower’s obligations under this Article
III (including, without limitation, the Reimbursement Obligation) shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off, counterclaim or
defense to payment which the Borrower may have or have had against any Issuing Lender or any
beneficiary of a Letter of Credit or any other Person. The Borrower also agrees that no Issuing
Lender nor any L/C Participant shall be responsible for, and the Borrower’s Reimbursement
Obligation under Section 3.5 shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even though such documents shall in fact
prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be
transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of
Credit or any such transferee. No Issuing Lender shall be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the
applicable Issuing Lender’s gross negligence or willful misconduct, as determined by a court of
competent jurisdiction by final nonappealable judgment. The Borrower agrees that any action taken
or omitted by the applicable Issuing Lender under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or willful misconduct shall
be binding on the Borrower and shall not result in any liability of such Issuing Lender or any L/C
Participant to the Borrower. The responsibility of the applicable Issuing Lender to the Borrower
in connection with any draft presented for payment under any Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be limited to determining
that the documents (including each draft) delivered under such



38









 







Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.



     SECTION 3.7 Effect of Letter of Credit Application. To the extent that any provision
of any Letter of Credit Application or L/C Supporting Documentation related to any Letter of Credit
is inconsistent with the provisions of this Article III, the provisions of this Article
III shall apply.



ARTICLE IV




GENERAL LOAN PROVISIONS




     SECTION 4.1 Interest.



     (a) Interest Rate Options. Subject to the provisions of this Section, at the election
of the Borrower, (i) Revolving Credit Loans shall bear interest at (A) the Base Rate plus
the Applicable Margin or (B) the LIBOR Rate plus the Applicable Margin (provided
that the LIBOR Rate shall not be available until three (3) Business Days after the Closing Date
unless the Borrower has delivered to the Administrative Agent a letter in form and substance
satisfactory to the Administrative Agent indemnifying the Lenders in the manner set forth in
Section 4.9 of this Agreement) and (ii) Swingline Loans shall bear interest at the Base
Rate plus the Applicable Margin. The Borrower shall select the rate of interest and
Interest Period, if any, applicable to any Revolving Credit Loan at the time a Notice of Borrowing
is given pursuant to Section 2.3 or at the time a Notice of Conversion/Continuation is
given pursuant to Section 4.2. Any Revolving Credit Loan or any portion thereof as to
which the Borrower has not duly specified an interest rate as provided herein shall be deemed a
Base Rate Loan.



     (b) Interest Periods. In connection with each LIBOR Rate Loan, the Borrower, by
giving notice at the times described in Section 2.3 or 4.2, as applicable, shall
elect an interest period (each, an “Interest Period”) to be applicable to such Revolving
Credit Loan, which Interest Period shall be a period of one (1), two (2), three (3), or six (6)
months; provided that:




     (i) the Interest Period shall commence on the date of advance of or conversion to any
LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each successive
Interest Period shall commence on the date on which the immediately preceding Interest
Period expires;




     (ii) if any Interest Period would otherwise expire on a day that is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day; provided,
that if any Interest Period with respect to a LIBOR Rate Loan would otherwise expire on a
day that is not a Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the immediately preceding
Business Day;




     (iii) any Interest Period with respect to a LIBOR Rate Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically



39









 







corresponding day in the calendar month at the end of such Interest Period) shall end on the
last Business Day of the relevant calendar month at the end of such Interest Period;




     (iv) no Interest Period shall extend beyond the Maturity Date; and




     (v) there shall be no more than eight (8) Interest Periods in effect at any time.



     (c) Default Rate. Subject to Section 11.3, (i) immediately upon the
occurrence and during the continuance of an Event of Default under Section 11.1(a),
(b), (i) or (j), or (ii) at the election of the Required Agreement Lenders,
upon the occurrence and during the continuance of any other Event of Default, (A) the Borrower
shall no longer have the option to request LIBOR Rate Loans, Swingline Loans or Letters of Credit,
(B) all outstanding LIBOR Rate Loans shall bear interest at a rate per annum of two percent (2%) in
excess of the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest
Period and thereafter at a rate equal to two percent (2%) in excess of the rate then applicable to
Base Rate Loans, and (C) all outstanding Base Rate Loans and other Obligations arising hereunder or
under any other Loan Document shall bear interest at a rate per annum equal to two percent (2%) in
excess of the rate then applicable to Base Rate Loans. Interest shall continue to accrue on the
Obligations after the filing by or against the Borrower of any petition seeking any relief in
bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state,
federal or foreign.



     (d) Interest Payment and Computation. Interest on each Base Rate Loan shall be due
and payable in arrears on the last Business Day of each calendar quarter commencing September 30,
2006; and interest on each LIBOR Rate Loan shall be due and payable on the last day of each
Interest Period applicable thereto, and if such Interest Period extends over three (3) months, at
the end of each three (3) month interval during such Interest Period. Interest on LIBOR Rate Loans
and all fees payable hereunder shall be computed on the basis of a 360-day year and assessed for
the actual number of days elapsed and interest on Base Rate Loans shall be computed on the basis of
a 365/366-day year and assessed for the actual number of days elapsed.



     (e) Maximum Rate. In no contingency or event whatsoever shall the aggregate of all
amounts deemed interest under this Agreement charged or collected pursuant to the terms of this
Agreement exceed the highest rate permissible under any Applicable Law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a
court determines that the Lenders have charged or received interest hereunder in excess of the
highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate permitted by Applicable Law and the Lenders shall at the Administrative Agent’s option (i)
promptly refund to the Borrower any interest received by the Lenders in excess of the maximum
lawful rate or (ii) apply such excess to the principal balance of the Obligations on a pro rata
basis. It is the intent hereof that the Borrower not pay or contract to pay, and that neither the
Administrative Agent nor any Lender receive or contract to receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable
Law.



     SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans. Provided that
no Default or Event of Default has occurred and is then continuing, the Borrower shall have the
option to (a) convert, at any time following the third (3rd) Business Day after the




40









 






earlier to occur of (i) the Closing Date and (ii) the delivery date of the indemnity letter
contemplated by the proviso in Section 4.1(a) hereof, all or any portion of any outstanding
Base Rate Loans (other than Swingline Loans) in a principal amount equal to $3,000,000 or any whole
multiple of $1,000,000 in excess thereof into one or more LIBOR Rate Loans and (b) upon the
expiration of any Interest Period, (i) convert all or any part of its outstanding LIBOR Rate Loans
in a principal amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof into
Base Rate Loans (other than Swingline Loans) or (ii) continue such LIBOR Rate Loans as LIBOR Rate
Loans. Whenever the Borrower desires to convert or continue Revolving Credit Loans as provided
above, the Borrower shall give the Administrative Agent irrevocable prior written notice in the
form attached as Exhibit E (a “Notice of Conversion/Continuation”) not later than 12:00
p.m. three (3) Business Days before the day on which a proposed conversion or continuation of such
Loan is to be effective specifying (A) the Loans to be converted or continued, and, in the case of
any LIBOR Rate Loan to be converted or continued, the last day of the Interest Period therefor, (B)
the effective date of such conversion or continuation (which shall be a Business Day), (C) the
principal amount of such Loans to be converted or continued, and (D) the Interest Period to be
applicable to such converted or continued LIBOR Rate Loan. The Administrative Agent shall promptly
notify the Lenders of such Notice of Conversion/Continuation.




     SECTION 4.3 Fees.



     (a) Commitment Fee. The Borrower shall pay to the Administrative Agent, for the
account of the Lenders, a non-refundable commitment fee at a rate per annum equal to 0.50% on the
average daily unused portion of the Commitment as in effect from time to time during the period
commencing on the Closing Date and ending on the Maturity Date; provided, that the amount
of outstanding Swingline Loans shall not be considered usage of the Commitment for the purpose of
calculating such commitment fee. The commitment fee shall be payable for each calendar quarter in
arrears on the last Business Day of such calendar quarter during the term of this Agreement
commencing with the calendar quarter ending September 30, 2006 and ending on the Maturity Date.
Such commitment fee shall be distributed by the Administrative Agent to the Lenders pro
rata in accordance with the Lenders’ respective Commitment Percentages.



     (b) Other Fees. The Borrower agrees to pay any fees (and other expenses) as set forth
in the Fee Letter.



     SECTION 4.4 Manner of Payment. Each payment by the Borrower on account of the
principal of or interest on the Loans or of any fee, commission or other amounts (including the
Reimbursement Obligation) payable to the Lenders under this Agreement shall be made not later than
2:00 p.m. on the date specified for payment under this Agreement to the Administrative Agent at the
Administrative Agent’s Office for the account of the Lenders (other than as set forth below)
pro rata in accordance with their respective Commitment Percentages, (except as
specified below), in Dollars, in immediately available funds and shall be made without any set-off,
counterclaim or deduction whatsoever. Any payment received after such time but before 3:00 p.m. on
such day shall be deemed a payment on such date for the purposes of Section 11.1, but for
all other purposes shall be deemed to have been made on the next succeeding Business Day. Any
payment received after 3:00 p.m. shall be deemed to have been made on the next succeeding Business
Day for all purposes. Upon receipt by the Administrative Agent of



41









 







each such payment, the Administrative Agent shall distribute to each Lender at its Lending
Office its pro rata share of such payment in accordance with such Lender’s
Commitment Percentage, (except as specified below) and shall wire advice of the amount of such
credit to each Lender. Each payment to the Administrative Agent of the applicable Issuing Lender’s
fees or L/C Participants’ commissions shall be made in like manner, but for the account of the
applicable Issuing Lender or the L/C Participants, as the case may be. Each payment to the
Administrative Agent of Administrative Agent’s fees or expenses shall be made for the account of
the Administrative Agent and any amount payable to any Lender under Sections 4.9,
4.10, 4.11 or 13.3 shall be paid to the Administrative Agent for the
account of the applicable Lender. Subject to Section 4.1(b)(ii), if any payment under this
Agreement shall be specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day and such extension of time shall in such case be
included in computing any interest if payable along with such payment.



     SECTION 4.5 Evidence of Indebtedness.



     (a) Extensions of Credit. The Extensions of Credit 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 Extensions of
Credit made by the Lenders to the Borrower 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 Borrower 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 Borrower shall execute and deliver to such Lender
(through the Administrative Agent) a Revolving Credit Note and/or Swingline Note, as applicable,
which shall evidence such Lender’s Revolving Credit Loans and/or Swingline Loans, as applicable, in
addition to such accounts or records. Each Lender may attach schedules to its Notes and endorse
thereon the date, amount and maturity of its Loans and payments with respect thereto.



     (b) Participations. 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 Swingline 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.



     SECTION 4.6 Adjustments. If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its
Loans or other obligations hereunder resulting in such Lender’s receiving payment of a proportion
of the aggregate amount of its Loans and accrued interest thereon or other such obligations (other
than pursuant to Sections 4.9, 4.10, 4.11 or 13.3 hereof) greater
than its pro rata share thereof as provided herein, then the Lender receiving such
greater proportion shall (a)



42









 







notify the Administrative Agent of such fact, and (b) purchase (for cash at face value)
participations in the Loans and such other obligations of the other Lenders, or make such other
adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and other amounts owing them; provided that:




     (i) if any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and




     (ii) the provisions of this paragraph shall not be construed to apply to (A) any
payment made by the Borrower pursuant to and in accordance with the express terms of this
Agreement or (B) any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans or participations in Swingline Loans and Letters
of Credit to any assignee or participant, other than to the Borrower or any of its
Subsidiaries (as to which the provisions of this paragraph shall apply).


Each Credit Party consents to the foregoing and agrees, to the extent it may effectively do so
under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against each Credit Party rights of setoff and counterclaim with respect
to such participation as fully as if such Lender were a direct creditor of each Credit Party in the
amount of such participation.




     SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by
the Administrative Agent. The obligations of the Lenders under this Agreement to make the
Loans and issue or participate in Letters of Credit are several and are not joint or joint and
several. Unless the Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date with respect to a LIBOR Rate Loan or prior to 12:00 noon on a proposed
borrowing date with respect to a Base Rate Loan that such Lender will not make available to the
Administrative Agent such Lender’s ratable portion of the amount to be borrowed on such date (which
notice shall not release such Lender of its obligations hereunder), the Administrative Agent may
assume that such Lender has made such portion available to the Administrative Agent on the proposed
borrowing date in accordance with Sections 2.3(b), and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a corresponding amount.
If such amount is made available to the Administrative Agent on a date after such borrowing date,
such Lender shall pay to the Administrative Agent on demand an amount, until paid, equal to the
product of (a) the amount not made available by such Lender in accordance with the terms hereof,
multiplied by (b) the daily average Federal Funds Rate during such period as determined by
the Administrative Agent, multiplied by (c) a fraction, the numerator of which is the
number of days that elapse from and including such borrowing date to the date on which such amount
not made available by such Lender in accordance with the terms hereof shall have become immediately
available to the Administrative Agent, and the denominator of which is 360. A certificate of the
Administrative Agent with respect to any amounts owing under this Section shall be conclusive,
absent manifest error. If such Lender’s Commitment Percentage of such borrowing is not made
available to the Administrative Agent by such Lender within three (3) Business Days after such
borrowing date, the Administrative Agent shall be entitled to recover such amount made available by
the



43









 







Administrative Agent with interest thereon at the rate per annum applicable to Base Rate Loans
hereunder, on demand, from the Borrower. The failure of any Lender to make available its
Commitment Percentage of any Loan requested by the Borrower shall not relieve it or any other
Lender of its obligation, if any, hereunder to make its Commitment Percentage of such Loan
available on the borrowing date, but no Lender shall be responsible for the failure of any other
Lender to make its Commitment Percentage of such Loan available on the borrowing date.



     SECTION 4.8 Changed Circumstances.



     (a) Circumstances Affecting LIBOR Rate Availability. If with respect to any Interest
Period the Administrative Agent or any Lender (after consultation with the Administrative Agent)
shall determine that, by reason of circumstances affecting the foreign exchange and interbank
markets generally, deposits in eurodollars, in the applicable amounts are not being quoted via the
Telerate Page 3750 or offered to the Administrative Agent or such Lender for such Interest Period,
then the Administrative Agent shall forthwith give notice thereof to the Borrower. Thereafter,
until the Administrative Agent notifies the Borrower that such circumstances no longer exist, the
obligation of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any
Loan to or continue any Loan as a LIBOR Rate Loan shall be suspended, and the Borrower shall repay
in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR
Rate Loan together with accrued interest thereon, on the last day of the then current Interest
Period applicable to such LIBOR Rate Loan or convert the then outstanding principal amount of each
such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period.



     (b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the
introduction of, or any change in, any Applicable Law or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the Lenders (or any of
their respective Lending Offices) with any request or directive (whether or not having the force of
law) of any such Governmental Authority, central bank or comparable agency, shall make it unlawful
or impossible for any of the Lenders (or any of their respective Lending Offices) to honor its
obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender shall promptly give
notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice
to the Borrower and the other Lenders. Thereafter, until the Administrative Agent notifies the
Borrower that such circumstances no longer exist, (a) the obligations of the Lenders to make LIBOR
Rate Loans and the right of the Borrower to convert any Loan or continue any Loan as a LIBOR Rate
Loan shall be suspended and thereafter the Borrower may select only Base Rate Loans hereunder, and
(b) if any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of the
then current Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate
Loan shall immediately be converted to a Base Rate Loan for the remainder of such Interest Period.



     SECTION 4.9 Indemnity. The Borrower hereby indemnifies each of the Lenders against
any loss or expense which may arise or be attributable to each Lender’s obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or maintain any Loan (a) as a
consequence of any failure by the Borrower to make any payment when due of any amount due hereunder
in connection with a LIBOR Rate Loan, (b) due to any failure of the



44









 







Borrower to borrow, continue or convert on a date specified therefor in a Notice of Borrowing
or Notice of Conversion/Continuation or (c) due to any payment, prepayment or conversion of any
LIBOR Rate Loan on a date other than the last day of the Interest Period therefor. The amount of
such loss or expense shall be determined, in the applicable Lender’s sole discretion, based upon
the assumption that such Lender funded its Commitment Percentage of the LIBOR Rate Loans in the
London interbank market and using any reasonable attribution or averaging methods which such Lender
deems appropriate and practical. A certificate of such Lender setting forth the basis for
determining such amount or amounts necessary to compensate such Lender shall be forwarded to the
Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for
manifest error.



     SECTION 4.10 Increased Costs.



     (a) Increased Costs Generally. If any Change in Law shall:




     (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for the account
of, or advances, loans or other credit extended or participated in by, any Lender (except
any reserve requirement reflected in the LIBOR Rate) or an Issuing Lender;




     (ii) subject any Lender or any Issuing Lender to any tax of any kind whatsoever with
respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or
any LIBOR Rate Loan made by it, or change the basis of taxation of payments to such Lender
or such Issuing Lender in respect thereof (except for Indemnified Taxes or Other Taxes
covered by Section 4.11 and the imposition of, or any change in the rate of any
Excluded Taxes payable by such Lender or such Issuing Lender); or




     (iii) impose on any Lender or any Issuing Lender or the London interbank market any
other condition, cost or expense affecting this Agreement or LIBOR Rate Loans made by such
Lender or any Letter of Credit or participation therein;


and the result of any of the foregoing shall be to increase the cost to such Lender of making,
converting into or maintaining any LIBOR Rate Loan (or of maintaining its obligation to make any
such Loan), or to increase the cost to such Lender or such Issuing Lender of participating in,
issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or
to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such
Lender or such Issuing Lender hereunder (whether of principal, interest or any other amount) then,
upon written request of such Lender or such Issuing Lender, the Borrower shall promptly pay to any
such Lender or such Issuing Lender, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Lender, as the case may be, for such additional costs
incurred or reduction suffered.




     (b) Capital Requirements. If any Lender or any Issuing Lender determines that any
Change in Law affecting such Lender or such Issuing Lender or any lending office of such Lender or
such Issuing Lender or such Lender’s or such Issuing Lender’s holding company, if



45









 







any, regarding capital requirements has or would have the effect of reducing the rate of
return on such Lender’s or such Issuing Lender’s capital or on the capital of such Lender’s or such
Issuing Lender’s holding company, if any, as a consequence of this Agreement, the Commitment of
such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or
the Letters of Credit issued by such Issuing Lender, to a level below that which such Lender or
such Issuing Lender or such Lender’s or such Issuing Lender’s holding company could have achieved
but for such Change in Law (taking into consideration such Lender’s or such Issuing Lender’s
policies and the policies of such Lender’s or such Issuing Lender’s holding company with respect to
capital adequacy), then from time to time upon written request of such Lender or such Issuing
Lender the Borrower shall promptly pay to such Lender or such Issuing Lender, as the case may be,
such additional amount or amounts as will compensate such Lender or such Issuing Lender or such
Lender’s or such Issuing Lender’s holding company for any such reduction suffered.



