**Exhibit 10.6**

 

EXECUTION COPY

 

RECEIVABLES SALE AND SERVICING AGREEMENT

 

Dated as of November 25, 2005

 

by and among

 

EACH OF THE ENTITIES PARTY HERETO FROM TIME TO TIMEAS ORIGINATORS,

 

VERTIS RECEIVABLES II, LLC,

 

as Buyer,

 

and

 

VERTIS, INC.,

 

as Servicer

 

 

Receivables Sale and ServicingAgreement

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TABLE OF CONTENTS

 
|                                                       | **Page**                                                                         |
|------------------------------------------------------------|----------------------------------------------------------------------------------|
|                                                       |                                                                             |
| ARTICLE I DEFINITIONS AND  INTERPRETATION             | 1                                                                                |
|                                                       |                                                                             |   |
|                                                       | Section 1.01. Definitions                                                   | 1 |
|                                                       | Section 1.02. Rules of  Construction                                   | 1 |
|                                                       |                                                                             |   |
| ARTICLE II TRANSFERS OF  RECEIVABLES                  | 2                                                                                |
|                                                       |                                                                             |
|                                                       | Section 2.01. Agreement to  Transfer                                        | 2 |
|                                                       | Section 2.02. Grant of  Security Interest                                   | 3 |
|                                                       | Section 2.03. Originator  Support Agreement                                 | 3 |
|                                                       | Section 2.04. Originators  Remain Liable                                    | 4 |
|                                                       |                                                                             |   |
| ARTICLE III CONDITIONS  PRECEDENT                     | 4                                                                                |
|                                                       |                                                                             |   |
|                                                       | Section 3.01. Conditions  Precedent to Initial Transfer                     | 4 |
|                                                       | Section 3.02. Termination of  Transfers                                     | 5 |
|                                                       |                                                                             |   |
| ARTICLE IV REPRESENTATIONS,  WARRANTIES AND COVENANTS | 5                                                                                |
|                                                       |                                                                             |   |
|                                                       | Section 4.01. Representations  and Warranties of the Transaction Parties    | 5 |
|                                                       | Section 4.02. Affirmative  Covenants of the Originators                     | 13 |
|                                                       | Section 4.03. Negative  Covenants of the Originators                        | 19 |
|                                                       | Section 4.04. Breach of  Representations, Warranties or Covenants           | 22 |
|                                                       |                                                                             |   |
| ARTICLE V INDEMNIFICATION                             | 22                                                                               |
|                                                       |                                                                             |   |
|                                                       | Section 5.01. Indemnification                                               | 22 |
|                                                       | Section 5.02. Indemnities by  the Servicer                                  | 24 |
|                                                       |                                                                             |   |
| ARTICLE VI MISCELLANEOUS                              | 25                                                                               |
|                                                       |                                                                             |   |
|                                                       | Section 6.01. Notices                                                       | 25 |
|                                                       | Section 6.02. No Waiver;  Remedies                                          | 26 |
|                                                       | Section 6.03. Successors and  Assigns                                       | 27 |
|                                                       | Section 6.04. Termination;  Survival of Obligations.                        | 27 |
|                                                       | Section 6.05. Complete  Agreement; Modification of Agreement                | 28 |
|                                                       | Section 6.06. Amendments and  Waivers                                       | 28 |
|                                                       | Section 6.07. Governing Law;  Consent to Jurisdiction; Waiver of Jury Trial | 28 |
|                                                       | Section 6.08. Counterparts                                                  | 29 |
|                                                       | Section 6.09. Severability                                                  | 29 |
|                                                       | Section 6.10. Section Titles                                           | 30 |
|                                                       | Section 6.11. No Setoff                                                     | 30 |
|                                                       | Section 6.12. Confidentiality                                               | 30 |
|                                                       | Section 6.13. Further  Assurances                                           | 31 |

 

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|                                              | Section 6.14. Fees and  Expenses                           | 32     |
|---------------------------------------------------|-----------------------------------------------------------------|--------|
|                                              | Section 6.15. Nonrecourse  Obligations                     | 32     |
|                                              |                                                            |   |
| ARTICLE VII SERVICER  PROVISIONS             | 32                                                              |
|                                              |                                                            |   |
|                                              | Section 7.01. Appointment of  the Servicer                 | 32     |
|                                              | Section 7.02. Duties and  Responsibilities of the Servicer | 32     |
|                                              | Section 7.03. Collections on  Receivables                  | 33     |
|                                              | Section 7.04. Covenants of the  Servicer                   | 35     |
|                                              | Section 7.05. Reporting  Requirements of the Servicer      | 39     |
|                                              |                                                            |   |
| ARTICLE VIII EVENTS OF  SERVICER TERMINATION | 39                                                              |
|                                              |                                                            |   |
|                                              | Section 8.01. Events of  Servicer Termination              | 39     |
|                                              |                                                            |   |
| ARTICLE IX SUCCESSOR SERVICER  PROVISIONS    | 42                                                              |
|                                              |                                                            |   |
|                                              | Section 9.01. Servicer Not to  Resign                      | 42     |
|                                              | Section 9.02. Appointment of  the Successor Servicer       | 43     |
|                                              | Section 9.03. Duties of the  Servicer                      | 43     |
|                                              | Section 9.04. Effect of  Termination or Resignation        | 44     |
|                                              | Section 9.05. Power of  Attorney                           | 44     |

 

INDEX OF APPENDICES

 
| Exhibit 2.01(a)        | Form of Receivables Assignment                                                                                               |   |
|-----------------------------|-----------------------------------------------------------------------------------------------------------------------------------|--------|
| Exhibit 2.01(c)(ii)    | Form of Subordinated Note                                                                                                    |   |
| Exhibit 2.03           | Form of Originator Support Agreement                                                                                         |   |
| Exhibit 9.05           | Form of Power of Attorney                                                                                                    |   |
|                        |                                                                                                                              |   |
| Schedule 4.01(b)  | Jurisdiction of Organization; Executive  Offices; Collateral Locations; Corporate, Legal and Other Names;  Identification Numbers |   |
| Schedule 4.01(j)       | Intellectual Property                                                                                                             |   |
| Schedule 4.01(k)       | Investigations, Audits, Etc.                                                                                                      |   |
| Schedule 4.01(l)       | Litigation                                                                                                                        |   |
| Schedule 4.01(n)       | ERISA                                                                                                                             |   |
| Schedule 4.01(o)       | Deposit and Disbursement Accounts                                                                                                 |   |
| Schedule 4.01(z)       | Supplementary Representations                                                                                                     |   |
| Schedule 4.02(g)       | Conduct of Business                                                                                                               |   |
|                        |                                                                                                                              |   |
| Annex X                     | Definitions and Interpretations                                                                                                   |   |
| Annex Y                     | Schedule of Documents                                                                                                        |   |
| Annex Z                     | Financial Test                                                                                                                    |   |

 

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THIS RECEIVABLES SALE AND SERVICING AGREEMENT(as amended, restated, supplemented or otherwise modified and in effect fromtime to time, this “Agreement”) is entered into as of November 25,2005 by and among each of the persons signatory hereto from time to time asOriginators, each an “Originator” and, collectively, the “Originators”),VERTIS, INC. (“Parent”), a Delaware corporation, in its capacity asservicer hereunder (in such capacity, the “Servicer”) and VERTISRECEIVABLES II, LLC, a Delaware limited liability company (“Buyer”).

 

RECITALS

 

A.                                   Buyer is a specialpurpose limited liability company the sole member of which is the Parent.

 

B.                                     Buyer has beenformed for the sole purpose of purchasing all Receivables originated by eachOriginator and to finance such Receivables under the Funding Agreement.

 

C.                                     Each Originatorintends to sell, and Buyer intends to purchase, such Receivables, from time totime, as described herein.

 

D.                                    In addition, theMember may, from time to time, contribute capital to Buyer in the form ofContributed Receivables or cash.

 

E.                                      In order toeffectuate the purposes of this Agreement and the Funding Agreement, Buyerdesires to appoint Parent to service, administer and collect the Receivablessecuring the Advances pursuant to this Agreement and Parent is willing to actin such capacity as Servicer hereunder on the terms and conditions set forthherein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of thepremises and the mutual covenants hereinafter contained, and for other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereto agree as follows:

 

# **ARTICLE IDEFINITIONS AND INTERPRETATION**

# ** **

## Section 1.01.  Definitions.  Capitalized terms used and not otherwisedefined herein shall have the meanings ascribed to them in Annex X.

##  

## Section 1.02.  Rules ofConstruction.  For purposes of thisAgreement, the rules of construction set forth in Annex X shallgovern.  All Appendices hereto, orexpressly identified to this Agreement, are incorporated herein by referenceand, taken together with this Agreement, shall constitute but a singleagreement.

 

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# **ARTICLE IITRANSFERS OF RECEIVABLES**

# ** **

## Section 2.01.  Agreementto Transfer.

##  

### (a)                                  ReceivablesTransfers.  Subject to the terms andconditions hereof, each Originator agrees to sell (without recourse except tothe limited extent specifically provided herein) or, in the case of the Member,sell or contribute, to Buyer on the Effective Date and on each Business Daythereafter until the Commitment Termination Date (each such date, a “TransferDate”) all Receivables owned by it on each such Transfer Date, and Buyeragrees to purchase or acquire as a capital contribution all such Receivables oneach such Transfer Date.  All suchTransfers by an Originator to Buyer shall collectively be evidenced by acertificate of assignment substantially in the form of Exhibit 2.01(a) (each,a “Receivables Assignment,” and collectively, the “Receivables Assignments”),and each Originator and Buyer shall execute and deliver a ReceivablesAssignment on or before the Effective Date.

###  

### (b)                                 Determinationof Sold Receivables.  On and as ofeach Transfer Date, (i) all Receivables then owned by each Originator(other than the Member) and not previously acquired by Buyer shall be soldimmediately upon its creation, and (ii) to the extent Receivables thenowned by the Member have not been contributed to Buyer in accordance with Section 2.01(d),such Receivables shall be sold to Buyer (each such Receivable sold immediatelyupon its creation pursuant to clauses (i) and (ii) above,individually, a “Sold Receivable” and, collectively, the “SoldReceivables”).

###  

### (c)                                  Paymentof Sale Price.  (i)  Inconsideration for each Sale of Sold Receivables hereunder, Buyer shall pay tothe Originator thereof on the Transfer Date therefor the applicable Sale Pricetherefor in Dollars in immediately available funds.  All cash payments by Buyer under this Section 2.01(c)(i) shallbe effected by means of a wire transfer on the day when due to such account oraccounts as the Originators may designate from time to time.

###  

#### (ii)                                  Tothe extent that the Sale Price of Sold Receivables exceeds the amount of cashthen available to Buyer, the applicable Originator hereby agrees to make asubordinated loan (each, a “Subordinated Loan”) to Buyer in an amountnot to exceed the lesser of (i) the amount of such excess in satisfactionof the equivalent portion of the Sale Price not paid in cash and (ii) themaximum Subordinated Loan that could be borrowed without rendering Buyer’s NetWorth less than the Required Capital Amount. The Subordinated Loans of an Originator shall be evidenced by asubordinated promissory note substantially in the form of Exhibit 2.01(c)(ii) hereto(a “Subordinated Note”) executed by Buyer and payable to suchOriginator.  The Subordinated Loans shallbear interest and be payable as provided in the Subordinated Note.

####  

### (d)                                 Determinationof Contributed Receivables.  Prior tothe delivery of an Election Notice pursuant to this Section 2.01(d) onany Transfer Date the Member (i) may, by written notice to the Buyer,elect to treat the Receivables transferred by it on such date as a capitalcontribution to the Buyer, and (ii) hereby elects, on any Transfer Date onwhich the Buyer cannot pay the Sale Price therefore in cash or withSubordinated Loans, to treat the Receivables transferred by it on such date asa capital contribution to the Buyer (each Receivable that is the

###  

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### subject of an election under clause (i) or (ii) hereofshall be a “Contributed Receivable”). Notwithstanding the foregoing, the Member shall not be obligated orrequired at any time to make any capital contributions to Buyer and may bywritten notice to the Buyer, revoke its election under clause (ii) above.  On any Transfer Date on which the Buyercannot pay the Sale Price for Receivables in cash or with Subordinated Loans toan Originator, and if such Originator is the Member, Member does not elect tomake a capital contribution of such Receivable Originator shall elect toterminate sales and transfers of Receivables hereunder by sending a writtennotice to Buyer and, at any time the Funding Agreement remains outstanding, tothe Administrative Agent (any such notice an “Election Notice”).

###  

### (e)                                  Ownershipof Transferred Receivables.  On andafter each Transfer Date and after giving effect to the Transfers to be made oneach such date, Buyer shall own the Transferred Receivables and no Originatorshall take any action inconsistent with such ownership nor shall any Originatorclaim any ownership interest in such Transferred Receivables.

###  

### (f)                                    Servicingof Receivables.  So long as no Eventof Servicer Termination shall have occurred and be continuing and no SuccessorServicer has assumed the responsibilities and obligations of the Servicerpursuant to Section 9.02, the Servicer shall (i) conduct theservicing, administration and collection of the Transferred Receivables andshall take, or cause to be taken, all such actions as may be necessary oradvisable to service, administer and collect the Transferred Receivables, allin accordance with (A) the terms of this Agreement, (B) customary andprudent servicing procedures for trade receivables of a similar type and (C) allapplicable laws, rules and regulations, and (ii) hold all Contractsand other documents and incidents relating to the Transferred Receivables intrust for the benefit of Buyer, as the owner thereof, and for the sole purposeof facilitating the servicing of the Transferred Receivables in accordance withthe terms of this Agreement.  Buyerhereby instructs the Servicer, and the Servicer hereby acknowledges, that theServicer shall hold all Contracts and other documents relating to suchTransferred Receivables in trust for the benefit of the Buyer and the Servicer’sretention and possession of such Contracts and documents shall at all times besolely in a custodial capacity for the benefit of the Buyer and its assigns andpledgees.

###  

## Section 2.02.  Grant ofSecurity Interest.  The partieshereto intend that each Transfer shall be absolute and shall constitute apurchase and sale or capital contribution, as applicable, and not a loan.  Notwithstanding the foregoing, in addition toand not in derogation of any rights now or hereafter acquired by Buyer under Section 2.01hereof, the parties hereto intend that this Agreement shall constitute asecurity agreement under applicable law and if a court of competentjurisdiction determines that any transaction provided for herein constitutes aloan and not a sale or capital contribution, as applicable, that eachOriginator shall be deemed to have granted, and each Originator does herebygrant, to Buyer a continuing security interest in all of such Originator’sright, title and interest in, to and under the Receivables whether now owned orhereafter acquired by such Originator to secure the obligations of suchOriginator to Buyer hereunder (including, if and to the extent that anyTransfer is recharacterized as a transfer for security under applicable law,the obligation to transfer ownership of the Receivables hereunder).

##  

## Section 2.03.  OriginatorSupport Agreement.  The Parent herebyagrees that in the event that any of its Affiliates become parties to thisAgreement as Originators, the Parent shall undertake and agree, to and for thebenefit of Buyer, to cause the due and punctual performance

##  

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## and observanceby each such Originator of all of the terms, conditions, agreements andundertakings on the part of such Originator to be performed or observed by ithereunder or under any other Related Document and, in connection therewith,shall execute and deliver to Buyer an Originator Support Agreement in the formattached hereto as Exhibit 2.03, to more fully evidence suchundertaking.

##  

## Section 2.04.  OriginatorsRemain Liable.  It is expresslyagreed by the Originators that, anything herein to the contrarynotwithstanding, each Originator shall remain liable to the Obligor (and anyother party to the related Contract) under any and all of the Receivablesoriginated by it and under the Contracts therefor to observe and perform allthe conditions and obligations to be observed and performed by itthereunder.  Buyer shall not have anyobligation or liability to the Obligor or any other party to the relatedContract under any such Receivables or Contracts by reason of or arising out ofthis Agreement or the granting herein of a Lien thereon or the receipt by Buyerof any payment relating thereto pursuant hereto.  The exercise by Buyer of any of its rightsunder this Agreement shall not release any Originator from any of itsrespective duties or obligations under any such Receivables or Contracts.  Buyer shall not be required or obligated inany manner to perform or fulfill any of the obligations of any Originator underor pursuant to any such Receivable or Contract, or to make any payment, or tomake any inquiry as to the nature or the sufficiency of any payment received byit or the sufficiency of any performance by any party under any such Receivableor Contract, or to present or file any claims, or to take any action to collector enforce any performance or the payment of any amounts that may have beenassigned to it or to which it may be entitled at any time or times.

##  

# **ARTICLE IIICONDITIONS PRECEDENT**

# ** **

## Section 3.01.  ConditionsPrecedent to Initial Transfer.  Theinitial Transfer hereunder shall be subject to satisfaction of each of thefollowing conditions precedent:

##  

### (a)                                  SaleAgreement; Other Documents.  ThisAgreement or counterparts hereof shall have been duly executed by, anddelivered to, each Originator, the Servicer and Buyer, and Buyer shall havereceived such information, documents, instruments, agreements and legalopinions as Buyer shall request in connection with the transactions contemplatedby this Agreement, including all those identified in the Schedule ofDocuments, each in form and substance satisfactory to Buyer.

###  

### (b)                                 GovernmentalApprovals.  Buyer shall have received(i) satisfactory evidence that the Originators and the Servicer haveobtained all required consents and approvals of all Persons, including allrequisite Governmental Authorities, to the execution, delivery and performanceof this Agreement and the other Related Documents and the consummation of thetransactions contemplated hereby and thereby or (ii) an Officer’sCertificate from each Originator and the Servicer in form and substancesatisfactory to Buyer affirming that no such consents or approvals arerequired.

###  

### (c)                                  Compliancewith Laws.  Each Originator shall bein compliance with all applicable foreign, federal, state, provincial and locallaws and regulations, including, without limitation, those specificallyreferenced in Section 4.02(f).

 

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### (d)                                 FundingAgreement Conditions.  Each of thoseconditions precedent set forth in Section 3.01 of the FundingAgreement shall have been satisfied or waived in writing as provided therein.

###  

The acceptance by any Originator of the SalePrice for any Sold Receivables and the contribution to Buyer by the Member ofany Contributed Receivables on any Transfer Date shall be deemed to constitute,as of any such Transfer Date, a representation and warranty by such Originatorthat the conditions precedent set forth in this Section 3.01 havebeen satisfied.  Upon any such acceptanceor contribution, title to the Transferred Receivables sold or contributed onsuch Transfer Date shall be vested absolutely in Buyer, whether or not suchconditions were in fact so satisfied.

 

## Section 3.02.  Terminationof Transfers.  Transfers of Receivableshereunder shall terminate on the Commitment Termination Date.

##  

# **ARTICLE IVREPRESENTATIONS, WARRANTIES AND COVENANTS**

# ** **

## Section 4.01.  Representationsand Warranties of the Transaction Parties. To induce Buyer to purchase the Sold Receivables and to acquire theContributed Receivables, each Transaction Party, as applicable, makes thefollowing representations and warranties to Buyer as to itself only as of theClosing Date and, except to the extent otherwise expressly provided below, asof each Transfer Date, each of which shall survive the execution and deliveryof this Agreement.

##  

### (a)                                  Organization,Powers and Good Standing.

###  

#### (i)                                     Organization.  Each of the Transaction Parties is (i) dulyorganized, validly existing and in good standing under the laws of itsjurisdiction of organization; (ii) is duly qualified to do business in allstates where such qualification is required except where failure to be soqualified would not reasonably be expected to have a Material Adverse Effectwithin the meaning of clauses (b) through (e) of the definitionthereof; (iii) has the requisite corporate or company power and authorityand the legal right to own, pledge, mortgage or otherwise encumber and operateits properties, to lease the property it operates under lease, and to conductits business, in each case, as now, heretofore and proposed to be conducted; (iv) hasall licenses, permits, consents or approvals from or by, and has made allfilings with, and has given all notices to, all Governmental Authorities havingjurisdiction, to the extent required for such ownership, operation and conduct,except where the failure to do any of the foregoing could not reasonably beexpected to result in a Material Adverse Effect within the meaning of clauses (b) through(e) of the definition thereof; (v) is in compliance with its articlesor certificate of incorporation and by-laws or operating agreement, asapplicable; and (vi) subject to specific representations set forth hereinregarding ERISA, Environmental Laws, tax laws and other laws, is in compliancewith all applicable provisions of law,

####  

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#### except where the failure to socomply, individually or in the aggregate, could not reasonably be expected to result in a MaterialAdverse Effect.

####  

#### (ii)                                  CorporatePowers.  The execution, delivery andperformance by each Transaction Party of this Agreement and the other RelatedDocuments to which it is a party and the creation and perfection of allTransfers and Liens provided for herein and therein and, solely with respect toclause (iv) below, the exercise by Buyer, or its assigns of any ofits rights and remedies under any Related Document to which it is a party: (i) arewithin such Person’s corporate or company power; (ii) have been dulyauthorized by all necessary or proper corporate and shareholder or company andmember action; (iii) do not result in the creation or imposition of anyAdverse Claim upon any of the property of such Person; and (iv) do notrequire the consent or approval of any Governmental Authority or any otherPerson, except those referred to in Section 3.01(b), all of whichhave been duly obtained, made or complied with prior to the EffectiveDate.  On or prior to the Effective Date,each of the Related Documents has been duly executed and delivered by eachTransaction Party that is a party thereto and on the Closing Date each suchRelated Document shall then constitute a legal, valid and binding obligation ofsuch Transaction Party, enforceable against it in accordance with its terms.