     (c) Certificates for Reimbursement. A certificate of a Lender or an Issuing Lender
setting forth the amount or amounts necessary to compensate such Lender or such Issuing Lender or
its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and
delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such
Lender or such Issuing Lender, as the case may be, the amount shown as due on any such certificate
within ten (10) days after receipt thereof.



     (d) Delay in Requests. Failure or delay on the part of any Lender or any Issuing
Lender to demand compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or such Issuing Lender’s right to demand such compensation; provided that the
Borrower shall not be required to compensate a Lender or an Issuing Lender pursuant to this Section
for any increased costs incurred or reductions suffered more than nine (9) months prior to the date
that such Lender or such Issuing Lender, as the case may be, notifies the Borrower of the Change in
Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Lender’s
intention to claim compensation therefor (except that if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period referred to above shall be
extended to include the period of retroactive effect thereof).



     SECTION 4.11 Taxes.



     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation
of the Borrower hereunder or under any other Loan Document shall be made free and clear of and
without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if
the Borrower shall be required by Applicable Law to deduct any Indemnified Taxes (including any
Other Taxes) from such payments, then (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) the Administrative Agent, Lender or Issuing Lender, as the case may be,
receives an amount equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount
deducted to the relevant Governmental Authority in accordance with Applicable Law.



46









 





     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of
paragraph (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with Applicable Law.



     (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative
Agent, each Lender and each Issuing Lender, within ten (10) days after demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section) paid by the
Administrative Agent, such Lender or such Issuing Lender, as the case may be, and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or liability delivered to
the Borrower by a Lender or an Issuing Lender (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Lender, shall be
conclusive absent manifest error.



     (d) Evidence of Payments. As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.



     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the Borrower is resident
for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by Applicable Law or reasonably requested by
the Borrower or the Administrative Agent, such properly completed and executed documentation
prescribed by Applicable Law as will permit such payments to be made without withholding or at a
reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or
reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to backup withholding or
information reporting requirements. Without limiting the generality of the foregoing, in the event
that the Borrower is a resident for tax purposes in the United States, any Foreign Lender shall
deliver to the Borrower and the Administrative Agent (in such number of copies as shall be
requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the request of the Borrower or the
Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of
the following is applicable:




     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility
for benefits of an income tax treaty to which the United States is a party,




     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,



47









 






     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that
such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the
Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section
881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section
881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form
W-8BEN, or




     (iv) any other form prescribed by Applicable Law as a basis for claiming exemption from
or a reduction in United States Federal withholding tax duly completed together with such
supplementary documentation as may be prescribed by Applicable Law to permit the Borrower to
determine the withholding or deduction required to be made.



     (f) Treatment of Certain Refunds. If the Administrative Agent, a Lender or an Issuing
Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has
paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to
such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund),
net of all out-of-pocket expenses of the Administrative Agent, such Lender or such Issuing Lender,
as the case may be, and without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund); provided that the Borrower, upon the request of the
Administrative Agent, such Lender or such Issuing Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent, such Lender or such Issuing Lender in the
event the Administrative Agent, such Lender or such Issuing Lender is required to repay such refund
to such Governmental Authority. This paragraph shall not be construed to require the
Administrative Agent, any Lender or any Issuing Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the Borrower or any other
Person.



     (g) Survival. Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in this Section shall
survive the payment in full of the Obligations and the termination of the Commitment.



     SECTION 4.12 Mitigation Obligations; Replacement of Lenders.



     (a) Designation of a Different Lending Office. If any Lender requests compensation
under Section 4.10, or requires the Borrower to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 4.11, then
such Lender shall use reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 4.10 or Section
4.11, as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay



48









 







all reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.



     (b) Replacement of Lenders. If any Lender requests compensation under Section
4.10, or if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 4.11, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its 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 13.10), 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:




     (i) the Borrower shall have paid to the Administrative Agent the assignment fee
specified in Section 13.10;




     (ii) such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in Letters of Credit, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder and under the other Loan
Documents (including any amounts under Section 4.9) from the assignee (to the extent
of such outstanding principal and accrued interest and fees) or the Borrower (in the case of
all other amounts);




     (iii) in the case of any such assignment resulting from a claim for compensation under
Section 4.10 or payments required to be made pursuant to Section 4.11, such
assignment will result in a reduction in such compensation or payments thereafter; and




     (iv) such assignment does not conflict with Applicable Law.


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 Borrower to require
such assignment and delegation cease to apply.




     SECTION 4.13 Security. The Obligations of the Borrower shall be secured as provided
in the Security Documents.



     SECTION 4.14 Additional Subsidiary Borrowers. The Borrower may designate any Domestic
Subsidiary as a Subsidiary Borrower under this Agreement and the other Loan Documents upon
satisfaction of each of the following conditions.



     (a) The Borrower shall have delivered to the Administrative Agent a written notice requesting
that such Domestic Subsidiary be designated as a new Subsidiary Borrower. The Administrative Agent
agrees that promptly upon receipt of such notice it will forward such notice to the Lenders
requesting their approval of such Domestic Subsidiary as a Subsidiary Borrower. If the Required
Agreement Lenders approve such designation (which approval shall occur no earlier than five (5)
Business Days after the Lenders receive written notice of the request that such Domestic Subsidiary
be designated as a new Subsidiary Borrower), the



49









 







applicable Domestic Subsidiary shall be deemed a “Borrower” under this Agreement and the other
Loan Documents and all references herein (other than the references in Articles V,
VI, VII, VIII, IX and X of this Agreement) to “Borrower”
shall be deemed to include the Subsidiary Borrower.



     (b) The Administrative Agent shall have received a duly executed supplement to this Agreement
and any other applicable Loan Documents joining such Domestic Subsidiary as a Subsidiary Borrower
hereunder (such supplement to be in form and substance reasonably satisfactory to the
Administrative Agent).



     (c) Such Domestic Subsidiary shall deliver to the Administrative Agent such documents and
certificates referred to in Section 5.2 as may be reasonably requested by the
Administrative Agent (it being agreed by the Borrower that, if the designation of such Domestic
Subsidiary as a Subsidiary Borrower obligates the Administrative Agent or any Lender to comply with
“know your customer” or similar identification procedures in circumstances where the necessary
information is not already available to it, the Borrower shall, promptly upon the request of the
Administrative Agent or any Lender, supply such documentation and other evidence as is reasonably
requested by the Administrative Agent or any Lender in order for the Administrative Agent or such
Lender to carry out, and be satisfied it has complied with the results of, all necessary “know your
customer” or other similar checks under all Applicable Laws).




(d) (i) If not previously granted to the Administrative Agent under the Security Documents,
such Domestic Subsidiary shall pledge a security interest in all Collateral owned by such
Domestic Subsidiary by delivering to the Administrative Agent a duly executed supplement to
each applicable Security Document or such other documents as the Administrative Agent shall
reasonably deem appropriate for such purpose.




     (ii) To the extent not previously delivered to the Administrative Agent under the
Security Documents, the Borrower shall deliver to the Administrative Agent such original
Capital Stock or other certificates and stock or other transfer powers evidencing the
Capital Stock of such Domestic Subsidiary and, to the extent required by the Security
Documents, all Capital Stock or other certificates and stock or other transfer powers
evidencing the Capital Stock owned by such Domestic Subsidiary.



     (e) The Borrower shall deliver to the Administrative Agent such updated Schedules to the Loan
Documents as requested by the Administrative Agent with respect to such Domestic Subsidiary.



     (f) The Borrower shall deliver to the Administrative Agent such other documents (including,
without limitation, legal opinions) as may be reasonably requested by the Administrative Agent, all
in form, content and scope reasonably satisfactory to the Administrative Agent.



     (g) The obligations of each Subsidiary Borrower hereunder and under the other Loan Documents
shall be joint and several with the Obligations of the Borrower and each other Subsidiary Borrower.



50









 





ARTICLE V




CLOSING; CONDITIONS OF CLOSING AND BORROWING




     SECTION 5.1 Closing. The closing shall take place at the offices of Kennedy Covington
Lobdell & Hickman, L.L.P. at 10:00 a.m. on May 31, 2006 or at such other place, date and time as
the parties hereto shall mutually agree.



     SECTION 5.2 Conditions to Closing and Initial Extensions of Credit. The obligation of
the Lenders to close this Agreement and to make the initial Loan or issue or participate in the
initial Letter of Credit, if any, is subject to the satisfaction of each of the following
conditions:



     (a) Executed Loan Documents. This Agreement, a Revolving Credit Note in favor of each
Lender (if requested thereby), a Swingline Note in favor of the Swingline Lender (if requested
thereby) and the Security Documents, together with any other applicable Loan Documents, shall have
been duly authorized, executed and delivered to the Administrative Agent by the parties thereto,
shall be in full force and effect and no Default or Event of Default shall exist hereunder or
thereunder.



     (b) Closing Certificates; Etc. The Administrative Agent shall have received each of
the following in form and substance reasonably satisfactory to the Administrative Agent:



          (i) Officer’s Certificate of the Borrower. A certificate from a Responsible Officer
of the Borrower to the effect that all representations and warranties of the Borrower and its
Subsidiaries contained in this Agreement and the other Loan Documents are true, correct and
complete in all material respects (provided that any representation or warranty that is
qualified by materiality or by reference to Material Adverse Effect shall be true, correct and
complete in all respects); that neither the Borrower nor any of its Subsidiaries is in violation of
any of the covenants contained in this Agreement and the other Loan Documents; that, after giving
effect to the transactions contemplated by this Agreement, no Default or Event of Default has
occurred and is continuing; and that each of the Credit Parties, as applicable, has satisfied each
of the conditions set forth in Section 5.2 and Section 5.3.




          (ii) Certificate of Secretary of each Credit Party. A certificate of a Responsible
Officer of each Credit Party certifying as to the incumbency and genuineness of the signature of
each officer of such Credit Party executing Loan Documents to which it is a party and certifying
that attached thereto is a true, correct and complete copy of (A) the articles or certificate of
incorporation or formation of such Credit Party and all amendments thereto, certified as of a
recent date by the appropriate Governmental Authority in its jurisdiction of incorporation or
formation, (B) the bylaws or other governing document of such Credit Party as in effect on the
Closing Date, (C) resolutions duly adopted by the board of directors or other governing body of
such Credit Party authorizing the transactions contemplated hereunder and the execution, delivery
and performance of this Agreement and the other Loan Documents to which it is a party, and (D) each
certificate required to be delivered pursuant to Section 5.2(b)(iii).




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          (iii) Certificates of Good Standing. Certificates as of a recent date of the good
standing of each Credit Party under the laws of its jurisdiction of organization and, to the extent
requested by the Administrative Agent, each other jurisdiction where such Credit Party is qualified
to do business and, to the extent available, a certificate of the relevant taxing authorities of
such jurisdictions certifying that such Credit Party has filed required tax returns and owes no
delinquent taxes.




          (iv) Opinions of Counsel. Favorable opinions of counsel to the Credit Parties
addressed to the Administrative Agent and the Lenders with respect to the Credit Parties, the Loan
Documents and such other matters as the Lenders shall request.




          (v) Tax Forms. Copies of the United States Internal Revenue Service forms required by
Section 4.11(e).




     (c) Personal Property Collateral.



          (i) Filings and Recordings. The Administrative Agent shall have received all filings
and recordations that are necessary to perfect the security interests of the Administrative Agent,
on behalf of itself and the Lenders, in the Collateral shall have been received by the
Administrative Agent and the Administrative Agent shall have received evidence and evidence
reasonably satisfactory to the Administrative Agent that upon such filings and recordations such
security interests constitute valid and perfected first priority Liens thereon.




          (ii) Pledged Collateral. The Administrative Agent shall have received original stock
certificates or other certificates evidencing the Capital Stock pledged pursuant to the Security
Documents, together with an undated stock power for each such certificate duly executed in blank by
the registered owner thereof.




          (iii) Lien Search. The Administrative Agent shall have received the results of a Lien
search (including a search as to judgments, pending litigation and tax matters), in form and
substance reasonably satisfactory thereto, made against the Credit Parties under the Uniform
Commercial Code (or applicable judicial docket) as in effect in any state in which any of the
assets of such Credit Party are located, indicating among other things that its assets are free and
clear of any Lien except for Permitted Liens.




          (iv) Hazard and Liability Insurance. The Administrative Agent shall have received
certificates of property hazard, business interruption and liability insurance, evidence of payment
of all insurance premiums for the current policy year of each insurance policy (naming the
Administrative Agent as additional insured on all certificates for liability insurance and loss
payee (or mortgagee) with respect to the Collateral on all certificates for property insurance),
and, if requested by the Administrative Agent, copies (certified by a Responsible Officer) of
insurance policies in the form required under the Security Documents and otherwise in form and
substance reasonably satisfactory to the Administrative Agent.




     (d) Consents; Defaults.



          (i) Governmental and Third Party Approvals. The Credit Parties shall have received
all material governmental, shareholder and third party consents and approvals necessary




52









 







(or any other material consents as determined in the reasonable discretion of the
Administrative Agent) in connection with the transactions contemplated by this Agreement and the
other Loan Documents and the other transactions contemplated hereby and all applicable waiting
periods shall have expired without any action being taken by any Person that could reasonably be
expected to restrain, prevent or impose any material adverse conditions on any of the Credit
Parties or such other transactions or that could seek or threaten any of the foregoing, and no law
or regulation shall be applicable which in the reasonable judgment of the Administrative Agent
could reasonably be expected to have such effect.




          (ii) No Injunction, Etc. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any Governmental Authority to
enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related
to or arises out of this Agreement or the other Loan Documents or the consummation of the
transactions contemplated hereby or thereby, or which, in the Administrative Agent’s sole
discretion, would make it inadvisable to consummate the transactions contemplated by this Agreement
or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby.




     (e) Financial Matters.



          (i) Financial Statements. The Administrative Agent shall have received (A) the
audited Consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 2005 and
the related audited statements of income and retained earnings and cash flows for the Fiscal Year
then ended, (B) any interim unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries and related unaudited interim statements of income, cash flows and retained earnings
for each interim quarterly period (if any) ended at least forty-five (45) days prior to the Closing
Date and (C) if requested by the Administrative Agent (on behalf of itself or any Lender), any
financial statements or projections of the Canadian Borrower and its Subsidiaries required to be
delivered by the Canadian Borrower to the Canadian Administrative Agent pursuant to Section
5.2 of the Canadian Credit Agreement.




          (ii) Financial Projections. The Administrative Agent shall have received projections
prepared by management of the Borrower, of balance sheets, income statements and cash flow
statements on a quarterly basis for 2006 and on an annual basis for each year thereafter during the
term of the Credit Facility.




          (iii) Financial Condition Certificate. The Borrower shall have delivered to the
Administrative Agent a certificate, in form and substance satisfactory to the Administrative Agent,
and certified as accurate by a Responsible Officer of the Borrower, that (A) the Borrower and each
of its Subsidiaries are each Solvent, (B) the material payables of the Borrower and each of its
Subsidiaries are current and not past due, (C) attached thereto are calculations, as determined on
a pro forma basis as of March 31, 2006 and after giving effect to the transactions
contemplated hereby and any Extensions of Credit or Canadian Extensions of Credit to be made on the
Closing Date, with the covenants contained in Article IX; (D) the financial projections
previously delivered to the Administrative Agent represent the good faith estimates (utilizing
assumptions believed to be reasonable) of the financial condition and operations of the Borrower
and its Subsidiaries; (E) attached thereto is a calculation of the ratio of (1) Consolidated Total


53









 







Indebtedness as of the Closing Date (after giving effect to any Extensions of Credit or
Canadian Extensions of Credit on the Closing Date) to (2) Consolidated EBITDA for the most recently
ended four (4) consecutive fiscal quarters for which financial statements have been delivered,
demonstrating that such ratio is less than 5.80 to 1.00; (F) attached thereto is a calculation of
Consolidated Adjusted EBITDA for the most recently ended four (4) consecutive fiscal quarters for
which financial statements have been delivered, demonstrating to the reasonable satisfaction of the
Administrative Agent that Consolidated Adjusted EBITDA (as determined in such manner) is not less
than $500,000,000; and (G) attached thereto is a calculation of the Borrowing Limit as of the
Closing Date.




          (iv) Payment at Closing; Fee Letters. The Borrower shall have paid to the
Administrative Agent and the Lenders the fees set forth or referenced in Section 4.3 and
any other accrued and unpaid fees or commissions due hereunder (including, without limitation,
legal (including, without limitation, local counsel) fees and expenses) and to any other Person
such amount as may be due thereto in connection with the transactions contemplated hereby,
including all taxes, fees and other charges in connection with the execution, delivery, recording,
filing and registration of any of the Loan Documents.




     (f) Miscellaneous.



          (i) Notice of Borrowing. The Administrative Agent shall have received a Notice of
Borrowing from the Borrower in accordance with Section 2.3(a) with respect to any Loans (if
any) to be made on the Closing Date, and a Notice of Account Designation specifying the account or
accounts to which the proceeds of any Loans made on or after the Closing Date are to be disbursed.




          (ii) Existing Facilities. Each of the Existing Facilities shall be repaid in full and
terminated and all collateral security therefor shall be released, and the Administrative Agent
shall have received pay-off letters in form and substance satisfactory to it evidencing such
repayment, termination and release.




          (iii) Closing of the Canadian Credit Facility. The Canadian Credit Facility shall
simultaneously close on the Closing Date.




          (iv) Other Documents. All opinions, certificates and other instruments and all
proceedings in connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Administrative Agent. The Administrative Agent shall
have received copies of all other documents, certificates and instruments reasonably requested
thereby, with respect to the transactions contemplated by this Agreement.




     SECTION 5.3 Conditions to All Extensions of Credit. The obligations of the Lenders
to make any Extensions of Credit (including any initial Extensions of Credit), convert or continue
any Loan and/or any Issuing Lender to issue or extend any Letter of Credit are subject to the
satisfaction of the following conditions precedent on the relevant borrowing, continuation,
conversion, issuance or extension date:



     (a) Continuation of Representations and Warranties. The representations and
warranties contained in Article VI shall be true and correct in all material respects on
and as of



54









 







such borrowing, continuation, conversion, issuance or extension date with the same effect as
if made on and as of such date, except for any representation and warranty made as of an earlier
date, which representation and warranty shall remain true and correct as of such earlier date;
provided that any representation or warranty that is qualified by materiality or by
reference to Material Adverse Effect shall be true and correct in all respects on and as of such
borrowing, continuation, conversion, issuance or extension date.



     (b) No Existing Default. No Default or Event of Default shall have occurred and be
continuing (i) on the borrowing, continuation or conversion date with respect to such Loan or after
giving effect to the Loans to be made, continued or converted on such date or (ii) on the issuance
or extension date with respect to such Letter of Credit or after giving effect to the issuance or
extension of such Letter of Credit on such date.



     (c) Notices. The Administrative Agent shall have received a Notice of Borrowing or
Notice of Conversion/Continuation, as applicable, from the Borrower in accordance with Section
2.3(a) or Section 4.2, as applicable.



     SECTION 5.4 Post-Closing Conditions.



     (a) Prior to July 14, 2006, as such date may be extended by the Administrative Agent in its
sole discretion, the Administrative Agent shall have received (a) a duly executed copy of each
applicable Foreign Pledge Document with respect to a pledge of sixty-five percent (65%) of the
total outstanding Capital Stock of Bowater-Korea Co., Ltd., including, without limitation, if
applicable, original stock certificates (or the equivalent thereof pursuant to the Applicable Laws
and practices of the Republic of Korea) evidencing the Capital Stock of Bowater-Korea Co., Ltd.,
together with an appropriate undated stock power for each certificate duly executed in blank by the
Borrower), (b) such documents and certificates referred to in Section 5.2 as may be
reasonably requested by the Administrative Agent in connection therewith (including, without
limitation, favorable legal opinions of counsel addressed to the Administrative Agent and the
Lenders with respect to Bowater-Korea Co., Ltd., the Loan Documents and such other matters as the
Administrative Agent shall reasonably request), and (c) such other documents and certificates as
may be reasonably requested by the Administrative Agent (in consultation with the Borrower), all in
form, content and scope reasonably satisfactory to the Administrative Agent. Notwithstanding the
foregoing, subject to Section 12.3, the Administrative Agent may waive any or all of the
requirements contained in this Section 5.4 to the extent that, in the sole discretion of
the Administrative Agent, they are impracticable or pose a materially undue burden on the Borrower
or Bowater-Korea Co., Ltd.



     (b) Prior to June 30, 2006, as such date may be extended by the Administrative Agent in its
sole discretion, the Administrative Agent shall have received the following control agreements, in
each case in form and substance satisfactory to the Administrative Agent:




     (i) A deposit account control agreement executed by the applicable Credit Party, the
Administrative Agent and Bank of America, N.A. with respect to all Deposit Accounts, other
than Excluded Deposit Accounts (in each case as defined in the Collateral Agreement), of the
Credit Parties at Bank of America, N.A.;



55









 






     (ii) A deposit account control agreement executed by the applicable Credit Party, the
Administrative Agent and JPMorgan Chase Bank, N.A. with respect to all Deposit Accounts,
other than Excluded Deposit Accounts (in each case as defined in the Collateral Agreement),
of the Credit Parties at JPMorgan Chase Bank, N.A.;




     (iii) A deposit account control agreement executed by the applicable Credit Party, the
Administrative Agent and Wachovia Bank, National Association with respect to all Deposit
Accounts, other than Excluded Deposit Accounts (in each case as defined in the Collateral
Agreement), of the Credit Parties at Wachovia Bank, National Association;




     (iv) A securities account control agreement executed by the applicable Credit Party,
the Administrative Agent and Bank of New York with respect to all securities accounts of the
Credit Parties at Bank of New York; and




     (v) All other control agreements which the Administrative Agent requires to be
delivered pursuant to the Collateral Agreement, in each case in form and substance
satisfactory to the Administrative Agent.



     (c) Prior to June 30, 2006, as such date may be extended by the Administrative Agent in its
sole discretion, the Administrative Agent shall have received any warehouse or similar agreement,
and any other ancillary documentation, required to be delivered thereto pursuant to Section
4.6(b) of the Collateral Agreement (or, if any such warehouse or similar agreement, and any
other ancillary documentation, has not been delivered by such date, the Borrower shall take all
actions required by the Administrative Agent pursuant to Section 4.6(b) in connection
therewith).



ARTICLE VI




REPRESENTATIONS AND WARRANTIES OF THE BORROWER




     SECTION 6.1 Representations and Warranties. To induce the Administrative Agent and
Lenders to enter into this Agreement and to induce the Lenders to make Extensions of Credit, the
Borrower hereby represents and warrants to the Administrative Agent and Lenders both before and
after giving effect to the transactions contemplated hereunder that:



     (a) Organization; Power; Qualification. Each of the Borrower and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has the power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted and is duly qualified and authorized
to do business in each jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization except in jurisdictions where the failure to
be so qualified or in good standing could not reasonably be expected to result in a Material
Adverse Effect.



     (b) Ownership. Each Subsidiary of the Borrower as of the Closing Date is listed on
Schedule 6.1(b) together with (i) its jurisdiction of formation and each jurisdiction in
which it is



56









 







qualified to do business as of the Closing Date, (ii) each Person holding ownership interests
in such Subsidiary, (iii) the nature of the ownership interest held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership interests and (iv) a
designation of each Subsidiary that is inactive. All outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable, with no personal liability attaching to
the ownership thereof, and not subject to any preemptive or similar rights, except as described in
Schedule 6.1(b). As of the Closing Date, there are no outstanding stock purchase warrants,
subscriptions, options, securities, instruments or other rights of any type or nature whatsoever,
which are convertible into, exchangeable for or otherwise provide for or permit the issuance of
Capital Stock of the Borrower or its Subsidiaries, except as described on Schedule 6.1(b).



     (c) Authorization of Agreement, Loan Documents and Borrowing. Each of the Borrower and
its Subsidiaries has the right, power and authority and has taken all necessary corporate and other
action to authorize the execution, delivery and performance of this Agreement and each of the other
Loan Documents to which it is a party in accordance with their respective terms. This Agreement
and each of the other Loan Documents have been duly executed and delivered by the duly authorized
officers of the Borrower and each of its Subsidiaries party thereto, and each such document
constitutes the legal, valid and binding obligation of the Borrower or its Subsidiary party
thereto, enforceable in accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or similar state or federal laws from time
to time in effect which affect the enforcement of creditors’ rights in general and (ii) the
application of general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).



     (d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc. The
execution, delivery and performance by the Borrower and its Subsidiaries of the Loan Documents to
which each such Person is a party, in accordance with their respective terms, the Extensions of
Credit hereunder and the transactions contemplated hereby do not and will not, by the passage of
time, the giving of notice or otherwise, (i) require any Governmental Approval or violate any
Applicable Law relating to the Borrower or any of its Subsidiaries, (ii) conflict with, result in a
breach of or constitute a default under the articles of incorporation, bylaws or other
organizational documents of the Borrower or any of its Subsidiaries, (iii) conflict with, result in
a breach of or constitute a default under any indenture, agreement or other instrument to which
such Person is a party or by which any of its properties may be bound or any Governmental Approval
relating to such Person, which could reasonably be expected to have a Material Adverse Effect, (iv)
result in or require the creation or imposition of any Lien upon or with respect to any property
now owned or hereafter acquired by such Person other than Liens arising under the Loan Documents or
(v) require any consent or authorization of, filing with, or other act in respect of, an arbitrator
or Governmental Authority and no consent of any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement other than consents,
authorizations, filings or other acts or consents for which the failure to obtain or make could not
reasonably be expected to have a Material Adverse Effect and other than consents or filings under
the UCC.



     (e) Compliance with Law; Governmental Approvals. Each of the Borrower and its
Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to



57









 







conduct its business, each of which is in full force and effect, is final and not subject to
review on appeal and is not the subject of any pending or, to the best of its knowledge, threatened
attack by direct or collateral proceeding, except where the failure to do so could not reasonably
be expected to have a Material Adverse Effect, (ii) is in compliance with its articles of
incorporation, bylaws or other organizational documents of the Borrower or any of its Subsidiaries,
except where the failure to comply could not reasonably be expected to have a Material Adverse
Effect, (iii) is in compliance with each Governmental Approval applicable to it and in compliance
with all other Applicable Laws relating to it or any of its respective properties, except where the
failure to comply could not reasonably be expected to have a Material Adverse Effect, and (iv) has
timely filed all reports, documents and other materials required to be filed by it under all
Applicable Laws with any Governmental Authority and has retained all records and documents required
to be retained by it under Applicable Law, except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse Effect.



     (f) Tax Returns and Payments. Each of the Borrower and its Subsidiaries has duly
filed or caused to be filed all federal and other material tax returns required by Applicable Law
to be filed, and has paid, or made adequate provision for the payment of, all federal and other
material taxes, assessments and governmental charges or levies upon it and its property, income,
profits and assets which are due and payable. Such returns accurately reflect in all material
respects all liability for taxes of the Borrower and its Subsidiaries for the periods covered
thereby. There is no ongoing audit or examination or, to the knowledge of the Borrower, other
investigation by any Governmental Authority of the tax liability of the Borrower and its
Subsidiaries, except, in each case, as could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. No Governmental Authority has asserted any Lien or
other claim against the Borrower or any of its Subsidiaries with respect to unpaid taxes which has
not been discharged or resolved other than Permitted Liens. The charges, accruals and reserves on
the books of the Borrower and any of its Subsidiaries in respect of federal and other material
taxes for all Fiscal Years and portions thereof since the organization of the Borrower and any of
its Subsidiaries are in the judgment of the Borrower adequate, and the Borrower does not anticipate
any material amount of additional taxes or assessments for any of such years.



     (g) Intellectual Property Matters. Each of the Borrower and its Subsidiaries owns or
possesses rights to use all franchises, licenses, copyrights, copyright applications, patents,
patent rights or licenses, patent applications, trademarks, trademark rights, service mark, service
mark rights, trade names, trade name rights, copyrights and other rights with respect to the
foregoing which are reasonably necessary to conduct its business, except where the failure to own
or possess such rights, individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect. No event has occurred which permits, or after notice or lapse of time
or both would permit, the revocation or termination of any such rights, and neither the Borrower
nor any of its Subsidiaries is liable to any Person for infringement under Applicable Law with
respect to any such rights as a result of its business operations except as could not reasonably be
expected to have a Material Adverse Effect.



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     (h) Environmental Matters.



          (i) The properties owned, leased or operated by the Borrower and its Subsidiaries now or in
the past do not contain, and to their knowledge have not previously contained, any Hazardous
Materials in amounts or concentrations which (A) constitute or constituted a violation of
applicable Environmental Laws or (B) could give rise to liability under applicable Environmental
Laws except where such violation or liability could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect;




          (ii) Except to the extent such matters could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, the Borrower, each of its Subsidiaries and such
properties and all operations conducted in connection therewith are in compliance, and have been in
compliance, with all applicable Environmental Laws, and there is no contamination at, under or
about such properties or such operations which could interfere with the continued operation of such
properties;




          (iii) Neither the Borrower nor any of its Subsidiaries has received any written notice of
violation, alleged violation, non-compliance, liability or potential liability regarding
environmental matters, Hazardous Materials, or compliance with Environmental Laws, nor does the
Borrower or any of its Subsidiaries have knowledge or reason to believe that any such notice will
be received or is being threatened, except where such violation, alleged violation, non-compliance,
liability or potential liability which is the subject of such notice could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect;




          (iv) Hazardous Materials have not been transported or disposed of to or from the properties
owned, leased or operated by the Borrower and its Subsidiaries in violation of, or in a manner or
to a location which could give rise to liability under, Environmental Laws, nor have any Hazardous
Materials been generated, treated, stored or disposed of at, on or under any of such properties in
violation of, or in a manner that could give rise to liability under, any applicable Environmental
Laws, except where such violation or liability could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect;




          (v) No judicial proceedings or governmental or administrative action is pending, or, to the
knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any of
its Subsidiaries is or will be named as a potentially responsible party with respect to such
properties or operations conducted in connection therewith, 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 Borrower, any of
its Subsidiaries or such properties or such operations that could reasonably be expected to have a
Material Adverse Effect; and




          (vi) There has been no release, or to the best of the Borrower’s knowledge, threat of release,
of Hazardous Materials at or from properties owned, leased or operated by the Borrower or any
Subsidiary, now or in the past, in violation of or in amounts or in a manner that could give rise
to liability under Environmental Laws that could reasonably be expected to have a Material Adverse
Effect.




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     (i) ERISA.



          (i) As of the Closing Date, neither the Borrower nor any of its Subsidiaries nor any ERISA
Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plans
other than those identified on Schedule 6.1(i-1) and neither the Borrower nor any of its
Subsidiaries maintains or contributes to, or has any obligation under, any Canadian Employee
Benefit Plans other than those identified on Schedule 6.1(i-2).



          (ii) The Borrower, each of its Subsidiaries and each of their ERISA Affiliates is in material
compliance with all applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except for any required
amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not
yet expired and except where a failure to so comply could not reasonably be expected to have a
Material Adverse Effect. The Borrower and each of its Subsidiaries is in material compliance with
all applicable provisions of the ITA and other Applicable Law and the regulations and published
interpretations thereunder with respect to all Canadian Employee Benefit Plans except where a
failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each
Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified, and each trust related to such plan
has been determined to be exempt under Section 501(a) of the Code except for such plans that have
not yet received determination letters but for which the remedial amendment period for submitting a
determination letter has not yet expired. No liability has been incurred by the Borrower, any of
its Subsidiaries or any of their ERISA Affiliates which remains unsatisfied for any taxes or
penalties with respect to any Employee Benefit Plan or any Multiemployer Plan except for a
liability that could not reasonably be expected to have a Material Adverse Effect. No liability has
been incurred by the Borrower or any of its Subsidiaries which remains unsatisfied for any taxes or
penalties with respect to any Canadian Employee Benefit Plan or any Canadian Multiemployer Plan,
except for a liability that could not reasonably be expected to have a Material Adverse Effect.



          (iii) Except as set forth on Schedule 6.1(i-1) or Schedule 6.1(i-2), as of the
Closing Date, no Pension Plan or Canadian Pension Plan has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code or any other Applicable Law) been
incurred (without regard to any waiver granted under Section 412 of the Code or any other
Applicable Law), nor has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has the Borrower, any of Subsidiaries or any of
their ERISA Affiliates failed to make any contributions or to pay any amounts due and owing as
required by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to
the due dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has
there been any event requiring any disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with
respect to any Pension Plan.



          (iv) Except where the failure of any of the following representations to be correct in all
material respects could not reasonably be expected to have a Material Adverse Effect, neither the
Borrower nor any of its Subsidiaries nor any of their ERISA Affiliates has: (A) engaged in a
nonexempt prohibited transaction described in Section 406 of the ERISA or Section 4975 of the Code,
(B) incurred any liability to the PBGC which remains outstanding



60









 







other than the payment of premiums and there are no premium payments which are due and unpaid,
(C) failed to make a required contribution or payment to a Multiemployer Plan or a Canadian
Multiemployer Plan, (D) failed to make a required installment or other required payment under
Section 412 of the Code, other Applicable Laws or its Employee Benefit Plans or (E) failed to make
a required installment or other required payment under Applicable Laws or its Canadian Employee
Benefit Plans.



          (v) No Termination Event has occurred or is reasonably expected to occur.



          (vi) Except where the failure of any of the following representations to be correct in all
material respects could not reasonably be expected to have a Material Adverse Effect, no
proceeding, claim (other than a benefits claim in the ordinary course of business), lawsuit and/or
investigation is existing or, to the best knowledge of the Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in Section 3(1) of ERISA)
currently maintained or contributed to by the Borrower, any of its Subsidiaries or any of their
ERISA Affiliates, (B) Pension Plan or Canadian Pension Plan or (C) Multiemployer Plan or Canadian
Multiemployer Plan.



     (j) Margin Stock. Neither the Borrower nor any of its Subsidiaries is engaged
principally or as one of its activities in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” (as each such term is defined or used, directly or
indirectly, in Regulation U of the Board of Governors of the Federal Reserve System). No part of
the proceeds of any of the Loans or Letters of Credit will be used for purchasing or carrying
margin stock or for any purpose which violates, or which would be inconsistent with, the provisions
of Regulation T, U or X of such Board of Governors.



     (k) Government Regulation. Neither the Borrower nor any of its Subsidiaries is an
“investment company” or a company “controlled” by an “investment company” (as each such term is
defined or used in the Investment Company Act of 1940, as amended) and neither the Borrower nor any
of its Subsidiaries is, or after giving effect to any Extension of Credit or Canadian Extension of
Credit will be, subject to regulation under the Interstate Commerce Act, as amended, or any other
Applicable Law which limits its ability to incur or consummate the transactions contemplated
hereby.



     (l) Significant Indebtedness. Schedule 6.1(l) sets forth a complete and
accurate list of all Significant Indebtedness of the Borrower and its Subsidiaries in effect as of
the Closing Date. As of the Closing Date, other than as set forth in Schedule 6.1(l), each
indenture, agreement or other instrument governing such Significant Indebtedness is, and after
giving effect to the consummation of the transactions contemplated by the Loan Documents will be,
in full force and effect in accordance with the terms thereof. To the extent requested by the
Administrative Agent, the Borrower and its Subsidiaries have delivered to the Administrative Agent
a true and complete copy of each indenture, agreement or other instrument governing the Significant
Indebtedness required to be listed on Schedule 6.1(l). As of the Closing Date, neither the
Borrower nor any Subsidiary (nor, to the knowledge of the Borrower, any other party thereto) is in
breach of or in default under any Significant Indebtedness in any material respect.



61









 





     (m) Employee Relations. Each of the Borrower and its Subsidiaries has a stable work
force in place, except as could not reasonably be expected to have a Material Adverse Effect. The
Borrower knows of no pending, threatened or contemplated strikes, work stoppage or other collective
labor disputes involving its employees or those of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect.



     (n) Burdensome Provisions. Except as described on Schedule 6.1(n), no
Subsidiary is party to any agreement or instrument or otherwise subject to any restriction or
encumbrance that restricts or limits its ability to make dividend payments or other distributions
in respect of its Capital Stock to the Borrower or any Subsidiary or to transfer any of its assets
or properties to the Borrower or any other Subsidiary in each case other than restrictions or
encumbrances existing under or by reason of (i) the Loan Documents, (ii) Applicable Law and (iii)
legally enforceable provisions which are contained in either (A) the organizational documents of
any Subsidiary that a not Wholly-Owned Subsidiary or (B) any other agreements with the other
owner(s) of such Subsidiary (which, in the case of such provisions existing on the Closing Date,
are described on Schedule 6.1(n)).