####  

#### (iii)                               BindingObligation.  This Agreement is, andthe other Related Documents are the legally valid and binding obligations ofthe applicable parties thereto, each enforceable against each of such parties,as applicable, in accordance with their respective terms, except as may belimited by bankruptcy, insolvency, reorganization, moratorium or other lawsaffecting, creditors’ rights generally and the effects of general principles ofequity.

####  

### (b)                                 Jurisdictionof Organization; Executive Offices; Collateral Locations; Corporate or OtherNames; FEIN.  As of the EffectiveDate, each Originator is a registered organization of the type set forth on Schedule 4.01(b) andis organized under the laws of the State of Delaware (which is its onlyjurisdiction of organization) and each such Originator’s organizationalidentification number (if any), the current location of such Originator’s chiefexecutive office, principal place of business, other offices, the warehousesand premises within which any records relating to the Receivables is stored orlocated, and the locations of its records concerning the Receivables are setforth in Schedule 4.01(b) or such other locations identifiedby such Originator in writing to the Borrower from and after the ClosingDate.  During the five years prior to theClosing Date, except as set forth in Schedule 4.01(b), noOriginator has been known as or used any corporate, legal, fictitious or tradename.  In addition, Schedule 4.01(b) liststhe federal employer identification number of each Originator.

###  

### (c)                                  Disclosure.  No representation or warranty of anyTransaction Party contained in this Agreement, any of the other RelatedDocuments or any other document, certificate or written statement furnished byon behalf of any Transaction Party to Buyer (or, in the case of the Servicer,to the Administrative Agent or any Lender) relating to this Agreement, theTransferred Receivables or any of the other Related Documents contains anyuntrue statement of a material fact or omitted, omits or will omit to state amaterial fact necessary in order to make the statements contained herein ortherein not misleading in any material respect in light of the circumstances inwhich the same were made.

 

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### (d)                                 NoMaterial Adverse Effect.  Since December 31,2004 there have been no events or changes in facts or circumstances affectingany Transaction Party which have had or would reasonably be expected within thenext twelve (12) months to have a Material Adverse Effect.

###  

### (e)                                  NoConflict.  The execution, deliveryand performance by each Transaction Party of this Agreement and the otherRelated Documents to which it is a party and the creation and perfection of allTransfers and Liens provided for herein and therein (i) does not and willnot violate or conflict in any material respect with any laws, rules,regulations or orders of any Governmental Authority or violate, conflict with,result in a breach of, or constitute a default (with due notice or lapse oftime or both) under any Contractual Obligation or organizational documents ofany Transaction Party and (ii) does not result in the creation orimposition of any Adverse Claim upon any of the property of any TransactionParty other than the Adverse Claims created pursuant hereto.

###  

### (f)                                    Solvency.  After giving effect to (i) thetransactions contemplated by this Agreement and the other Related Documents and(ii) the payment and accrual of all transaction costs in connection withthe foregoing, each Transaction Party is and will be Solvent.  After giving effect to the sale andcontribution of Receivables and other payments and transactions contemplated onsuch Transfer Date, each Transaction Party is and will be Solvent.Notwithstanding the foregoing, the Buyer and its assigns agree that noTransaction Party shall be in breach of the representation and warranty setforth in this Section 4.01(f) solely because of the fact thatthe balance sheet of Holdings and its consolidated Subsidiaries, calculated inaccordance with GAAP, reflects a negative net worth.

###  

### (g)                                 MarginRegulations.

###  

#### (i)                                     Nopart of the proceeds of any Sale will be used for “buying” or “carrying” “marginstock” within the respective meanings of such terms under Regulation U ofthe Board of Governors of the Federal Reserve System as now and from time totime hereafter in effect or for any other purpose that violates the provisionsof the regulations of the Board of Governors of the Federal ReserveSystem.  If requested by Buyer, eachTransaction Party will furnish to Buyer a statement to the foregoing effect inconformity with the requirements of FR Form G-3 or FR Form 0-1, asapplicable, referred to in Regulation U.

####  

#### (ii)                                  Noneof the Transaction Parties is required to register as (i) an “investmentcompany” as defined in, or subject to regulation under, the Investment CompanyAct of 1940 or (ii) a “holding company” as defined in, or subject toregulation under, the Public Utility Holding Company Act of 1935.

####  

### (h)                                 Brokers.  As of the Effective Date, no broker or finderacting on behalf of any Transaction Party was employed or utilized in connectionwith this Agreement or the other Related Documents or the transactionscontemplated hereby or thereby and no Transaction Party has any obligation toany Person in respect of any finder’s or brokerage fees in connectiontherewith.

 

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### (i)                                     Compliancewith Laws.  Each Transaction Partyrepresents and warrants that it (i) is in compliance with the requirementsof all applicable laws, rules, regulations and orders of any GovernmentalAuthority (including, without limitation, Executive Order No. 13224 on TerroristFinancing, effective September 24, 2001, and the Uniting and StrengtheningAmerica by Providing Appropriate Tools Required to Intercept and ObstructTerrorism Act of 2001, Public Law 107-56) and the obligations, covenants andconditions contained in all Contractual Obligations other than those laws,rules, regulations, orders and provisions of such Contractual Obligations thenoncompliance with which could not be reasonably expected to have, eitherindividually or in the aggregate, a Material Adverse Effect, and (ii) maintainsall licenses, qualifications and permits referred to above.

###  

### (j)                                     IntellectualProperty.  As of the Effective Date,each Originator owns, is licensed to use or otherwise has the right to use, allmaterial Intellectual Property used in or necessary for the conduct of itsbusiness as currently conducted that is material to (i) the ability ofsuch Originator to perform its obligations under the Related Documents, (ii) thevalidity or enforceability of any Related Document or the rights and remediesof the Borrower, the Lenders or the Administrative Agent under any RelatedDocument, (iii) the federal income tax attributes of the sale,contribution or pledge of the Transferred Receivables pursuant to any RelatedDocument or (iv) the Transferred Receivables (or the collectibilitythereof), the Contracts therefore, the Borrower Collateral (in each case, takenas a whole) or the ownership interests or Liens of the Borrower or the Lendersor the Administrative Agent thereon or the priority of such interests or Liens,and all such material Intellectual Property is identified on Schedule 4.01(j).As of the Effective Date, except as disclosed in Schedule 4.01(j),the use of such Intellectual Property by the Originators and the conduct oftheir businesses does not and has not been alleged by any Person to infringe onthe rights of any Person.

###  

### (k)                                  Investigations, Audits, Etc.  Asof the Effective Date, except as set forth on Schedule 4.01(k), noTransaction Party or any of their Subsidiaries is the subject of any review oraudit by the IRS or any governmental investigation concerning the violation orpossible violation of any law that would reasonably be expected to result inany Material Adverse Effect within the meaning of clauses (b) through (e) ofthe definition thereof.

###  

### (l)                                     Litigation;Adverse Facts.  Except as set forthon Schedule 4.01(l), there are no judgments outstanding against anyTransaction Party or affecting any property of any Transaction Party as of theEffective Date, nor is there any Litigation pending, or to the best knowledgeof any Transaction Party threatened, against any Transaction Party that wouldreasonably be expected to result in any Material Adverse Effect within themeaning of clauses (b) through (e) of the definition thereof.

###  

### (m)                               Taxes.

###  

#### (i)                                     Asof the Effective Date, (i) all Tax Returns required to be filed by anyTransaction Party or any other member of the Parent Group have been timely andproperly filed and (ii) all taxes that are due (other than taxes being orabout to be contested in good faith by appropriate proceedings and for whichadequate reserves have been provided for in accordance with GAAP) have beenpaid, except where the failure to file Tax Returns or pay Taxes would not havea Material Adverse Effect.  No

####  

8

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#### Governmental Authority hasasserted any claim for taxes, or to any Transaction Party’s knowledge, hasthreatened to assert any claim for taxes that would, if not paid by aTransaction Party, have a Material Adverse Effect.  All taxes required by law to be withheld orcollected and remitted (including, without limitation, income tax, unemploymentinsurance and workmen’s compensation premiums) with respect to the TransactionParties have been withheld or collected and paid to the appropriate GovernmentalAuthorities (or are properly being held for such payment), except for amountsthe nonpayment of which would not be reasonably likely to have a MaterialAdverse Effect.

####  

#### (ii)                                  Noneof the Transaction Parties has been notified that either the IRS, or any otherGovernmental Authority, has raised, or intends to raise, any adjustments withrespect to Taxes of the Transaction Parties, which adjustments would bereasonably likely to have a Material Adverse Effect.

####  

#### (iii)                               Itis not necessary that this Agreement or any other Related Document be filed,registered, recorded or enrolled in connection with any Taxes with any court,public office or other authority in any jurisdiction or that any ad valoremstamp duty, stamp duty, documentary, registration or similar tax or duty bepaid on the execution or delivery of this Agreement or any other RelatedDocument.

####  

### (n)                                 ERISA.

###  

#### (i)                                     Schedule 4.01(n)lists all Plans and separately identifies all Pension Plans, including Title IVPlans, Multiemployer Plans, ESOPs and Welfare Plans, including all RetireeWelfare Plans as of the Effective Date. As of the Effective Date, copies of all such listed Plans other thanMultiemployer Plans as defined in ERISA Section 3(37)(A), together with acopy of the latest form IRS/DOL 5500-series for each such Plan (other than suchMultiemployer Plans) have been provided or made available to Buyer.  Except with respect to Multiemployer Plans,each Qualified Plan has been determined by the IRS to qualify under Section 401of the IRC, and the trusts created thereunder have been determined to be exemptfrom tax under the provisions of Section 501 of the IRC, and nothing hasoccurred that would cause the loss of such qualification or tax-exemptstatus.  Each Plan (other than anyMultiemployer Plan) is in material compliance with the applicable provisions ofERISA and the IRC, including the timely filing of all reports required underthe IRC or ERISA.  With respect to eachMultiemployer Plan, no Originator is aware of any material noncompliance with theapplicable provisions of ERISA and the IRC, including the timely filing of allreports required under the IRC or ERISA. Neither any Transaction Party nor ERISA Affiliate has failed to make anymaterial contribution or pay any amount due as required by either Section 412of the IRC or Section 302 of ERISA or the terms of any such Plan.  Neither any Transaction Party nor ERISAAffiliate has engaged in a “prohibited transaction,” as defined in Section 406of ERISA and Section 4975 of the IRC, 

#### in connection with any Plan,that would subject any Transaction Party to a material tax on prohibitedtransactions imposed by Section 502(i) of ERISA or Section 4975of the IRC.

 

9

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#### (ii)                                  Asof the Effective Date, except as set forth in Schedule 4.01(n): (i) noTitle IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event orevent described in Section 4062(e) of ERISA with respect to any TitleIV Plan has occurred within the last five years or is reasonably expected tooccur; (iii) there are no pending, or to the knowledge of any Borrower,threatened claims (other than claims for benefits in the normal course),sanctions, actions or lawsuits, asserted or instituted against any Plan or anyPerson as fiduciary or sponsor of any Plan that would reasonably be expected toresult in liabilities to the Transaction Parties and their ERISA Affiliates inexcess of $500,000; (iv) no Transaction Party or ERISA Affiliate hasincurred or reasonably expects to incur any liability in excess of $500,000 asa result of a complete or partial withdrawal from a Multiemployer Plan; (v) withinthe last five years no Title IV Plan of any Transaction Party or ERISAAffiliate has been terminated, except in a “standard termination” as that termis used in Section 4041(b)(1) of ERISA, nor has any Title IV Plan ofany Transaction Party or ERISA Affiliate (determined at any time within thepast five years) with Unfunded Pension Liabilities been transferred outside ofthe “controlled group” (within the meaning of Section 4001(a)(14) ofERISA) of any Transaction Party or ERISA Affiliate; (vi) except in thecase of any ESOP, Stock of all Transaction Parties and their ERISA Affiliatesmakes up, in the aggregate, no more than 10% of fair market value of the assetsof any Plan measured on the basis of fair market value as of the latestvaluation date of any Plan; and (vii) no liability under any Title IV Planhas been satisfied with the purchase of a contract from an insurance companythat is not rated AAA by S&P or an equivalent rating by another nationallyrecognized rating agency.

####  

### (o)                                 Depositand Disbursement Accounts.  Schedule 4.01(o)lists all banks and other financial institutions at which any Originator or theServicer maintains deposit accounts established for the receipt of collectionson Receivables, including any Collection Accounts, and such Schedule correctlyidentifies the name, address and telephone number of each depository, the namein which the account is held, a description of the purpose of the account, andthe complete account number therefor.

###  

### (p)                                 Nonapplicabilityof Bulk Sales Laws.  No transactioncontemplated by this Agreement or any of the other Related Documents requirescompliance with any bulk sales act or similar law.

###  

### (q)                                 InvestmentCompany Act Exemptions.  Eachpurchase of Transferred Receivables under this Agreement constitutes a purchaseor other acquisition of notes, drafts, acceptances, open accounts receivable orother obligations representing part or all of the sales price of merchandise,insurance or services within the meaning of Section 3(c)(5) of theInvestment Company Act.

###  

### (r)                                    GovernmentRegulation.  No Transaction Party issubject to regulation under the Public Utility Holding Company Act of 1935, theFederal Power Act, or any other federal or state statute that restricts orlimits its ability to incur Debt or to perform its obligations hereunder orunder any other Related Document.  Thepurchase or acquisition of the Transferred Receivables by Buyer hereunder, theapplication of the Sale Price therefor and the consummation of the transactionscontemplated by this Agreement and the other Related Documents will not

###  

10

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### violate any provision of any such statute or any rule,regulation or order issued by the Securities and Exchange Commission.

###  

### (s)                                  Noticesto Obligors.  Each Transaction Partyhas directed all Obligors of Transferred Receivables originated by it to remitall payments with respect to such Receivables for deposit in a Lockbox orCollection Account.

###  

### (t)                                    Booksand Records; Minutes.  The by-laws orthe certificate or articles of incorporation of each Originator require it tomaintain (i) books and records of account and (ii) minutes of themeetings and other proceedings of its Stockholders and board of directors (oran analogous governing body).

###  

### (u)                                 Ownershipof Receivables; Liens.  Immediatelyprior to its transfer hereunder, each Originator owned each Receivableoriginated or acquired by it free and clear of any Adverse Claim and, from andpursuant to such transfer, Buyer will acquire valid and properly perfectedtitle to and the sole record and beneficial ownership interest in eachTransferred Receivable, free and clear of any Adverse Claim or restrictions ontransferability.  Each Originator hasreceived all assignments, bills of sale and other documents, and has dulyeffected all recordings, filings and other actions necessary to establish,protect and perfect such Originator’s right, title and interest in and to theReceivables originated or acquired by it and its other properties andassets.  Each Originator has rights inand full power to transfer its Receivables hereunder.  No effective financing statements or othersimilar instruments are of record in any filing office listing any Originatoras debtor and purporting to cover the Transferred Receivables except thoseterminated on the Closing Date and financing statements filed in accordancewith the Related Documents.

###  

### (v)                                 [RESERVED].

###  

### (w)                               Representationsand Warranties in Other Related Documents. Each of the representations and warranties of each Transaction Partycontained in the Related Documents (other than this Agreement) is true andcorrect and such Transaction Party hereby makes each such representation andwarranty to, and for the benefit of, the Buyer as if the same were set forth infull herein.  Each Transaction Partyconsents to the assignment of Buyer’s rights with respect to all suchrepresentations and warranties to the Administrative Agent and the Lenders (andtheir respective successors and assigns) pursuant to the Funding Agreement asmore fully described in Section 6.03 below.

###  

### (x)                                   Receivables.  With respect to each Transferred Receivableacquired by the Buyer hereunder:

###  

#### (i)                                     EachReceivable included in any Borrower Base Certificate as an Eligible Receivable,as of the applicable Transfer Date therefor, satisfied the criteria for anEligible Receivable on such Transfer Date;

####  

#### (ii)                                  immediatelyprior to its transfer to Buyer, such Receivable was owned by the Originatorthereof free and clear of any Adverse Claim, and such Originator had the fullright, power and authority to sell, contribute, assign, transfer and pledge itsinterest therein as contemplated under this Agreement and the other RelatedDocuments and,

####  

11

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####  

#### upon such Transfer, Buyer willacquire valid and properly perfected title to and the sole record andbeneficial ownership interest in such Receivable, free and clear of any AdverseClaim and, following such Transfer, such Receivable will not be subject to anyAdverse Claim as a result of any action or inaction on the part of suchOriginator;

####  

#### (iii)                               theTransfer of each such Receivable pursuant to this Agreement and the ReceivablesAssignment executed by the Originator thereof constitutes, as applicable, avalid sale, contribution, transfer, assignment, setover and conveyance to Buyerof all right, title and interest of such Originator in and to such Receivable;and

####  

#### (iv)                              suchTransferred Receivable was originated in compliance with the Credit andCollection Policies.

####  

### (y)                                 FairValue.  With respect to eachTransferred Receivable acquired by the Buyer hereunder, (i) theconsideration (taking into account any increase in the outstanding balance ofthe Subordinated Note) received from the Buyer in respect of such TransferredReceivable represents adequate consideration and fair and reasonably equivalentvalue for such Transferred Receivable as of the applicable Transfer Date and (ii) suchconsideration is not less than the fair market value of such TransferredReceivables, in each case, as of the applicable Transfer Date.

###  

### (z)                                   Supplementary Representations.  Each of the representations and warranties ofthe Borrower set forth on Schedule 4.01(z)is true and correct in all respects.

###  

### (aa)                            Accessto the Accounts.  None of theTransaction Parties has access to any of the Accounts.

###  

### (bb)                          Intent.  None of the Transaction Parties has enteredinto this Agreement or any of the other Related Documents with the intent ofhindering, delaying or defrauding present or future creditors of anyTransaction Party.  None of theTransaction Parties has removed or concealed any assets from its creditors orparticipated in the removal or concealing of assets of any Transaction Party orany Person entity, nor will any of them do so in the future.   The transfers contemplated by this Agreementare being undertaken in good faith by each Transaction Party for bona fidebusiness purposes.

###  

### (cc)                            Conditions.  Upon any acceptance or contribution, title tothe Transferred Receivables sold or contributed hereunder, the following arestatements are true:

###  

#### (i)                                     therepresentations and warranties of each Originator contained herein or in anyother Related Document are true and correct in all material respects unlesspreviously cured pursuant to Section 4.04 hereof (withoutduplication of any materiality qualifier contained therein) as of such TransferDate, both before and after giving effect to such Transfer and to theapplication of the Sale Price therefor, except to the extent that any suchrepresentation or warranty expressly relates to an earlier date and except forchanges therein expressly permitted by this Agreement;

####  

#### (ii)                                  eachOriginator is in compliance with each of its covenants and other agreements setforth herein or in any other Related Document; and

 

12

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#### (iii)                               eachOriginator has such other action, including delivery of approvals, consents,opinions, documents and instruments to Buyer as Buyer has reasonably requested.

####  

The representations and warranties described in this Section 4.01shall survive the Transfer of the Transferred Receivables to Buyer, anysubsequent assignment of the Transferred Receivables by Buyer, and thetermination of this Agreement and the other Related Documents and shallcontinue until the indefeasible payment in full of all Transferred Receivables.

 

## Section 4.02.  AffirmativeCovenants of the Originators.  EachOriginator covenants and agrees that, unless otherwise consented to by Buyerand the Administrative Agent, from and after the Effective Date and until theTermination Date:

##  

### (a)                                  Officesand Records.  Each Originator shall maintainits jurisdiction of organization, principal place of business and chiefexecutive office and the office at which it keeps its Records at the respectivelocations specified in Schedule 4.01(b) or, upon 30 days’prior written notice to Buyer and the Administrative Agent, at such otherlocation in a jurisdiction where all action requested by Buyer, any Lender orthe Administrative Agent pursuant to Section 6.13 shall have beentaken with respect to the Transferred Receivables.  Each Originator shall at its own cost andexpense, for not less than three years from the date on which each TransferredReceivable was originated, or for such longer period as may be required by law,maintain adequate Records with respect to such Transferred Receivable, includingrecords of all payments received, credits granted and merchandise returned withrespect thereto.  Upon the request ofBuyer, each Originator shall (i) mark each Contract (other than invoices)which constitutes “chattel paper” under the UCC and evidences a TransferredReceivable with a legend, acceptable to Buyer, evidencing that Buyer haspurchased such Transferred Receivable and that the Administrative Agent, forthe benefit of the Lenders, has a security interest in and lien thereon, and (ii) markits computer records pertaining to the Transferred Receivables with such alegend.

###  

### (b)                                 Access.  Each Originator shall, at its own expense,during normal business hours, from time to time upon ten (10) BusinessDays’ prior notice (or, if a Termination Event has occurred and in continuing,one (1) Business Day’s prior notice) and as frequently as Buyer or theServicer determines to be appropriate: (i) provide Buyer, the Servicer andany of their respective officers, employees, agents and representatives accessto its properties (including properties of such Originator utilized inconnection with the collection, processing or servicing of the TransferredReceivables), facilities, advisors and employees (including officers) of eachOriginator, (ii) permit Buyer and the Servicer and any of their respectiveofficers, employees, agents and representatives to inspect, audit and makeextracts from such Originator’s books and records, including all Recordsmaintained by such Originator, (iii) permit Buyer, the Servicer and theirrespective officers, employees, agents and representatives, to inspect, reviewand evaluate the Transferred Receivables of such Originator, and (iv) permitBuyer, the Servicer and their respective officers, employees, agents andrepresentatives to discuss matters relating to the Transferred Receivables orsuch Originator’s performance under this Agreement or the affairs, finances andaccounts of such Originator with any of its officers, directors, employees,representatives or agents (in each case, with those Persons having knowledge ofsuch matters) and with its independent certified public accountants asspecified in Section 4.02(c) below;

###  

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### provided, however, that, solong as no Termination Event or Incipient Termination Event has occurred and iscontinuing, (i) the Buyer shall be limited to two (2) audits pursuantto this Section 4.02(b) during each calendar year  and (ii) Originators’ obligation toreimburse out-of-pocket expenses in respect of each such audit shall not exceed$50,000.  If an Incipient TerminationEvent or a Termination Event shall have occurred and be continuing, or theBuyer, in good faith, notifies any Originator that an Incipient TerminationEvent or a Termination Event may have occurred, is imminent or deems its rightsor interests in the Transferred Receivables insecure, each such Originatorshall provide such access at all times and without advance notice and shallprovide Buyer and the Servicer with access to its suppliers and customers; provided,that, such Originator shall have the opportunity to be present at the time ofany such access to its such Originator’s suppliers or customers.  Each Originator shall make available to Buyerand the Servicer and their respective counsel, as quickly as is possible underthe circumstances, originals or copies of all books and records, includingRecords maintained by such Originator, as Buyer or the Servicer mayrequest.  Each Originator shall deliverany document or instrument necessary for Buyer or the Servicer, as they mayfrom time to time request, to obtain records from any service bureau or otherPerson that maintains records for such Originator, and shall maintain duplicaterecords or supporting documentation on media, including computer tapes anddiscs owned by such Originator.