     (o) Financial Statements. The audited and unaudited financial statements delivered
pursuant to Section 5.2(e)(i) are complete and correct and fairly present in all material
respects on a Consolidated basis the assets, liabilities and financial position of the Borrower and
its Subsidiaries as at the respective dates of such statements, and the results of the operations
and changes of financial position for the periods then ended (other than customary year-end
adjustments for interim financial statements). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP. Such financial
statements show all material indebtedness and other material liabilities, direct or contingent, of
the Borrower and its Subsidiaries as of the date thereof, including material liabilities for taxes,
material commitments, and Indebtedness, in each case, to the extent required to be disclosed under
GAAP. The projected financial statements delivered pursuant to Section 5.2(e)(ii) were
prepared in good faith on the basis of the assumptions stated therein, which assumptions are
believed to be reasonable in light of then existing conditions.



     (p) No Material Adverse Change. Since December 31, 2005, there has been no material
adverse change in the business, assets, liabilities (actual or contingent), operations, or
condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole and no
event has occurred or condition arisen that could reasonably be expected to have a Material Adverse
Effect.



     (q) Solvency. As of the Closing Date and after giving effect to each Extension of
Credit made hereunder and each Canadian Extension of Credit, each of the Credit Parties will be
Solvent.



     (r) Titles to Properties. Each of the Borrower and its Subsidiaries has such title to
the real property owned or leased by it as is reasonably necessary to the conduct of its business
and valid and legal title to all of its personal property and assets, including, but not limited
to, those reflected on the balance sheets of the Borrower and its Subsidiaries delivered pursuant
to Sections 5.2(e)(i), 7.1(a) and (b), except those which have been
disposed of by the Borrower or



62









 







its Subsidiaries subsequent to such date which dispositions have been in the ordinary course
of business or as otherwise expressly permitted hereunder.



     (s) Liens. None of the properties and assets of the Borrower or any of its
Subsidiaries is subject to any Lien, except Permitted Liens. Neither the Borrower nor any of its
Subsidiaries has signed any financing statement or any security agreement authorizing any secured
party thereunder to file any financing statement, except to perfect those Permitted Liens.



     (t) Litigation. Except for matters existing on the Closing Date and set forth on
Schedule 6.1(t), there are no actions, suits or proceedings pending nor, to the knowledge
of the Borrower, threatened against or in any other way relating adversely to or affecting the
Borrower or any of its Subsidiaries or any of their respective properties in any court or before
any arbitrator of any kind or before or by any Governmental Authority that has or could reasonably
be expected to have a Material Adverse Effect.



     (u) Senior Indebtedness Status. The Obligations of each Credit Party under this
Agreement and each of the other Loan Documents ranks and shall continue to rank at least senior in
priority of payment to all Subordinated Indebtedness of each such Person and is designated as
“Senior Indebtedness” under all instruments and documents, now or in the future, relating to all
Subordinated Indebtedness of such Person.



     (v) OFAC. None of the Borrower, any Subsidiary of the Borrower or any Affiliate of
the Borrower or any Subsidiary Guarantor: (i) is a Sanctioned Person, (ii) has more than ten
percent (10%) of its assets in Sanctioned Entities, or (iii) derives more than ten percent (10%) of
its operating income from investments in, or transactions with Sanctioned Persons or Sanctioned
Entities. The proceeds of any Loan will not be used and have not been used to fund any operations
in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a
Sanctioned Entity.



     (w) Disclosure. The Borrower and/or its Subsidiaries have disclosed to the
Administrative Agent and the Lenders all agreements, instruments and corporate or other
restrictions to which the Borrower or any of its Subsidiaries are subject, and all other matters
known to it, that, individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. The financial statements, material reports, material certificates or
other material information furnished (whether in writing or orally), taken together as a whole, by
or on behalf of any of the Borrower or any of its Subsidiaries to the Administrative Agent or any
Lender in connection with the transactions contemplated hereby and the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other information so furnished) do
not contain any material misstatement of fact or omit to state any material fact necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading; provided that, with respect to projected financial information, pro
forma financial information, estimated financial information and other projected or
estimated information, such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.



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     SECTION 6.2 Survival of Representations and Warranties, Etc. All representations and
warranties set forth in this Article VI and all representations and warranties contained in
any certificate, or any of the Loan Documents (including, but not limited to, any such
representation or warranty made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations and warranties made
under this Agreement shall be made or deemed to be made at and as of the Closing Date (except those
that are expressly made as of a specific date), shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made by or on behalf of
the Lenders or any borrowing hereunder.



ARTICLE VII




FINANCIAL INFORMATION AND NOTICES




     Until all the Obligations have been paid and satisfied in full and the Commitment terminated,
unless consent has been obtained in the manner set forth in Section 13.2, the Borrower will
furnish or cause to be furnished to the Administrative Agent (for distribution to the Lenders) at
the Administrative Agent’s Office at the address set forth in Section 13.1 or such other
office as may be designated by the Administrative Agent from time to time:



     SECTION 7.1 Financial Statements and Projections.



     (a) Quarterly Financial Statements. As soon as practicable and in any event within
forty-five (45) days (or, if earlier, on the date of any required public filing thereof) after the
end of each fiscal quarter of each Fiscal Year, an unaudited Consolidated balance sheet of the
Borrower and its Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated
statements of income, retained earnings and cash flows and a report containing management’s
discussion and analysis of such financial statements for the fiscal quarter then ended and that
portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail
setting forth in comparative form the corresponding figures as of the end of and for the
corresponding period in the preceding Fiscal Year and prepared by the Borrower in accordance with
GAAP and, if applicable, containing disclosure of the effect on the financial position or results
of operations of any change in the application of accounting principles and practices during the
period, and certified by the chief financial officer of the Borrower to present fairly in all
material respects the financial condition of the Borrower and its Subsidiaries on a Consolidated
basis as of their respective dates and the results of operations of the Borrower and its
Subsidiaries for the respective periods then ended, subject to normal year end adjustments.
Delivery by the Borrower to the Administrative Agent and the Lenders of the Borrower’s quarterly
report to the SEC on Form 10-Q with respect to any fiscal quarter within the period specified above
shall be deemed to be compliance by the Borrower with this Section 7.1(a) (it being agreed
that such quarterly report shall be deemed delivered on the date that (i) such report is posted on
the website of the SEC at www.sec.gov or on the website of the Borrower at
www.Bowater.com and (ii) the Borrower has provided the Administrative Agent with written
notice of such posting).



     (b) Annual Financial Statements. As soon as practicable and in any event within
ninety (90) days (or, if earlier, on the date of any required public filing thereof) after the end
of each Fiscal Year, an audited Consolidated balance sheet of the Borrower and its Subsidiaries as



64









 







of the close of such Fiscal Year and audited Consolidated statements of income, retained
earnings and cash flows and a report containing management’s discussion and analysis of such
financial statements for the Fiscal Year then ended, including the notes thereto, all in reasonable
detail setting forth in comparative form the corresponding figures as of the end of and for the
preceding Fiscal Year and prepared in accordance with GAAP and, if applicable, containing
disclosure of the effect on the financial position or results of operations of any change in the
application of accounting principles and practices during the year. Such annual financial
statements shall be audited by an independent certified public accounting firm acceptable to the
Administrative Agent and the Canadian Administrative Agent, and accompanied by a report thereon by
such certified public accountants that is not qualified with respect to scope limitations imposed
by the Borrower or any of its Subsidiaries or with respect to accounting principles followed by the
Borrower or any of its Subsidiaries not in accordance with GAAP. Delivery by the Borrower to the
Administrative Agent and the Lenders of the Borrower’s annual report to the SEC on Form 10-K with
respect to any Fiscal Year within the period specified above shall be deemed to be compliance by
the Borrower with this Section 7.1(b) (it being agreed that such annual report shall be
deemed delivered on the date that (i) such report is posted on the website of the SEC at
www.sec.gov or on the website of the Borrower at www.Bowater.com and (ii) the
Borrower has provided the Administrative Agent with written notice of such posting).



     (c) Annual Business Plan and Financial Projections. As soon as practicable and in any
event within ninety (90) days after the beginning of each Fiscal Year, a business plan of the
Borrower and its Subsidiaries for such Fiscal Year, such plan to be prepared in accordance with
GAAP and to include, on a quarterly basis, the following: a projected income statement, statement
of cash flows and balance sheet and a statement containing the volume and price assumptions by
product line used in preparing the business plan, accompanied by a certificate from a Responsible
Officer of the Borrower to the effect that, to the best of such officer’s knowledge, such
projections are good faith estimates (utilizing assumptions believed to be reasonable) of the
financial condition and operations of the Borrower and its Subsidiaries for such Fiscal Year.



     (d) Financial Statements of the Canadian Borrower and its Subsidiaries. If requested
by the Administrative Agent (on behalf of itself or any Lender), any financial statements of the
Canadian Borrower and its Subsidiaries required to be delivered by the Canadian Borrower to the
Canadian Administrative Agent pursuant to Section 7.1 of the Canadian Credit Agreement.



     SECTION 7.2 Officer’s Compliance Certificate. At each time financial statements are
delivered pursuant to Sections 7.1(a) or (b) and at such other times as the
Administrative Agent shall reasonably request, an Officer’s Compliance Certificate.



     SECTION 7.3 Accountants’ Certificate. At each time financial statements are delivered
pursuant to Section 7.1(b), a certificate of the independent public accountants certifying
such financial statements that in connection with their audit, nothing came to their attention that
caused them to believe that the Borrower failed to comply with the terms, covenants, provisions or
conditions of Articles IX, or, if such is not the case, specifying such non-compliance and
its nature and period of existence.



     SECTION 7.4 Other Reports.



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     (a) Promptly upon their becoming available, copies of all registration statements (other than
on Form S-8) and regular periodic reports on Forms 10-K, 10-Q and 8-K that the Borrower or any of
its Subsidiaries shall have filed with the SEC, or any similar periodic reports filed with any
comparable agency in Canada (it being agreed that each such report or statement shall be deemed
delivered on the date that (i) such report or statement is posted on the website of the SEC at
www.sec.gov, on SEDAR at www.sedar.com or on the website of the Borrower at
www.Bowater.com and (ii) the Borrower has provided the Administrative Agent with written
notice of such posting).



     (b) Promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of
all financial statements, reports and proxy statements so mailed (it being agreed that such mailing
shall be deemed delivered on the date that (i) such information is posted on the website of the SEC
at www.sec.gov, on SEDAR at www.sedar.com or on the website of the Borrower at
www.Bowater.com and (ii) the Borrower has provided the Administrative Agent with written
notice of such posting).



     (c) Such other information regarding the operations, business affairs and financial condition
of the Borrower or any of its Subsidiaries as the Administrative Agent (for itself or on behalf of
any Lender) may reasonably request.



     SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no event later
than ten (10) days after any Credit Party obtains knowledge thereof) telephonic and written notice
of:



     (a) the commencement of all proceedings and investigations by or before any Governmental
Authority and all actions and proceedings in any court or before any arbitrator against or
involving the Borrower or any of its Subsidiaries or any of their respective properties, assets or
businesses that if adversely determined could reasonably be expected to have a Material Adverse
Effect;



     (b) any notice of any violation received by the Borrower or any of its Subsidiaries from any
Governmental Authority including, without limitation, any notice of violation of Environmental Laws
which in any such case could reasonably be expected to have a Material Adverse Effect;



     (c) any labor controversy that has resulted in, or threatens to result in, a strike or other
work action against the Borrower or any of its Subsidiaries which in any such case could reasonably
be expected to have a Material Adverse Effect;



     (d) any attachment, judgment, lien, levy or order exceeding $10,000,000 that is assessed
against the Borrower or any of its Subsidiaries;



     (e) (i) any Default or Event of Default or (ii) any event which constitutes or which with the
passage of time or giving of notice or both would constitute a default or event of default under
any Significant Indebtedness to which the Borrower or any of its Subsidiaries is a party or by
which the Borrower or any of its Subsidiaries or any of their respective properties may be bound
which could reasonably be expected to have a Material Adverse Effect;



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     (f) (i) any unfavorable determination letter from the Internal Revenue Service regarding the
qualification of an Employee Benefit Plan under Section 401(a) of the Code (along with a copy
thereof), (ii) all notices received by the Borrower or any of its Subsidiaries or any of their
ERISA Affiliates of the PBGC’s or any other Governmental Authority’s intent to terminate any
Pension Plan or Canadian Pension Plan or to have a trustee appointed to administer any Pension Plan
or Canadian Pension Plan, (iii) all notices received by the Borrower or any of its Subsidiaries or
any of their ERISA Affiliates from a Multiemployer Plan or Canadian Multiemployer Plan sponsor
concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA or
any other Applicable Law and (iv) the Borrower obtaining knowledge or reason to know that the
Borrower or any of its Subsidiaries or any of their ERISA Affiliates has filed or intends to file a
notice of intent to terminate any Pension Plan or Canadian Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA or otherwise;



     (g) any event which makes any of the representations set forth in Section 6.1 that is
subject to materiality or Material Adverse Effect qualifications inaccurate in any respect or any
event which makes any of the representations set forth in Section 6.1 that is not subject
to materiality or Material Adverse Effect qualifications inaccurate in any material respect; and



     (h) any notice delivered to the Borrower or the Canadian Borrower, or sent by or on behalf of
the Borrower or the Canadian Borrower, with respect to the Canadian Credit Agreement or any of the
loan documents executed in connection therewith (including a copy of any such notice).



     SECTION 7.6 Accuracy of Information. All written information, reports, statements and
other papers and data furnished by or on behalf of the Borrower to the Administrative Agent or any
Lender whether pursuant to this Article VII or any other provision of this Agreement, or
any of the Security Documents, shall, at the time the same is so furnished, comply with the
representations and warranties set forth in Section 6.1(w).



ARTICLE VIII




AFFIRMATIVE COVENANTS




     Until all of the Obligations have been paid and satisfied in full and the Commitment
terminated, unless consent has been obtained in the manner provided for in Section 13.2,
the Borrower will, and will cause each of its Subsidiaries to:



     SECTION 8.1 Preservation of Corporate Existence and Related Matters. Except as
permitted by Section 10.4, preserve and maintain its legal existence and all material
rights, franchises, licenses and privileges and qualify and remain qualified as a foreign
corporation and authorized to do business in each jurisdiction in which the failure to so qualify
could reasonably be expected to have a Material Adverse Effect.



     SECTION 8.2 Maintenance of Property; Reinvestment.



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     (a) Protect and preserve all properties used or useful in its business, including copyrights,
patents, trade names, service marks and trademarks; maintain in good working order and condition,
ordinary wear and tear excepted, all buildings, equipment and other tangible real and personal
property; and from time to time make or cause to be made all repairs, renewals and replacements
thereof and additions to such property necessary for the conduct of its business; in each case, to
the extent necessary so that the business carried on in connection therewith may be conducted in a
commercially reasonable manner, it being understood and agreed that nothing in this paragraph shall
prohibit the idling or abandonment of any property in the reasonable business judgment of the
Borrower and its Subsidiaries.



     (b) (i) If the Borrower or any of its Subsidiaries receives Net Cash Proceeds in excess of
$10,000,000 from any Asset Disposition permitted under this Agreement (other than (A) any Asset
Disposition permitted pursuant to clauses (a), (b), (c), (d), (e) or (f) of Section 10.5 or
(B) any Asset Disposition described in clause (ii) below) or consented to by the requisite Lenders
pursuant to Section 13.2, or from any Insurance and Condemnation Event, and the Aggregate
Credit Exposure is in excess of $100,000,000 at the end of the fiscal quarter following the time
such proceeds are received, the Borrower shall no later than twelve (12) months following such
quarter end, apply such portion of such Net Cash Proceeds to repayment of the outstanding amounts
under this Credit Facility or the Canadian Credit Facility as shall reduce the Aggregate Credit
Exposure to an amount less than $100,000,000; provided that no such repayment shall be
required to the extent that such portion of the Net Cash Proceeds is within such twelve (12) month
period either (A) reinvested in the business (including Capital Expenditures, Permitted
Acquisitions, purchases of assets in the ordinary course of business and other business
expenditures permitted hereunder) or (B) subject to compliance with Section 10.10, applied
to repayment of the Existing Notes.



          (ii) No later than five (5) Business Days following the date of receipt by the Borrower or any
of its Subsidiaries of any Net Cash Proceeds from any Asset Disposition of timberlands permitted
pursuant to Section 10.5 or consented to by the requisite Lenders pursuant to Section
13.2, the Borrower shall apply such Net Cash Proceeds to repayment of the outstanding amounts
under this Credit Facility or the Canadian Credit Facility in an aggregate amount equal to the
lesser of (A) fifty percent (50%) of the aggregate amount of such Net Cash Proceeds or (B) the
amount which when used to repay the outstanding amounts under this Credit Facility or the Canadian
Credit Facility will reduce the Aggregate Credit Exposure to an amount less than $100,000,000.




     SECTION 8.3 Insurance. Maintain insurance with financially sound and reputable
insurance companies against such risks and in such amounts as are customarily maintained by similar
businesses and as may be required by Applicable Law and as are required by any Security Documents
(including, without limitation, hazard and business interruption insurance), and on the Closing
Date and from time to time thereafter deliver to the Administrative Agent upon its reasonable
request information in reasonable detail as to the insurance then in effect, stating the names of
the insurance companies, the amounts of the insurance, the dates of the expiration thereof and the
properties and risks covered thereby.



     SECTION 8.4 Accounting Methods and Financial Records. Maintain a system of
accounting, and keep proper books, records and accounts (which shall be true and complete in all



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material respects) as may be required or as may be necessary to permit the preparation of
financial statements in accordance with GAAP and in compliance with the regulations of any
Governmental Authority having jurisdiction over it or any of its properties.



     SECTION 8.5 Payment of Taxes. Pay and discharge all taxes, assessments and other
governmental charges that may be levied or assessed upon it or on its income or profits or any of
its property; except for any such tax, assessment or other governmental charge the payment of which
is being contested in good faith so long as adequate reserves are maintained with respect thereto
in accordance with GAAP.



     SECTION 8.6 Compliance With Laws and Approvals. Observe and remain in compliance in
with all Applicable Laws and maintain in full force and effect all Governmental Approvals, in each
case applicable to the conduct of its business, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.



     SECTION 8.7 Environmental Laws. In addition to and without limiting the generality of
Section 8.6, (a) comply with, and ensure such compliance by all tenants and subtenants with
all applicable Environmental Laws and obtain and comply with and maintain, and ensure that all
tenants and subtenants, if any, obtain and comply with and maintain, any and all licenses,
approvals, notifications, registrations or permits required by applicable Environmental Laws,
except where the failure to do so could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, (b) conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions required under Environmental
Laws, and promptly comply with all lawful orders and directives of any Governmental Authority
regarding Environmental Laws, except where the failure to conduct or complete such actions, or
comply with such orders or directions, could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect and (c) defend, indemnify and hold harmless the
Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates,
employees, agents, officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the presence of Hazardous
Materials, or the violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of the Borrower or any of its Subsidiaries, or any orders,
requirements or demands of Governmental Authorities related thereto, including, without limitation,
reasonable attorney’s and consultant’s fees, investigation and laboratory fees, response costs,
court costs and litigation expenses, except to the extent that any of the foregoing directly result
from the gross negligence or willful misconduct of the party seeking indemnification therefor, as
determined by a court of competent jurisdiction by final nonappealable judgment.



     SECTION 8.8 Compliance with ERISA. In addition to and without limiting the generality
of Section 8.6, (a) except where the failure to so comply could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, (i) comply with all material
applicable provisions of ERISA with respect to Employee Benefit Plans and the ITA and other
Applicable Law with respect to all Canadian Employee Benefit Plans, (ii) not take any action or
fail to take action the result of which could be a liability to the PBGC or any other Governmental
Authority or to a Multiemployer Plan or a Canadian Multiemployer Plan, (iii) not



69









 







participate in any prohibited transaction that could result in any civil penalty under ERISA
or tax under the Code and (iv) operate each Employee Benefit Plan in such a manner that will not
incur any tax liability under Section 4980B of the Code or any liability to any qualified
beneficiary as defined in Section 4980B of the Code and (b) furnish to the Administrative Agent
upon the Administrative Agent’s request such additional information about any Employee Benefit Plan
or Canadian Employee Benefit Plan as may be reasonably requested by the Administrative Agent.



     SECTION 8.9 Visits and Inspections. Permit representatives of the Administrative
Agent or any Lender, from time to time upon prior reasonable notice and during normal business
hours, at the Borrower’s expense, to visit and inspect its properties; inspect, audit and make
extracts from its books, records and files, including, but not limited to, management letters
prepared by independent accountants; and discuss with its principal officers, and its independent
accountants, its business, assets, liabilities, financial condition, results of operations and
business prospects. Upon the occurrence and during the continuance of an Event of Default, the
Administrative Agent or any Lender may do any of the foregoing at any time without advance notice.



     SECTION 8.10 Additional Subsidiaries.



     (a) Within thirty (30) days after (i) the redesignation of an Immaterial Subsidiary as a
Material Subsidiary in accordance with Section 8.10(b) below or (ii) the creation or
acquisition of any Material Subsidiary, including in connection with any Permitted Acquisition (any
such Subsidiary, a “New Material Subsidiary”), cause to be executed and delivered to the
Administrative Agent (unless otherwise agreed to by the Administrative Agent): (A) a duly executed
joinder agreement in form and substance reasonably satisfactory to the Administrative Agent joining
such New Material Subsidiary to the Subsidiary Guaranty Agreement, the Collateral Agreement and any
other applicable Security Documents, (B) such updated Schedules to the Loan Documents as requested
by the Administrative Agent with regard to such Person (including, without limitation, updated
Schedules 6.1(a) and 6.1(b) reflecting the creation or acquisition of such New
Material Subsidiary), (C) such original stock or other certificates and stock or other transfer
powers evidencing the ownership interests of the Borrower or the applicable Material Subsidiary, as
applicable, in such New Material Subsidiary (unless such New Material Subsidiary is a Restricted
Subsidiary), (D) such documents and certificates referred to in Section 5.2 as may be
reasonably requested by the Administrative Agent (including, without limitation, favorable legal
opinions of counsel addressed to the Administrative Agent and the Lenders with respect to the New
Material Subsidiary, the Loan Documents and such other matters as the Lenders shall request), and
(E) such other documents and certificates as may be reasonably requested by the Administrative
Agent, all in form, content and scope reasonably satisfactory to the Administrative Agent.



     (b) The Borrower may, at any time and upon written notice to the Administrative Agent,
redesignate any Immaterial Subsidiary as a Material Subsidiary. Further, promptly after the date
on which the Borrower or the Administrative Agent determines that any Subsidiary no longer
qualifies as an Immaterial Subsidiary such Subsidiary shall be redesignated as a Material
Subsidiary and shall comply with clause (a) of this Section.



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     (c) Notify the Administrative Agent at the time that any Person becomes a first tier Foreign
Subsidiary of the Borrower or any Material Subsidiary, and promptly thereafter (and in any event
within forty-five (45) days after notification), cause to be executed and delivered to the
Administrative Agent (unless otherwise agreed to by the Administrative Agent): (i) Foreign Pledge
Agreements pledging sixty-five percent (65%) of the total outstanding Capital Stock of such new
Foreign Subsidiary and a consent thereto executed by such new Foreign Subsidiary (including,
without limitation, if applicable, original stock certificates (or the equivalent thereof pursuant
to the Applicable Laws and practices of any relevant foreign jurisdiction) evidencing the Capital
Stock of such new Foreign Subsidiary, together with an appropriate undated stock power for each
certificate duly executed in blank by the registered owner thereof), (ii) such updated Schedules to
the Loan Documents as requested by the Administrative Agent with regard to such Person (including,
without limitation, updated Schedules 6.1(a) and 6.1(b) reflecting the creation or
acquisition of such Person), (iii) such documents and certificates referred to in Section
5.2 as may be reasonably requested by the Administrative Agent (including, without limitation,
favorable legal opinions of counsel addressed to the Administrative Agent and the Lenders with
respect to such Person, the Loan Documents and such other matters as the Lenders shall request),
and (iv) such other documents and certificates as may be reasonably requested by the Administrative
Agent, all in form, content and scope reasonably satisfactory to the Administrative Agent.



     (d) Within thirty (30) days after the creation or acquisition of any new Subsidiary, including
in connection with any Permitted Acquisition, cause to be executed and delivered to the
Administrative Agent (unless otherwise agreed to by the Administrative Agent) a duly executed
joinder agreement in the form attached to the Intercompany Subordination Agreement joining such new
Subsidiary thereto.



     SECTION 8.11 Use of Proceeds. The Borrower shall use the proceeds of the Extensions
of Credit (a) to finance the acquisition of Capital Assets, (b) to refinance the Existing
Facilities and (c) for working capital and general corporate purposes of the Borrower and its
Subsidiaries, including the payment of certain fees and expenses incurred in connection with this
Agreement.



     SECTION 8.12 Further Assurances. Make, execute and deliver all such additional and
further acts, things, deeds and instruments as the Administrative Agent or the Required Agreement
Lenders (through the Administrative Agent) may reasonably require to document and consummate the
transactions contemplated hereby and to vest completely in and insure the Administrative Agent and
the Lenders their respective rights under this Agreement, the Letters of Credit and the other Loan
Documents.



ARTICLE IX




FINANCIAL COVENANTS




     Until all of the Obligations have been paid and satisfied in full and the Commitment
terminated, unless consent has been obtained in the manner set forth in Section 13.2, the
Borrower and its Subsidiaries on a Consolidated basis will not:



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     SECTION 9.1 Consolidated Senior Secured Leverage Ratio: As of any fiscal quarter end,
permit the Consolidated Senior Secured Leverage Ratio to be greater than 1.25 to 1.00.



     SECTION 9.2 Interest Coverage Ratio. As of any fiscal quarter end, permit the ratio
of (a) Consolidated Adjusted EBITDA for the period of four (4) consecutive fiscal quarters ending
on or immediately prior to such date to (b) Consolidated Interest Expense paid or payable in cash
for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date
to be less than 2.00 to 1.00.



ARTICLE X




NEGATIVE COVENANTS




     Until all of the Obligations have been paid and satisfied in full and the Commitment
terminated, unless consent has been obtained in the manner set forth in Section 13.2, the
Borrower will not and will not permit any of its Subsidiaries to:



     SECTION 10.1 Limitations on Indebtedness. Create, incur, assume or suffer to exist
any Indebtedness except:



     (a) (i) the Obligations (excluding Hedging Obligations permitted pursuant to Section
10.1(c)) and (ii) the Guaranty Obligations in favor of the Administrative Agent for the benefit
of the Secured Parties;



     (b) (i) the Canadian Obligations (excluding Hedging Obligations permitted pursuant to
Section 10.1(c)) and (ii) the Guaranty Obligations in favor of the Canadian Administrative
Agent for the benefit of the Canadian Secured Parties;



     (c) Indebtedness incurred in connection with a Hedging Agreement (i) which is entered into for
interest rate, foreign currency or other business purposes and not for speculative purposes and
(ii) with a counterparty reasonably satisfactory to the Administrative Agent and the Canadian
Administrative Agent; provided that any counterparty that is a Lender, a Canadian Lender or
any Affiliate thereof shall be deemed satisfactory to the Administrative Agent and the Canadian
Administrative Agent;



     (d) Indebtedness existing on the Closing Date and not otherwise permitted under this Section
and, to the extent that the outstanding principal amount of such Indebtedness is in excess of
$25,000,000, listed on Schedule 10.1 (including any Indebtedness issued to refinance or to
refund such Indebtedness or any Indebtedness which constitutes a renewal or extension of such
Indebtedness); provided that (i) the principal amount of such Indebtedness may not be
increased at the time of such refinancing, refunding, renewal or extension except (A) by an amount
equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably
incurred, in connection with such refinancing, refunding, renewal or extension and by an amount
equal to any existing commitments unutilized thereunder and (B) by additional amounts, to the
extent that the Consolidated Total Leverage Ratio, on a pro forma basis after
giving effect to such increase, would be no greater than 5.50 to 1.00, (ii) no Default or Event of
Default exists



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and is continuing or would be caused by the refinancing, refunding, renewal or extension
thereof, (iii) the Administrative Agent and the Canadian Administrative Agent shall have received
satisfactory written evidence that the Borrower and its Subsidiaries would be in compliance with
all covenants in this Agreement and the Canadian Credit Agreement on a pro forma
basis after giving effect to the refinancing, refunding, renewal or extension thereof, (iv) the
weighted average life of such Indebtedness shall not be shorter than the weighted average life of
the Indebtedness being refinanced, refunded, renewed or extended, (v) any terms of subordination
set forth in the Indebtedness being refinanced, refunded, renewed or extended are not adversely
affected in any material respect and (vi) none of the Existing Notes nor any Indebtedness incurred
in accordance with this paragraph to refinance, refund, renew or extend the Existing Notes shall be
guaranteed by the Borrower or any of its Subsidiaries (other than (A) those Existing Notes which
are guaranteed by the Borrower as of the Closing Date and identified on Schedule 10.1 as
being so guaranteed and (B) any Indebtedness issued to refinance any Existing Notes which, as of
the Closing Date, (1) have an outstanding principal balance in excess of $50,000,000 and (2) mature
or are subject to mandatory redemption prior to the Maturity Date);



     (e) Indebtedness incurred in connection with Capital Leases, including those Capital Leases
existing on the Closing Date, and purchase money Indebtedness, including all purchase money
Indebtedness existing on the Closing Date, in an aggregate amount not to exceed $50,000,000 on any
date of determination;



     (f) Guaranty Obligations with respect to Indebtedness permitted pursuant to subsections
(c), (e), (h), (l) and (m) of this Section
(provided that any Guaranty Obligations of Indebtedness incurred pursuant to subsection
(h) or, to the extent applicable, subsection (m) of this Section shall be
subordinated to the Obligations and the Canadian Obligations to the same extent as the Indebtedness
that is being guaranteed);



     (g) (i) (A) Indebtedness owed by any Credit Party to any other Credit Party (provided
that, if requested by the Administrative Agent, such Indebtedness shall be subordinated to the
Obligations on terms and conditions reasonably satisfactory to the Administrative Agent) and (B)
Indebtedness owed by any Canadian Credit Party to any other Canadian Credit Party (provided
that, if requested by the Canadian Administrative Agent, such Indebtedness shall be subordinated to
the Canadian Obligations on terms and conditions reasonably satisfactory to the Canadian
Administrative Agent);



          (ii) (A) Indebtedness owed by any Canadian Credit Party to any Credit Party (provided
that such Indebtedness shall be payable by such Canadian Credit Party on demand by the applicable
Credit Party) and (B) Indebtedness owed by any Credit Party to any Canadian Credit Party
(provided that such Indebtedness shall be payable by such Credit Party on demand by the
applicable Canadian Credit Party);




          (iii) Indebtedness owed by any Subsidiary which is not a Credit Party or a Canadian Credit
Party to any other Subsidiary which is not a Credit Party or a Canadian Credit Party;




          (iv) Indebtedness owed by any Credit Party or any Canadian Credit Party to a Subsidiary that
is not a Credit Party or a Canadian Party (provided that such Indebtedness (other


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than Indebtedness existing as of the Closing Date pursuant to the Bowater-Calhoun Arrangement)
shall be subordinated to the Obligations and the Canadian Obligations, as applicable, pursuant to
an Intercompany Subordination Agreement); and




          (v) Indebtedness owed by any Subsidiary that is not a Credit Party or a Canadian Credit Party
to a Credit Party or a Canadian Credit Party (provided that such Indebtedness shall be
payable by such Subsidiary on demand by the Credit Party or the Canadian Credit Party, as
applicable, to the extent required pursuant to the Intercompany Subordination Agreement);
provided that the aggregate amount of such Indebtedness incurred after the Closing Date,
together with any equity or capital investments made after the Closing Date permitted pursuant to
Section 10.3(g) (without duplication), shall not exceed $50,000,000 outstanding on any date
of determination (which amount shall be calculated as the net balance of such loans, advances and
investments as reduced by any repayments or distributions made with respect thereto);
provided further that the limitation set forth in the preceding proviso shall not
be applicable to any loans and advances made by the Borrower to Bowater Canada Finance Corporation
to pay interest on the BCFC Notes;




     (h) Subordinated Indebtedness; provided that in the case of each issuance of
Subordinated Indebtedness, (i) no Default or Event of Default shall have occurred and be continuing
or would be caused by the issuance of such Subordinated Indebtedness, (ii) the Consolidated Total
Leverage Ratio on pro forma basis after giving effect to issuance of such
Subordinated Indebtedness is no greater than 5.50 to 1.00 and (iii) the Administrative Agent and
the Canadian Administrative Agent shall have received satisfactory written evidence that the
Borrower and its Subsidiaries would be in compliance with all covenants contained in this Agreement
and the Canadian Credit Agreement on a pro forma basis after giving effect to the
issuance of any such Subordinated Indebtedness;



     (i) Indebtedness of the Borrower or any of its Subsidiaries as an account party in respect of
trade letters of credit in an aggregate amount not to exceed $25,000,000 on any date of
determination; provided that no such trade letter of credit shall be secured by any assets
of the Borrower or any of its Subsidiaries other than the assets being acquired or shipped pursuant
to such letter of credit;



     (j) Indebtedness (i) of any Person that becomes a Subsidiary after the Closing Date in
connection with any Permitted Acquisition or (ii) assumed in connection with any assets acquired in
connection with any Permitted Acquisition, and the refinancing, refunding, renewal and extension
(but not the increase in the aggregate principal amount) thereof; provided that (A) such
Indebtedness exists at the time such Person becomes a Subsidiary or such assets are acquired and is
not created in contemplation of, or in connection with, such Person becoming a Subsidiary or such
assets being acquired and (B) notwithstanding anything to the contrary contained in this Agreement,
neither the Borrower nor any other Subsidiary (other than such Person) shall have any liability or
other obligation with respect to such Indebtedness (other than any liability or other obligation of
the Borrower or any of its Subsidiaries permitted hereunder which existed prior to the time that
such Person became a Subsidiary or such asset was acquired);



74









 





     (k) Additional unsecured Indebtedness not otherwise permitted pursuant to this Section in an
aggregate amount not to exceed $250,000,000 outstanding on any date of determination;
provided that in the case of each issuance of such Indebtedness (i) no Default or Event of
Default shall have occurred and be continuing or would be caused by the issuance of such
Indebtedness and (ii) the Consolidated Total Leverage Ratio on pro forma basis
after giving effect to issuance of such Indebtedness is no greater than 4.50 to 1.00;



     (l) Indebtedness in an aggregate principal amount not to exceed $125,000,000 in the form of
Canadian cash management facilities; and



     (m) Additional Indebtedness not otherwise permitted pursuant to this Section in an aggregate
amount outstanding not to exceed $25,000,000.