###  

### (c)                                  Communicationwith Accountants.  Each Originatorauthorizes Buyer and the Servicer and their designated representatives tocommunicate directly with its independent certified public accountants, andauthorizes and, if requested by Buyer or Servicer, shall instruct thoseaccountants to disclose and make available to Buyer, the Servicer and theirdesignated representatives, any and all financial statements and othersupporting financial documents, schedules and information relating to suchOriginator (including copies of any issued management letters) with respect tothe business, financial condition and other affairs of such Originator; provided,that the Buyer or Servicer shall notify such Originator prior to any contactwith such accountants and advisors and shall give such Originator theopportunity to participate in such discussions. Each Originator agrees to render to Buyer and the Servicer at suchOriginator’s own cost and expense, such clerical and other assistance as may bereasonably requested with regard to the foregoing.  If any Termination Event shall have occurredand be continuing, each Originator shall, promptly upon request therefor,deliver to Buyer or its designee all Records reflecting activity through theclose of business on the Business Day immediately preceding the date of suchrequest.

###  

### (d)                                 ComplianceWith Credit and Collection Policies. Each Originator shall comply with the Credit and Collection Policiesapplicable to each Transferred Receivable and the Contracts therefor, and withthe terms of such Receivables and Contracts.

###  

### (e)                                  Assignment.  Each Originator hereby acknowledges that onthe date hereof Buyer has collaterally assigned for security purposes all ofits right, title and interest in, to and under this Agreement to theAdministrative Agent for the benefit of the Administrative Agent, the Lenders,the Indemnified Persons and the Affected Parties and that the AdministrativeAgent, the Lenders, the Indemnified Persons and the Affected Parties are thirdparty beneficiaries hereof.  EachOriginator hereby further acknowledges that after the occurrence and during thecontinuation of a Termination Event all provisions of this Agreement shallinure to the benefit of the Administrative Agent and the Lenders, including theenforcement of any provision hereof,

###  

14

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### but that the Administrative Agent, the Lenders, theIndemnified Person and the Affected Parties shall have no obligations or dutiesunder this Agreement. Each Originator hereby further acknowledges that theexecution and performance of this Agreement are conditions precedent for theAdministrative Agent and the Lenders to enter into the Funding Agreement andthat the agreement of the Administrative Agent and Lenders to enter into theFunding Agreement will directly or indirectly benefit such Originator andconstitutes good and valuable consideration for the rights and remedies of theAdministrative Agent and each Lender with respect hereto.

###  

### (f)                                    Compliancewith Agreements and Applicable Laws. Each Originator shall perform each of its obligations under thisAgreement and the other Related Documents and comply with all federal, state,provincial and local laws and regulations applicable to it and the Receivables,including those relating to truth in lending, retail installment sales, faircredit billing, fair credit reporting, equal credit opportunity, fair debtcollection practices, privacy, licensing, securities laws, margin regulations,taxation, ERISA and labor matters and environmental laws and environmentalpermits, except where the failure to so comply could not reasonably be expectedto result in a Material Adverse Effect. Each Originator shall pay all Charges, including any stamp duties, whichmay be imposed as a result of the transactions contemplated by this Agreementand the other Related Documents, except to the extent such Charges are beingcontested in accordance with Section 4.01(m) or constitute an obligation solely of the Borrower.

###  

### (g)                                 Maintenanceof Existence and Conduct of Business. Each Originator shall:  (i) door cause to be done all things necessary to preserve and keep in full force andeffect its corporate existence and its rights and franchises; (ii) onlyengage in business of the types described on Schedule 4.02(g) andreasonable extensions thereof and in accordance with the terms of itscertificate or articles of incorporation and by-laws; (iii) at all timesmaintain, preserve and protect all of its assets and properties which arenecessary in the conduct of its business, including all licenses, permits,charters and registrations, and keep the same in good repair, working order andcondition in all material respects (taking into consideration ordinary wear andtear) and from time to time make, or cause to be made, all necessary orappropriate repairs, replacements and improvements thereto consistent withindustry practices in each case, to the extent the failure to do so couldreasonably be expected to (i) materially impair the ability of suchOriginator to perform its obligations under the Related Documents, (ii) adverselyaffect the validity or enforceability of any Related Document or the rights andremedies of the Borrower, the Lenders or the Administrative Agent under anyRelated Document, (iii) adversely affect the federal income tax attributesof the sale, contribution or pledge of the Transferred Receivables pursuant toany Related Document or (iv) affect the enforceability or value of theTransferred Receivables (or the collectibility thereof), the Contractstherefore, the Borrower Collateral (in each case, taken as a whole) or theownership interests or Liens of the Borrower or the Lenders or theAdministrative Agent thereon or the priority of such interests or Liens; and (iv) transactbusiness only in trade names and its legal name as of the Effective Date or,upon 30 days’ prior written notice to Buyer, in any other legal name withrespect to which all action requested by Buyer pursuant to Section 6.13shall have been taken with respect to the Transferred Receivables.

###  

### (h)                                 Noticeof Material Events.  Each Originatorshall promptly inform Buyer in writing of the occurrence of any of thefollowing, in each case setting forth the details thereof,

###  

15

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### any notices or other correspondence relating thereto,and what action, if any, such Originator proposes to take with respect thereto:

###  

#### (i)                                     (A) anyLitigation commenced or threatened against Holdings, any Originator or anyother Subsidiary of Holdings that (1) is asserted or instituted againstany Plan, its fiduciaries (in their capacity as a fiduciary of any such Plan)or its assets or against Holdings, any Originator or any other Subsidiary ofHoldings or any of their respective ERISA Affiliates in connection with anyPlan that individually or in the aggregate could reasonably be expected to resultin liabilities of any Originator or its ERISA Affiliates in excess of $500,000,(2) alleges criminal misconduct by Holdings, any Originator or any otherSubsidiary of Holdings, or (3) if determined adversely, could reasonablybe expected to have a Material Adverse Effect or  (B) any Litigation commenced orthreatened against Holdings, any Originator or any other Subsidiary of Holdingswith respect to or in connection with all or any portion of the TransferredReceivables that (A) seeks damages or penalties in an uninsured amount inexcess of $250,000 in the aggregate or (B) seeks injunctive relief;

####  

#### (ii)                                  thecommencement of a case or proceeding by or against Holdings, any Originator orany other Subsidiary of Holdings seeking a decree or order in respect ofHoldings, any Originator or such Subsidiary (A) under the Bankruptcy Codeor any other applicable federal, state, provincial or foreign bankruptcy orother similar law, (B) appointing a custodian, receiver, liquidator,assignee, trustee or sequestrator (or similar official) for Holdings, anyOriginator or such Subsidiary or for any substantial part of such Person’sassets, or (C) ordering the winding-up or liquidation of the affairs ofHoldings, any Originator or any other Subsidiary of Holdings;

####  

#### (iii)                               (A) anyAdverse Claim made or asserted against any of the Transferred Receivables ofwhich it becomes aware or (B) any determination that a TransferredReceivable was not an Eligible Receivable at the time sale to Buyer or hasceased to be an Eligible Receivable on account of any matter giving rise toindemnification under Section 5.01;

####  

#### (iv)                              theexecution or filing with the IRS or any other Governmental Authority of anyagreement or other document extending, or having the effect of extending, theperiod for assessment or collection of any Charges that could reasonably beexpected to become a Lien on the Receivables; or

####  

#### (v)                                 anyother event, circumstance or condition that has had or could reasonably beexpected to have a Material Adverse Effect.

####  

### (i)                                     SeparateIdentity.

###  

#### (i)                                     EachOriginator shall, and shall cause each other member of the Parent Group to,maintain records and books of account separate from those of Buyer.

####  

#### (ii)                                  Thefinancial statements of Holdings and its consolidated Subsidiaries shall disclosethe effects of each Originator’s transactions in accordance with GAAP and, inaddition, disclose that (A) Buyer’s sole business consists of the purchaseor acceptance

####  

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#### through capital contribution(in the case of the Member) and ownership of the Receivables from theOriginators and the subsequent financing of such Receivables pursuant to theFunding Agreement, (B) Buyer is a separate legal entity with its ownseparate creditors who will be entitled, upon its liquidation, to be satisfiedout of Buyer’s assets prior to any value in Buyer becoming available to Buyer’sequity holders and (C) the assets of Buyer are not available to paycreditors of any Originator or any other Affiliate of such Originator.

####  

#### (iii)                               Theresolutions, agreements and other instruments underlying the transactionsdescribed in this Agreement shall be continuously maintained by each Originatoras official records.

####  

#### (iv)                              EachOriginator shall, and shall cause each other member of the Parent Group to,maintain an arm’s-length relationship with Buyer and shall not hold itself outas being liable for the Debts or liabilities of Buyer.

####  

#### (v)                                 EachOriginator shall, and shall cause each other member of the Parent Group to,keep its assets and its liabilities wholly separate from those of Buyer andshall not commingle the Buyer’s assets with the assets of any other Person.

####  

#### (vi)                              NoOriginator shall or shall permit any other member of the Parent Group to,conduct its business in the name of the Buyer or in a manner designed tomislead third parties as to the separate identity of Buyer.

####  

#### (vii)                           NoOriginator shall (and each Originator shall cause each other member of theParent Group not to) mislead third parties by conducting or appearing toconduct business on behalf of Buyer or expressly or impliedly representing orsuggesting that such Originator or any other member of the Parent Group isliable or responsible for the Debts of Buyer or that the assets of suchOriginator or any other member of the Parent Group are available to pay thecreditors of Buyer.

####  

#### (viii)                        Theoperating expenses and liabilities of Buyer shall be paid from Buyer’s ownfunds and not from any funds of any Originator or other member of the ParentGroup.

####  

#### (ix)                                EachOriginator shall, and shall cause each other member of the Parent Group to, atall times have stationery and other business forms and a mailing address andtelephone number separate from those of Buyer.

####  

#### (x)                                   EachOriginator shall, and shall cause each other member of the Parent Group to, atall times limit its transactions with Buyer only to those expressly permittedhereunder or under any other Related Document.

####  

### (j)                                     ERISA.  Each Originator shall give Buyer promptwritten notice of (i) any event that could reasonably be expected toresult in the imposition of a Lien under Section 412 of the IRC or Section 302or 4068 of ERISA and (ii) any event that could reasonably be expected toresult in the incurrence by any Originator of any liabilities under Title IV ofERISA (other than premium payments arising in the ordinary course of business)in excess of $500,000.

 

17

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### (k)                                  Payment,Performance and Discharge of Obligations.

###  

#### (i)                                     Subjectto Section 4.02(k)(ii), each Originator shall (and shall cause eachother member of the Parent Group to) pay, perform and discharge or cause to bepaid, performed and discharged all of its obligations and liabilities,including all Charges upon its income and properties and all lawful claims forlabor, materials, supplies and services, promptly when due in each case, to theextent the failure to do so could reasonably be expected to (i) materiallyimpair the ability of such Originator to perform its obligations under theRelated Documents, (ii) adversely affect the validity or enforceability ofany Related Document or the rights and remedies of the Borrower, the Lenders orthe Administrative Agent under any Related Document, (iii) adverselyaffect the federal income tax attributes of the sale, contribution or pledge ofthe Transferred Receivables pursuant to any Related Document or (iv) affectthe enforceability or value of the Transferred Receivables (or thecollectibility thereof), the Contracts therefore, the Borrower Collateral (ineach case, taken as a whole) or the ownership interests or Liens of theBorrower or the Lenders or the Administrative Agent thereon or the priority ofsuch interests or Liens..

####  

#### (ii)                                  EachOriginator and each other member of the Parent Group may in good faith contest,by appropriate proceedings, the validity or amount of any Charges or claimsdescribed in Section 4.02(k)(i); provided, that (A) adequatereserves with respect to such contest are maintained on the books of suchOriginator or such member, as applicable, in accordance with GAAP, (B) suchcontest is maintained and prosecuted continuously and with diligence, (C) noneof the Receivables may become subject to forfeiture or loss as a result of suchcontest, (D) no Lien may be imposed to secure payment of such Charges orclaims (excepting only Liens as to which foreclosure is not imminent and theuse and value of the property to which the Lien attaches is not impaired duringthe pendency of such proceeding), and (E) Buyer has advised suchOriginator in writing that Buyer reasonably believes that nonpayment ornondischarge thereof could not reasonably be expected to have or result in aMaterial Adverse Effect within the meaning of clauses (b) through (e) thereof.

####  

### (l)                                     Depositof Collections.  Each Originatorshall (and shall cause each of its Affiliates to) (i) instruct allObligors to remit all payments with respect to any Receivables directly into aCollection Account, and (ii) deposit or cause to be deposited promptlyinto a Collection Account, and in any event no later than the first BusinessDay after receipt thereof, all Collections it may receive in respect ofTransferred Receivables (and until so deposited, all such Collections shall beheld in trust for the benefit of Buyer and its assigns (including theAdministrative Agent and the Lenders)). No Originator shall make or permit to be made deposits into a Lockbox ora Collection Account other than in accordance with this Agreement and the otherRelated Documents.  Without limiting thegenerality of the foregoing, each Originator shall take reasonable steps toassure that no Collections or other proceeds with respect to a Receivablereconveyed to it pursuant to Section 4.04 hereof are paid ordeposited into any Lockbox or Collection Account.

###  

### (m)                               AccountingChanges.  If any Accounting Changesoccur and such changes result in a change in the standards or terms usedherein, then the parties hereto agree to enter into good

###  

18

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### faith negotiations in order to amend such provisionsso as to equitably reflect such Accounting Changes with the desired result thatthe criteria for evaluating the financial condition of such Persons and theirSubsidiaries shall be the same after such Accounting Changes as if suchAccounting Changes had not been made.  Ifthe parties hereto agree upon the required amendments to this Agreement, thenafter appropriate amendments have been executed and the underlying AccountingChange with respect thereto has been implemented, any reference to GAAPcontained herein shall, only to the extent of such Accounting Change, refer toGAAP consistently applied after giving effect to the implementation of suchAccounting Change.  If such partiescannot agree upon the required amendments within 30 days following the date ofimplementation of any Accounting Change, then all financial statementsdelivered and all standards and terms used herein shall be prepared, deliveredand used without regard to the underlying Accounting Change.

###  

### (n)                                 GeneralTrial Balance.  Each Originator shallgenerate its General Trial Balance on each day that such Originator transfersReceivables pursuant to this Agreement. If at any time any Originator fails to generate its General TrialBalance, Buyer shall have the right to reconstruct such General Trial Balanceso that a determination of the Sold Receivables and Contributed Receivables canbe made.  Each Originator agrees to cooperatewith such reconstruction, including by delivery to Buyer, upon Buyer’s request,of copies of all Records.

###  

## Section 4.03.  NegativeCovenants of the Originators.  EachOriginator covenants and agrees that, without the prior written consent ofBuyer, from and after the Closing Date and until the Termination Date:

##  

### (a)                                  Saleof Receivables and Related Assets. No Originator shall sell, transfer, convey, assign (by operation of lawor otherwise) or otherwise dispose of, or assign any right to receive income inrespect of, any of its Receivables or Contracts therefor, or any of its rightswith respect to any Lockbox or Collection Account, except for the sales,transfers, conveyances, assignments or dispositions expressly contemplatedhereunder.

###  

### (b)                                 Liens.  No Originator shall create, incur, assume orpermit to exist any Adverse Claim on or with respect to its Receivables(whether now owned or hereafter acquired) except for Permitted Encumbrancesthat do not attach to Transferred Receivables.

###  

### (c)                                  Modificationsof Receivables or Contracts.  Exceptto the extent the Servicer is permitted to do so by the Credit and CollectionPolicies, no Originator shall extend, amend, forgive, discharge, compromise,cancel or otherwise modify the terms of any Transferred Receivable, or amend,modify or waive any term or condition of any Contract therefor in a manner thatwould have the effect of creating such a modification of a Receivable.

###  

### (d)                                 SaleCharacterization.  No Originatorshall (and each Originator shall cause each other member of the Parent Groupnot to) make statements or disclosures or prepare any financial statements forany purpose, including for federal income tax, reporting or accountingpurposes, that shall account for the transactions contemplated by this Agreementin any manner other than with respect to the Sale of each Sold Receivableoriginated or acquired by it, as a true sale or absolute assignment of its fullright, title and ownership interest in such Transferred

###  

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### Receivable to Buyer and with respect to the Transferof each Contributed Receivable originated or acquired by it, as a contributionto the capital of Buyer.

###  

### (e)                                  CapitalStructure and Business.  NoOriginator shall (and each Originator shall cause each other member of theParent Group not to) (i) make any changes in any of its businessobjectives, purposes or operations that could reasonably be expected to have orresult in a Material Adverse Effect or (ii) amend, supplement or otherwisemodify its certificate or articles of incorporation, bylaws, limited liabilitycompany agreement and other organizational documents except where suchamendment, supplement or other modification could not reasonably be expect tohave or result in a Material Adverse Effect within the meaning of clause (b) through(e) of the definition thereof.  NoOriginator shall change the type of entity it is, its jurisdiction oforganization or its organizational identification number, if any, issued by itsstate of organization, except upon 30 days’ prior written notice to Buyer andwith respect to which jurisdiction all action requested by Buyer pursuant to Section 6.13shall have been taken with respect to the Transferred Receivables.

###  

### (f)                                    ActionsAffecting Rights.  No Originatorshall (i) take any action, or fail to take any action, if such action orfailure to take action may interfere with the enforcement of any rights givento the Buyer or its assignees hereunder or under the other Related Documents,including rights with respect to the Transferred Receivables; or (ii) failto pay any Charge, fee or other obligation of such Originator with respect tothe Transferred Receivables, or fail to defend any action, if such failure topay or defend may adversely affect the priority or enforceability of theperfected title of Buyer to and the sole record and beneficial ownershipinterest of Buyer in the Transferred Receivables or, prior to their Transferhereunder, such Originator’s right, title or interest therein.

###  

### (g)                                 ERISA.  No Originator shall, or shall cause or permitany ERISA Affiliate to, cause or permit to occur an event that could reasonablybe expected to result in the imposition of a Lien under Section 412 of theIRC or Section 302 or 4068 of ERISA or cause or permit to occur an ERISAEvent.

###  

### (h)                                 Changeto Credit and Collection Policies. No Originator shall fail to comply in any material respect with, and nomaterial change, amendment, modification or waiver shall be made to, the Creditand Collection Policies without the prior written consent of Buyer.

###  

### (i)                                     AdverseTax Consequences.  No Originatorshall take or permit to be taken any action (other than with respect to actionstaken or to be taken solely by a Governmental Authority), or fail or neglect toperform, keep or observe any of its obligations hereunder or under the otherRelated Documents, that would have the effect directly or indirectly ofsubjecting any payment to Buyer, or to any assignee who is a resident of theUnited States of America, to withholding taxation.

###  

### (j)                                     NoProceedings.  From and after theEffective Date and until the date one year plus one day following theTermination Date, no Originator shall, directly or indirectly, institute orcause to be instituted against Buyer any proceeding of the type referred to in Sections8.01(d) and 8.01(e) of the Funding Agreement.

 

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### (k)                                  Mergers,Acquisitions, Sales, etc.  Other thanas permitted pursuant to Section 5.6 of the Existing Credit Agreement, noTransaction Party shall (i) be a party to any merger or consolidation, ordirectly or indirectly purchase or otherwise acquire all or substantially allof the assets or any stock of any class of, or any partnership or joint ventureinterest in, any other Person, or (ii) directly or indirectly sell,transfer, assign, convey or lease whether in one or a series of transactions,all or substantially all of its assets other than pursuant hereto, except forany such merger or consolidation, sale, transfer, conveyance, lease orassignment of or by any majority-owned Subsidiary into such Person or into,with or to any other majority-owned Subsidiary and any such purchase or otheracquisition by such Person or any majority-owned Subsidiary of the assets orstock of any majority-owned Subsidiary. Notwithstanding the foregoing, otherthan the Parent in its capacity as the sole member of the Buyer, no member ofthe Parent Group shall be a party to any merger or consolidation, or directlyor indirectly purchase or otherwise acquire all or substantially all of theassets or any Stock of the Buyer. In connection with any merger orconsolidation that is permitted pursuant to Section 5.6 of the ExistingCredit Agreement, each Originator will (i) provide written notice thereofto the Buyer, and (ii) take all such actions and deliver, or cause to bedelivered, such opinion letters of counsel, certificates and other agreementsthat the Buyer deems reasonably necessary or desirable under the UCC tomaintain the perfection and priority of the Buyer’s ownership interest in theReceivables.