     SECTION 10.2 Limitations on Liens. Create, incur, assume or suffer to exist, any Lien
on or with respect to any of its assets or properties (including, without limitation, shares of
Capital Stock), real or personal, whether now owned or hereafter acquired, except:



     (a) (i) Liens of the Administrative Agent for the benefit of the Secured Parties and (ii)
Liens of the Canadian Administrative Agent for the benefit of the Canadian Secured Parties;



     (b) Liens not otherwise permitted by this Section and in existence on the Closing Date and,
with respect to each Credit Party and each Canadian Credit Party, described on Schedule
10.2 (including Liens incurred in connection with any refinancing, refunding, renewal or
extension of Indebtedness pursuant to Section 10.1(d) solely to the extent that the such
Liens were in existence on the Closing Date and described on Schedule 10.2);
provided that the scope of any such Lien shall not be increased, or otherwise expanded, to
cover any additional property or type of asset, as applicable, beyond that in existence on the
Closing Date;



     (c) Liens for taxes, assessments and other governmental charges or levies not yet due or as to
which the period of grace (not to exceed thirty (30) days), if any, related thereto has not expired
or which are being contested in good faith and by appropriate proceedings if adequate reserves are
maintained to the extent required by GAAP;



     (d) the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for
labor, materials, supplies or rentals incurred in the ordinary course of business, (i) which are
not overdue for a period of more than thirty (30) days or (ii) which are being contested in good
faith and by appropriate proceedings if adequate reserves are maintained to the extent required by
GAAP;



     (e) Liens consisting of deposits or pledges made in the ordinary course of business in
connection with, or to secure payment of, obligations under workers’ compensation, unemployment
insurance or similar legislation;



     (f) Liens constituting encumbrances in the nature of zoning restrictions, easements and rights
or restrictions of record on the use of real property or other similar restrictions, which do not,
in any case, impair the use thereof in the ordinary conduct of business;



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     (g) Liens securing Indebtedness permitted under Sections 10.1(e); provided
that (i) such Liens shall be created substantially simultaneously with the acquisition or lease of
the related asset, (ii) such Liens do not at any time encumber any property other than the property
financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased
and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed one
hundred percent (100%) of the original purchase price or lease payment amount of such property at
the time it was acquired;



     (h) Liens securing judgments for the payment of money not constituting an Event of Default
under Section 11.1(m) or securing appeal or other surety bonds relating to such judgments;



     (i) Liens on tangible property or tangible assets of the Borrower or any of its Subsidiaries
acquired pursuant to a Permitted Acquisition, or on tangible property or tangible assets of any
Subsidiary of the Borrower which are in existence at the time that such Subsidiary of the Borrower
is acquired pursuant to a Permitted Acquisition (provided that such Liens (i) are not
incurred in connection with, or in anticipation of, such Permitted Acquisition, (ii) are applicable
only to specific tangible property or tangible assets, (iii) are not “blanket” or all asset Liens
and (iv) do not attach to any other property or assets of the Borrower or any of its Subsidiaries);



     (j) Liens in existence as of the Closing Date in connection with the Bowater-Calhoun
Arrangement as described in clause (b) of the definition thereof; and



     (k) Liens not otherwise permitted hereunder securing obligations not at any time exceeding in
the aggregate $25,000,000.



     SECTION 10.3 Limitations on Loans, Advances, Investments and Acquisitions. Purchase,
own, invest in or otherwise acquire, directly or indirectly, any Capital Stock, interests in any
partnership or joint venture (including, without limitation, the creation or capitalization of any
Subsidiary), evidence of Indebtedness or other obligation or security, all or substantially all of
the business or assets of any other Person (or any portion of the business or assets of any other
Person that constitutes a line of business, a business unit or a division) or any other investment
or interest whatsoever in any other Person, or make or permit to exist, directly or indirectly, any
loans, advances or extensions of credit to, or any investment in cash or by delivery of property
in, any Person (collectively, “Investments”) except:



     (a) Investments:



          (i) existing on the Closing Date in Subsidiaries existing on the Closing Date;




          (ii) after the Closing Date in Subsidiaries formed after the Closing Date so long as the
Borrower, the Canadian Borrower and their respective Subsidiaries comply with the applicable
provisions of Section 8.10 of this Agreement and Section 8.10 of the Canadian
Credit Agreement;




          (iii) existing on the Closing Date (other than Investments in Subsidiaries on the Closing
Date) and described on Schedule 10.3;




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     (b) Investments in cash and Cash Equivalents;



     (c) Investments by the Borrower or any of its Subsidiaries in the form of Permitted
Acquisitions;



     (d) Hedging Agreements permitted pursuant to Section 10.1;



     (e) Investments in the form of loans and advances to employees in the ordinary course of
business, which, in the aggregate, do not exceed at any time $2,000,000;



     (f) (i) Investments in the form of intercompany Indebtedness permitted pursuant to Section
10.1(g) (other than clause (v) of Section 10.1(g)), (ii) equity or capital investments
made by the Borrower or any of its Subsidiaries in any Credit Party or any Canadian Credit Party
(or made in a Wholly-Owned Subsidiary that is not a Credit Party or a Canadian Credit Party and
immediately contributed (directly or indirectly through one or more intermediate Wholly-Owned
Subsidiaries) into a Credit Party or a Canadian Credit Party) and (iii) equity or capital
investments made by any Subsidiary that is not a Credit Party or a Canadian Credit Party in any
other Subsidiary that is not a Credit Party or a Canadian Credit Party;



     (g) Investments in the form of intercompany Indebtedness permitted by clause (v) of
Section 10.1(g), together with equity or capital investments made by any Credit Party or
any Canadian Credit Party to any Subsidiary which is not a Credit Party or a Canadian Credit Party;
provided that the aggregate amount of such intercompany Indebtedness and equity or capital
investments, in each case incurred or made after the Closing Date, shall not exceed $50,000,000
outstanding on any date of determination (which amount shall be calculated as the net balance of
such loans, advances and equity or capital investments as reduced by any repayments or
distributions made with respect thereto); provided further that the limitation set
forth in the preceding proviso shall not be applicable to any loans and advances made by the
Borrower to Bowater Canada Finance Corporation to pay interest on the BCFC Notes; and



     (h) Investments made after the Closing Date and not otherwise permitted hereunder (including
minority investments in joint ventures) in an aggregate amount not to exceed $20,000,000 on any
date of determination (which amount shall be calculated as the net balance of such Investments as
reduced by any repayments or distributions made with respect thereto).



     SECTION 10.4 Limitations on Mergers and Liquidation. Merge, amalgamate, consolidate
or enter into any similar combination with any other Person or liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution) except:



     (a) any Wholly-Owned Subsidiary of the Borrower may be merged, amalgamated or consolidated
with or into:




     (i) the Borrower (provided that the continuing or surviving Person shall be the
Borrower); or




     (ii) any other Wholly-Owned Subsidiary of the Borrower (provided that the
continuing or surviving Person shall (A) be a Subsidiary Guarantor in the case of a merger,
amalgamation or consolidation involving a Subsidiary Guarantor, (B) include the



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Canadian Borrower in the case of a merger, amalgamation or consolidation involving the
Canadian Borrower and (C) subject to clauses (i) and (ii)(B) above, be a Canadian Guarantor
in the case of a merger, amalgamation or consolidation involving a Canadian Guarantor);


provided further that no Credit Party may be merged, amalgamated or consolidated
with or into a Canadian Credit Party and no Canadian Credit Party may be merged, amalgamated or
consolidated with or into a Credit Party;




     (b) any Wholly-Owned Subsidiary of the Borrower may merge or amalgamate into the Person such
Wholly-Owned Subsidiary was formed to acquire in connection with a Permitted Acquisition;



     (c) any Wholly-Owned Subsidiary of the Borrower may merge or amalgamate into any Person
pursuant to an Asset Disposition of all of the assets of such Wholly-Owned Subsidiary permitted
pursuant to Section 10.5; and



     (d) any Subsidiary of the Borrower (other than the Canadian Borrower) may wind-up, liquidate
or dissolve provided that (i) its assets are transferred to the Borrower or any Wholly-Owned
Subsidiary of the Borrower and (ii) if such Subsidiary is (A) a Subsidiary Guarantor then the
transferee shall be a Credit Party and (B) a Canadian Guarantor (other than the Borrower) then the
transferee shall be a Canadian Credit Party.



     SECTION 10.5 Limitations on Asset Dispositions. Make any Asset Disposition
(including, without limitation, the sale of any receivables and leasehold interests and any
sale-leaseback or similar transaction) except:



     (a) the sale of inventory in the ordinary course of business;



     (b) the sale of obsolete, worn-out or surplus assets no longer used or usable in the business
of the Borrower or any of its Subsidiaries;



     (c) the transfer of assets to the Borrower, the Canadian Borrower or any Wholly-Owned
Subsidiary (provided that, in the case of any such transfer of assets, (i) if the
transferee of such assets is a Credit Party or a Canadian Credit Party, such Credit Party or
Canadian Credit Party shall not pay more than the fair market value of such assets (determined as
of the date of the applicable transfer) and (ii) if the transferor of such assets is a Credit Party
or a Canadian Credit Party, the transferee shall not pay less than the fair market value of such
assets (determined as of the date of the applicable transfer);



     (d) the sale or discount without recourse of accounts receivable arising in the ordinary
course of business in connection with the compromise or collection thereof;



     (e) the disposition of any Hedging Agreement;



     (f) the disposition of cash or Cash Equivalents;



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     (g) subject to the requirements of Section 8.2(b), the sale of timberlands by the
Borrower or its Subsidiaries; and



     (h) additional Asset Dispositions not otherwise permitted pursuant to this Section in an
aggregate amount not to exceed $250,000,000 in the aggregate during the term of this Agreement.



     SECTION 10.6 Limitations on Dividends and Distributions. Declare or pay any dividends
upon any of its Capital Stock; purchase, redeem, retire or otherwise acquire, directly or
indirectly, any shares of its Capital Stock, or make any distribution of cash, property or assets
among the holders of shares of its Capital Stock, or make any change in its capital structure which
such change in its capital structure could reasonably be expected to have a Material Adverse
Effect; provided that:



     (a) the Borrower or any Subsidiary may pay dividends in shares of its own Capital Stock;



     (b) the Borrower or any Subsidiary may make cash distributions or equity repurchases pursuant
to employee benefit plans or incentive compensation plans, in each case to the extent such
distributions constitute compensation to executives or employees of the Borrower or of the
applicable Subsidiary;



     (c) any Subsidiary may pay dividends to the holders of its Capital Stock (other than payment
of dividends to holders of the Exchangeable Shares); provided that in the case of any
dividend paid by a Subsidiary that is not a Wholly-Owned Subsidiary, such dividend may be paid only
if such dividend is paid on a ratable basis to the holders of such Capital Stock in accordance with
their respective ownership percentages in such Subsidiary;



     (d) the Borrower may pay cash dividends to holders of its Capital Stock and Bowater Canada,
Inc. may pay cash dividends to holders of the Exchangeable Shares; provided that (i) any
such dividend is paid as promptly as possible but in no event later than seventy-five (75) days
after the date of declaration of such dividend, (ii) such dividends do not exceed $75,000,000 in
the aggregate during each Fiscal Year and (iii) on each date that a dividend is declared and after
giving effect thereto:




     (A) no Default or Event of Default shall have occurred and be continuing; and




     (B) the Borrower shall be in pro forma compliance with each of the
covenants set forth in Article IX;



     (e) the Borrower may repurchase shares of its Capital Stock in an aggregate amount of up to
$100,000,000 during the term of this Agreement; provided that on each date that Capital
Stock is repurchased and after giving effect thereto:




     (A) no Default or Event of Default shall have occurred and be continuing;




     (B) the Borrower shall be in pro forma compliance with each of the
covenants set forth in Article IX;



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     (C) the Aggregate Credit Exposure shall not exceed $100,000,000; and




     (D) the pro forma Consolidated Total Leverage Ratio shall not exceed
4.50 to 1.00; and



     (f) Bowater Canada, Inc. or Bowater Canadian Holdings Incorporated may repurchase all or a
portion of the Exchangeable Shares solely through an exchange of common stock of the Borrower for
the Exchangeable Shares being repurchased.



     SECTION 10.7 Limitations on Exchange and Issuance of Capital Stock. Except to the
extent included as Indebtedness and incurred in accordance with Section 10.1 hereof, issue,
sell or otherwise dispose of any class or series of Capital Stock that, by its terms or by the
terms of any security into which it is convertible or exchangeable, is, or upon the happening of an
event or passage of time would be, (a) convertible or exchangeable into Indebtedness unless such
Indebtedness is permitted at the time pursuant to Section 10.1 or (b) required to be
redeemed or repurchased, including at the option of the holder, in whole or in part, or has, or
upon the happening of an event or passage of time would have, a redemption or similar payment due.



     SECTION 10.8 Transactions with Affiliates. Directly or indirectly (a) make any loan
or advance to, or purchase or assume any note or other obligation to or from, any of its officers,
directors, shareholders or other Affiliates, or to or from any member of the immediate family of
any of its officers, directors, shareholders or other Affiliates, or subcontract any operations to
any of its Affiliates or (b) enter into, or be a party to, any other transaction not described in
clause (a) above with any of its Affiliates other than:




     (i) transactions permitted by Section 10.3, 10.4, 10.6 or
10.7;




     (ii) transactions existing on the Closing Date and described on Schedule 10.8;




     (iii) normal compensation and reimbursement of reasonable expenses of officers and
directors; and




     (iv) other transactions in the ordinary course of business on terms as favorable as
would be obtained by it on a comparable arms-length transaction with an independent,
unrelated third party.



     SECTION 10.9 Certain Accounting Changes; Organizational Documents.



     (a) Change its Fiscal Year end, or make any change in its accounting treatment and reporting
practices except as required by GAAP.



     (b) Amend, modify or change its articles of incorporation (or corporate charter or other
similar organizational documents) or amend, modify or change its bylaws (or other similar
documents) in any manner which materially adversely affects the rights or interests of the Lenders
or the Canadian Lenders.



     SECTION 10.10 Amendments; Payments and Prepayments of Indebtedness.



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     (a) Amend, modify or change any indenture or other agreement governing the Existing Notes in
any respect which would materially adversely affect the rights or interests of the Administrative
Agent, the Canadian Administrative Agent, the Lenders and the Canadian Lenders.



     (b) Amend, modify or change (i) any provision of this Agreement which, under Section
13.2, is subject to the approval of the Required Lenders without amending, modifying or
changing the corresponding provision in the Canadian Credit Agreement or (ii) any provision of the
Canadian Credit Agreement which, under Section 14.2 of the Canadian Credit Agreement, is
subject to the approval of the Required Lenders without amending, modifying or changing the
corresponding provision in this Agreement.



     (c) Amend or modify (or permit the modification or amendment of) any of the terms or
provisions of any Subordinated Indebtedness in any respect which would materially adversely affect
the rights or interests of the Administrative Agent, the Canadian Administrative Agent, the Lenders
and the Canadian Lenders.



     (d) Cancel, forgive, make any prepayment on, or redeem or acquire for value (including,
without limitation, by way of depositing with any trustee with respect thereto money or securities
before due for the purpose of paying when due, but excluding payments at the scheduled maturity
thereof) any Subordinated Indebtedness or the Existing Notes or any Indebtedness incurred to
refinance the Existing Notes as permitted pursuant to Section 10.1(d), except for:




     (A) refinancings, refundings, renewals, extensions or exchange of any Subordinated
Indebtedness permitted by Section 10.1(h);




     (B) refinancings, refundings, renewals, extensions or exchange of any Existing Notes
permitted by Section 10.1(d); and




     (C) cash redemptions or repayments of the Existing Notes or any Indebtedness incurred
to refinance the Existing Notes as permitted pursuant to Section 10.1(d);
provided that (1) no Default or Event of Default shall have occurred and be
continuing at the time of such redemption or repayment or would result from such redemption
or repayment and (2) if at the time of such redemption or repayment (or immediately after
giving effect thereto), the sum of (x) the principal amount of the outstanding Loans under
this Credit Facility plus (y) the principal amount of the outstanding Canadian Loans
is in excess $100,000,000, the Administrative Agent shall have received satisfactory written
evidence that:




     (I) the Borrower and its Subsidiaries would be in compliance with all covenants
in this Agreement on a pro forma basis after giving effect to such
redemption;




     (II) the principal amount of availability under this Credit Facility and the
Canadian Credit Facility both before and after giving effect to such redemption is
equal to or greater than $50,000,000;



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     (III) the Consolidated Total Senior Secured Indebtedness, both before and
immediately after giving effect thereto, is less than or equal to eighty percent
(80%) of the net book value of the Coverage Assets as set forth on the Consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries most recently
delivered pursuant to Section 5.2 or 7.1 hereof; and




     (IV) the principal amount of outstanding loans and the face amount of
outstanding letters of credit under the Canadian Credit Facility, both before and
immediately after giving effect thereto, is less than or equal to fifty percent
(50%) of the net book value of the accounts receivable and inventory owned by the
Canadian Borrower and each of its Canadian Subsidiaries as set forth on the
Consolidated balance sheet of the Canadian Borrower and its Consolidated
Subsidiaries most recently delivered pursuant to Section 5.2 or 7.1
of the Canadian Credit Agreement.



     SECTION 10.11 Restrictive Agreements.



     (a) Enter into any Indebtedness which:




     (i) contains any covenants more restrictive than the provisions of Articles
VIII, IX and X, or




     (ii) contains any negative pledge on assets or restricts, limits or otherwise encumbers
its ability to incur Liens on or with respect to any of its assets or properties other than
the assets or properties securing such Indebtedness (other than (A) the Existing Notes
(provided that such provisions may not be amended or modified to be more
restrictive), (B) any Indebtedness incurred in accordance with Section 10.1(d) to
refinance the Existing Notes (provided that such provisions may not be more
restrictive than those contained in the Existing Notes) and (C) the Canadian Credit Facility
(provided that such provisions shall not be amended or modified except as permitted
hereunder and thereunder)).



     (b) Enter into or permit to exist any agreement which impairs or limits the ability of any
Subsidiary of the Borrower to pay dividends to the Borrower or to make or repay loans or advances
to the Borrower other than (i) restrictions and conditions imposed by Applicable Law or the Loan
Documents, (ii) legally enforceable restrictions and conditions which are permitted by clause (iii)
of Section 6.1(n) and (iii) customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary or its assets pending such sale; provided that such
restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is
permitted under this Agreement.



     SECTION 10.12 Nature of Business. Alter in any material respect the character or
conduct of the business conducted by the Borrower and its Subsidiaries as of the Closing Date.



     SECTION 10.13 Impairment of Security Interests. Take or omit to take any action,
which might or would have the result of materially impairing the security interests in favor of the



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Administrative Agent with respect to the Collateral or grant to any Person (other than the
Administrative Agent for the benefit of itself and the Secured Parties pursuant to the Security
Documents) any interest whatsoever in the Collateral, except for Permitted Liens and Asset
Dispositions permitted under Section 10.5.



ARTICLE XI




DEFAULT AND REMEDIES




     SECTION 11.1 Events of Default. Each of the following shall constitute an Event of
Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court or any order, rule
or regulation of any Governmental Authority or otherwise:



     (a) Default in Payment of Principal of Loans and Reimbursement Obligations. The
Borrower or any other Credit Party shall default in any payment of principal of any Loan or
Reimbursement Obligation when and as due (whether at maturity, by reason of acceleration or
otherwise).



     (b) Other Payment Default. The Borrower or any other Credit Party shall default in
the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Loan or Reimbursement Obligation or the payment of any other Obligation, and such
default shall continue for a period of three (3) or more Business Days.



     (c) Misrepresentation. Any representation, warranty, certification or statement of
fact made or deemed made by or on behalf of the Borrower or any other Credit Party herein, in any
other Loan Document, or in any document delivered in connection herewith or therewith that is
subject to materiality or Material Adverse Effect qualifications, shall be incorrect or misleading
in any respect when made or deemed made or any representation, warranty, certification or statement
of fact made or deemed made by or on behalf of the Borrower or any other Credit Party herein, any
other Loan Document, or in any document delivered in connection herewith or therewith that is not
subject to materiality or Material Adverse Effect qualifications, shall be incorrect or misleading
in any material respect when made or deemed made.



     (d) Default in Performance of Certain Covenants. The Borrower or any other Credit
Party shall default in the performance or observance of any covenant or agreement contained in
Sections 5.4, 7.1, 7.2 or 7.5(e)(i) or Articles IX or
X.



     (e) Default in Performance of Other Covenants and Conditions. The Borrower or any
other Credit Party shall default in the performance or observance of any term, covenant, condition
or agreement contained in this Agreement (other than as specifically provided for otherwise in this
Section) or any other Loan Document and such default shall continue for a period of thirty (30)
days after written notice thereof has been given to the Borrower by the Administrative Agent.



     (f) Hedging Agreement. The Borrower or any other Credit Party shall default in the
performance or observance of any terms, covenant, condition or agreement (after giving effect to



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any applicable grace or cure period) under any Hedging Agreement and such default causes the
termination of such Hedging Agreement and the Termination Value owed by such Credit Party as a
result thereof exceeds $25,000,000.



     (g) Indebtedness Cross-Default.




     (i) Any “Event of Default” (as defined in the Canadian Credit Agreement) shall occur
under the Canadian Credit Agreement.




     (ii) Any default shall occur in the payment of any Indebtedness of the Borrower or any
of its Subsidiaries (other than the Loans, any Reimbursement Obligation or the Canadian
Credit Facility) the aggregate outstanding amount of which Indebtedness is in excess of
$25,000,000 beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness was created.




     (iii) Any default in the observance or performance of any other agreement or condition
relating to any Indebtedness of the Borrower or any of its Subsidiaries (other than the
Loans, any Reimbursement Obligation or the Canadian Credit Facility) the aggregate
outstanding amount of which Indebtedness is in excess of $25,000,000 or contained in any
instrument or agreement evidencing, securing or relating thereto or any other event shall
occur or condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, with the giving of notice if required, any such
Indebtedness to become due prior to its stated maturity (any applicable grace period having
expired).



     (h) Change in Control. Any Change in Control shall occur.



     (i) Voluntary Bankruptcy Proceeding. The Borrower or any of its Subsidiaries shall
(i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect),
(ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii)
consent to or fail to contest in a timely and appropriate manner any petition filed against it in
an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail
to contest in a timely and appropriate manner, the appointment of, or the taking of possession by,
a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi)
make a general assignment for the benefit of creditors, or (vii) take any corporate action for the
purpose of authorizing any of the foregoing.



     (j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced
against the Borrower or any of its Subsidiaries in any court of competent jurisdiction seeking (i)
relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment
of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the
Borrower or any of its Subsidiaries or for all or any substantial part of their respective assets,
domestic or foreign, and such case or proceeding shall continue without dismissal or stay



84









 







for a period of sixty (60) consecutive days, or an order granting the relief requested in such
case or proceeding (including, but not limited to, an order for relief under such federal
bankruptcy laws) shall be entered.



     (k) Failure of Agreements. Any provision of this Agreement or any provision of any
other Loan Document shall for any reason cease to be valid and binding on the Borrower or any other
Credit Party party thereto or any such Person shall so state in writing, or any Loan Document shall
for any reason cease to create a valid and perfected first priority Lien on, or security interest
in, any of the Collateral purported to be covered thereby, in each case other than in accordance
with the express terms hereof or thereof.



     (l) Termination Event. The occurrence of any of the following events: (i) the
Borrower or any of its Subsidiaries or any of their ERISA Affiliates fails to make full payment
when due of all amounts which, under the provisions of any Pension Plan or Section 412 of the Code,
the Borrower or any of its Subsidiaries or any of their ERISA Affiliates is required to pay as
contributions thereto, (ii) the Borrower or any of its Subsidiaries fails to make full payment when
due of all amounts which, under the provisions of any Canadian Pension Plan or other Applicable
Law, the Borrower or any of its Subsidiaries is required to pay as contributions thereto, (iii) an
accumulated funding deficiency in excess of $25,000,000 occurs or exists, whether or not waived,
with respect to any Pension Plan or Canadian Pension Plan, (iv) a Termination Event, (v) the
Borrower or any of its Subsidiaries or any of their ERISA Affiliates as employers under one or more
Multiemployer Plans makes a complete or partial withdrawal from any such Multiemployer Plan and the
plan sponsor of such Multiemployer Plan notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding $25,000,000 or (vi) the
Borrower or any of its Subsidiaries as employers under one or more Canadian Multiemployer Plans
makes a complete or partial withdrawal from any such Canadian Multiemployer Plan and the plan
sponsor of such Canadian Multiemployer Plans notifies such withdrawing employer that such employer
has incurred a withdrawal liability requiring payments in an amount exceeding $25,000,000.



     (m) Judgment. A judgment or order for the payment of money which causes the aggregate
amount of all such judgments or orders to exceed (i) $10,000,000 in the aggregate (to the extent
not covered by independent third-party insurance as to which the insurer does not dispute coverage)
or (ii) $50,000,000 in the aggregate (regardless of insurance) shall be entered against the
Borrower or any of its Subsidiaries by any court and such judgment or order shall continue without
having been paid and satisfied, discharged, vacated or stayed for a period of thirty (30) days
after the entry thereof.



     (n) Environmental. Any one or more Environmental Claims shall have been asserted
against the Borrower or any of its Subsidiaries; the Borrower or any of its Subsidiaries would be
reasonable likely to incur liability as a result thereof; and such liability would be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect.



     SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with the consent
of the Required Agreement Lenders, the Administrative Agent may, or upon the request of the
Required Agreement Lenders, the Administrative Agent shall, by notice to the Borrower:



85









 





     (a) Acceleration; Termination of Facilities. Terminate the Commitment and declare the
principal of and interest on the Loans and the Reimbursement Obligations at the time outstanding,
and all other amounts owed to the Lenders and to the Administrative Agent under this Agreement or
any of the other Loan Documents (including, without limitation, all L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have presented or shall be
entitled to present the documents required thereunder) and all other Obligations (other than
Hedging Obligations), to be forthwith due and payable, whereupon the same shall immediately become
due and payable without presentment, demand, protest or other notice of any kind, all of which are
expressly waived by each Credit Party, anything in this Agreement or the other Loan Documents to
the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to
request borrowings or Letters of Credit thereunder; provided, that upon the occurrence of
an Event of Default specified in Section 11.1(i) or (j), the Credit Facility shall
be automatically terminated and all Obligations (other than Hedging Obligations) shall
automatically become due and payable without presentment, demand, protest or other notice of any
kind, all of which are expressly waived by each Credit Party, anything in this Agreement or in any
other Loan Document to the contrary notwithstanding.



     (b) Letters of Credit. With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by
the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused
portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay the other Obligations on a pro rata basis. After all such Letters
of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been
satisfied and all other Obligations shall have been paid in full, the balance, if any, in such cash
collateral account shall be returned to the Borrower.



     (c) Rights of Collection. Exercise on behalf of the Lenders all of its other rights
and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy
all of the Borrower’s Obligations.



     SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of the
rights and remedies of the Administrative Agent and the Lenders set forth in this Agreement is not
intended to be exhaustive and the exercise by the Administrative Agent and the Lenders of any right
or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given hereunder or under the
other Loan Documents or that may now or hereafter exist at law or in equity or by suit or
otherwise. No delay or failure to take action on the part of the Administrative Agent or any
Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege or shall be construed to be
a waiver of any Event of Default. No course of dealing between the Borrower, the Administrative
Agent and the Lenders or their respective agents or employees shall be effective to change, modify
or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a
waiver of any Event of Default.



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     SECTION 11.4 Crediting of Payments and Proceeds. In the event that the Borrower shall
fail to pay any of the Obligations when due or the Obligations have been accelerated pursuant to
Section 11.2, all payments received by the Lenders upon the Obligations and all net
proceeds from the enforcement of the Obligations shall be applied:



     First, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts, including attorney fees, payable to the Administrative Agent in its
capacity as such and each Issuing Lender in its capacity as such (ratably among the Administrative
Agent and each Issuing Lender in proportion to the respective amounts described in this clause
First payable to them);



     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
fees (ratably among the Lenders in proportion to the respective 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 Reimbursement Obligations (including any accrued and unpaid interest
thereon) (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 and Reimbursement Obligations (ratably among the Lenders in proportion to the respective
amounts described in this clause Fourth held by them);



     Fifth, to the Administrative Agent for the account of each Issuing Lender, to cash
collateralize any L/C Obligations then outstanding (ratably among the Issuing Lenders in proportion
to the respective amounts described in this clause Fifth payable to them);



     Sixth, to the payment of that portion of the Obligations constituting Hedging
Obligations (including any termination payments and any accrued and unpaid interest thereon)
(ratably among the Secured Parties providing the Hedging Agreements giving rise to such Hedging
Obligations in proportion to the respective amounts described in this clause Sixth payable
to them); and



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



     SECTION 11.5 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 Credit 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 Borrower) 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



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unpaid and to file such other documents as may be necessary or advisable in order to have the
claims of the Lenders and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and
their respective agents and counsel and all other amounts due the Lenders and the Administrative
Agent under Sections 3.3, 4.3 and 13.3) 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 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, 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 3.3,
4.3 and 13.3.



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 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.




ARTICLE XII




THE ADMINISTRATIVE AGENT




     SECTION 12.1 Appointment and Authority. Each of the Lenders and each of the Issuing
Lenders hereby irrevocably appoints Wachovia 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 Issuing Lenders, and neither the Borrower nor any of its Subsidiaries shall
have rights as a third party beneficiary of any of such provisions.



     SECTION 12.2 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 Borrower
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.



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     SECTION 12.3 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 Required Agreement Lenders, as applicable (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 Borrower or any of its 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 Required Agreement Lenders, as applicable (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
Section 13.2 and Section 11.2) or (ii) in the absence of its own gross negligence
or willful misconduct as determined by a court of competent jurisdiction by final nonappealable
judgment. 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 Borrower, a Lender
or an Issuing Lender in accordance with Section 13.1. In the event that the Administrative
Agent receives such a notice, it shall promptly give notice thereof to the Lenders and the Issuing
Lenders.



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 V or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the Administrative Agent.




     SECTION 12.4 Reliance by the 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



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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 applicable Issuing Lender, the Administrative Agent may presume that such condition
is satisfactory to such Lender or such Issuing Lender unless the Administrative Agent shall have
received notice to the contrary from such Lender or such Issuing Lender 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 Borrower), 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.



     SECTION 12.5 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.



     SECTION 12.6 Resignation of Administrative Agent.



     (a) The Administrative Agent may at any time give notice of its resignation to the Lenders,
each Issuing Lender and the Borrower. Upon receipt of any such notice of resignation, the Required
Agreement Lenders shall have the right, in consultation with the Borrower, 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. If no such successor shall have been so appointed by the Required
Agreement 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 Issuing Lenders, appoint a successor Administrative Agent meeting the
qualifications set forth above provided that if the Administrative Agent shall notify the Borrower
and the Lenders that no qualifying Person has accepted such appointment, then such resignation
shall nonetheless become effective in accordance with such notice and (i) the retiring
Administrative Agent shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any collateral security held by the Administrative
Agent on behalf of any Lender or any Issuing Lender under any of the Loan Documents, the retiring
Administrative Agent shall continue to hold such collateral security until such time as a successor
Administrative Agent is appointed) and (ii) 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 each Issuing Lender directly, until such time as the Required Agreement Lenders appoint
a successor Administrative Agent as provided for above in this paragraph. 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)



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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 paragraph). The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. After the retiring Administrative Agent’s resignation
hereunder and under the other Loan Documents, the provisions of this Article and Section
13.3 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.



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



     SECTION 12.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender and
each Issuing Lender 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 each Issuing Lender 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 taking action under or based
upon this Agreement, any other Loan Document or any related agreement or any document furnished
hereunder or thereunder.



     SECTION 12.8 No Other Duties, etc. Anything herein to the contrary notwithstanding,
none of the syndication agents, documentation agents, co-agents, book manager, lead manager,
arranger, lead arranger or co-arranger listed on the cover page or signature pages 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 an
Issuing Lender hereunder.



     SECTION 12.9 Collateral and Guaranty Matters. The Lenders irrevocably authorize the
Administrative Agent, at its option and in its discretion,



     (a) to release any Lien on any Collateral granted to or held by the Administrative Agent, for
the ratable benefit of the Secured Parties, under any Loan Document (i) upon repayment of the
outstanding principal of and all accrued interest on the Loans and Reimbursement Obligations,
payment of all outstanding fees and expenses hereunder, the



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termination of the Commitment and the expiration or termination of all Letters of Credit, (ii)
that is sold or to be sold or otherwise transferred as part of or in connection with any sale or
transfer permitted hereunder or under any other Loan Document, or (iii) subject to Section
13.2, if approved, authorized or ratified in writing by the Required Agreement Lenders;



     (b) to subordinate or release any Lien on any Collateral granted to or held by the
Administrative Agent under any Loan Document to the holder of any Permitted Lien; and



     (c) to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty
Agreement, the Collateral Agreement and any other Loan Documents if such Person ceases to be a
Subsidiary as a result of a transaction(s) permitted hereunder.



Upon request by the Administrative Agent at any time, the Required Agreement Lenders will confirm
in writing the Administrative Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Subsidiary Guarantor from its obligations
under the Subsidiary Guaranty Agreement pursuant to this Section.



ARTICLE XIII




MISCELLANEOUS




     SECTION 13.1 Notices.



     (a) Method of Communication. Except as otherwise provided in this Agreement, all
notices and communications hereunder shall be in writing (for purposes hereof, the term “writing”
shall include information in electronic format such as electronic mail and internet web pages), or
by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand
delivery or sent via electronic mail, posting on an internet web page, telecopy, recognized
overnight courier service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or sent by electronic
mail, posting on an internet web page, telecopy, (ii) on the next Business Day if sent by
recognized overnight courier service and (iii) on the third (3rd) Business Day following
the date sent by certified mail, return receipt requested. A telephonic notice to the
Administrative Agent as understood by the Administrative Agent will be deemed to be the controlling
and proper notice in the event of a discrepancy with or failure to receive a confirming written
notice.



     (b) Addresses for Notices. Notices to any party shall be sent to it at the following
addresses, or any other address as to which all the other parties are notified in writing.



	 	 	 	 
	 	If to the Borrower:

	 	Bowater Incorporated
	 

	 	 	55 East Camperdown Way
	 

	 	 	Greenville, SC 29602-1028
	 

	 	 	Attention: Treasurer
	 

	 	 	Telephone No.: (864) 282-9413
	 

	 	 	Telecopy No.: (864) 282-9219
	 
	 	 	 
	 	With copies to:

	 	Pepper Hamilton LLP






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	 	 	3000 Two Logan Square
	 

	 	 	Philadelphia, Pennsylvania 19103
	 

	 	 	Attention: J. Bradley Boericke
	 

	 	 	Telephone No.: (215) 981-4790
	 

	 	 	Telecopy No.: (215) 689-4615
	 
	 	 	 
	 	If to Wachovia as

	 	Wachovia Bank, National Association
	 	Administrative Agent:

	 	Charlotte Plaza, CP-8
	 

	 	 	201 South College Street
	 

	 	 	Charlotte, North Carolina 28288-0680
	 

	 	 	Attention: Syndication Agency Services
	 

	 	 	Telephone No.: (704) 374-2698
	 

	 	 	Telecopy No.: (704) 383-0288
	 
	 	 	 
	 	If to any Lender:

	 	To the address set forth on the Register






     (c) Administrative Agent’s Office. The Administrative Agent hereby designates its
office located at the address set forth above, or any subsequent office which shall have been
specified for such purpose by written notice to the Borrower and Lenders, as the Administrative
Agent’s Office referred to herein, to which payments due are to be made and at which Loans will be
disbursed and Letters of Credit requested.



     SECTION 13.2 Amendments, Waivers and Consents. Except as set forth below or as
specifically provided in any Loan Document, any term, covenant, agreement or condition of this
Agreement or any of the other Loan Documents may be amended or waived by the Lenders, and any
consent given by the Lenders, if, but only if, (a) in the case of an amendment, waiver or consent
for which a substantially similar corresponding amendment, waiver or consent with regard to the
Canadian Credit Agreement will be made effective thereunder contemporaneously, such amendment,
waiver or consent is in writing signed by the Required Lenders (or by the Administrative Agent with
the consent of the Required Lenders) and delivered to the Administrative Agent and, in the case of
an amendment, signed by the Borrower and (b) in the case of any other amendment, waiver or consent
specifically impacting only this Agreement and the other Loan Documents, such amendment, waiver or
consent is in writing signed by the Required Agreement Lenders (or by the Administrative Agent with
the consent of the Required Agreement Lenders) and delivered to the Administrative Agent and, in
the case of an amendment, signed by the Borrower; provided, that no amendment, waiver or
consent shall:



     (a) waive any condition set forth in Section 5.2 without the written consent of each
Lender directly affected thereby;



     (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 11.2) or the amount of Loans of any Lender without the written consent
of such Lender;



     (c) postpone any date fixed by this Agreement or any other Loan Document for any payment 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



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directly affected thereby; provided, that only the consent of the Required Lenders
shall be necessary in order to waive (in whole or in part) any prepayment required pursuant to
Section 8.2(b).