###  

### (l)                                     [RESERVED].

###  

### (m)                               Modificationto the Credit Agreement.  Without theprior written consent of the Administrative Agent, the Parent will not agree toany amendment, modification or waiver to any provision of the Credit Agreement(other than the Existing Credit Agreement so long as the administrative agentthereunder is GE Capital or an Affiliate thereof) which impairs the rights ofthe Buyer, the Administrative Agent, the Indemnified Persons or the AffectedParties under any Related Document or with respect to the TransferredReceivables, the Collections thereon or the Borrower Collateral.

###  

### (n)                                 Commingling.  No Originator shall (and each Originatorshall cause each other member of the Parent Group not to) deposit or permit thedeposit of any funds that do not constitute Collections of TransferredReceivables into any Lockbox or Collection Account, provided that after theCommitment Termination Date, so long as any Transferred Receivables of anObligor remain unpaid, no Originator shall instruct such Obligor to remitCollections of any Receivables to any Person or account other than to a Lockboxor Collection Account.  If any funds notconstituting collections of Transferred Receivables are nonetheless depositedinto a Lockbox or Collection Account and such Originator so notifies Buyer,Buyer shall notify the Administrative Agent to promptly remit any such amountsto the applicable Originator.

###  

### (o)                                 ExcludedReceivables.  The definition of “ExcludedReceivable” in Annex X makes specific reference to (i) responsemanagement facility located in Rochester, New York, (ii) sheet fedprinting facility located in Chicago, Illinois and (iii) media placementbusiness formerly known as The Newspaper Network located in Atlanta, Georgia,Greenville, South Carolina and Sacramento, California (each an “Excluded Unit”).  In the event any Originator elects to combinethe operations of any other divisions or joint ventures of such Originator withan Excluded Unit or rename any such division or joint venture with the name ofan Excluded

###  

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### Unit, the Originator will provide the Buyer not lessthan thirty (30) days written notice prior to the date of implementation ofsuch action.  After giving such notice,such Originator shall (i) provide such information to the Buyer relatingto such action as the Buyer may reasonably request and (ii) execute anddeliver such amendments to this Agreement and other agreements and documentsrelated hereto as the Buyer may reasonably request to maintain perfected in theReceivables intended to be conveyed hereunder.

###  

## Section 4.04.  Breach ofRepresentations, Warranties or Covenants. Upon discovery by any Originator or Buyer of any breach with respect toany Receivable of any (a) representation, warranty or covenant relating tothe absence of Dilution Factors, or (b) representation, warranty orcovenant described in Sections 4.01(s), 4.01(u), 4.01(x),4.01(y), 4.02(l), 4.03(a), 4.03(b), 4.03(c),4.03(n) or 4.03(o), the party discovering the same shall giveprompt written notice thereof to the other parties hereto.  The Originator that breached suchrepresentation, warranty or covenant shall, if requested by notice from Buyer,on the first Business Day following receipt of such notice, either (a) repurchasethe affected Transferred Receivable from Buyer for cash remitted to theapplicable Collection Account or (b) transfer ownership of a new EligibleReceivable or new Eligible Receivables to Buyer on such Business Day withoutpayment of the Sale Price therefor, in each case in an amount (the “RejectedAmount”) equal to the Billed Amount of such Transferred Receivable minusthe sum of (i) Collections received in respect thereof plus (ii) theamount of any Dilution Factors taken into account in the calculation of theOriginal Sale Price thereof.  EachOriginator shall take reasonable steps to assure that no Collections or otherproceeds with respect to a Transferred Receivable so reconveyed to it are paidor deposited into any Collection Account.

##  

# **ARTICLE VINDEMNIFICATION**

# ** **

## Section 5.01.  Indemnification.  Without limiting any other rights that Buyeror any of its Stockholders, any of its assignees including the Lenders and theAdministrative Agent, or any of their respective officers, directors,employees, attorneys, agents or representatives and transferees, successors andassigns (each, a “Buyer Indemnified Person”) may have hereunder or underapplicable law, each Originator hereby agrees to indemnify and hold harmlesseach Buyer Indemnified Person from and against any and all Indemnified Amountsthat may be claimed or asserted against or incurred by any such BuyerIndemnified Person in connection with or arising out of the transactionscontemplated under this Agreement or with respect to such Originator’sobligations under any other Related Document, any actions or failures to act inconnection therewith, including any and all legal costs and expenses arisingout of or incurred in connection with disputes between or among any parties toany of the Related Documents, or in respect of any Transferred Receivable orany Contract therefor or the use by such Originator of the Sale Price therefor;provided, that no Originator shall be liable for any indemnification toa Buyer Indemnified Person to the extent that any such Indemnified Amounts (x)result from such Buyer Indemnified Person’s gross negligence or willfulmisconduct, as determined by a court of competent jurisdiction, (y) constitute recourse for uncollectible or uncollected Transferred Receivables due tothe credit risk, financial inability to pay or other failure (without cause orjustification) or inability on the part of the related Obligor to perform itsobligations thereunder or the occurrence of any event of bankruptcy withrespect to such Obligor or (z) includes any tax imposed on or measured by thenet income or profits or any franchise or other tax in lieu thereof

##  

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## (includingbranch profits or similar taxes) of any Indemnified Person by (i) thejurisdiction under the laws of which such Indemnified Person is organized orany political subdivision thereof or (ii) the jurisdiction of suchIndemnified Person’s applicable lending office or any political subdivisionthereof.  Subject to clauses (x), (y)and (z) of the proviso in the immediately preceding sentence, butotherwise without limiting the generality of the foregoing, each Originatorshall pay on demand to each Buyer Indemnified Person any and all IndemnifiedAmounts relating to or resulting from:

##  

#### (i)                                     relianceon any representation or warranty made or deemed made by such Originator (orany of its officers) under or in connection with this Agreement or any otherRelated Document (without regard to any qualifications concerning theoccurrence or non-occurrence of a Material Adverse Effect (other than aqualifier with respect to the financial condition of an Originator) or similarconcepts of materiality) or on any other information delivered by suchOriginator pursuant hereto or thereto that shall have been incorrect when madeor deemed made or delivered;

####  

#### (ii)                                  thefailure by such Originator to comply with any term, provision or covenantcontained in this Agreement, any other Related Document or any agreementexecuted in connection herewith or therewith (without regard to anyqualifications concerning the occurrence or non-occurrence of a MaterialAdverse Effect (other than a qualifier with respect to the financial conditionof an Originator) or similar concepts of materiality), any applicable law, rule orregulation with respect to any Transferred Receivable or the Contract therefor,or the nonconformity of any Transferred Receivable or the Contract thereforwith any such applicable law, rule or regulation;

####  

#### (iii)                               thefailure to vest and maintain vested in Buyer, or to Transfer to Buyer, validand properly perfected title to and sole record and beneficial ownership of theReceivables that constitute Transferred Receivables, together with allCollections in respect thereof, free and clear of any Adverse Claim;

####  

#### (iv)                              anydispute, claim, offset or defense of any Obligor (other than its discharge inbankruptcy) to the payment of any Receivable that is the subject of a Transferhereunder (including a defense based on such Receivable or the Contracttherefor not being a legal, valid and binding obligation of such Obligorenforceable against it in accordance with its terms (other than as a result ofa discharge in bankruptcy), or any other claim resulting from the sale of themerchandise or services giving rise to such Receivable or the furnishing orfailure to furnish such merchandise or services or relating to collectionactivities with respect to such Receivable (if such collection activities wereperformed by any Originator or any Affiliate thereof acting as the Servicer ora Sub-Servicer);

####  

#### (v)                                 anyproducts liability claim or other claim arising out of or in connection withmerchandise, insurance or services that is the subject of any Contract;

####  

#### (vi)                              thecommingling of Collections with respect to Transferred Receivables by anyOriginator at any time with its other funds or the funds of any other Personexcept as required pursuant to Section 7.03 hereof;

####  

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#### (vii)         any failure by such Originator to causethe filing of, or any delay in filing, financing statements or other similarinstruments or documents under the UCC of any applicable jurisdiction or anyother applicable laws with respect to any Receivable that is the subject of aTransfer hereunder to the extent that such filing is necessary to maintain theperfection and priority of the Buyer in such Receivable, whether at the time ofany such Transfer or at any subsequent time;

####  

#### (viii)        any investigation, Litigation orproceeding related to this Agreement or the use of the Sale Price obtained inconnection with any Sale or the ownership of Receivables or Collections withrespect thereto or in respect of any Receivable or Contract;

####  

#### (ix)           any claim brought by any Person otherthan a Buyer Indemnified Person arising from any activity by such Originator orany of its Affiliates in servicing, administering or collecting any TransferredReceivables;

####  

#### (x)            any failure of (x) a CollectionAccount Bank to comply with the terms of the applicable Collection AccountAgreement, (y) the Concentration Account Bank to comply with the terms of theConcentration Account Agreement, or (z) the Borrower Account Bank to complywith the terms of the Borrower Account Agreement;

####  

#### (xi)           any withholding, deduction or Chargeimposed upon any payments with respect to any Transferred Receivable, anyBorrower Assigned Agreement or any other Borrower Collateral;

####  

provided, that, the above provisions forindemnity shall not be interpreted to eliminate principles of causation indetermining whether an indemnified loss has occurred.

 

#### If and to the extent that this Section 5.01 may beunenforceable for any reason, each Originator agrees to make the maximumcontribution to the payment and satisfaction thereof which is permissible underapplicable law.

####  

## Section 5.02.  Indemnitiesby the Servicer.

##  

### (a)           Without limiting any other rightsthat a Buyer Indemnified Person may have hereunder or under applicable law, theServicer hereby agrees to indemnify and hold harmless each Buyer IndemnifiedPerson from and against any and all Indemnified Amounts that may be claimed orasserted against or incurred by any such Buyer Indemnified Person in connectionwith or arising out of the collection activities of the Servicer hereunder orout of any breach by the Servicer of its obligations hereunder or under anyother Related Document; provided, that the Servicer shall not be liablefor any indemnification to a Buyer Indemnified Person to the extent that anysuch Indemnified Amount (x) results from such Buyer Indemnified Person’s grossnegligence or willful misconduct, in each case as determined by a court ofcompetent jurisdiction, or (y) constitutes recourse for uncollectible oruncollected Transferred Receivables due to the credit risk, financial inabilityto pay or other failure (without cause or justification) or inability on thepart of the related Obligor to perform its obligations thereunder or theoccurrence of any event of bankruptcy with respect to such Obligor.  Without limiting the generality of the

 

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foregoing, the Servicer shallpay on demand to each Buyer Indemnified Person any and all Indemnified Amountsrelating to or resulting from:

###  

#### (i)            reliance on any representation orwarranty made or deemed made by the Servicer (or any of its officers) under orin connection with this Agreement or any other Related Document (without regardto any qualifications concerning the occurrence or non-occurrence of a MaterialAdverse Effect or similar concepts of materiality) or on any other informationdelivered by the Servicer pursuant hereto or thereto that shall have beenincorrect when made or deemed made or delivered;

####  

#### (ii)           the failure by the Servicer to complywith any term, provision or covenant contained in this Agreement, any otherRelated Document or any agreement executed in connection herewith or therewith(without regard to any qualifications concerning the occurrence ornon-occurrence of a Material Adverse Effect or similar concepts ofmateriality), any applicable law, rule or regulation with respect to anyTransferred Receivable or the Contract therefor, or the nonconformity of anyTransferred Receivable or the Contract therefor with any such applicable law, rule orregulation;

####  

#### (iii)          the imposition of any Adverse Claimwith respect to any Transferred Receivable or the Borrower Collateral as aresult of any action taken by the Servicer;

####  

#### (iv)          the commingling of Collections withrespect to Transferred Receivables by the Servicer at any time with its otherfunds or the funds of any other Person except as required pursuant to Section 7.03hereof;

####  

provided, that, the above provisions forindemnity shall not be interpreted to eliminate principles of causation in determiningwhether an indemnified loss has occurred.

 

#### If and to the extent that this Section 5.02 may beunenforceable for any reason, each Servicer agrees to make the maximumcontribution to the payment and satisfaction thereof which is permissible underapplicable law.

####  

### (b)           Any Indemnified Amounts subject tothe indemnification provisions of this Section 5.02  shall be paid by the Servicer to the BuyerIndemnified Person entitled thereto within five Business Days following demandtherefor.

###  

# **ARTICLE VIMISCELLANEOUS**

# ** **

## Section 6.01.  Notices.  Except as otherwise provided herein, wheneverit is provided herein that any notice, demand, request, consent, approval,declaration or other communication shall or may be given to or served upon anyof the parties by any other parties, or whenever any of the parties desires togive or serve upon any other parties any communication with respect to thisAgreement, each such notice, demand, request, consent, approval, declaration orother communication shall be in writing and shall be deemed to have beenvalidly served, given or delivered (a) upon the earlier of actual receiptand three Business Days after deposit in the

 

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United States Mail, registeredor certified mail, return receipt requested, with proper postage prepaid, (b) upontransmission, when sent by email of the signed notice in PDF form or facsimiletransmission (with such email or facsimile promptly confirmed by delivery of acopy by personal delivery or United States Mail as otherwise provided in this Section 6.01),(c) one Business Day after deposit with a reputable overnight courier withall charges prepaid or (d) when delivered, if hand-delivered by messenger,all of which shall be addressed to the party to be notified and sent to theaddress or facsimile number set forth below in this Section 6.01 orto such other address (or facsimile number) as may be substituted bynotice given as herein provided:

##  

| Each  Originator: |   | c/o Vertis, Inc.                                       |
|-------------------|--------|-------------------------------------------------------------|
|              |   | 250 West Pratt Street                                       |
|              |   | Baltimore, MD 21201                                         |
|              |   | Attention: Chief Financial Officer and Chief Legal  Officer |
|              |   | Facsimile No.: (410) 454-0887                               |
|              |   |                                                        |
| Buyer:            |   | Vertis Receivables II, LLC                                  |
|              |   | 250 West Pratt Street                                       |
|              |   | Baltimore, MD 21201                                         |
|              |   | Attention: Chief Financial Officer and Chief Legal  Officer |
|              |   | Facsimile No.: (410) 454-0887                               |
|              |   |                                                        |
| Parent:           |   | Vertis, Inc.                                           |
|              |   | 250 West Pratt Street                                       |
|              |   | Baltimore, MD 21201                                         |
|              |   | Attention: Chief Financial Officer and Chief Legal  Officer |
|              |   | Facsimile No.: (410) 454-0887.                              |

 

Without limiting thegenerality of the foregoing, all notices to be provided to the Buyer hereundershall be delivered to both the Buyer and the Administrative Agent under theFunding Agreement, and shall be effective only upon such delivery to theAdministrative Agent in accordance with the terms of the FundingAgreement.  The giving of any noticerequired hereunder may be waived in writing by the party entitled to receivesuch notice.  Failure or delay indelivering copies of any notice, demand, request, consent, approval,declaration or other communication to any Person (other than Buyer) designatedin any written communication provided hereunder to receive copies shall in noway adversely affect the effectiveness of such notice, demand, request,consent, approval, declaration or other communication.  Notwithstanding the foregoing, whenever it isprovided herein that a notice is to be given to any other party hereto by aspecific time, such notice shall only be effective if actually received by suchparty prior to such time, and if such notice is received after such time or ona day other than a Business Day, such notice shall only be effective on theimmediately succeeding Business Day.

 

## Section 6.02.  No Waiver;Remedies.  Buyer’s failure, at anytime or times, to require strict performance by the Originators of anyprovision of this Agreement or any Receivables Assignment shall not waive,affect or diminish any right of Buyer thereafter to demand strict complianceand performance herewith or therewith. Any suspension or waiver of any breach or default hereunder shall notsuspend, waive or affect any other breach or default whether the same is prioror subsequent thereto and whether the same or of a different type.  None of the 

 

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undertakings, agreements,warranties, covenants and representations of any Originator contained in thisAgreement or any Receivables Assignment, and no breach or default by anyOriginator hereunder or thereunder, shall be deemed to have been suspended orwaived by Buyer unless such waiver or suspension is by an instrument in writingsigned by an officer of or other duly authorized signatory of Buyer anddirected to such Originator specifying such suspension or waiver.  Buyer’s rights and remedies under thisAgreement shall be cumulative and nonexclusive of any other rights and remediesthat Buyer may have under any other agreement, including the other RelatedDocuments, by operation of law or otherwise. Recourse to the Receivables shall not be required.

##  

## Section 6.03.  Successorsand Assigns.  This Agreement shall bebinding upon and shall inure to the benefit of each Originator, Servicer andBuyer and their respective successors and permitted assigns, except asotherwise provided herein.  No Originatornor the Servicer may assign, transfer, hypothecate or otherwise convey itsobligations or duties hereunder without the prior express written consent ofBuyer.  Any such purported assignment,transfer, hypothecation or other conveyance by any Originator without the priorexpress written consent of Buyer, shall be void.  Each Originator and the Servicer acknowledgesthat Buyer may assign its rights granted hereunder, including the benefit ofany indemnities under Article V, and upon such assignment, suchassignee shall have, to the extent of such assignment, all rights of Buyerhereunder and, to the extent permitted under the Funding Agreement, may in turnassign such rights.  Each Originator andthe Servicer agrees that, upon any such assignment, such assignee may enforcedirectly, without joinder of Buyer, the rights set forth in thisAgreement.  All such assignees, includingparties to the Funding Agreement in the case of any assignment to such parties,shall be third party beneficiaries of, and shall be entitled to enforce Buyer’srights and remedies under, this Agreement to the same extent as Buyer or any ofits designated representatives may do. The terms and provisions of this Agreement are for the purpose ofdefining the relative rights and obligations of each Originator, the Servicerand Buyer with respect to the transactions contemplated hereby and, except forthe Lenders and the Administrative Agent, no Person shall be a third partybeneficiary of any of the terms and provisions of this Agreement.

##  

## Section 6.04.  Termination;Survival of Obligations.

##  

### (a)           This Agreement shall create andconstitute the continuing obligations of the parties hereto in accordance withits terms, and shall remain in full force and effect until the later of (i) theTermination Date and (ii) the date on which Buyer and Originators enterinto a written agreement providing for the termination of their rights andobligations hereunder..

###  

### (b)           Except as otherwise expresslyprovided herein or in any other Related Document, no termination or cancellation(regardless of cause or procedure) of any commitment made by Buyer under thisAgreement shall in any way affect or impair the obligations, duties andliabilities of any Originator or the rights of Buyer relating to any unpaidportion of any and all recourse and indemnity obligations of such Originator toBuyer, including those set forth in Sections 4.04, 5.01, 6.12,6.14 and 6.15, due or not due, liquidated, contingent orunliquidated or any transaction or event occurring prior to such termination,or any transaction or event, the performance of which is required after theCommitment Termination Date.  Except asotherwise expressly provided herein or in any other Related Document, allundertakings, agreements, covenants, warranties and representations of orbinding upon each Originator, and all rights of

 

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Buyer hereunder, all ascontained in the Related Documents, shall not terminate or expire, but rathershall survive any such termination or cancellation and shall continue in fullforce and effect until the Termination Date; provided, that the rightsand remedies pursuant to Sections 4.04, the indemnification andpayment provisions of Article V, and the provisions of Sections4.03(j), 6.03, 6.12, 6.14 and 6.15 shall becontinuing and shall survive any termination of this Agreement.

###  

## Section 6.05.  CompleteAgreement; Modification of Agreement. This Agreement and the other Related Documents constitute the completeagreement between the parties with respect to the subject matter hereof andthereof, supersede all prior agreements and understandings relating to thesubject matter hereof and thereof, and may not be modified, altered or amendedexcept as set forth in Section 6.06.

##  

## Section 6.06.  Amendmentsand Waivers.  No amendment,modification, termination or waiver of any provision of this Agreement or anyof the other Related Documents, or any consent to any departure by anyOriginator therefrom, shall in any event be effective unless the same shall bein writing and signed by each of the parties hereto; provided, that,prior to the Termination Date, no amendment, modification, termination orwaiver of any provision of this Agreement or any of the other RelatedDocuments, or any consent to any departure by any Originator therefrom, shallin any event be effective unless the same shall be in writing and signed by theAdministrative Agent.  No consent ordemand in any case shall, in itself, entitle any party to any other consent orfurther notice or demand in similar or other circumstances.

##  

## Section 6.07.  GoverningLaw; Consent to Jurisdiction; Waiver of Jury Trial.

##  

### (a)           **THIS AGREEMENT AND EACHRELATED DOCUMENT (EXCEPT TO THE EXTENT THAT ANY RELATED DOCUMENT EXPRESSLYPROVIDES TO THE CONTRARY) AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDERSHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY ANDPERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THELAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND SECTION 5-1402OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OFLAW PRINCIPLES), EXCEPT TO THE EXTENT THAT THE PERFECTION, EFFECT OF PERFECTIONOR PRIORITY OF THE INTERESTS OF THE BUYER IN THE RECEIVABLES OR REMEDIESHEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF AJURISDICTION OTHER THAN THE STATE OF NEW YORK, AND ANY APPLICABLE LAWS OF THEUNITED STATES OF AMERICA.**

###  

### (b)           **EACH PARTY HERETO HEREBYCONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE BOROUGH OFMANHATTAN IN NEW YORK CITY SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANYCLAIMS OR DISPUTES BETWEEN THEM PERTAINING TO THIS AGREEMENT OR TO ANY MATTERARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED DOCUMENT; PROVIDED,THAT EACH PARTY HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS**

 

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**MAY HAVETO BE HEARD BY A COURT LOCATED OUTSIDE OF THE BOROUGH OF MANHATTAN IN NEW YORKCITY; PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BEDEEMED OR OPERATE TO PRECLUDE BUYER FROM BRINGING SUIT OR TAKING OTHER LEGALACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE RECEIVABLES OR ANY OTHERSECURITY FOR THE OBLIGATIONS OF THE ORIGINATORS ARISING HEREUNDER, OR TOENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF BUYER.  EACH PARTY HERETO SUBMITS AND CONSENTS INADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION THAT SUCH PARTY MAY HAVEBASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUMNONCONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OREQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  EACH PARTY HERETO HEREBY WAIVES PERSONALSERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTIONOR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BEMADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SETFORTH IN SECTION 6.01 HEREOF AND THATSERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY’SACTUAL RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAIL,PROPER POSTAGE PREPAID.  NOTHING IN THIS SECTION SHALLAFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNERPERMITTED BY LAW.**

###  

### (c)           **BECAUSE DISPUTES ARISINGIN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY ANDECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISHAPPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THEPARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCHAPPLICABLE LAWS.  THEREFORE, TO ACHIEVETHE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, ORPROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORTOR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THERELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANYRELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.**

###  

## Section 6.08.  Counterparts.  This Agreement may be executed in any numberof separate counterparts, each of which shall collectively and separately constituteone agreement.

##  

## Section 6.09.  Severability.  Wherever possible, each provision of thisAgreement shall be interpreted in such a manner as to be effective and validunder applicable law, but if any provision of this Agreement shall beprohibited by or invalid under applicable law, such

 

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provision shall be ineffectiveonly to the extent of such prohibition or invalidity without invalidating theremainder of such provision or the remaining provisions of this Agreement.

##  

## Section 6.10.  Section Titles.  The section titles and table of contentscontained in this Agreement are provided for ease of reference only and shallbe without substantive meaning or content of any kind whatsoever and are not apart of the agreement between the parties hereto.

##  

## Section 6.11.  No Setoff.  Each Originator’s obligations under thisAgreement shall not be affected by any right of setoff, counterclaim,recoupment, defense or other right such Originator might have against Buyer,all of which rights are hereby expressly waived by such Originator.

##  

## Section 6.12.  Confidentiality.

##  

### (a)           Except to the extent otherwiserequired by applicable law, as reasonably believed to be appropriate to befiled publicly with the Securities and Exchange Commission, or unless eachAffected Party shall otherwise consent in writing, each Originator, theServicer and Buyer agree to maintain the confidentiality of this Agreement (andall drafts hereof and documents ancillary hereto) in its communications withthird parties other than any Affected Party or any Buyer Indemnified Person andotherwise not to disclose, deliver or otherwise make available to any thirdparty (other than its directors, officers, employees, accountants or counsel)the original or any copy of all or any part of this Agreement (or any drafthereof and documents ancillary hereto) except to an Affected Party, a BuyerIndemnified Person.

###  

### (b)           Each Originator and the Serviceragrees that it shall not (and shall not permit any of its Subsidiaries to)issue any news release or make any public announcement pertaining to thetransactions contemplated by this Agreement and the Related Documents withoutthe prior written consent of Buyer (which consent shall not be unreasonablywithheld) unless such news release or public announcement is required by law,in which case such Originator or the Servicer shall consult with Buyer prior tothe issuance of such news release or public announcement.  Any Originator or the Servicer may, however,disclose the general terms of the transactions contemplated by this Agreementand the Related Documents to trade creditors, suppliers and othersimilarly-situated Persons so long as such disclosure is not in the form of anews release or public announcement.

###  

### (c)           Except to the extent otherwiserequired by applicable law, or in connection with any judicial oradministrative proceedings, reasonably believed to be appropriate to be filedpublicly with the Securities Exchange Commission, or unless the Originators andthe Servicer otherwise consent in writing, the Buyer agrees (i) tomaintain the confidentiality of (A) this Agreement (and all drafts hereofand documents ancillary hereto) and (B) all other confidential proprietaryinformation with respect to the Originators, the Servicer and their respectiveAffiliates and each of their respective businesses obtained by the Buyer inconnection with the structuring, negotiation and execution of the transactionscontemplated herein and in the other documents ancillary hereto, in each case,in its communications with third parties other than any Originator or theServicer, and (ii) not to disclose, deliver, or otherwise make availableto any third party (other than its directors, officers, employees, accountantsor counsel) the original or any copy of all or any part of this Agreement (orany draft hereof and documents ancillary

 

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hereto) except to anyOriginator. Notwithstanding the foregoing, Buyer shall be permitted to disclosecopies of this Agreement and the confidential proprietary information describedabove to (1) each Affected Party and each Affected Party’s and theirrespective Affiliates’ directors, officers, employees and agents, includingaccountants, legal counsel and other advisors (it being understood that thePersons to whom such disclosure is made will be informed of the confidentialnature of such Information and instructed to keep such Information confidentialand to not disclose or use such Information in violation of Regulation FD (17C.F.R. § 243.100-243.103));  (2) anyregulatory authority (it being understood that it will to the extent reasonablypracticable provide the Originators and/or the Servicer with an opportunity torequest confidential treatment from such regulatory authority), (3) to theextent required by applicable laws or regulations or by any subpoena or similarlegal process, (4) to any other party to the Funding Agreement, (5) tothe extent required in connection with the exercise of any remedies hereunderor any suit, action or proceeding relating to this Agreement or any otherRelated Document or the enforcement of rights hereunder or thereunder, (6) subjectto an agreement containing provisions substantially the same as those of thisSection, to any assignee or pledgee of (or participant in), or any prospectiveassignee or pledgee of (or participant in), any of its rights or obligationsunder this Agreement, (7) with the consent of the applicable Originator orServicer or (8) to the extent such Agreement or other information (i) becomespublicly available other than as a result of a breach of this Section or (ii) becomesavailable to the Buyer or Affected Party on a nonconfidential basis from asource other than Holdings or any Subsidiary thereof.

###  

## Section 6.13.  FurtherAssurances.

##  

### (a)           Each Originator shall, at its solecost and expense, upon request of Buyer, promptly and duly execute and deliverany and all further instruments and documents and take such further actionsthat may be necessary or desirable or that Buyer may request to carry out moreeffectively the provisions and purposes of this Agreement or any other RelatedDocument or to obtain the full benefits of this Agreement and of the rights andpowers herein granted, including (i) using its best efforts to secure allconsents and approvals necessary or appropriate for the assignment to or forthe benefit of Buyer of any Transferred Receivable held by such Originator orin which such Originator has any rights not heretofore assigned, and (ii) filingany financing or continuation statements under the UCC with respect to theownership interests or Liens granted hereunder or under any other RelatedDocument.  Each Originator herebyauthorizes Buyer, to file any such financing or continuation statements withoutthe signature of such Originator to the extent permitted by applicablelaw.  A carbon, photographic or otherreproduction of this Agreement or of any notice or financing statement coveringthe Transferred Receivables or any part thereof shall be sufficient as a noticeor financing statement where permitted by law. If any amount payable under or in connection with any of the TransferredReceivables is or shall become evidenced by any instrument, such instrument,other than checks and notes received in the ordinary course of business, shallbe duly endorsed in a manner satisfactory to Buyer immediately upon suchOriginator’s receipt thereof and promptly delivered to Buyer.

###  

### (b)           If any Originator fails to performany agreement or obligation under this Section 6.13, Buyer may (butshall not be required to) itself perform, or cause performance of, such

 

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agreement or obligation, andthe expenses of Buyer incurred in connection therewith shall be payable by suchOriginator upon demand of Buyer.

###  

## Section 6.14.  Fees andExpenses.  In addition to itsindemnification obligations pursuant to Article V, each Originatoragrees, jointly and severally, to pay on demand all Rating Agency fees and allcosts and expenses incurred by Buyer in connection with the negotiation,preparation, execution and delivery of this Agreement and the other RelatedDocuments, including the fees and out-of-pocket expenses incurred by Buyer,(including any such amounts owed by Buyer in connection with its financing ofthe Transfers hereunder), for counsel, advisors, consultants and auditorsretained in connection with the transactions contemplated hereby and advice inconnection therewith, and each Originator agrees, jointly and severally, to payall costs and expenses, if any (including reasonable attorneys’ fees andexpenses but excluding any costs of enforcement or collection of theTransferred Receivables), in connection with the enforcement of this Agreementand the other Related Documents.

##  

## Section 6.15.  NonrecourseObligations.  Notwithstanding anyprovision in any other Section of this Agreement to the contrary, anyobligation of Buyer to pay any amounts payable to the Originators pursuant tothis Agreement shall be paid pursuant hereto only if the Buyer has ExcessFunds.  In the event that the Buyer doesnot have Excess Funds, the excess of the amounts due hereunder (and subject tothis Section 6.15) over the amounts paid shall not constitute a “claim”under Section 101(5) of the Bankruptcy Code against Buyer until suchtime as the Buyer has Excess Funds.

##  

# **ARTICLE VIISERVICER PROVISIONS**

# ** **

## Section 7.01.  Appointmentof the Servicer.  Buyer herebyappoints the Servicer as its agent to service the Transferred Receivables and,in accordance with the Related Documents, to enforce Buyer’s rights andinterests in and under each Transferred Receivable and Contract therefor and toserve in such capacity until the termination of its responsibilities pursuantto Sections 8.01 or 9.01. In connection therewith, the Servicer hereby accepts such appointmentand agrees to perform the duties and obligations set forth herein.  The Servicer may, with the prior writtenconsent of the Buyer, subcontract with a Sub-Servicer for the collection,servicing or administration of the Transferred Receivables; provided,that (a) the Servicer shall remain liable for the performance of theduties and obligations of such Sub-Servicer pursuant to the terms hereof, (b) anySub-Servicing Agreement that may be entered into and any other transactions orservices relating to the Transferred Receivables involving a Sub-Servicer shallbe deemed to be between the Sub-Servicer and the Servicer alone, and Buyershall not be deemed a party thereto and shall have no obligations, duties orliabilities with respect to the Sub-Servicer and (c) each Sub-ServicingAgreement shall expressly provide that it shall automatically terminate uponthe termination of the Servicer’s responsibilities hereunder in accordance withthe terms hereof.

##  

## Section 7.02.  Duties andResponsibilities of the Servicer.

##  

### (a)           Subject to the provisions of thisAgreement, the Servicer shall conduct the servicing, administration andcollection of the Transferred Receivables and shall take, or cause to

 

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be taken, all actions that (i) maybe necessary or advisable to service, administer and collect each TransferredReceivable from time to time, (ii) the Servicer would take if theTransferred Receivables were owned by the Servicer, and (iii) areconsistent with the Credit and Collection Policies.

###  

### (b)           In addition to the foregoing, inorder to ensure that the Buyer has adequate funding for the purchase ofReceivables hereunder, the Servicer shall be responsible for the following:

###  

#### (i)            preparation and delivery on behalfof Buyer all Borrowing Requests, Repayment Notices, Borrowing BaseCertificates, Monthly Reports, Weekly Reports and Daily Reports required to bedelivered under the Funding Agreement;

####  

#### (ii)           calculation and monitoring of theBorrowing Base and the components thereof, and whether the Receivables includedin the calculation of the Net Receivables Balance are in fact EligibleReceivables; and

####  

#### (iii)          establishment, maintenance andadministration of the Collection Accounts, the Concentration Account, and theBorrower Account in accordance with Article VIII of the Funding Agreement.

####  

## Section 7.03.  Collectionson Receivables.

##  

### (a)           In the event that the Servicer isunable to determine the specific Transferred Receivables on which Collectionshave been received from the Obligor thereunder, the parties agree that suchCollections shall be deemed to have been received on such Receivables in theorder in which they were originated with respect to such Obligor.  In addition, if an Obligor is an obligor onTransferred Receivables and any other Receivables or indebtedness owed to anyOriginator, then, unless (i) otherwise required by applicable law or (ii) specifiedby the applicable Obligor in good faith and without direction of the Servicer,the Borrower or any member of the Parent Group with respect to the applicationof payments in respect of multiple Transferred Receivables owing by suchObligor, Collections on such Transferred Receivables or other Receivables orindebtedness shall be treated first, as a Collection of any TransferredReceivables of such Obligor, in the order in which they were originated, beforebeing applied to any other Receivables or other indebtedness of such Obligor.  In the event that the Servicer is unable todetermine the specific Transferred Receivables on which discounts, offsets orother non-cash reductions have been granted or made with respect to the Obligorthereunder, the parties agree for purposes of this Agreement only that suchreductions shall be deemed to have been granted or made (i) prior to aTermination Event, on such Receivables as determined by the Servicer, and (ii) fromand after the occurrence of a Termination Event, in the reverse order in whichthey were originated with respect to such Obligor.

###  

### (b)           If the Servicer determines thatamounts unrelated to the Transferred Receivables (the “Unrelated Amounts”)have been deposited in any Account, then the Servicer shall provide writtenevidence thereof to the Buyer no later than the first Business Day followingthe day on which the Servicer had actual knowledge thereof, which evidenceshall be provided in writing and shall be otherwise satisfactory to Buyer.

 

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### (c)           Authorization of the Servicer.  Buyer hereby authorizes the Servicer to take,solely in accordance with the Credit and Collection Policies, any and allreasonable steps in its name and on its behalf necessary or desirable and notinconsistent with the rights of the Buyer hereunder, in the determination ofthe Servicer, to (a) collect all amounts due under any TransferredReceivable, including endorsing the applicable name on checks and otherinstruments representing Collections on such Receivable, and execute anddeliver any and all instruments of satisfaction or cancellation or of partialor full release or discharge and all other comparable instruments with respectto any such Receivable and (b) after any Transferred Receivable becomes aDelinquent Receivable or a Defaulted Receivable and to the extent permittedunder and in compliance with applicable law and regulations, commenceproceedings with respect to the enforcement of payment of any such Receivableand the Contract therefor and adjust, settle or compromise any payments duethereunder, in each case to the same extent as the applicable Originator couldhave done if it had continued to own such Receivable.  The Borrower shall furnish the Servicer withany powers of attorney and other documents necessary or appropriate to enablethe Servicer to carry out its servicing and administrative dutieshereunder.  Notwithstanding anything tothe contrary contained herein, at any time at which the Administrative Agentsucceeds to, or upon the exercise of remedies with respect to, Buyer’s rightsunder this Agreement (in each case in accordance with the provisions of theFunding Agreement), the Administrative Agent shall also have the absolute andunlimited right to direct the Servicer (at the Servicer’s expense) (i) tocommence or settle any legal action to enforce collection of any TransferredReceivable or (ii) to foreclose upon, repossess or take any other actionthat the Buyer deems necessary or advisable with respect thereto.  In no event shall the Servicer be entitled tomake Buyer or any Affected Party a party to any Litigation without suchAffected Party’s express prior written consent.

###  

### (d)           Servicing Fees.  As compensation for its servicing activitiesand as reimbursement for its reasonable expenses in connection therewith, theServicer shall be entitled to receive the Servicing Fees monthly on eachSettlement Date.  Such Servicing Feesshall be payable from available funds in accordance with Section 2.07 and2.08 of the Funding Agreement.  TheServicer shall be required to pay for all expenses incurred by it in connectionwith its activities hereunder (including any payments to accountants, counselor any other Person) and shall not be entitled to any payment therefor otherthan the Servicing Fees.

###  

### (e)           Sales of Receivables.  The Buyer agrees that the Servicer, on behalfof the Buyer, may from time to time sell or otherwise transfer TransferredReceivables for which the applicable Obligor is a BK Obligor to a third partythat is not an Affiliate of Holdings; provided, that, (i) until theTermination Date, no such transfers shall be permitted under this Section 7.03(e) ifeither a Termination Event or an Incipient Termination Event shall haveoccurred and be continuing prior to or after the consummation of any suchtransfer, (ii) the Outstanding Balance of any Transferred Receivables soldor otherwise transferred pursuant to this Section 7.03(e) inany transaction shall not exceed $3,000,000, (iii) the aggregateOutstanding Balance of all Transferred Receivables sold or otherwisetransferred pursuant to this Section 7.03(e) from and afterthe Closing Date shall not exceed $10,000,000, (iv) each sale or transferof Transferred Receivables pursuant to this Section 7.03(e) shallbe made without any recourse to the Buyer and (v) any buyer of anyTransferred Receivables sold or otherwise transferred pursuant to this Section 7.03(e) shallagree in writing that, until the date that is one year plus one day followingthe date on which all Borrower Obligations have been indefeasibly paid in fullin cash, such

 

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Person shall not, directly orindirectly, institute or cause to be instituted against Buyer any proceeding ofthe type referred to in Sections 8.01(c) or 8.01(d) ofthis Agreement.

###  

### (f)            Computer Records.  The Servicer shall maintain, consistent withthe requirements of Section 2.01(f)(i), computer records of allinvoices that are (or evidence) Contracts and from which duplicate copies ofsuch invoices can be produced.

###  

## Section 7.04.  Covenantsof the Servicer.  The Servicercovenants and agrees that from and after the Effective Date and until theTermination Date:

##  

### (a)           Compliance with Agreements andApplicable Laws.  The Servicer shallperform each of its obligations under this Agreement and the other RelatedDocuments and comply with all federal, state, provincial and local laws andregulations applicable to it and the Receivables, including those relating totruth in lending, retail installment sales, fair credit billing, fair creditreporting, equal credit opportunity, fair debt collection practices, privacy,licensing, securities laws, margin regulations, taxation, ERISA and labormatters and environmental laws and environmental permits, except where thefailure to so comply could not reasonably be expected to result in a MaterialAdverse Effect.

###  

### (b)           Maintenance of Existence andConduct of Business.  The Servicershall:  (i) do or cause to be doneall things necessary to preserve and keep in full force and effect its corporateexistence and its rights and franchises; (ii) continue to conduct itsbusiness substantially as now conducted or as otherwise permitted hereunder andin accordance with the terms of its certificate or articles of incorporationand by-laws; and (iii) at all times maintain, preserve and protect all ofits assets and properties used or useful in the conduct of its business,including all licenses, permits, charters and registrations, and keep the samein good repair, working order and condition in all material respects (takinginto consideration ordinary wear and tear) and from time to time make, or causeto be made, all necessary or appropriate repairs, replacements and improvementsthereto consistent with industry practices, except to the extent that thefailure to comply with this clauses (ii) and (iii) couldnot reasonably be expected to have a Material Adverse Effect within the meaningof clauses (b) through (e) of the definition thereof.

###  

### (c)           Deposit of Collections.  The Servicer shall deposit or cause to bedeposited promptly into a Collection Account, and in any event no later thanthe first Business Day after receipt thereof, all Collections it may receivewith respect to any Transferred Receivable.

###  

### (d)           ERISA.  The Servicer shall give the AdministrativeAgent prompt written notice of any event that (i) could reasonably beexpected to result in the imposition of a Lien under Section 412 of theIRC or Section 302 or 4068 of ERISA, or (ii) could reasonably beexpected to result in the incurrence by Servicer of any liabilities under TitleIV of ERISA (other than premium payments arising in the ordinary course ofbusiness) in excess of $500,000.

###  

### (e)           Compliance with Credit andCollection Policies.  The Servicershall comply with the Credit and Collection Policies with respect to eachTransferred Receivable and the Contract therefor.  The Servicer shall not extend, amend,forgive, discharge, compromise, waive, cancel or otherwise modify the terms ofany Transferred Receivable or amend, modify or waive any term or condition ofany Contract related thereto in a manner that would have the effect of creating

 

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such a modification of aReceivable, except that the Servicer may (i) reduce the OutstandingBalance of a Receivable as required to reflect any Dilution Factors and (ii) takesuch actions, to the extent permitted by the Credit and Collection Policies, asthe Servicer may deem reasonably necessary or desirable in order to maximizeCollections with respect to any past-due Receivable so long as, after givingeffect to any such action, no Receivables which constituted EligibleReceivables prior to such action would no longer constitute EligibleReceivables as a result of such action. The Servicer shall not without the prior written consent of the Buyeramend, modify or waive any term or provision of the Credit and CollectionPolicies.

###  

### (f)            Ownership of TransferredReceivables; Servicing Records.  TheServicer shall (i) identify the Transferred Receivables clearly andunambiguously in its Servicing Records to reflect that such TransferredReceivables are the property of the Borrower and that a Lien on suchTransferred Receivables has been granted to the Administrative Agent for thebenefit of the Lenders; (ii) maintain and implement administrative andoperating procedures (including, without limitation, an ability to recreaterecords evidencing such Receivables in the event of the destruction of anyoriginals thereof) as are necessary or advisable in accordance with industrypractice (1) to reflect promptly (a) all payments received and allcredits and extensions granted with respect to such Receivables, (b) thereturn, rejection, repossessions, or stoppage in transit of anymerchandise the sale of which has given rise to any such Receivable and (c) anyother reductions in the Outstanding Balance of the Receivables on account ofDilution Factors; and (2) to determine no less frequently than the dateeach Daily Report, Weekly Report or Monthly Report is due, whether eachTransferred Receivable then outstanding qualifies as an Eligible Receivable; (iii) byno later than the Effective Date, mark conspicuously with a legend, in form andsubstance satisfactory to the Buyer, its computer records pertaining toSubstantial Contracts that constitute Borrower Collateral, and its filecabinets or other storage facilities where it maintains information pertainingto the Borrower Collateral, to evidence the assignment of the Receivables underthis Agreement and the assignment and Liens granted pursuant to the FundingAgreement.  Upon the occurrence andduring the continuance of a Termination Event, the Servicer shall deliver andturn over such books and records to the Buyer or its representatives at anytime on demand.  The Servicer shallpermit any representative of the Buyer to inspect such books and records andshall provide photocopies thereof to Buyer as more specifically set forth in Section 7.04(i).

###  

### (g)           Payment and Performance of Chargesand other Obligations.

###  

#### (i)            Subject to Section 7.04(g)(ii),the Servicer shall pay, perform and discharge or cause to be paid, performedand discharged promptly all charges and claims payable by it, including (A) Chargesimposed upon it, its income and profits, or any of its property (real, personalor mixed) and all Charges with respect to tax, social security and unemploymentwithholding with respect to its employees, and (B) lawful claims forlabor, materials, supplies and services or otherwise before any amount thereofshall become past due in each case, to the extent the failure to do so couldreasonably be expected to (i) materially impair the ability of suchServicer to perform its obligations under the Related Documents, (ii) adverselyaffect the validity or enforceability of any Related Document or the rights andremedies of the Borrower, the Lenders or the Administrative Agent under anyRelated Document, (iii) adversely affect the federal income tax attributesof the sale, contribution or pledge of the Transferred Receivables

 

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pursuant toany Related Document or (iv) affect the enforceability or value of theTransferred Receivables (or the collectibility thereof), the Contractstherefore, the Borrower Collateral (in each case, taken as a whole) or theownership interests or Liens of the Borrower or the Lenders or theAdministrative Agent thereon or the priority of such interests or Liens.

####  

#### (ii)           The Servicer may in good faithcontest, by appropriate proceedings, the validity or amount of any charges orclaims described in Section 7.04(g)(i); provided that (A) adequatereserves with respect to such contest are maintained on the books of theServicer, in accordance with GAAP, (B) such contest is maintained andprosecuted continuously and with diligence, (C) none of the BorrowerCollateral becomes subject to forfeiture or loss as a result of such contest, (D) noLien shall be imposed to secure payment of such charges or claims (exceptingonly Liens as to which foreclosure is not imminent and the use and value of theproperty to which the Lien attaches is not impaired during the pendency of suchproceeding), and (E) the Administrative Agent has not advised the Servicerin writing that it reasonably believes that failure to pay or to discharge suchclaims or charges could have or result in a Material Adverse Effect.

####  

### (h)           Access.  Subject to the requirements of Section 4.02(b),the Servicer agrees to provide Buyer, the Buyer’s officers, employees,directors, agents and representatives with all access that the Originators havecovenanted and agreed to provide to the Buyer in Section 4.02(b).

###  

### (i)            Communication with Accountants.  The Servicer authorizes Buyer to communicatedirectly with its independent certified public accountants, and authorizes and,shall upon Buyer’s request, instruct those accountants to disclose and makeavailable to Buyer, its officers, employees, agents and representatives any andall financial statements and other supporting financial documents, schedulesand information relating to the Servicer (including copies of any issuedmanagement letters) with respect to the business, financial condition and otheraffairs of the Servicer; provided, that the Buyer shall notify theServicer prior to any contact with such accountants and advisors and shall givethe Servicer the opportunity to participate in such discussions.  The Servicer agrees to render to Buyer, atthe Servicer’s own cost and expense, such clerical and other assistance as maybe reasonably requested with regard to the foregoing.

###  

### (j)            Collection of TransferredReceivables.  In connection with thecollection of amounts due or to become due under the Transferred Receivables,the Borrower Assigned Agreements and any other Borrower Collateral, theServicer shall take such action as it, and from and after the occurrence andduring the continuance of a Termination Event, the Buyer may deem necessary ordesirable to enforce collection of the Transferred Receivables, the BorrowerAssigned Agreements and the other Borrower Collateral.  If (i) an Incipient Termination Event ora Termination Event shall have occurred and be continuing or (ii) theBuyer in good faith believes that an Incipient Termination Event or aTermination Event is imminent, then the Buyer may, without prior notice to anyOriginator or the Servicer, (x) exercise its right to take exclusive ownershipand control of (1) the Lockboxes and the Collection Accounts in accordancewith the terms of the applicable Collection Account Agreements and (2) theConcentration Account(in which case the Servicer shall be required to depositany Collections it then has in its possession

 

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or at any time thereafterreceives, immediately in the Agent Account) and (y) notify any Obligor underany Transferred Receivable or obligors under the Borrower Assigned Agreementsof the sale to Buyer of such Transferred Receivables and of the pledge of suchTransferred Receivables or Borrower Assigned Agreements, as the case may be, tothe Buyer and its assignees and direct that payments of all amounts due or tobecome due to the Buyer thereunder be made directly to the Buyer or anyservicer, collection agent or lockbox or other account designated by the Buyerand the Buyer may enforce collection of any such Transferred Receivable or theBorrower Assigned Agreements and adjust, settle or compromise the amount orpayment thereof.  The Buyer shall provideprompt notice to the Servicer of any such notification of assignment, pledge ordirection of payment to the Obligors under any Transferred Receivables.

###  

### (k)           Performance of Borrower AssignedAgreements.  The Servicer shall (i) performand observe all the terms and provisions of the Borrower Assigned Agreements tobe performed or observed by it, enforce the Borrower Assigned Agreements onbehalf of the Borrower in accordance with their terms and take all action asmay from time to time be requested by the Buyer in order to accomplish theforegoing, and (ii) upon the request of and as directed by the Buyer, makesuch demands and requests to any other party to the Borrower AssignedAgreements as are permitted to be made by the Servicer thereunder.

###  

### (l)            License for Use of Software andOther Intellectual Property.  Unlessexpressly prohibited by the licensor thereof or any provision of applicablelaw, if any, the Servicer hereby grants to the Buyer (and to the AdministrativeAgent on behalf of the Lenders as assignee of the Buyer) a limited license touse, without charge, the Servicer’s computer programs, software, printouts andother computer materials, technical knowledge or processes, data bases,materials, trademarks, registered trademarks, trademark applications, servicemarks, registered service marks, service mark applications, patents, patentapplications, trade names, rights of use of any name, labels, fictitious names,inventions, designs, trade secrets, goodwill, registrations, copyrights,copyright applications, permits, licenses, franchises, customer lists, creditfiles, correspondence, and advertising materials or any property of a similarnature, as it pertains to the Transferred Receivables and the other BorrowerCollateral, or any rights to any of the foregoing, only as reasonably requiredin connection with the collection of the Transferred Receivables and theadvertising for sale, and selling any of the Borrower Collateral, or exercisingof any other remedies with respect thereto, and the Servicer agrees that itsrights under all licenses and franchise agreements shall inure to the Buyer(and to the Administrative Agent on behalf of the Lenders as assignee of theBuyer) for purposes of the license granted herein.  Except upon the occurrence and during thecontinuation of a Termination Event, the Buyer agrees not to use (and shallcause the Administrative Agent to covenant not to use) any such license withoutgiving the Servicer prior written notice.

###  

### (m)          Deposit of Collections.  The Servicer shall (and shall cause each ofits Affiliates to) (i) instruct all Obligors to remit all payments withrespect to any Transferred Receivables directly into a Lockbox or CollectionAccount, and (ii) deposit or cause to be deposited promptly into a Lockboxor Collection Account, and in any event no later than the first Business Dayafter receipt thereof, all Collections it may receive in respect of TransferredReceivables (and until so deposited, all such Collections shall be held intrust for the benefit of Buyer and its assigns (including the AdministrativeAgent and the Lenders).  The Servicershall not make or permit to be made deposits into a Lockbox or a CollectionAccount other than in accordance with this

 

38

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Agreement and the other RelatedDocuments.  Without limiting thegenerality of the foregoing, the Servicer shall take reasonable steps to assurethat no Collections or other proceeds with respect to a Receivable reconveyedto any Originator pursuant to Section 4.04 hereof are paid ordeposited into any Lockbox or Collection Account.

###  

### (n)           Commingling.  The Servicer shall not (and shall cause eachother member of the Parent Group not to) deposit or permit the deposit of anyfunds that do not constitute Collections of Transferred Receivables into anyLockbox or Collection Account except as otherwise permitted by Section 4.03(n)hereof.  If any funds not constitutingCollections of Transferred Receivables are nonetheless deposited into a Lockboxor Collection Account and the Servicer so notifies Buyer, Buyer shall promptlyremit any such amounts to the applicable Originator.  So long as any Transferred Receivables of anObligor remain unpaid, the Servicer shall not instruct such Obligor to remitCollections of any Receivables to any Person or account other than to a Lockboxor Collection Account.

###  

### (o)           Separate Identity.  The Servicer shall comply with Section 4.02(i) tothe same extent as if it were an Originator.

###  

## Section 7.05.  ReportingRequirements of the Servicer.  TheServicer hereby agrees that, from and after the Effective Date and until theTermination Date, it shall prepare and deliver or cause to be prepared anddelivered to the Lenders and the Administrative Agent, on behalf of the Buyer,the financial statements, notices, reports, and other information set forth inAnnex 5.02(a) to the Funding Agreement at the times, to the Persons and inthe manner set forth in Annex 5.02(a) of the Funding Agreement.

##  

# **ARTICLE VIIIEVENTS OF SERVICER TERMINATION**

# ** **

## Section 8.01.  Events ofServicer Termination.  If any of thefollowing events (each, an “Event of Servicer Termination”) shall occur(regardless of the reason therefor):

##  

### (a)           the Servicer shall (i) fail tomake any payment or deposit hereunder when due and payable and the same shallremain unremedied for three (3) Business Days or more; (ii) fail todeliver when due any of the reports required to be delivered pursuant to Section 7.05or any other report related to the Receivables as required by the other RelatedDocuments and the same shall remain unremedied for five (5) Business Daysafter the date specified for delivery of any report;  or (iii) fail or neglect to perform,keep or observe any other provision of this Agreement or the other RelatedDocuments (other than any provision embodied in or covered by any other clauseof this Section 8.01) and the same shall remain unremedied forthirty (30) days or more following the earlier to occur of an AuthorizedOfficer of the Servicer becoming aware of such breach and the Servicer’sreceipt of notice thereof; or

###  

### (b)           the Servicer or any Subsidiary whichacts as a Sub-Servicer shall fail to pay when due or within any applicablegrace period any principal or interest on Debt or any Contingent Obligations or(2) a breach or default of the Servicer or any Subsidiary which actsas a Sub-Servicer shall occur, or any condition or event shall occur, withrespect to any Debt or any

 

39

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Contingent Obligations, in eachcase if the effect of such breach, default or occurrence is to cause or topermit the holder or holders then to cause, Debt and/or Contingent Obligationshaving an aggregate principal amount in excess of $5,000,000 to become or bedeclared due prior to their stated maturity or

###  

### (c)           (1) the Servicer or anySubsidiary which acts as a Sub-Servicer commences a voluntary case under theBankruptcy Code, or consents to the entry of an order for relief in aninvoluntary case or to the conversion of an involuntary case to a voluntarycase under any such law or consents to the appointment of or taking possessionby a receiver, trustee or other custodian for all or a substantial part of itsproperty; or (2) the Servicer or any Subsidiary which acts as aSub-Servicer makes any assignment for the benefit of creditors; or (3) theboard of directors (or equivalent thereof) or the shareholders (or equivalentthereof) of the Servicer or any Subsidiary which acts as a Sub-Servicer adoptsany resolution or otherwise authorizes action in connection with theadministration, liquidation, winding-up or dissolution of the Servicer or anySubsidiary which acts as a Sub-Servicer or to approve any of the actionsreferred to in this Section 8.01(c); or

###  

### (d)           (1) a court enters a decree ororder for relief with respect to the Servicer or any Subsidiary which acts as aSub-Servicer in an involuntary case under the Bankruptcy Code, which decree ororder is not stayed or other similar relief is not granted under any applicablefederal or state law; or (2) the continuance of any of the followingevents for sixty (60) days unless dismissed, bonded or discharged:  (a) an involuntary case is commencedagainst****the Servicer or any Subsidiary whichacts as a Sub-Servicer, under any applicable bankruptcy, insolvency or othersimilar law now or hereafter in effect; or (b) a decree or order of acourt for the appointment of a receiver, liquidator, sequestrator, trustee,custodian, administrator or other officer having similar powers over****the Servicer or any Subsidiary which acts as aSub-Servicer, or over all or a substantial part of its property, is entered; or(c) a receiver, trustee or other custodian is appointed without theconsent of the Servicer or any Subsidiary which acts as a Sub-Servicer for, oran encumbrance takes possession of, all or a substantial part of the propertyof the Servicer or any Subsidiary which acts as a Sub-Servicer; or

###  

### (e)           the Servicer or any Subsidiary whichacts as a Sub-Servicer generally does not pay its debts as such debts becomedue or any Authorized Officer thereof admits in writing its inability to, or isgenerally unable to, pay its debts as such debts become due; or

###  

### (f)            any money judgment, writ or warrantof attachment, or similar process (other than those described elsewhere in thisSection 8.01) involving an amount in the aggregate at any time inexcess of $5,000,000 (to the extent not adequately covered by insuranceprovided by a reputable and solvent insurance company) is entered or filedagainst the Servicer or any Subsidiary which acts as a Sub-Servicer or any oftheir respective assets and remains undischarged, unvacated, unbonded orunstayed for a period of thirty (30) days or in any event later than five (5) BusinessDays prior to the date of any proposed sale thereunder; or

###  

### (g)           (i) any information contained inany Borrowing Base Certificate is untrue or incorrect in any respect other thanan Immaterial Misstatement, (ii) any information contained in any MonthlyReport, Weekly Report or Daily Report is untrue or incorrect in any materialrespect or (iii) any representation or warranty of the Servicer herein orin any other Related

 

40

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Document or in any writtenstatement, report, financial statement or certificate (other than a BorrowingBase Certificate) made or delivered by the Servicer to any Affected Partyhereto or thereto is untrue or incorrect in any material respect (withoutduplication of any materiality qualifier contained therein) as of the date whenmade or deemed made and such representation and warranty, if relating to anyTransferred Receivable, has not been cured by the repurchase of any suchTransferred Receivable pursuant to Section 4.04; or

###  

### (h)           the Buyer shall have determined thatany event or condition that materially adversely affects the ability of theServicer to collect the Transferred Receivables or to otherwise performhereunder has occurred; or

###  

### (i)            a Termination Event shall haveoccurred or this Agreement shall have been terminated; or

###  

### (j)            a deterioration has taken place inthe quality of servicing of Transferred Receivables or other Receivables servicedby the Servicer that the Buyer, in its sole discretion, determines to bematerial, and such material deterioration has not been eliminated within 30days after written notice thereof shall have been given by the AdministrativeAgent to the Servicer; or

###  

### (k)           the Servicer shall assign or purportto assign any of its obligations hereunder without the prior written consent ofthe Buyer; or

###  

### (l)            a Change of Control shall occur; or

###  

### (m)          a default or breach of the test setforth in Annex Z shall occur and (i) such event cannot reasonablybe expected to be corrected or reversed within 45 days of the date of suchdefault or breach or (ii) 45 days shall have passed since the date of suchdefault or breach; or

###  

### (n)           (i) Holdings or any of Holdings’Significant Subsidiaries shall fail to pay when due or within any applicablegrace period any principal or interest on Debt or any Contingent Obligations or(2) a breach or default of Holdings or any of Holdings’ SignificantSubsidiaries shall occur, or any condition or event shall occur, with respectto any Debt or any Contingent Obligations, in each case if the effect of suchbreach, default or occurrence is to cause or to permit the holder or holdersthen to cause, Debt and/or Contingent Obligations having an aggregate principalamount in excess of $5,000,000 to become or be declared due prior to theirstated maturity;

###  

### (ii) (1) Holdingsor any of Holdings’ Significant Subsidiaries commences a voluntary case underthe Bankruptcy Code, or consents to the entry of an order for relief in aninvoluntary case or to the conversion of an involuntary case to a voluntarycase under any such law or consents to the appointment of or taking possessionby a receiver, trustee or other custodian for all or a substantial part of its property;or (2) Holdings or any of Holdings’ Significant Subsidiaries makes anyassignment for the benefit of creditors; or (3) the board of directors (orequivalent thereof) or the shareholders (or equivalent thereof) of Holdings orany of Holdings’ Significant Subsidiaries adopts any resolution or otherwiseauthorizes action in connection with the administration, liquidation,winding-up or dissolution of Holdings or any of Holdings’ SignificantSubsidiaries or to approve any of the actions referred to in this Section 8.01(n)(ii);or

 

41

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### (iii)          (1) a court enters a decree ororder for relief with respect to Holdings or any of Holdings’ SignificantSubsidiaries in an involuntary case under the Bankruptcy Code, which decree ororder is not stayed or other similar relief is not granted under any applicablefederal or state law; or (2) the continuance of any of the followingevents for sixty (60) days unless dismissed, bonded or discharged:  (A) an involuntary case is commencedagainst the Holdings or any of Holdings’ Significant Subsidiaries, under anyapplicable bankruptcy, insolvency or other similar law now or hereafter ineffect; or (B) a decree or order of a court for the appointment of areceiver, liquidator, sequestrator, trustee, custodian, administrator or otherofficer having similar powers over Holdings or any of Holdings’ SignificantSubsidiaries, or over all or a substantial part of its property, is entered; or(C) a receiver, trustee or other custodian is appointed without theconsent of Holdings or any of Holdings’ Significant Subsidiaries for, or anencumbrance takes possession of, all or a substantial part of the property ofHoldings or any of Holdings’ Significant Subsidiaries; or

###  

### (iv)          Holdings or any of Holdings’Significant Subsidiaries generally does not pay its debts as such debts becomedue or any Authorized Officer thereof admits in writing its inability to, or isgenerally unable to, pay its debts as such debts become due; or

###  

### (iv)          any money judgment, writ or warrant ofattachment, or similar process (other than those described elsewhere in this Section 8.01)involving an amount in the aggregate at any time in excess of $5,000,000 (tothe extent not adequately covered by insurance provided by a reputable andsolvent insurance company) is entered or filed against Holdings or any ofHoldings’ Significant Subsidiaries or any of their respective assets andremains undischarged, unvacated, unbonded or unstayed for a period of thirty(30) days or in any event later than five (5) Business Days prior to thedate of any proposed sale thereunder;

###  

then, and in any suchevent, the Buyer may, by delivery of a Servicer Termination Notice to theServicer, terminate the servicing responsibilities of the Servicer hereunder,without demand, protest or further notice of any kind, all of which are herebywaived by the Servicer.  Upon thedelivery of any such notice, all authority and power of the Servicer under thisAgreement shall pass to and be vested in the Successor Servicer acting pursuantto Section 9.02; provided, that notwithstanding anything tothe contrary herein, the Servicer agrees to continue to follow the proceduresset forth in Section 7.02 with respect to Collections on theTransferred Receivables until a Successor Servicer has assumed theresponsibilities and obligations of the Servicer in accordance with Section 9.02.

 

# **ARTICLE IXSUCCESSOR SERVICER PROVISIONS**

# ** **

## Section 9.01.  ServicerNot to Resign.  The Servicer shallnot resign from the obligations and duties hereby imposed on it except upon adetermination that (a) the performance of its duties hereunder has becomeimpermissible under applicable law or regulation and (b) there is noreasonable action that the Servicer could take to make the performance of itsduties hereunder become permissible under applicable law.  Any such determination shall (i) withrespect to clause (a) above, be evidenced by an opinion of counselto such effect and (ii) with respect to clause (b) above, beevidenced by an Officer’s Certificate to such effect, in each case delivered

 

42

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to the AdministrativeAgent.  No such resignation shall becomeeffective until a Successor Servicer shall have assumed the responsibilitiesand obligations of the Servicer in accordance with Section 9.02.

##  

## Section 9.02.  Appointmentof the Successor Servicer.  Inconnection with the termination of the Servicer’s responsibilities or theresignation by the Servicer under this Agreement pursuant to Sections 8.01or 9.01, the Buyer may at any time appoint a successor servicer to theServicer that shall be acceptable to the Administrative Agent and shall succeedto all rights and assume all of the responsibilities, duties and liabilities ofthe Servicer under this Agreement (the Administrative Agent, in such capacity,or such successor servicer being referred to as the “Successor Servicer”);provided, that the Successor Servicer shall have no responsibility forany actions of the Servicer prior to the date of its appointment or assumptionof duties as Successor Servicer.  Inselecting a Successor Servicer, the Buyer may (but shall not be required to)obtain bids from any potential Successor Servicer and may agree to any bid itdeems appropriate.  The SuccessorServicer shall accept its appointment by executing, acknowledging anddelivering to the Buyer an instrument in form and substance acceptable to theBuyer.

##  

## Section 9.03.  Duties ofthe Servicer.  The Servicer covenantsand agrees that, following the appointment of, or assumption of duties by, aSuccessor Servicer:

##  

### (a)           The Servicer shall terminate itsactivities as Servicer hereunder in a manner that facilitates the transfer ofservicing duties to the Successor Servicer and is otherwise acceptable to theBuyer and, without limiting the generality of the foregoing, shall, at its ownexpense, timely deliver (i) any funds to the Administrative Agent thatwere required to be remitted to the Administrative Agent for deposit in theAgent Account under the Funding Agreement and (ii) all Servicing Recordsand other information with respect to the Transferred Receivables to theSuccessor Servicer at a place selected by the Successor Servicer.  The Servicer shall cooperate with theSuccessor Servicer in effecting the termination of the responsibilities andrights of the predecessor Servicer under this Agreement and shall account forall funds and shall execute and deliver such instruments and do such otherthings as may be required to vest and confirm in the Successor Servicer allrights, powers, duties, responsibilities, obligations and liabilities of theServicer.  All reasonable costs andexpenses (including reasonable attorneys’ fees) incurred in connection withtransferring all files and other documents in respect of the TransferredReceivables to the Successor Servicer shall be for the account of thepredecessor Servicer.

###  

### (b)           The Servicer shall terminate eachexisting Sub-Servicing Agreement and the Successor Servicer shall not be deemedto have assumed any of the Servicer’s interests therein or to have replaced theServicer as a party thereto.

###  

### (c)           In the event that the Servicer is terminated as Servicer hereunder butno Successor Servicer has been appointed, the Servicer shall at the directionof Buyer with the consent of the Administrative Agent timely deliver to theAdministrative Agent as assignee of Buyer or its designee, at a placedesignated by the Administrative Agent or such designee, copies of allServicing Records and other information with respect to the TransferredReceivables which otherwise would be required to be delivered to the SuccessorServicer under Section 9.03(a) above, and all reasonable costsand expenses (including reasonable attorneys’ fees) incurred in

 

43

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connection with transferringsuch files and other documents to the Administrative Agent shall be for theaccount of the predecessor Servicer.

###  

## Section 9.04.  Effect ofTermination or Resignation.  Anytermination of or resignation by the Servicer hereunder shall not affect anyclaims that the Buyer or its assigns may have against the Servicer for eventsor actions taken or not taken by the Servicer arising prior to any suchtermination or resignation.

##  

## Section 9.05.  Power ofAttorney.  On the Closing Date, theServicer shall execute and deliver a power of attorney in substantially in theform attached hereto as Exhibit 9.05 (a “Power of Attorney”).  The Power of Attorney is a power coupled withan interest and shall be irrevocable until this Agreement has terminated inaccordance with its terms and all of the Transferred Receivables have beenindefeasibly paid or otherwise written off as uncollectible.  The powers conferred on the Buyer under eachPower of Attorney are solely to protect the interests of the Buyer in theTransferred Receivables and the ability of the Successor Servicer to assume theservicing rights, powers and responsibilities of the Servicer hereunder andshall not impose any duty upon the Buyer or the Successor Servicer to exerciseany such powers.

##  

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

44

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IN WITNESS WHEREOF, the parties have caused thisReceivables Sale and Servicing Agreement to be executed by their respective dulyauthorized representatives, as of the date first above written.

 

 
|   | VERTIS RECEIVABLES II, LLC, as Buyer                    |
|--------|---------------------------------------------------------|
|   |                                                    |   |
|   | By:                                                     | /S/ John V.  Howard, Jr. |
|   | Name:                                                   |  John V.  Howard, Jr. |
|   | Title:                                                  |   |  Chief Legal  Officer and Secretary |
|   |                                                    |   |
|   |                                                    |
|   | VERTIS, INC., as Servicer, an Originator and as  Parent |
|   |                                                    |   |
|   | By:                                                     | /S/ John V.  Howard, Jr. |
|   | Name:                                                   |  John V.  Howard, Jr. |
|   | Title:                                                  |   |  Chief Legal  Officer and Secretary |
|   |                                                    |   |
|   |                                                    |
|   | WEBCRAFT, LLC, as an Originator                         |
|   |                                                    |   |
|   | By:                                                     | /S/ John V.  Howard, Jr. |
|   | Name:                                                   |  John V.  Howard, Jr. |
|   | Title:                                                  |   |  Chief Legal  Officer and Secretary |
|   |                                                    |   |
|   |                                                    |
|   | WEBCRAFT CHEMICALS, LLC, as an Originator               |
|   |                                                    |   |
|   | By:                                                     | /S/ John V.  Howard, Jr. |
|   | Name:                                                   |  John V.  Howard, Jr. |
|   | Title:                                                  |   |  Chief Legal  Officer and Secretary |
|   |                                                    |   |
|   |                                                    |
|   | ENTERON GROUP, LLC, as an Originator                    |
|   |                                                    |   |
|   | By:                                                     | /S/ John V. Howard, Jr. |
|   | Name:                                                   |  John V.  Howard, Jr. |
|   | Title:                                                  |   |  Chief Legal  Officer and Secretary |
|   |                                                    |   |
|   |                                                    |   |
|   | VERTIS MAILING, LLC, as  an Originator                  |
|   |                                                    |   |
|   | By:                                                     | /S/ John V.  Howard, Jr. |
|   | Name:                                                   |  John V.  Howard, Jr. |
|   | Title:                                                  |   |  Chief Legal  Officer and Secretary |
|        |                                                         |  |  |  |

 

S-1

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EXHIBIT 2.01(a)

 

Form of

 

RECEIVABLES ASSIGNMENT

 

THIS RECEIVABLESASSIGNMENT (the “Receivables Assignment”) is entered into as of November 25,2005 by and between [Name of Originator] (the “Originator”) and VERTISRECEIVABLES II, LLC (“Buyer”).

 

1.                                       We refer to that certain Receivables Saleand Servicing Agreement (as amended, restated, supplemented or otherwisemodified from time to time, the “Sale Agreement”) of even date herewithamong the Originator, the other Originators party thereto, Vertis, Inc. andBuyer.  All of the terms, covenants andconditions of the Sale Agreement are hereby made a part of this ReceivablesAssignment and are deemed incorporated herein in full.  Unless otherwise defined herein, capitalizedterms or matters of construction defined or established in the Sale Agreementshall be applied herein as defined or established therein.

 

2.                                       For good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the Originator herebysells, or, in the event the Originator is a Member of Buyer, sells orcontributes, to Buyer, without recourse, except as provided in Section 4.04of the Sale Agreement, all of the Originator’s right, title and interest in, toand under all of its Receivables (including all Collections, Records andproceeds with respect thereto) existing as of the Closing Date and thereaftercreated or arising at any time until the Commitment Termination Date.

 

3.                                       Subject to the terms and conditions ofthe Sale Agreement, the Originator hereby covenants and agrees to assign, sellor contribute, as applicable, execute and deliver, or cause to be assigned,sold or contributed, executed and delivered, and to do or make, or cause to bedone or made, upon request of Buyer and at the Originator’s expense, any andall agreements, instruments, papers, deeds, acts or things, supplemental,confirmatory or otherwise, as may be reasonably required by Buyer for thepurpose of or in connection with acquiring or more effectively vesting in Buyeror evidencing the vesting in Buyer of the property, rights, title and interestsof the Originator sold or contributed hereunder or intended to be sold orcontributed hereunder.

 

4.                                       Wherever possible, each provision of thisReceivables Assignment shall be interpreted in such a manner as to be effectiveand valid under applicable law, but if any provision of this ReceivablesAssignment shall be prohibited by or invalid under applicable law, suchprovision shall be ineffective only to the extent of such prohibition orinvalidity without invalidating the remainder of such provision or theremaining provisions of this Receivables Assignment.

 

5.                                       THIS RECEIVABLES ASSIGNMENT SHALL BEGOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWSOF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND SECTION 5-1402OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO

 

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CONFLICTS OF LAW PRINCIPLES), AND ANY APPLICABLE LAWS OF THE UNITEDSTATES OF AMERICA.

 

IN WITNESSWHEREOF, the parties have caused this Receivables Assignment to be executed bytheir respective officers thereunto duly authorized, as of the day and yearfirst above written.

 
| [NAME OF  ORIGINATOR]                 |
|---------------------------------------|
|                                  |
|                                  |
| By:                                   |   |   |
| Name:                                 |   |
| Title:                                |   |
|                                  |   |
|                                  |   |
| VERTIS  RECEIVABLES II, LLC, as Buyer |
|                                  |
| By:                                   |   |   |
| Name:                                 |   |
| Title:                                |   |
|                                       |  |  |  |

 

2

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EXHIBIT 2.01(c)(ii)

 

Form of

 

SUBORDINATED NOTE

 
| $[                ] |   | [                ] |
|-----------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|

 

FOR VALUERECEIVED, the undersigned, VERTIS RECEIVABLES II, LLC, a Delaware limitedliability company (the “Borrower”), hereby promises to pay to the orderof [                                ],a [                                ](the “Subordinated Lender”), or its assigns, at 250 West Pratt Street,Baltimore, MD  21201, or at such otherplace as the holder of this Subordinated Note (“Note”) may designatefrom time to time in writing, in lawful money of the United States of Americaand in immediately available funds, the principal amount of [         ]DOLLARS [$         ], or, if less,the aggregate unpaid principal amount of all Subordinated Loans (as defined inthe Sale Agreement referred to below) made to the Borrower, upon the earlier tooccur of (i) Final Advance Date and (ii) the Termination Date (ineach case, as defined in Annex X to the Sale Agreement referred tobelow), together with interest thereon from time to time from the EffectiveDate (as defined in the Sale Agreement referred to below) at the rate shown inThe Wall Street Journal as the “Prime Rate” on such date (the “Interest Rate”)on the unpaid principal amount of each Subordinated Loan for the periodcommencing on and including the date of such Subordinated Loan to but excludingthe date such Subordinated Loan is paid in full.

 

The date, amountand interest rate of each Subordinated Loan made by the Subordinated Lender tothe Borrower, and each payment made by or on behalf of the Borrower on accountof the principal thereof, shall be recorded by the Subordinated Lender on itsbooks and, prior to any transfer of this Note, endorsed by the Subordinated Lenderon the schedule attached hereto or any continuation thereof.  The books of the Subordinated Lender and suchschedule shall be presumptive evidence of the amounts due and owing to theSubordinated Lender by the Borrower; provided, that any failure of theSubordinated Lender to record a notation in its books or on the schedule tothis Note as aforesaid or any error in so recording shall not limit orotherwise affect the obligation of the Borrower to repay Subordinated Loans inaccordance with their respective terms set forth herein.

 

All capitalizedterms, unless otherwise defined herein, shall have the meanings assigned tothem in the Receivables Sale and Servicing Agreement of even date herewith (asthe same may be subsequently amended, restated or otherwise modified, the “Sale Agreement”)by and among the Borrower, the Subordinated Lender, the other Originatorsthereunder and Vertis, Inc.  ThisNote is issued pursuant to the Sale Agreement and is one of the SubordinatedNotes referred to therein.  All of theterms, covenants and conditions of the Sale Agreement and all other instrumentsevidencing the indebtedness hereunder, including the other Related Documents,are hereby made a part of this Note and are deemed incorporated herein in full.

 

The Borrower mayat any time and from time to time voluntarily repay, in whole or in part, allSubordinated Loans made hereunder.  Anyamount so repaid may, subject to the terms and conditions hereof, be reborrowedhereunder; provided, that all repayments of

 

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Subordinated Loans or any portion thereof shall be made together withpayment of all interest accrued on the amount repaid to (but excluding) thedate of such repayment.

 

Interest shall bepayable on the outstanding principal amount of this Note from time to time inarrears on the first Business Day of each calendar month.  All computations of interest shall be made bythe Subordinated Lender on the basis of a 365 day year, in each case for theactual number of days occurring in the period for which such interest ispayable.  The Interest Rate shall bedetermined (i) on the first Business Day immediately prior to theEffective Date for calculation of the Interest Rate for the period from theEffective Date through the end of the first calendar month following theEffective Date, and (ii) as of the last Business Day of each month for usein calculating the interest that is payable for the following calendar month,and the Interest Rate so determined shall be utilized for such calendarmonth.  Each determination by theSubordinated Lender of an interest rate hereunder shall be final, binding andconclusive on the Borrower (absent manifest error).  The Borrower shall pay interest at theapplicable Interest Rate on unpaid interest on any Subordinated Loan or anyinstallment thereof, and on any other amount payable by the Borrower hereunder(to the extent permitted by law) that shall not be paid in full when due(whether at stated maturity, by acceleration or otherwise) for the periodcommencing on the due date thereof to (but excluding) the date the same isindefeasibly paid in full.

 

If any payment orprepayment on this Note becomes due and payable on a day other than a BusinessDay, the maturity thereof shall be extended to the next succeeding Business Dayand, with respect to payments of principal, interest thereon shall be payableat the Interest Rate during such extension.

 

As set forthbelow, the indebtedness evidenced by this Subordinated Note is subordinate inright of payment to all Borrower Obligations and all renewals, extensions,refinancings or refundings of any such obligations (whether for principal,interest (including but not limited to interest accruing after the filing of apetition initiating any bankruptcy, insolvency or receivership proceeding (each,an “Insolvency Proceeding”) whether or not such interest is allowed insuch Insolvency Proceeding), fees, indemnities, repurchase price, expenses orotherwise) (collectively, the “Senior Obligations”).  The subordination provisions contained hereinare for the direct benefit of, and may be enforced by, any holder of a SeniorObligation, and may not be terminated, amended or otherwise revoked until theSenior Obligations have been indefeasibly paid in full in cash and the RelatedDocuments terminated in accordance with their respective terms. ThisSubordinated Note shall not be subject to any defense or any rights of set-off,including on account of any past or present debt.  Upon the occurrence and during the continuanceof any Termination Event or Incipient Termination Event, the SubordinatedLender shall not demand, accelerate, sue for, take, receive or accept from theBorrower, directly or indirectly, in cash or other property or by set-off orany other manner (including, without limitation, from or by way of collateral)any payment of or security for all or any part of the indebtedness under thisSubordinated Note or exercise any remedies or take any action or proceeding toenforce the same.  The Subordinated Lenderhereby agrees that prior to the date that is one year and one day after all ofthe Senior Obligations have been indefeasibly paid in full in cash and theRelated Documents terminated in accordance with their respective terms, theSubordinated Lender will not take any action to institute any InsolvencyProceeding in respect of the Borrower or which would be reasonably likely tocause the Borrower to be subject to, or seek the protection of, any suchInsolvency Proceeding.

 

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If the Borrowerbecomes subject to any Insolvency Proceeding, then the holders of the SeniorObligations shall receive payment in full of all amounts due or to become dueon or with respect to the Senior Obligations before the Subordinated Lendershall be entitled to receive any payment on account of this SubordinatedNote.  Accordingly, any payment ordistribution of assets of the Borrower of any kind or character, whether incash, securities or other property, in any applicable Insolvency Proceeding,that would otherwise be payable to or deliverable upon or with respect to anyor all indebtedness under this Subordinated Note, is hereby assigned to andshall be paid or delivered by the person making such payment or delivery(whether a trustee in bankruptcy, a receiver, custodian or liquidating trusteeor otherwise) directly to the Administrative Agent for application to, or ascollateral for the payment of, the Senior Obligations until such SeniorObligations shall have been indefeasibly paid in full in cash.

 

In no contingencyor event whatsoever, whether by reason of advancement of the proceeds hereof orotherwise, shall the amount paid or agreed to be paid to Subordinated Lenderfor the use, forbearance or detention of money advanced hereunder exceed thehighest rate of interest permissible under law (the “Maximum LawfulRate”).  In the event that a court ofcompetent jurisdiction determines that Subordinated Lender has charged orreceived interest hereunder in excess of the Maximum Lawful Rate, the amount ofinterest payable hereunder shall be equal to the amount payable under theMaximum Lawful Rate; provided, that if at any time thereafter the amountof interest payable to Subordinated Lender hereunder is less than the amountpayable under the Maximum Lawful Rate, the Borrower shall continue to payinterest hereunder at the Maximum Lawful Rate until such time as the totalinterest received by Subordinated Lender from the making of Subordinated Loanshereunder is equal to the total interest that Subordinated Lender would havereceived had the amount of interest payable to Subordinated Lender hereunderbeen (but for the operation of this paragraph) the amount of interest payablefrom the Effective Date.  Thereafter, theamount of interest payable hereunder shall be the amount determined inaccordance with the terms hereof unless and until the amount so calculatedagain exceeds the amount payable under the Maximum Lawful Rate, in which eventthis paragraph shall again apply.  In noevent shall the total interest received by Subordinated Lender pursuant to theterms hereof exceed the amount that Lender could lawfully have received had theinterest due hereunder been calculated for the full term hereof at the MaximumLawful Rate.  In the event the amountpayable under the Maximum Lawful Rate is calculated pursuant to this paragraph,such interest shall be calculated at a daily rate equal to the Maximum LawfulRate divided by the number of days in the year in which such calculation ismade.  In the event that a court ofcompetent jurisdiction, notwithstanding the provisions of this Note, shall makea final determination that Subordinated Lender has received interest hereunderin excess of the Maximum Lawful Rate, Subordinated Lender shall, to the extentpermitted by applicable law, promptly apply such excess first to any interestdue and not yet paid hereunder, then to the outstanding principal amount of theSubordinated Loans, then to fees and any other unpaid charges, and thereaftershall refund any excess to the Borrower or as a court of competent jurisdictionmay otherwise order.

 

Wherever possibleeach provision of this Note shall be interpreted in such a manner as to beeffective and valid under applicable law, but if any provision of this Noteshall be prohibited or invalid under applicable law, such provision shall beineffective only to the extent of such prohibition or invalidity withoutinvalidating the remainder of such provision or remaining provisions of thisNote.

 

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Time is of theessence of this Note.  To the fullestextent permitted by applicable law, the Borrower expressly waives presentment,demand, diligence, protest and all notices of any kind whatsoever with respectto this Note.

 

**BECAUSEDISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOSTQUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THEPARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THANARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY AJUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THEJUDICIAL SYSTEM AND OF ARBITRATION, THE BORROWER HERETO WAIVES ALL RIGHT TOTRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO ENFORCE OR DEFENDANY RIGHTS OR REMEDIES UNDER THIS NOTE, THE SALE AGREEMENT OR THE TRANSACTIONSCONTEMPLATED HEREBY OR THEREBY, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.**

 

THIS NOTE SHALL BEGOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWSOF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND SECTION 5-1402OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OFLAW PRINCIPLES), AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

IN WITNESS WHEREOF,the Borrower has caused this Note to be signed and delivered by its dulyauthorized officer as of the date set forth above.

 
|   | VERTIS  RECEIVABLES II, LLC |
|--------|-----------------------------|
|   |                        |   |   |
|   | By:                         |   |   |   |
|   | Name:                       |   |   |
|   | Title:                      |   |   |   |
|        |                             |  |  |  |  |

 

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SCHEDULE OF LOANS TO SUBORDINATED NOTE

 
| **Date**   | ** ** | **Amount  of  Subordinated Loan** | ** ** | **Amount  of  Principal Paid** | ** ** | **Unpaid  Principal Balance** | ** ** | **Notation  made by** |
|------------|------------|-----------------------------------|------------|--------------------------------|------------|-------------------------------|------------|-----------------------|
| ** ** | ** ** | ** **                        | ** ** | ** **                     | ** ** | ** **                    | ** ** | ** **            |
| ** ** | ** ** | ** **                        | ** ** | ** **                     | ** ** | ** **                    | ** ** | ** **            |
| ** ** | ** ** | ** **                        | ** ** | ** **                     | ** ** | ** **                    | ** ** | ** **            |

 

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EXHIBIT 2.03

 

Form of

 

ORIGINATOR SUPPORT AGREEMENT

 

THIS ORIGINATORSUPPORT AGREEMENT (“Agreement”) is entered into as of [            ,       ], by VERTIS, INC., a Delawarecorporation (“Parent”), in favor of VERTIS RECEIVABLES II, LLC, a Delawarelimited liability company (“SPE”).

 

RECITALS

 

A.                                   SPE, as purchaser, has entered into aReceivables Sale and Servicing Agreement dated as of November 25, 2005 (asthe same may from time to time be amended, restated, supplemented or otherwisemodified, the “Sale Agreement”), with Parent, and the persons partythereto as “Originators.”  Unlessotherwise defined herein, capitalized terms or matters of construction definedor established Annex X to the Sale Agreement shall be applied herein asdefined or established therein.

 

B.                                     It is a condition precedent to [            ]becoming a party to the Sale Agreement as an “Originator” that Parent, asowner, directly or indirectly, of at least 100% of the outstanding Stock havingordinary voting power to elect the board of directors of [            ]and each other Originator, shall have executed and delivered this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, inconsideration of the premises and of the mutual covenants herein contained andfor other good and valuable consideration, the receipt and sufficiency of whichare hereby acknowledged, and in order to induce SPE to make purchases under theSale Agreement, Parent hereby agrees as follows:

 

Section 1.  UnconditionalUndertaking.  Parent herebyunconditionally and irrevocably undertakes and agrees with and for the benefitof SPE and the Administrative Agent (for itself and for the benefit of theLenders and the Swing Line Lender) to cause the due and punctual performanceand observance by the Servicer and each other Originator and their respectivesuccessors and assigns (collectively, the “Vertis Entities”) of all ofthe terms, covenants, conditions, agreements and undertakings on the part ofsuch Vertis Entity to be performed or observed under the Sale Agreement or anydocument delivered by such Vertis Entity in connection with the Sale Agreement,the Funding Agreement and the Related Documents in accordance with the termsthereof, including the punctual payment when due of all obligations of suchVertis Entity now or hereafter existing under the Sale Agreement whether forindemnification payments, fees, expenses or otherwise (such terms, covenants,conditions, agreements, undertakings and other obligations being the “GuaranteedObligations”), and agrees to pay any and all reasonable and documentedexpenses (including reasonable and documented fees and expenses of attorneys,auditors and accountants) incurred by SPE and its assigns in enforcing anyrights under this Agreement; provided, that the foregoing unconditionalundertaking of Parent is not intended to, and shall not, constitute a guaranteeof the collectibility or payment of the Transferred Receivables.  Parent agrees that each of its Subsidiariesthat

 

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becomes an “Originator” under the Sale Agreement shall be deemed to bean “Originator” for purposes of this Agreement. In the event that any Vertis Entity shall fail in any manner whatsoeverto perform or observe any of its Guaranteed Obligations when the same shall berequired to be performed or observed under the Sale Agreement or any such otherRelated Document, then Parent will itself duly and punctually perform orobserve, or cause to be duly and punctually performed or observed, suchGuaranteed Obligations, and it shall not be a condition to the accrual of theobligation of Parent hereunder to perform or observe any Guaranteed Obligation(or to cause the same to be performed or observed) that SPE or theAdministrative Agent, as applicable, shall have first made any request of ordemand upon or given any notice to Parent or to any Vertis Entity or their respectivesuccessors or assigns, or have instituted any action or proceeding againstParent or any Vertis Entity or their respective successors or assigns inrespect thereof.

 

Section 2.  ObligationAbsolute.  Parent undertakes that theGuaranteed Obligations will be performed or paid strictly in accordance withthe terms of the Sale Agreement or any other Related Document delivered by aVertis Entity in connection with the Sale Agreement regardless of any law,regulation or order applicable to SPE now or hereafter in effect in anyjurisdiction affecting any of such terms or the rights of SPE or theAdministrative Agent with respect thereto. The obligations of Parent under this Agreement are independent of theGuaranteed Obligations, and a separate action or actions may be brought andprosecuted against Parent to enforce this Agreement, irrespective of whetherany action is brought against any Vertis Entity or whether any Vertis Entity isjoined in any such action or actions. The liability of Parent under this Agreement shall be absolute andunconditional irrespective of:

 

(a)                                  any lack of validityor enforceability of the Sale Agreement or any other agreement or instrumentrelating thereto;

 

(b)                                 any change in thetime, manner or place of payment of, or in any other term of, all or any of theGuaranteed Obligations, or any other amendment or waiver of or any consent todeparture from the Sale Agreement or any other agreement or instrument relatingthereto, including, without limitation, any increase in the GuaranteedObligations resulting from additional purchases or contributions of Receivablesor otherwise;

 

(c)                                  any taking, exchange,release or non-perfection of any collateral, or any taking, release oramendment or waiver of or consent to departure from any guaranty, for all orany of the Guaranteed Obligations;

 

(d)                                 any manner ofapplication of collateral, or proceeds thereof, to all or any of the GuaranteedObligations, or any manner of sale or other disposition of any collateral forall or any of the Guaranteed Obligations or any other assets of any VertisEntity or any of its subsidiaries;

 

(e)                                  any change,restructuring or termination of the corporate structure or existence of anyVertis Entity or any of its subsidiaries; or

 

2

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(f)                                    any othercircumstance that might otherwise constitute a defense available to, or adischarge of, any Vertis Entity or a guarantor.

 

This Agreement shall continue to be effective or bereinstated, as the case may be, if at any time any payment of any of theGuaranteed Obligations is rescinded or must otherwise be returned by SPE uponthe insolvency, bankruptcy or reorganization of any Vertis Entity or otherwise,all as though payment had not been made.

 

Section 3.  Waivers.  Parent hereby waives promptness, diligence,notice of acceptance and, except to the extent required under the SaleAgreement any other notice with respect to any of the Guaranteed Obligationsand this Agreement and any requirement that SPE protect, secure, perfect orinsure any Lien or any property subject thereto or exhaust any right or takeany action against any Vertis Entity or any other person or entity or anycollateral.

 

Section 4.  Subrogation.  Parent agrees not to exercise any rights thatit may acquire by way of subrogation against any Vertis Entity and its propertyor any rights of indemnification, contribution and reimbursement from anyVertis Entity and its property, in each case in connection with this Agreementand any payments made hereunder, until such time as the Guaranteed Obligationshave been paid and performed in full and the Termination Date has occurred.

 

Section 5.  Separate Identity from Buyer.  Parent shall itself, and shall ensure thateach of its Affiliates, at all times comply with the covenants and agreementsof the Originators set forth in Section 4.02(i) of the SaleAgreement as if Parent and each of its Affiliates were identified therein.  Parent is party to no agreements with SPE orthe Administrative Agent other than pursuant to the Related Documents.

 

Section 6.  No Proceedings.  From and after the Closing Date and until thedate one year plus one day following the date on which all Borrower Obligationshave been indefeasibly paid in full in cash, Parent shall not, directly or indirectly,institute or cause to be instituted against SPE any proceeding of the typereferred to in Sections 8.01(c) or 8.01(d) of the SaleAgreement.

 

Section 7.  Amendmentsand Waivers.  No amendment or waiverof any provision of this Agreement, and no consent to any departure by Parentherefrom, shall in any event be effective unless the same shall be in writingand signed by SPE and the Administrative Agent, and then such waiver or consentshall be effective only in the specific instance and for the specific purposefor which given.

 

Section 8.  Addresses forNotices.  All notices and othercommunications hereunder shall be sent in the manner provided in Section 6.01of the Sale Agreement, which provisions are incorporated herein by thisreference as though fully set forth herein.

 

Section 9.  No Waiver;Remedies.  No failure on the part ofSPE or the Administrative Agent to exercise, and no delay in exercising, anyright hereunder shall operate as a waiver thereof; nor shall any single orpartial exercise of any right hereunder preclude any

 

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other or further exercise thereof or the exercise of any otherright.  The remedies herein provided arecumulative and not exclusive of any remedies provided by law.

 

Section 10.  ContinuingAgreement; Assignments under Sale Agreement.  This Agreement is a continuing agreement andshall (a) remain in full force and effect until the Termination Date hasoccurred and the payment and performance in full of the Guaranteed Obligationsand the payment of all other amounts payable under this Agreement, (b) bebinding upon Parent, its successors and assigns, and (c) inure to thebenefit of, and be enforceable by, SPE and its successors, transferees andassigns.  Without limiting the generalityof the foregoing clause (c), if Buyer assigns all or any of theTransferred Receivables, or any interest therein, the assignees shall thereuponbecome vested with all the benefits in respect thereof granted to SPE and theAdministrative Agent herein or otherwise, including the rights to receive anynotices hereunder, to consent to any waivers, amendments or other modificationsof this Agreement, and/or to be reimbursed for any expenses in enforcing anyrights hereunder.

 

Section 11.  Severability.  Wherever possible, each provision of thisAgreement shall be interpreted in such a manner as to be effective and validunder applicable law, but if any provision of this Agreement shall beprohibited by or invalid under applicable law, such provision shall beineffective only to the extent of such prohibition or invalidity withoutinvalidating the remainder of such provision or the remaining provisions ofthis Agreement.

 

Section 12.  GOVERNINGLAW.  THIS AGREEMENT AND THEORIGINATOR OBLIGATIONS ARISING HEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALLMATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, ANDCONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OFNEW YORK (INCLUDING SECTION 5-1401 AND SECTION 5-1402 OF THE GENERALOBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES)AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

IN WITNESSWHEREOF, Parent has caused this Agreement to be duly executed and delivered byits officer thereunto duly authorized as of the date first above written.

 
|   | VERTIS, INC., as  Parent |
|--------|--------------------------|
|   |                     |
|   |                     |   |   |
|   | By:                      |   |   |   |
|   | Name:                    |   |   |
|   | Title:                   |   |   |   |
|        |                          |  |  |  |  |

 

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EXHIBIT 9.05

 

Form of

 

POWER OF ATTORNEY

 

This Power ofAttorney is executed and delivered by Vertis, Inc., as Servicer “Grantor”)in favor of Vertis Receivables II, LLC (“SPE”) or such SuccessorServicer as the SPE may designate herein (the SPE or such Successor Servicer,the “Attorney”) pursuant to that certain Receivables Sale and ServicingAgreement dated as of November 25, 2005 (as the same may from time to timebe amended, restated, supplement or otherwise modified, the “Sale Agreement”),by and among Grantor, as Servicer, the persons party thereto as “Originators”,and SPE, as Buyer (the “SPE”). Capitalized terms used herein and not otherwise defined shall have themeanings ascribed to them in the Sale Agreement.  No person to whom this Power of Attorney ispresented, as authority for Attorney to take any action or actions contemplatedhereby, shall be required to inquire into or seek confirmation from Grantor asto the authority of Attorney to take any action described below, or as to theexistence of or fulfillment of any condition to this Power of Attorney, whichis intended to grant to Attorney unconditionally the authority to take andperform the actions contemplated herein, and Grantor irrevocably waives anyright to commence any suit or action, in law or equity, against any person orentity that acts in reliance upon or acknowledges the authority granted underthis Power of Attorney.  The power ofattorney granted hereby is coupled with an interest and may not be revoked orcancelled by Grantor until all Transferred Receivables under the Sale Agreementhave been indefeasibly paid in full and/or written-off as uncollectible andAttorney has provided its written consent thereto.

 

Grantor herebyirrevocably constitutes and appoints Attorney (and all officers, employees oragents designated by Attorney), with full power of substitution, as its trueand lawful attorney in fact with full irrevocable power and authority in itsplace and stead and in its name or in Attorney’s own name, from time to time inAttorney’s discretion, to take any and all appropriate action and to execute anddeliver any and all documents and instruments that may be necessary ordesirable to accomplish the purposes of the Sale Agreement, and, withoutlimiting the generality of the foregoing, hereby grants to Attorney the powerand right, on its behalf, without notice to or assent by it, upon theoccurrence and during the continuance of any Termination Event, to do thefollowing:  (a) open mail for it,and ask, demand, collect, give acquittances and receipts for, take possessionof, or endorse and receive payment of, any checks, drafts, notes, acceptances,or other instruments for the payment of moneys due in respect of TransferredReceivables, and sign and endorse any invoices, freight or express bills, billsof lading, storage or warehouse receipts, drafts against debtors, assignments,verifications, and notices in connection with any Transferred Receivable orother Borrower Collateral; (b) pay or discharge any taxes, Liens, or otherencumbrances levied or placed on or threatened against any Borrower Collateral;(c) defend any suit, action or proceeding brought against it or anyBorrower Collateral if the Grantor does not defend such suit, action orproceeding or if Attorney believes that it is not pursuing such defense in amanner that will maximize the recovery to Attorney, and settle, compromise oradjust any suit, action, or proceeding described above and, in connectiontherewith, give such discharges or releases as Attorney may deem appropriate; (d) fileor prosecute any claim, Litigation, suit or proceeding in any court ofcompetent jurisdiction or before any arbitrator, or take any other actionotherwise deemed appropriate by Attorney for the

 

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purpose of collecting any and all such moneys due with respect to anyTransferred Receivable or other Borrower Collateral or otherwise with respectto the Related Documents whenever payable and to enforce any other right inrespect of its property; (e) sell, transfer, pledge, make any agreementwith respect to, or otherwise deal with, any Transferred Receivables or otherBorrower Collateral, and execute, in connection with such sale or action, anyendorsements, assignments or other instruments of conveyance or transfer inconnection therewith; and (g) cause the certified public accountants thenengaged by it to prepare and deliver to Attorney at any time and from time totime, promptly upon Attorney’s request, any and all financial statements orother reports required to be delivered by or on behalf of Grantor under theRelated Documents, all as though Attorney were the absolute owner of itsproperty for all purposes, and to do, at Attorney’s option and its expense, atany time or from time to time, all acts and other things that Attorneyreasonably deems necessary to perfect, preserve, or realize upon theTransferred Receivables and the SPE’s interests therein, all as fully andeffectively as it might do.  Grantorhereby ratifies, to the extent permitted by law, all that said attorneys shalllawfully do or cause to be done by virtue hereof.

 

IN WITNESSWHEREOF, this Power of Attorney is executed by Grantor, and Grantor has causedits seal to be affixed pursuant to the authority of its board of directors this        day of November, 2005.

 

 
| Grantor |   |   |
|---------|--------|--------|
| ATTEST: |   |   |   |   |
|    |   |   |   |
|    |   |   |   |
| By:     |   |   |   |   | (SEAL) |
| Title:  |   |   |   |   |
|         |        |        |  |  |  |  |  |

[Notarization in appropriateform for the state of execution is required.]

 

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SCHEDULE 4.01(b)

 

JURISDICTION OF ORGANIZATION; EXECUTIVE OFFICES; COLLATERALLOCATIONS; CORPORATE, LEGAL AND OTHER NAMES; IDENTIFICATIONNUMBERS

 

**[Attached]**

 

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SCHEDULE 4.01(j)

 

INTELLECTUAL PROPERTY

 

**None.**

 

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SCHEDULE 4.01(k)

 

INVESTIGATIONS, AUDITS, ETC.

 

**[Attached]**

 

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SCHEDULE 4.01(l)

 

LITIGATION

 

**[Attached]**

 

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SCHEDULE 4.01(n)

 

ERISA

 

**[Attached]**

 

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SCHEDULE 4.01(o)

 

DEPOSIT AND DISBURSEMENT ACCOUNTS

 

**[Attached]**

 

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SCHEDULE 4.01(z)

 

SUPPLEMENTARY REPRESENTATIONS

 

In addition to the representations, warranties andcovenants contained in Section 4.01hereof, each Originator, hereby makes the following additional representations,warranties and covenants:

 

1.                                       Receivables. Each Eligible Receivable constitutes an “account” or a “generalintangible” within the meaning of the applicable UCC.

 

2.                                       Creation ofSecurity Interest.  Immediatelyprior to their transfer thereof to the Buyer, the Originators owned and hadgood and marketable title to the Receivables free and clear of any AdverseClaim.  The Agreement creates a valid andcontinuing security interest (as defined in the applicable UCC) in the Receivables,the Accounts and the Lockboxes in favor of the Buyer, which security interestis prior to all other Adverse Claims and is enforceable as such as against anycreditors of and purchasers from the Originators.

 

3.                                       Perfection. The Originators have caused the filing of all appropriate financingstatements in the proper filing office in the appropriate jurisdictions underapplicable law in order to perfect the sale of the Receivables from theOriginators to the Buyer pursuant to this Agreement.

 

4.                                       Priority.

 

(a)                                  Other than the transfer of the Receivablesby the Originators to the Borrower pursuant to this Agreement, noOriginator  has pledged, assigned, sold,conveyed, or otherwise granted a security interest in any of the Receivables,the Accounts or the Lockboxes to any other Person.

 

(b)                                 No Originator has authorized, or isaware of, any filing of any financing statement against any Originator thatinclude a description of collateral covering the Receivables or all otherassets transferred to the Buyer hereunder, other than any financing statementfiled pursuant to this Agreement and the Funding Agreement or financingstatements that have been validly terminated on or prior to the date hereof.

 

(c)                                  No Originator is aware of anyjudgment, ERISA or tax lien filings against any Originator.

 

(d)                                 None of the Accounts or any of theLockboxes are in the name of any Person other than the Borrower or theAdministrative Agent.  No Originator hasconsented to any Bank complying with instructions of any person other than theAdministrative Agent.

 

5.                                       Survival ofSupplemental Representations. Notwithstanding any other provision of this Agreement or any otherRelated Document, the representations contained in this Schedule 4.01(z)shall be continuing, and remain in full force and effect until the terminationof the Sale Agreement in accordance with Section 6.04 thereof.

 

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6.                                       Originatorsto Maintain Perfection and Priority.  In order toevidence the interests of the Buyer under this Agreement, each Originator shall,from time to time take such action, or execute and deliver such instruments(other than filing financing statements) as may be necessary or advisable(including, such actions as are requested by the Buyer) to maintain andperfect, as a first-priority interest, the Buyer’s ownership and securityinterest in the Receivables and all other assets sold to the Buyer pursuanthereto.  Each Originator shall, from timeto time and within the time limits established by law, prepare and present tothe Buyer for the Buyer’s authorization and approval all financing statements,amendments, continuations or initial financing statements in lieu of acontinuation statement in the, or other filings necessary to continue, maintainand perfect the Buyer’s ownership and security interest in the Receivables andall other assets sold to the Buyer pursuant hereto as a first-priorityinterest. The Buyer’s approval of such filings shall authorize the Originatorsto file such financing statements under the UCC without the signature of theBuyer where allowed by applicable law. Notwithstanding anything else in the Related Documents to the contrary,neither the Servicer nor any Originator shall have any authority to file atermination, partial termination, release, partial release or any amendmentthat deletes the name of a debtor or excludes collateral of any such financingstatements, without the prior written consent of the Buyer.

 

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SCHEDULE 4.02(g)

 

CONDUCT OF BUSINESS

 

**[Attached]**

 

----

 

ANNEX X

 

DEFINITIONS

 

**[Attached]**

 

----

 

ANNEX Y

 

SCHEDULE OF DOCUMENTS

 

**[Attached]**

 

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ANNEX Z

 

FINANCIAL TEST

 

MinimumEBITDA.  Holdings and its Subsidiaries on aconsolidated basis shall have, at the end of each Fiscal Quarter, EBITDA (ascalculated in accordance with the table set forth below) for the four fiscalquarter period then ended of not less than $160,000,000.  In the event that Holdings and itsSubsidiaries are not in compliance with the preceding sentence, THL andEvercore shall have the option to make a common equity or, on terms andconditions acceptable to Administrative Agent, preferred equity, contributionto Holdings and the net proceeds of such equity contribution shall be treatedon a dollar for dollar basis as EBITDA for purposes of determining compliancewith the preceding sentence; provided, that, such an equity contribution shall, forpurposes of its treatment as EBITDA, (i) not be made more than once in anyfiscal year and (ii) not exceed $15,000,000 in amount (i.e., not more than $15,000,000 of such an equitycontribution shall be treated as a replacement for EBITDA in any year and suchan equity contribution may only be made once per year).

 

“EBITDA”shall be calculated in accordance with the following table:

 
| Consolidated Net  Income is defined as follows:                            |                                                                                                                                                                                                                                                                                                  |   |
|----------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                       |                                                                                                                                                                                                                                                                                                  |   |
| Net income  during the measuring period on a consolidated basis excluding: |                                                                                                                                                                                                                                                                                                  | $      |   |
|                                                                       |                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                                       | the income (or  deficit) accrued prior to the date a Subsidiary was merged or consolidated  into Holdings or any of Holdings’ Subsidiaries                                                                                                                                                       |   |   |   |
|                                                                       |                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                                       | the income (or  deficit) from operations of any entity that is not a Subsidiary of Holdings  but in which Holdings has an ownership interest, except to the extent any  such income has actually been received by Holdings or any of its Subsidiaries  in the form of cash dividends or distributions |   |   |   |
|                                                                       |                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                                       | any restoration  to income of any contingency reserve greater than $1,000,000, except to the  extent that provision for such reserve was made out of income accrued during  such period                                                                                                               |   |   |   |
|                                                                       |                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                                       | any net gain (or  loss) attributable to the write-up (or write-down) of any asset (other than  accounts and inventory)                                                                                                                                                                                |   |   |   |
|                                                                       |                                                                                                                                                                                                                                                                                                  |   |   |   |
|                                                                       | any net gain  from the collection of the proceeds of life insurance policies                                                                                                                                                                                                                          |   |   |   |

 

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|                                  | any net gain (or  loss) arising from the sale of any securities, or the extinguishment of any  Indebtedness, of Holdings or any of their Subsidiaries         |   |   |        |
|---------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
|                                  |                                                                                                                                                          |   |   |        |
| Consolidated Net  Income              |                                                                                                                                                          | $      |   |
|                                  |                                                                                                                                                          |   |   |        |
| EBITDA is  defined as follows:        |                                                                                                                                                          |   |   |
|                                  |                                                                                                                                                          |   |   |        |
| Consolidated Net  Income (from above) |                                                                                                                                                          | $      |   |
|                                  |                                                                                                                                                          |   |   |        |
| Plus:                                 | (in each case to  the extent included in the calculation of Consolidated Net Income, but  without duplication):                                               |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | Interest  Expense, net of interest income                                                                                                                     |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | Non-cash  interest expense and amortization of original issue discount                                                                                        |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | any fees payable  with respect to the Related Documents                                                                                                       |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | gain/ (losses)  from extraordinary items                                                                                                                      |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | any gain (or  loss) arising from the sale, exchange or other disposition of assets out of  the ordinary course of business, other than accounts and inventory |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | any other  non-cash gains/(losses) (other than non-cash losses relating to write-offs,  write-downs or reserves with respect to accounts and inventory)       |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | non-recurring  gains/ (losses)                                                                                                                                |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | any provision  for income taxes/ (net of income tax credits)                                                                                                  |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | amortization of  deferred financing fees                                                                                                                      |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | restructuring  charges (GAAP)                                                                                                                                 |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | restructuring  charges (non-GAAP)                                                                                                                             |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | depreciation and  amortization                                                                                                                                |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | any deduction as  the result of any grant to any members of the management of Holdings or any  of its Subsidiaries of any Stock                               |   |   |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | EBITDA                                                                                                                                                        |   | $      |        |
|                                  |                                                                                                                                                          |   |   |        |
|                                  | Required EBITDA                                                                                                                                               |   | $      | 160,000,000 |
|                                       |                                                                                                                                                               |        |        |             |  |

 

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Capitalizedterms used in this Annex Z and not otherwise defined herein shall havethe respective meanings ascribed to them in Annex X.

 

Rules ofConstruction Concerning Financial Tests.  Unlessotherwise specifically provided therein, any accounting term used in anyRelated Document shall have the meaning customarily given such term inaccordance with GAAP, and all financial computations thereunder shall becomputed in accordance with GAAP consistently applied.  That certain items or computations areexplicitly modified by the phrase “in accordance with GAAP” shall in no way beconstrued to limit the foregoing.  If anyAccounting Changes occur and such changes result in a change in the calculationof the financial tests, standards or terms used in any Related Document, thenthe parties thereto agree to enter into negotiations in order to amend suchprovisions so as to equitably reflect such Accounting Changes with the desiredresult that the criteria for evaluating the financial condition of such Personsand their Subsidiaries shall be the same after such Accounting Changes as ifsuch Accounting Changes had not been made. If the parties thereto agree upon the required amendments thereto, thenafter appropriate amendments have been executed and the underlying AccountingChange with respect thereto has been implemented, any reference to GAAPcontained therein shall, only to the extent of such Accounting Change, refer toGAAP consistently applied after giving effect to the implementation of suchAccounting Change.  If such partiescannot agree upon the required amendments within 30 days following the date ofimplementation of any Accounting Change, then all financial statementsdelivered and all calculations of financial tests and other standards and termsin accordance with the Related Documents shall be prepared, delivered and madewithout regard to the underlying Accounting Change.

 

3

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