     (d) reduce the principal of, or the rate of interest specified herein on, any Loan or
Reimbursement Obligation, or (subject to clause (iv) of the second proviso to this Section) any
fees or other amounts payable hereunder or under any other Loan Document without the written
consent of each Lender directly affected thereby; provided that only the consent of the
Required Agreement Lenders shall be necessary to waive any obligation of the Borrower to pay
interest at the rate set forth in Section 4.1(c) during the continuance of an Event of
Default;



     (e) change Section 4.4 or Section 11.4 in a manner that would alter the
pro rata sharing of payments required thereby without the written consent of each
Lender directly affected thereby;



     (f) change any provision of this Section or the definitions of “Required Lenders” or “Required
Agreement 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 and each Canadian Lender
directly affected thereby;



     (g) increase the percentage specified in the definition of “Asset Coverage Amount”; reduce or
eliminate any of the Indebtedness specified in part (b) of the definition of “Consolidated Total
Senior Secured Indebtedness” in determining the Borrowing Limit; or add additional categories or
types of assets to the definition of “Coverage Assets”, in each case without the written consent of
each Lender directly affected thereby;



     (h) release all of the Subsidiary Guarantors or release Subsidiary Guarantors comprising
substantially all of the credit support for the Obligations, in either case, from the Subsidiary
Guaranty Agreement (other than as authorized in Section 12.9), without the written consent
of each Lender;



     (i) release all or substantially all of the Collateral or release any Security Document (other
than as authorized in Section 12.9 or as otherwise specifically permitted or contemplated
in this Agreement or the applicable Security Document) without the written consent of each Lender;
or



     (j) change Article XI of the Canadian Credit Agreement without the written consent of
each Lender;



     (k) add as Collateral any assets of any Person that is not organized under the laws of the
United States or any state thereof without the written consent of the Canadian Administrative Agent
and the Canadian Required Agreement Lenders (it being understood that under the terms of the
Canadian Credit Agreement a vote of the Administrative Agent and the Required Agreement Lenders
shall be required to add as Collateral for the Canadian Credit Facility any assets of any Person
that is not organized under the laws of Canada or any province thereof); or



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     (l) join as a Credit Party any Person that is not organized under the laws of the United
States or any state thereof without the written consent of the Canadian Administrative Agent and
the Canadian Required Agreement Lenders (it being understood that under the terms of the Canadian
Credit Agreement a vote of the Administrative Agent and the Required Agreement Lenders shall be
required to join as a Canadian Credit Party any Person that is not organized under the laws of
Canada or any province thereof);


provided further, that (i) no amendment, waiver or consent shall, unless in writing
and signed by the applicable Issuing Lender in addition to the Lenders required above, affect the
rights or duties of such Issuing Lender 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 Swingline Lender in addition to the Lenders required
above, affect the rights or duties of the Swingline 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; and (iv) 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.




     SECTION 13.3 Expenses; Indemnity.



     (a) Costs and Expenses. The Borrower and the other Credit Parties, jointly and
severally, 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 each Issuing Lender 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
any Issuing Lender (including the fees, charges and disbursements of any counsel for the
Administrative Agent, any Lender or any Issuing Lender), 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. The Borrower and the other Credit Parties shall indemnify the
Administrative Agent (and any sub-agent thereof), each Lender and each Issuing Lender, 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
(including, without limitation, any Environmental Claims or civil penalties or fines assessed by
OFAC), damages, liabilities and related expenses (including the fees, charges and disbursements



95









 







of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any
Indemnitee by any third party or by the Borrower or any other Credit 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 or the consummation of the
transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or
proposed use of the proceeds therefrom (including any refusal by any Issuing Lender 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
Borrower or any of its Subsidiaries, or any Environmental Claim related in any way to the Borrower
or any of its Subsidiaries, (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 Borrower or any other Credit Party, and regardless of
whether any Indemnitee is a party thereto, or (v) any claim (including, without limitation, any
Environmental Claims or civil penalties or fines assessed by OFAC), investigation, litigation or
other proceeding (whether or not the Administrative Agent or any Lender is a party thereto) and the
prosecution and defense thereof, arising out of or in any way connected with the Loans, this
Agreement, any other Loan Document, or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby, including without limitation,
reasonable attorneys and consultant’s fees, 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 the Borrower or any other Credit Party against an Indemnitee for
breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if
the Borrower or such Credit 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 Borrower for any reason fails to
indefeasibly pay any amount required under clause (a) or (b) of this Section to be paid by it to
the Administrative Agent (or any sub-agent thereof), any Issuing Lender or any Related Party of any
of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such
sub-agent), such Issuing Lender or such Related Party, as the case may be, such Lender’s Commitment
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 such Issuing Lender 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 such Issuing Lender in connection with such capacity. The obligations of
the Lenders under this clause (c) are subject to the provisions of Section 4.7.



     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
Applicable Law, the Borrower and each other Credit Party shall not assert, and hereby waives, any
claim against any Indemnitee, on any theory of liability, for special, indirect, consequential



96









 







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 clause (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 promptly after
demand therefor.



     SECTION 13.4 Right of Set-off. If an Event of Default shall have occurred and be
continuing, each Lender, each Issuing Lender, the Swingline Lender and each of their respective
Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted
by Applicable Law, to set off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender, such Issuing Lender, the Swingline Lender or any such
Affiliate to or for the credit or the account of the Borrower or any other Credit Party against any
and all of the obligations of the Borrower or such Credit Party now or hereafter existing under
this Agreement or any other Loan Document to such Lender, such Issuing Lender or the Swingline
Lender, irrespective of whether or not such Lender, such Issuing Lender or the Swingline Lender
shall have made any demand under this Agreement or any other Loan Document and although such
obligations of the Borrower or such Credit Party may be contingent or unmatured or are owed to a
branch or office of such Lender, such Issuing Lender or the Swingline Lender different from the
branch or office holding such deposit or obligated on such indebtedness. The rights of each
Lender, each Issuing Lender, the Swingline Lender and their respective Affiliates under this
Section are in addition to other rights and remedies (including other rights of setoff) that such
Lender, such Issuing Lender, the Swingline Lender or their respective Affiliates may have. Each
Lender, each Issuing Lender and the Swingline Lender agrees to notify the Borrower and the
Administrative Agent promptly after any such setoff and application; provided that the
failure to give such notice shall not affect the validity of such setoff and application.



     SECTION 13.5 Governing Law.



     (a) Governing Law. This Agreement and the other Loan Documents, unless expressly set
forth therein, shall be governed by, and construed in accordance with, the law of the State of New
York, without reference to the conflicts of law principles thereof.



     (b) Submission to Jurisdiction. The Borrower and each other Credit Party irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the
courts of the State of New York sitting in New York County and of the United States District Court
for the Southern District of New York, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any other Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such action or proceeding may be heard



97









 







and determined in such New York State court or, to the fullest extent permitted by Applicable
Law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan
Document shall affect any right that the Administrative Agent, any Lender or any Issuing Lender may
otherwise have to bring any action or proceeding relating to this Agreement or any other Loan
Document against the Borrower or any other Credit Party or its properties in the courts of any
jurisdiction.



     (c) Waiver of Venue. The Borrower and each other Credit Party irrevocably and
unconditionally waives, to the fullest extent permitted by Applicable Law, any objection that it
may now or hereafter have to the laying of venue of any action or proceeding arising out of or
relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of
this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by Applicable Law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.



     (d) Service of Process. Each party hereto irrevocably consents to service of process
in the manner provided for notices in Section 13.1. Nothing in this Agreement will affect
the right of any party hereto to serve process in any other manner permitted by Applicable Law.



     SECTION 13.6 Waiver of Jury Trial. 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 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



     SECTION 13.7 Reversal of Payments. To the extent the Borrower makes a payment or
payments to the Administrative Agent for the ratable benefit of the Lenders or the Administrative
Agent receives any payment or proceeds of the Collateral which payments or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid,
the Obligations or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment or proceeds had not been received by the Administrative Agent.



     SECTION 13.8 Injunctive Relief; Punitive Damages.



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     (a) The Borrower recognizes that, in the event the Borrower fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove
to be inadequate relief to the Lenders. Therefore, the Borrower agrees that the Lenders, at the
Lenders’ option, shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.



     (b) The Administrative Agent, the Lenders and the Borrower (on behalf of itself and the other
Credit Parties) hereby agree that no such Person shall have a remedy of punitive or exemplary
damages against any other party to a Loan Document and each such Person hereby waives any right or
claim to punitive or exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through arbitration or judicially.



     SECTION 13.9 Accounting Matters. 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
Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the
Borrower 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, (a) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and (b) the 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.



     SECTION 13.10 Successors and Assigns; Participations.



     (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 Borrower nor any other Credit 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 paragraph (b) of this Section, (ii) by way of participation in accordance with the
provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of paragraph (f) 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
paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties
of each of the Administrative Agent 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 at the time owing to it); provided that



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     (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 applicable 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 (A) such
assignment is made to an existing Lender, to an Affiliate thereof, or to an Approved Fund,
in which case no minimum amount shall apply, or (B) each of the Administrative Agent and, so
long as no Default or Event of Default has occurred and is continuing, the Borrower
otherwise consent (each such consent not to be unreasonably withheld or delayed);




     (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;




     (iii) (A) the consent of the Administrative Agent (such consent not to be unreasonably
withheld or delayed) shall be required for any assignment in respect of the Credit Facility
if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an
Approved Fund with respect to such Lender, (B) the consent of each Issuing Lender (such
consent not to be unreasonably withheld or delayed) shall be required for any assignment
that increases the obligation of the assignee to participate in exposure under one or more
Letters of Credit (whether or not then outstanding) and (C) the consent of the Swingline
Lender (such consent not to be unreasonably withheld or delayed) shall be required for any
assignment in respect of the Credit Facility; 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 of $3,500
for each assignment, 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 paragraph (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 4.8, 4.9, 4.10, 4.11 and
13.3 with respect to facts and circumstances occurring prior to the effective date of such
assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this


100









 






Agreement as a sale by such Lender of a participation in such rights and obligations in accordance
with paragraph (d) of this Section.




     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at one of its offices in Charlotte, North Carolina, 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 Commitment of, and principal amounts of the Loans 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 Borrower, 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 the Borrower and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.



     (d) Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrower and the Administrative Agent (except that notice shall be provided to the Borrower and
the Administrative Agent with respect to any participations to a Person that would be a Foreign
Lender), sell participations to any Person (other than a natural person or the Borrower or any of
the Borrower’s 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 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 Borrower, the
Administrative Agent and the other Lenders 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, modification or waiver or modification described in
Section 13.2 that directly affects such Participant. Subject to paragraph (e) of this
Section, the Borrower agrees that each Participant shall be entitled to the benefits of
Sections 4.8, 4.9, 4.10 and 4.11 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To
the extent permitted by law, each Participant also shall be entitled to the benefits of Section
13.4 as though it were a Lender, provided such Participant agrees to be subject to Section
4.6 as though it were a Lender.



     (e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Sections 4.10 and 4.11 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 Borrower’s 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 4.11 unless (i) the Borrower is notified of the participation sold
to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with
Section 4.11(e) as though it were a Lender and (ii) the applicable Lender shall provide the
Borrower with satisfactory evidence that the participation is in registered form and shall permit
the Borrower to



101









 







review such register as reasonably needed for the Borrower to comply with its obligations
under Applicable Laws.



     (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 to secure obligations of such Lender,
including without limitation 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.



     SECTION 13.11 Confidentiality. Each of the Administrative Agent and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that Information may be
disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (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, or required to be disclosed
to, any rating agency, or regulatory or similar authority (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 under this Agreement or under any other
Loan Document (or any Hedging Agreement with a Lender or the Administrative Agent) or any action or
proceeding relating to this Agreement or any other Loan Document (or any Hedging Agreement with a
Lender or the Administrative Agent) 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 purchasing Lender, proposed purchasing Lender, Participant or proposed Participant, or (ii)
any actual or prospective counterparty (or its advisors) to any swap or derivative transaction
relating to the Borrower and its obligations, (g) with the consent of the Borrower, (h) to Gold
Sheets and other similar bank trade publications, such information to consist of deal terms and
other information customarily found in such publications, or (i) 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 or any Lender on a nonconfidential basis from a source other
than the Borrower or (j) to governmental regulatory authorities in connection with any regulatory
examination of the Administrative Agent or any Lender or in accordance with the Administrative
Agent’s or any Lender’s regulatory compliance policy if the Administrative Agent or such Lender
deems necessary for the mitigation of claims by those authorities against the Administrative Agent
or such Lender or any of its subsidiaries or affiliates. For purposes of this Section,
“Information” means all information received from any Credit Party relating to any Credit
Party or any of their respective businesses, other than any such information that is available to
the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by any Credit
Party; provided that, in the case of information received from a Credit Party 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.



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     SECTION 13.12 Performance of Duties. Each of the Credit Party’s obligations under
this Agreement and each of the other Loan Documents shall be performed by such Credit Party at its
sole cost and expense.



     SECTION 13.13 All Powers Coupled with Interest. All powers of attorney and other
authorizations granted to the Lenders, the Administrative Agent and any Persons designated by the
Administrative Agent or any Lender pursuant to any provisions of this Agreement or any of the other
Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of
the Obligations remain unpaid or unsatisfied, any of the Commitment remains in effect or the Credit
Facility has not been terminated.



     SECTION 13.14 Survival of Indemnities. Notwithstanding any termination of this
Agreement, the indemnities to which the Administrative Agent and the Lenders are entitled under the
provisions of this Article XIII and any other provision of this Agreement and the other
Loan Documents shall continue in full force and effect and shall protect the Administrative Agent
and the Lenders against events arising after such termination as well as before.



     SECTION 13.15 Titles and Captions. Titles and captions of Articles, Sections and
subsections in, and the table of contents of, this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.



     SECTION 13.16 Severability of Provisions. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without
invalidating the remainder of such provision or the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any other jurisdiction.



     SECTION 13.17 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and shall be binding upon all parties, their successors
and assigns, and all of which taken together shall constitute one and the same agreement.



     SECTION 13.18 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.



     SECTION 13.19 Term of Agreement. This Agreement shall remain in effect from the
Closing Date through and including the date upon which all Obligations arising hereunder or under
any other Loan Document shall have been indefeasibly and irrevocably paid and satisfied in full and
the Commitment has been terminated. No termination of this Agreement shall affect



103









 







the rights and obligations of the parties hereto arising prior to such termination or in
respect of any provision of this Agreement which survives such termination.



     SECTION 13.20 Advice of Counsel, No Strict Construction. Each of the parties
represents to each other party hereto that it has discussed this Agreement with its counsel. The
parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.



     SECTION 13.21 USA Patriot Act. The Administrative Agent and each Lender hereby
notifies the Borrower 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 Borrower and each Subsidiary Guarantor, which
information includes the name and address of each Borrower and each Subsidiary Guarantor and other
information that will allow such Lender to identify such Borrower or Subsidiary Guarantor in
accordance with the Act.



     SECTION 13.22 Inconsistencies with Other Documents; Independent Effect of Covenants.



     (a) In the event there is a conflict or inconsistency between this Agreement and any other
Loan Document, the terms of this Agreement shall control; provided that any provision of
the Security Documents which imposes additional burdens on the Borrower or its Subsidiaries or
further restricts the rights of the Borrower or its Subsidiaries or gives the Administrative Agent
or Lenders additional rights shall not be deemed to be in conflict or inconsistent with this
Agreement and shall be given full force and effect.



     (b) The Borrower expressly acknowledges and agrees that each covenant contained in
Articles VIII, IX, or X hereof shall be given independent effect.
Accordingly, the Borrower shall not engage in any transaction or other act otherwise permitted
under any covenant contained in Articles VIII, IX, or X if, before or after
giving effect to such transaction or act, the Borrower shall or would be in breach of any other
covenant contained in Articles VIII, IX, or X.



[Signature pages to follow]




104









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by
their duly authorized officers, all as of the day and year first written above.



	 	 	 	 	 
	 	BOWATER INCORPORATED, as Borrower

 	 
	 	By:  	/s/ William G. Harvey
 	 
	 	 	William G. Harvey 	 
	 	 	Senior Vice President and

Chief Financial Officer 	 
	 



[Credit Agreement — Bowater Incorporated]





 









 





	 	 	 	 	 
	 	AGENTS AND LENDERS:





WACHOVIA BANK, NATIONAL ASSOCIATION,

as Administrative Agent, Swingline Lender, Issuing

Lender and Lender

 	 
	 	By:  	/s/ Scott Joyce
 	 
	 	 	Name:  	Scott Joyce 	 
	 	 	Title:  	Vice President 	 
	 



[Credit Agreement — Bowater Incorporated]





 









 





	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A, as Lender

 	 
	 	By:  	               /s/ Peter S. Predun
 	 
	 	 	Name:  	Peter S. Predun 	 
	 	 	Title:  	Vice President 	 
	 



[Credit Agreement — Bowater Incorporated]





 









 





	 	 	 	 	 
	 	UBS LOAN FINANCE LLC, as Lender

 	 
	 	By:  	              /s/ Richard L. Tavrow
 	 
	 	 	Name:  	Richard L. Tavrow 	 
	 	 	Title:  	Director, Bank Products Services, US 	 
	 



	 	 	 	 	 
	 	 	 
	 	By:  	              /s/ Irja R. Otsa
 	 
	 	 	Name:  	Irja R. Otsa 	 
	 	 	Title:  	Associate Director,

Bank Products Services, US 	 
	 



[Credit Agreement — Bowater Incorporated]









 









 











	 	 	 	 	 
	 	WELLS FARGO FOOTHILL, LLC, as Lender

 	 
	 	By:  	/s/ Dennis King
 	 
	 	 	Name:  	Dennis King 	 
	 	 	Title:  	Vice President 	 
	 



[Credit Agreement — Bowater Incorporated]





 









 





Annex A




LENDER AUTHORIZATION




Bowater Incorporated

Credit Agreement




May __, 2006




Wachovia Bank, National Association

Charlotte Plaza, CP-8

201 South College Street

Charlotte, North Carolina 28288-0680

Attention: Syndication Agency Services





			
	     Re:	 	Credit Agreement dated as of May 31, 2006 (as amended, the “Credit
Agreement”) by and among Bowater Incorporated (the “Borrower”), the banks
and financial institutions party thereto, as lenders, and Wachovia Bank, National
Association, as administrative agent (the “Administrative Agent”)





     This Authorization acknowledges our receipt and review of the execution copy of the Credit
Agreement in the form posted on SyndTrak Online. By executing this Authorization, we hereby
approve the Credit Agreement and authorize the Administrative Agent to execute and deliver the
Credit Agreement on our behalf.



     Each financial institution executing this Authorization agrees or reaffirms that it shall be a
party to the Credit Agreement and the other Loan Documents (as defined in the Credit Agreement) to
which Lenders are parties and shall have the rights and obligations of a Lender (as defined in the
Credit Agreement), and agrees to be bound by the terms and provisions applicable to a “Lender”,
under each such agreement. In furtherance of the foregoing, each financial institution executing
this Authorization agrees to execute any additional documents reasonably requested by the
Administrative Agent to evidence such financial institution’s rights and obligations under the
Credit Agreement.




	 	 	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	[Insert name of applicable financial institution]
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 	 	Name:	 	 
	 

	 	 	 	 	 	 
	 	 	Title: